Recovery Act: Increased Medicaid Funds Aided Enrollment Growth, and Most States Reported Taking Steps to Sustain Their Programs
Published: 2010-10-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In February 2009, the American Recovery and Reinvestment Act of 2009 (Recovery Act) initially provided states and the District of Columbia (the District) with an estimated $87 billion in increased Medicaid funds through December 2010, provided they met certain requirements. Funds were made available to states and the District through an increase in the Federal Medical Assistance Percentage (FMAP), the rate at which the federal government matches state expenditures for most Medicaid services. In March 2010, Congress passed the Patient Protection and Affordable Care Act (PPACA), which prohibits states from adopting certain changes to program eligibility in order to receive federal reimbursement, and in August 2010, extended increased FMAP rates through June 2011. GAO was asked to examine issues related to Medicaid funds under the Recovery Act. GAO examined (1) states' and the District's access to and use of increased FMAP funds, and (2) states' and the District's plans to sustain their Medicaid programs once these funds are no longer available. To do this work, GAO surveyed state Medicaid officials in the 50 states and the District in August 2009 and March 2010 about their program enrollment, uses of funds, program adjustments, and program sustainability. GAO obtained responses from all states and the District. GAO also reviewed CMS data and guidance and interviewed CMS and state officials.
section_title: What GAO Found
paragraphs: States and the District are on pace to draw down about 94 percent--$82 billion of the estimated $87 billion--in increased FMAP funds provided by the Recovery Act. Most states adjusted their Medicaid programs to comply with the act's requirements, and nearly all states and the District reported using the increased FMAP to cover increased enrollment, which grew by 14.2 percent nationally between October 2007 and February 2010. Enrollment growth across the states and the District ranged from about 1 percent to 38 percent, with 22 states and the District experiencing a 10 to less than 20 percent increase. Although most enrollment growth was attributable to children, the highest growth rate was among the non-disabled, non-aged adult population. Forty-seven states and the District reported concern regarding the sustainability of their Medicaid programs without the increased FMAP, and 46 states took steps to address sustainability, including introducing financing arrangements, such as taxes on health care providers, or reducing provider payments. Most states and the District also reported proposed changes for the future. Congress passed legislation in August 2010 to extend the increased FMAP through June 2011, although at lower rates than provided by the Recovery Act. How the subsequent return to regular FMAP rates will affect states and the District will vary depending on their unique economic circumstances. GAO estimates that regular FMAP rates will be, on average, nearly 11 percentage points lower than increased FMAP rates available in December 2010. For future adjustments, states and the District will need to consider PPACA, which prohibits more restrictive eligibility standards, methods, or procedures until 2014, in order to receive federal Medicaid reimbursement. HHS provided technical comments to this report, which GAO incorporated as appropriate.

section_title: Letter
paragraphs: Since the winter of 2007, the nation has faced what is generally reported to  be the most serious economic crisis since the Great Depression. From  October 2007 to June 2010, the national unemployment rate more than  doubled—from 4.7 to 9.5 percent. States’ individual experiences varied,  with unemployment rates in June 2010 at or above 9 percent in about half  the states and as high as 14.2 percent in Nevada. In addition to rising  unemployment, the current economic crisis has also led to decreases in  state tax revenues and increases in the number of individuals who are  eligible for Medicaid, the joint federal-state health financing program for  certain low-income populations, which is administered by the Department  of Health and Human Services’ (HHS) Centers for Medicare & Medicaid  Services (CMS).
The American Recovery and Reinvestment Act of 2009 (Recovery Act) was  enacted in February 2009 to promote economic recovery and investment  during this time of economic crisis. Among its stated purposes are to  provide fiscal relief to states and to maintain states’ Medicaid programs so  that Medicaid beneficiaries are assured continuity of services. The  Recovery Act initially provided states with an estimated $87 billion in  increased federal funds for Medicaid from February 2009 through  December 2010, which states could access provided they met certain  requirements, including ensuring that their program eligibility  requirements are not more restrictive than July 2008 standards. CMS  makes Recovery Act funds available to states for state spending on  Medicaid services through an increase in the rate at which the federal  government matches state expenditures for these services. The federal  government matches states’ spending for Medicaid services according to a  formula known as the Federal Medical Assistance Percentage (FMAP).  Without the fiscal relief provided to state Medicaid programs by the  Recovery Act, states reported that they would have faced difficulties  maintaining their level of benefits and services to an increasing number of  eligible Medicaid beneficiaries.
