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 asked the Government Accountability Office (GAO) to provide recommendations for modifying the federal Medicaid financing formula to make it more responsive to state Medicaid program needs during future economic downturns. The GAO developed a prototype countercyclical financing model that would temporarily increase the federal medical assistance percentage (FMAP) for Medicaid spending when certain conditions are met, but this model has never been put into practice.
This presentation describes the GAO prototype model, estimates the effects of this model if it had been implemented this year under current economic conditions, and compares these results to the fiscal relief provided to states under the Families First Families First Coronavirus Response Act (FFCRA, P.L. 116-127).
