In order to receive federal matching funds, states must report expenditures quarterly to the Centers for Medicare & Medicaid Services (CMS) on Form CMS-64. Because of this tie to federal match and regularity of reporting, analysts and policymakers frequently use the CMS-64 net financial management report (FMR) as a timely reliable source on Medicaid expenditures. The net FMR includes spending on services paid during the reporting quarter as well as prior period adjustments, which are adjustments made to expenditures previously reported on a prior CMS-64 filing.
While the net FMR is an accurate accounting of expenditures, prior period adjustments may create distortions in a state’s spending for certain services or populations during a year (e.g., negative spending). This presentation discusses how realigning prior period adjustments back to the period to which they apply may provide a more representative picture of spending over time.
This presentation also discusses how the treatment of prior period adjustments in analyses can have significant policy implications. Prior period adjustments ultimately resulted in the new adult group being less costly in the first few years than initially reported. Prior period adjustments are also important to understand how spending by territories compares to their allotments and would be important if the CMS-64 data are used to establish baseline spending for alternative Medicaid funding models such as block grants or per capita caps.