Moreover, in March 2010, Congress passed the Patient Protection and  Affordable Care Act (PPACA), which, among other provisions, prohibits  states from adopting more restrictive Medicaid eligibility standards,  methodologies, or procedures for adults until 2014 in order for states to  receive any federal Medicaid funding. Although some economists have  pointed to signs of economic improvement, the budget outlook for states  continues to show signs of stress, including a collective $174.1 billion  budget gap that states faced for fiscal year 2010, as well as additional  projected gaps in 2011 and 2012. To help states address continuing budget  gaps, federal legislation amending the Recovery Act was enacted on  August 10, 2010, which provides for an extension of increased FMAP  funding through June 30, 2011, but at a lower level. In light of lingering  fiscal pressures, it remains to be seen how states will respond to  provisions within PPACA and the extension of the increased FMAP  funding that will affect the financing of their Medicaid programs.
You expressed interest in states’ uses of the increased FMAP funds and  concerns they may have once this funding is no longer available. In this  report, we examine issues related to the federal Medicaid funds available  to states under the Recovery Act, including (1) the extent to which states  have accessed and used increased FMAP funds, and (2) how states plan to  sustain their Medicaid programs once the increased FMAP funds are no  longer available.
To address our objectives, we administered a Web-based survey to the  Medicaid directors or their designated contacts in all states in August 2009  and again in March 2010, and obtained response rates of 98 and   100 percent, respectively. We reviewed states’ responses to survey  questions, which collected information on a variety of topics, including  Medicaid enrollment, uses of increased FMAP funds, adjustments made in  response to the Recovery Act’s requirements, and the longer-term  sustainability of their Medicaid programs. We also asked states about  potential changes to their eligibility guidelines after Recovery Act funding  is no longer available. However, states completed the survey prior to  March 23, 2010, the enactment date of PPACA, and prior to enactment of  legislation extending Recovery Act funding, and therefore, could not have  taken into account provisions of the law when responding. As needed, we  followed up with Medicaid officials in selected states to clarify survey  responses and to obtain additional information on their compliance with  certain Recovery Act requirements. In addition, using a more limited  survey, we contacted the five largest U.S. insular areas—American Samoa,  Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico,  and the U.S. Virgin Islands—to collect enrollment and other data and  obtained responses from four of them. In addition, we reviewed data  from CMS on federal Medicaid funds allotted under the Recovery Act for  federal fiscal years (FFY) 2009 and 2010; interviewed CMS officials to  discuss their oversight of the Medicaid funds provided under the Recovery  Act; and reviewed data prepared by Federal Funds Information for States,  an organization that tracks and reports on the fiscal impact of federal  budget and policy decisions on state budgets and programs. We relied on  the survey responses reported by the official identified as the primary  contact for the state’s Medicaid program and on federal Medicaid data  provided by CMS. We did not independently verify these data. However,  we reviewed all survey responses and federal Medicaid data for internal  consistency and followed up with state officials and CMS for clarification  when necessary. Based on these activities, we determined these data were  sufficiently reliable for the purpose of our report. (See app. I for additional  information on the scope and methodology.)
We conducted a performance audit for this review from December 2009 to  August 2010 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Title XIX of the Social Security Act establishes Medicaid as a federal-state  partnership that finances health care for certain low-income individuals,  including children, families, the aged, and the disabled. Within broad  federal requirements, each state operates and administers its Medicaid  program in accordance with a CMS-approved state Medicaid plan. These  plans detail the populations served, the services covered, and the methods  used to calculate payments to providers. All states must provide certain  services, such as inpatient and outpatient hospital services, nursing facility  services, and physician services, and may provide additional, optional  services, such as prescription drugs, dental care, and certain home- and  community-based services. The federal government matches most state  Medicaid expenditures for covered services according to the FMAP, which  is based on a statutory formula drawing on each state’s annual per capita  income. To obtain federal matching funds for Medicaid, states file  quarterly financial reports with CMS and draw down funds through an  existing payment management system used by HHS.
