Medicaid is a countercyclical program: enrollment and spending grow when there is a downturn in the economic cycle, and vice versa. However, during recessions, states face an increasing demand for Medicaid at the same time that they have less revenue to pay for it. In response to this, Congress has acted to increase the federal medical assistance percentage (FMAP) for Medicaid spending to support states and direct federal stimulus funds into their economies. Some policymakers have suggested that Congress create a mechanism to automatically adjust the FMAP formula when certain conditions are met.
This presentation describes the policy choices and technical considerations that would need to be considered in designing an automatic mechanism and shows how different economic indicators can be used for this purpose.