Considerations for Designing Automatic Medicaid Financing Changes in Times of Crisis - Medicaid and CHIP Payment and Access Commission Moira ...
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Considerations for Designing Automatic Medicaid Financing Changes in Times of Crisis Medicaid and CHIP Payment and Access Commission Moira Forbes April 2, 2020 www.macpac.gov
Overview
• Refresher on the federal medical assistance percentage
(FMAP)
• Medicaid as a countercyclical financing mechanism
– Automatic stabilizer
– Fiscal stimulus
• Design considerations
• Discussion
April 2, 2020 1Federal Medical Assistance
Percentage
• Federal share for most health care services is determined by the
FMAP (adjusted annually)
• Higher reimbursement to states with lower per capita incomes
relative to national average
– Intended to reflect states’ differing abilities to fund Medicaid from their
own revenues
– Averages three years of data to minimize fluctuations
– Alternatives to per capita income have been suggested
• Statutory minimum of 50 percent and maximum of 83 percent;
highest FMAP in fiscal year 2020 is 76.98 percent
April 2, 2020 2Medicaid as an Automatic Stabilizer
• Automatic stabilizers are fiscal policies that
offset cyclical changes in economic activity
without additional governmental intervention
• Demand for Medicaid is countercyclical to
economic growth
– Enrollment and spending increase when there is a
downturn in the economic cycle
April 2, 2020 3Medicaid as an Automatic Stabilizer
• Medicaid functions as an automatic stabilizer
– Federal spending automatically increases in
proportion to increases in state spending
• Financing rules limit its effectiveness
– States must continue to contribute, have less
revenue in a downturn but cannot run deficits
– Annual FMAP updates do not take into account
recent changes in per capita income
April 2, 2020 4Medicaid as a Fiscal Stimulus • Fiscal stimulus is the use of specific policy changes to encourage economic growth during a recession • Enacted in response to present economic conditions and can be designed to address particular needs or goals • Requires legislative consensus on need for action, time to enact law and distribute funds April 2, 2020 5
Examples of Fiscal Stimulus
• March 2001– November 2001 recession
– Increased each state’s FMAP by 2.95 percent for 5 quarters
beginning in June 2003
• December 2007 – June 2009 recession
– Increased each state’s FMAP by 6.2 percent for 9 quarters
beginning in October 1, 2008, with additional increases for
states with high unemployment
• Disaster Adjusted Recovery FMAP
– Adjusts a state’s FMAP upward if the state experienced a
statewide, major disaster and the annual FMAP calculation
results in a decrease in FMAP of 3 percentage points or more
April 2, 2020 6Design Considerations for Creating an
Automatic FMAP Adjustment
• Policy choices affect technical design
considerations
– Whether to trigger an increase based on national
conditions or state-level factors
– Whether an increase should be the same for all
states or vary based on state-level factors
– Whether an increase should be based on robust data
(automatic stabilizer) or activate quickly (stimulus)
April 2, 2020 7Technical Design Decisions
• Once policy choices are made, technical design
decisions can be made to support preferred options
– How to identify a downturn that triggers an increase
– When to start and end an increase in federal funds
– Whether the increase should vary by state or not
• Each decision affects the timing and magnitude of
changes in federal spending, effects on the economy
April 2, 2020 8Measures to Identify a Downturn
$16,000 $80 $250.0 96.0%
Quarterly Sales tax and gross
Annual Sales tax and gross receipts
$15,500 95.0%
Employment Rate
GDP ($ billions)
$15,000 $70 $240.0 94.0%
receipts ($ billions)
$14,500 93.0%
$60 $230.0 92.0%
$14,000
$50 $220.0 91.0%
$13,500 90.0%
($ billions)
$13,000 $40 $210.0 89.0%
$12,500 88.0%
$12,000 $30 $200.0 87.0%
2005Q1
2005Q4
2006Q3
2007Q2
2008Q1
2008Q4
2009Q3
2010Q2
2011Q1
2011Q4
2005Q1
2005Q4
2006Q3
2007Q2
2008Q1
2008Q4
2009Q3
2010Q2
2011Q1
2011Q4
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
Quarter Quarter Quarter
Sales tax and gross receipts (annual)
Recession Stimulus
Sales tax and gross receipts (quarter)
Notes: ARRA is the American Recovery and Reinvestment Act (ARRA P.L. 111-5). GDP is gross domestic product. The National Bureau of Economic
Research declared a recession between December 2007—June 2009. ARRA increased states' FMAP between October 2008—December 2010.
