INCREASING THE FEDERAL SHARE OF MEDICAID (FMAP) IS GOOD FOR YOUR STATE'S ECONOMY

Some members of Congress are promoting legislation to increase the federal share of state Medicaid costs on a temporary basis.

To see how much additional economic stimulus your state would receive from this increase in the FMAP, click on your state's name in the drop-down menu below.

Background

Recently, Governors Bush (FL), Rowland (CT), and Owens (CO) sent a letter to HHS Secretary Tommy Thompson asking for "flexibility" to redesign the Medicaid program. On January 31st, Secretary Thompson obliged. In a somewhat secretive press briefing, he unveiled a plan that offers states an impossible choice: obtain some immediate fiscal relief ($12.7 billion over 7 years) and accept a Medicaid block grant for your state-which would eliminate the entitlement for beneficiaries-or continue Medicaid as is without any fiscal relief. The "fiscal relief" offered by the Administration is temporary-states have to pay back EVERY CENT in later years.

There are many unanswered questions about this proposal. To see the HHS press release, go to (http://www.hhs.gov/news/press/2003pres/20030131d.html).

There Is a Better Alternative

The alternative preferred by Medicaid advocates is an increase in the FMAP-Federal Medical Assistance Percentages. These percentages are the rates at which the federal government reimburses states for spending on Medicaid. Legislation to offer a temporary FMAP increase, S. 138, has been introduced in the Senate. It is sponsored by Senators Rockefeller (D-WV), Collins (R-ME), Smith (R-OR), and Nelson (D-NE) . Similar legislation is slated to be introduced in the House by Representatives King (R-NY) and Brown (D-OH) the week of February 10.

In addition to health care services, Medicaid plays a unique role in stimulating state business activity and state economies. Because Medicaid is a joint federal-state responsibility, every dollar a state spends on Medicaid pulls federal dollars into the state-dollars that would not otherwise come into the state. These new dollars pass from one person to another in successive rounds of spending. Economists call this the "multiplier effect." The magnitude of the multiplier effect varies from state to state. Because the multiplier is based on bringing in new federal funds, Medicaid will help your state's economy even more if Congress passes legislation that provides a temporary increase of the federal share of Medicaid, such as S. 138.