Policy Brief

Assume you are working for the Centers for Medicare and Medicaid Services (CMS) and have been asked to prepare a briefing document for your boss on the Medicaid matching grant. He/she needs to make a briefing to Congress and is not aware of the structure and goals of this grant.  As you prepare the brief you should organize it into key sections.

Background.  It would help your boss for you to first explain how the Medicaid intergovernmental grant is structured and how it ‘fits’ with the concept of fiscal federalism. You would want to note the overall goals of the intergovernmental grant system in the US as background for your boss.  You should note that the structure of the grant has been criticized historically and that both the Bush and Obama administrations have provided a temporary increase in the FMAP but that this extra aid ended June 2011 even while unemployment is still high.  You could make him/her aware of how many states have decided to expand Medicaid under the ACA and that these decisions are still fluid.  Emphasize, however, that your brief pertains to the FMAP that will continue to be used to match states’ spending for those enrollees eligible under Medicaid programs pre the ACA.

FMAP Floor Change. Given the criticism often aimed at the Medicaid intergovernmental grant structure, he/she would also like to hear the ‘pros and cons’ of moving to a 30% or a 60% ‘floor’ for the matching rate. You will use the data in your spreadsheet to highlight the changes seen across states under the 30% and 60% floor versus the status quo and what these changes mean for program equity. Consider both beneficiary and taxpayer equity.  In doing this you can make the assumption that the change in the floor would occur after the ARRA or other forms of stimulus and hence, state spending is matched at the ‘usual’ FMAP formula for spending on Medicaid enrollees eligible prior to the ACA expansion.  

Further Formula Change.  Your boss also needs to advise Congress as to whether we should continue with the types of changes made to the Medicaid matching grant under ARRA or move to those proposed in the GAO prototype formula as future recessions occur.  In this discussion you should highlight the counter-cyclical nature of the Medicaid program and discuss whether the Medicaid matching grant, as now structured, can readily adjust for the effects of recessions.  

Conclusion.  You should conclude with an overall recommendation regarding changing the FMAP floor and/or other elements of the formula.  In drawing these conclusions you should consider the effects of these changes on achieving efficiency in allocation of resources and on beneficiary and taxpayer equity. 

NOTE 1:  Be sure to use data from your spreadsheet in your writing! Also note there are several assigned readings that could be helpful to you. 

NOTE 2: This may be helpful in your writing: In short, the ARRA holds harmless all states from any declines in their FMAP that would have otherwise occurred based on changes in their per capita income relative to the national average; increases the federal share every state receives by 6.2 percentage points; and further reduces the state share in most states by 5.5%, 8.5%, or 11.5% depending on changes in each state's unemployment rate.  See http://edocket.access.gpo.gov/2010/pdf/2010-27412.pdf