Sources: MACPAC analysis of Bureau of Economic Analysis, 2020, SQGDP2 Quarterly GDP by state: all industry total (millions of current dollars); U.S.
Bureau of Labor Statistics, 2020, Local area unemployment statistics: monthly employment status of the civilian noninstitutional population,
seasonally adjusted; U.S. Census Bureau, 2020, Quarterly summary of state and local tax revenue table 3: State tax collections by state/type of tax.
April 2, 2020 9Threshold for Starting an Increase Growth Rate in Three Economic Measures by Quarter, 2005-2014
2.5% Recession ARRA Increase 25.0%
Percent Change (GDP and Employment)
Percent Change (Sales Tax and Gross
2.0% 20.0%
1.5% 15.0%
1.0% 10.0%
0.5% 5.0%
Receipts)
0.0% 0.0%
-0.5% -5.0%
-1.0% -10.0%
-1.5% -15.0%
-2.0% -20.0%
-2.5% -25.0%
2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1
GDP Employment rate Sales tax and gross receipts
Notes: ARRA is the American Recovery and Reinvestment Act (ARRA P.L. 111-5). GDP is gross domestic product. The National Bureau of Economic
Research declared a recession between December 2007—June 2009. ARRA increased states' FMAP between October 2008—December 2010.
Sources: MACPAC analysis of Bureau of Economic Analysis, 2020, SQGDP2 Quarterly GDP by state: all industry total (millions of current dollars); U.S.
Bureau of Labor Statistics, 2020, Local area unemployment statistics: monthly employment status of the civilian noninstitutional population, seasonally
adjusted; U.S. Census Bureau, 2020, Quarterly summary of state and local tax revenue (QTAX) table 3: State tax collections by state and type of tax.
April 2, 2020 10National or State-Level Indicators
Count of States with Quarterly GDP less than Pre-Recession Count of States Reaching Maximum Unemployment Rate
Level, 2008–2011 During the Quarter, 2008–2011
Recession ARRA Increase Recession ARRA Increase
National GDP National
greater than unmployment
pre-recession less than
level maximum
National GDP
less than pre- National
recession unemployment
35 34 18
28 31 33 level reaches
24 24 maximum
15 13 7 8 7
11 6
8 6 6 5 3 3 2 1 1 1
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
Notes: ARRA is the American Recovery and Reinvestment Act (ARRA P.L. 111-5). GDP is gross domestic product. The National Bureau of Economic
Research declared a recession between December 2007—June 2009. ARRA increased states' FMAP between October 2008—December 2010. For
purposes of this graph, pre-recession level was set at the GDP in the 4th quarter of 2007.
Source: MACPAC analysis of Bureau of Economic Analysis, 2020, SQGDP2 Quarterly gross domestic product (GDP) by state: all industry total (millions of
current dollars) and U.S. Bureau of Labor Statistics, 2020, Local area unemployment statistics: monthly employment status of the civilian noninstitutional
population, seasonally adjusted.
April 2, 2020 11Threshold for Ending an Increase
Cumulative Number of States Below High Unemployment Threshold by Quarter, 2008–2012
Recession ARRA Increase
49 51
43
30
26
21
14 17
10
3 6
2
National unemployment below threshold National unmployment above threshold
Notes: ARRA is the American Recovery and Reinvestment Act (ARRA P.L. 111-5). The National Bureau of Economic Research declared a recession between
December 2007—June 2009. ARRA increased states' FMAP between October 2008—December 2010. For purposes of this graph, pre-recession level was set at
the GDP in the 4th quarter of 2007. The high unemployment threshold was set at the 75th percentile plus one percentage point of the state’s unemployment
rates between the 2005—2019.
Source: MACPAC analysis of U.S. Bureau of Labor Statistics, 2020, Local area unemployment statistics: monthly employment status of the civilian
noninstitutional population, seasonally adjusted.
April 2, 2020 12Considerations for Designing Automatic Medicaid Financing Changes in Times of Crisis Medicaid and CHIP Payment and Access Commission Moira Forbes April 2, 2020
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