WASHINGTON , July 24, 2024 /PRNewswire/ -- Paragon Health Institute , a leader in health care research and market-based policy recommendations, has released a proposal for Medicaid finance reform . At the heart of the proposal is correcting the flawed federal medical assistance percentage (FMAP) for determining federal Medicaid funding, which rewards more money to richer states with more wasteful Medicaid programs. This methodology has created an environment where the wrong states receive more assistance.
Worse still, because of the Affordable Care Act's creation of a higher FMAP for the able-bodied, working-age Medicaid expansion enrollees, traditional beneficiaries of Medicaid have resources diverted away from them. Medicaid is a government program created to pay health care expenses for low-income pregnant women, children, seniors and the disabled. It was later expanded under the Affordable Care Act to cover millions more able-bodied, working-age adults.
The FMAP is the percentage of Medicaid costs paid by the federal government. For traditional Medicaid enrollees, a state's FMAP is largely determined by its per capita income with a 50 percent floor in the wealthiest states. States with lower per capita income receive a higher FMAP.
However, for states that added Medicaid enrollees through the Affordable Care Act's expansion, there is a much higher FMAP for this expansion population. Their FMAP was initially 100 percent from 2014 to 2016, declining to 90 percent in 2020—.