Medicaid is a countercyclical program: enrollment and spending grow when there is a downturn in the economic cycle, and states face an increasing demand for Medicaid but have less revenue to pay for it. In response, Congress has acted several times to increase the federal medical assistance percentage (FMAP) for Medicaid spending. Various organizations have suggested that Congress create a statutory mechanism to automatically adjust the FMAP formula if certain conditions are met.
The Commission approved a recommendation to Congress should adopt a statutory mechanism to amend the Social Security Act to provide an automatic Medicaid countercyclical financing model, using the prototype developed by the U.S. Government Accountability Office (GAO) as the basis. The Commission also recommended this policy change should also include:
- An eligibility maintenance of effort requirement for the period covered by an automatic countercyclical financing adjustment.
- an upper bound of 100 percent on countercyclical adjusted matching rates; and
- exclusion of countercyclical adjusted federal matching rate from services and populations that receive special matching rates (e.g., for the new adult group) or are otherwise capped or have allotments (e.g., disproportionate share hospital payments, territories).
