CMS Issues Final Rule Explaining How States Claim FMAP Rates in Medicaid Expansion

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By Ralph Lindeman  


The Centers for Medicare & Medicaid Services March 29 released a final rule setting out the methodology states will use in claiming an increased federal matching rate available for “newly eligible” individuals under the Affordable Care Act's Medicaid expansion.

The final rule (CMS-2327-FC), which will have a 60-day public comment period ending June 3, will be published in the Federal Register on April 2.

States that participate in the expansion will receive 100 percent reimbursement of their expansion costs from the federal government during the expansion's first three years.

The expansion covers adults younger than 65 with income up to 138 percent of the federal poverty level, including a 5 percent income disregard allowed under ACA, or a little more than $15,000 for a single adult.

The expansion funding, including the increased federal match rate--known as the Federal Medical Assistance Percentage (FMAP)--will be available to states when the expansion begins in January 2014.

These increased payments will be in effect from 2014 through 2016, phasing down to a permanent 90 percent matching rate by 2020.

HHS: 'Great Deal' for States

“This is a great deal for states and great news for Americans,” Health and Human Services Secretary Kathleen Sebelius said in a statement. “Thanks to the Affordable Care Act, more Americans will have access to health coverage and the federal government will cover a vast majority of the cost. Treating people who don't have insurance coverage raises health care costs for hospitals, people with insurance, and state budgets.”

In states that have already expanded their Medicaid programs to cover individuals who fall within the income guidelines for new eligibles under ACA, the rule also provides information about the availability of an increased FMAP for these adults who are, technically, not newly eligible.

The increased FMAP for newly eligible Medicaid enrollees will be 100 percent in calendar years 2014 through 2016, dropping to 95 percent in calendar year 2017, 94 percent in calendar year 2018, 93 percent in calendar year 2019, and 90 percent in calendar years 2020 and beyond.

If all states participated in the Medicaid expansion, about 16 million to 17 million low-income uninsured would obtain health coverage under ACA, according to the Congressional Budget Office.

However, the Supreme Court, in its June 2012 decision on ACA, said HHS may not penalize states that do not join the expansion, effectively making it optional among states. Some Republican governors, in explaining their reluctance to join the expansion, have questioned whether the federal government will be able to sustain the generous financial commitment to the expansion over the long term.

Some States Already Cover Higher Incomes

The rule also explains how the FMAP will be calculated in states that expanded their Medicaid coverage--before enactment of ACA in March 2010--to a level that comes within the newly eligible income guidelines allowed under ACA.

In these so-called expansion states (under the rule's terminology), beginning in 2014 the FMAP will increase, but the increase will not be to the same level as in states that are expanding Medicaid under ACA.

According to the final rule, the FMAP in these states will be increased to a rate that takes into account “the gap between the [state's] regular Medicaid FMAP and the increased 'newly eligible' FMAP” available to states expanding Medicaid for the first time under ACA.

Methodology for First-Time Applicants

A major part of the final rule covers the methodology states will use to claim their federal match at the appropriate FMAP for people applying for Medicaid.

A key question for states participating in the Medicaid expansion has been how to determine eligibility for people who may have been eligible for Medicaid before ACA but who do not apply for benefits until after the 2014 expansion takes effect.

In particular, states have asked whether they will need to set up two separate eligibility determinations--one using its old eligibility guidelines and one using the new Medicaid expansion guidelines.

In response to these questions, CMS said the final rule sets out a “simplified threshold methodology” for states to use in determining eligibility for this population. The methodology takes an applicant's modified adjusted gross income--which will apply to all new Medicaid applicant's beginning in 2014--and compares it with the eligibility criteria in effect in the state in December 2009, before enactment of ACA in March 2010.

“The threshold methodology provides a simple, accurate approach to determining the newly or not newly eligible status of individuals enrolled in the new adult group,” HHS wrote in fact sheet on the new rule.

Additional Comment Period

HHS said that, because of additional details about the threshold methodology in the final rule, it is providing additional opportunity for comment on the methodology. “While we believe that this additional detail will assist states in implementing the threshold methodology, we recognize the complexity surrounding these issues,” CMS said in an introduction to the rule.

CMS published a proposed rule Aug. 17, 2011 (76 Fed. Reg. 51,148) (157 HCDR, 8/15/11).

After considering public comments, CMS finalized many provisions of the proposed rule in the March 23, 2012, Federal Register (77 Fed. Reg. 17,144) (52 HCDR, 3/19/12). The new final rule addresses certain provisions that were included in the Aug. 17, 2011, Medicaid eligibility proposed rule but not included in the March 23, 2012, final rule, HHS said.

By Ralph Lindeman  

Text of the rule (CMS-2327-FC) is at An HHS fact sheet is at