CMS Enacts 6.2% FMAP Boost For Coronavirus Medicaid Spending

March 25, 2020 - Important aspects of the Families First Coronavirus Response Act took effect today, namely the enhanced federal Medicaid funding to reinforce state efforts against the coronavirus.

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“Today, the Trump Administration took steps to implement provisions of the Families First Coronavirus Response Act (Public Law 116-127) that provide states with enhanced federal Medicaid funding during the 2019 Novel Coronavirus (COVID-19) national emergency, including the release of implementation guidance,” the emailed announcement declared.

State budgets have significant influence over how a Medicaid program functions and meets the need of its beneficiaries.

Unfortunately, many states simply do not have the financial bandwidth to appropriately invest in coronavirus mitigation. In the past, states with low federal funding and high-risk beneficiaries with heavy healthcare spending have used risk stratification and care management to handle costs. States have seen some success with these methods, but with coronavirus even these strategies will not be enough.

To help states maintain healthcare spending through the crisis, the federal government offered to raise the federal medical assistance percentage (FMAP).

Until the end of the month that the national emergency ends, states must meet four conditions in order to qualify for the FMAP boost, which are outlined in the FAQ on the subject.

States must not increase their eligibility restrictions that were in place January 1, 2020. They also may not raise premiums over their January 1, 2020 premium levels.

States also are required to cover not only coronavirus testing but also services and treatments related to the disease. Finally, they must provide continuous coverage for beneficiaries who were enrolled as of or after March 13, 2020, when the Trump Administration declared a national emergency. The only exception is if the beneficiary disenrolls himself or if he moves to a different state.

“While CMS has not conducted reviews for state compliance, we believe that all states can take steps to be compliant and earn the enhanced funding, and CMS will provide technical assistance to states on this issue,” the FAQ sheet explained.

The increase is retroactive to January 1, 2020. It will terminate at the end of the quarter when the national emergency status lifts.

Payments are eligible for the FMAP based on when the state reimbursed a provider, not the date of the provider’s service.

The payments will be distributed first in grants for reimbursements from January 1, 2020 through March 31, 2020. From April 1, 2020 through June 30, 2020, the funding will be based on the state’s budget and checked against expenditure reports.

CHIP and enhanced FMAP (EFMAP) beneficiaries, such as beneficiaries with breast and cervical cancer, are not eligible for the FMAP increase. But, CMS pointed out, EFMAP uses FMAP as the base for its calculations, so any increase in the FMAP will translate in some rise in the state’s EFMAP, though likely not by the same amount.

When coronavirus gained a foothold in the US, states had over four times their 2010 savings available to them, according to the Brookings Institutes. However, with the downturn in municipal bonds and the fiscal year end (June 30) fast approaching, states will be forced to reduce their spending.

And, unlike the federal government, states must balance their budgets. Failure to do so requires that they make up for the deficit in lower spending, higher taxes, and more fees.

Thus, the Brookings Institute estimated that 38 states would make midyear adjustments to spending. Looking to the past to predict the future, after the Great Recession in 2008 and 2009, state and local spending cuts continued up to four years after the crisis.

The Brookings Institute recommended federal infusion of funds to help Medicaid programs continue to spend appropriately.

However, the organization found that the 6.2 percent which the Families First Coronavirus Response Act provides would not be sufficient.

“Congress is currently debating legislation that provides larger grants to states and should consider more help down the road if the aid turns out to be insufficient,” the report said.

Other experts have also recommended a raise in the FMAP percentage in response to the coronavirus, potentially tied to Medicaid expansion as an incentive.