The Federal Medical Assistance Percentage (FMAP) is the statutory percentage of Medicaid expenditures paid by the federal government. For traditional Medicaid enrollees (low-income pregnant women, children, seniors, and individuals with disabilities), the FMAP is largely a function of state per capita income as states with lower per capita income receive a higher FMAP. No state receives an FMAP below 50 percent. For Medicaid expansion enrollees, the FMAP is equal to 90 percent. The actual percentage of Medicaid expenditures paid by the federal government is substantially higher than the FMAP since states employ numerous accounting gimmicks and financial schemes to minimize the actual state share of expenditures.
There are several concerns with the open-ended FMAP reimbursement structure. First, it encourages excessive state spending and discourages states from seeking higher value from their expenditures. Second, it leads states to deploy gimmicks and schemes to obtain as much federal money as possible. Third, it incentivizes states to devote more resources through Medicaid and less on other state public priorities like education, transportation, and infrastructure. Fourth, it has produced extremely inequitable outcomes as wealthier states receive far more federal dollars per person in poverty than poorer states.
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