The Recovery Act initially provided eligible states with an increased FMAP  for 27 months from October 1, 2008, to December 31, 2010. On August 10,  2010 federal legislation was enacted amending the Recovery Act and  providing for an extension of increased FMAP funding through June 30,  2011, but at a lower level. Generally, for fiscal year 2009 through the third  quarter of fiscal year 2011, the increased FMAP is calculated on a quarterly  basis and is comprised of three components: (1) a “hold harmless”  provision, which maintains states’ regular FMAP rates at the highest rate  of any fiscal year from 2008 to 2011; (2) a general across-the-board  increase of 6.2 percentage points in states’ regular FMAPs through the first  quarter of fiscal year 2011, which will be reduced to regular FMAP by   July 1, 2011; and (3) a further increase to the regular FMAPs for those  states that have a qualifying increase in unemployment rates.  Because  the unemployment component of the increased FMAP is based on both t level of its regular FMAP and changes in a state’s unemployment rate— versus its existing unemployment rate—it does not fully differentiate  among states’ economic circumstances prior to the downturn. States with  comparatively high unemployment rates and higher regular FMAPs did not   For  always receive the largest unemployment adjustment to their FMAPs. example, Michigan had the highest pre-recession unemployment rate in  he  the nation at 7.3 percent in October 2007, and in June 2010, continued to  have one of the nation’s highest unemployment rates at 13.2 percent.  Although the state’s unemployment rate increased by 5.9 percentage  points over this time, the increased FMAP attributable to the  unemployment component in the fourth quarter of FFY 2010 was   3.88 percentage points. In contrast, New Hampshire received an  unemployment adjustment of 5.39 percentage points for the same period,  although growth in its unemployment rate was significantly lower, and in  June 2010, was less than half the unemployment rate in Michigan.
Following enactment of the Recovery Act, FMAP rates substantially  increased in all states over the regular 2009 FMAP rates and have  continued to increase, albeit at a slower rate, since that time. On average,  increased FMAP rates nationally for the first and second quarters of FFY  2009 were 8.58 percentage points higher than regular FFY 2009 FMAP  rates. By the fourth quarter of FFY 2010, the increased FMAP rates  nationwide had increased by an average of 10.59 percentage points over  the regular FFY 2010 FMAPs, with the increase ranging from   6.94 percentage points in North Dakota to 13.87 percentage points in  Louisiana. (See fig. 1.)
For all states, the largest proportion of the increased FMAP was the  component attributable to the across-the-board increase of 6.2 percentage  points. In addition, the “hold harmless” component contributed to the  increase in 17 states, and all states except North Dakota received an  increase to their regular FMAP rate based on qualifying increases in  unemployment rates. (See app. II for additional information on increased  FMAP rates available to states under the Recovery Act.)
For states to qualify for the increased FMAP, they must pay the state’s  share of Medicaid costs and comply with a number of requirements,  including the following:    States generally may not apply eligibility standards, methodologies, or  procedures that are more restrictive than those in effect under their state  Medicaid programs on July 1, 2008.
States must comply with prompt payment requirements.
States cannot deposit or credit amounts attributable (either directly or  indirectly) to certain elements of the increased FMAP in any reserve or  rainy day fund of the state.
States with political subdivisions—such as cities and counties—that  contribute to the nonfederal share of Medicaid spending cannot require  the subdivisions to pay a greater percentage of the nonfederal share than  would have been required on September 30, 2008.
In addition, states must separately track and report on increased FMAP  funds. To help states comply with these requirements, CMS provided the  increased FMAP funds to states through a separate account in the  payment management system used by HHS, allowing the funds to be  tracked separately from regular FMAP funds as required by the act. CMS  also provided guidance in the form of state Medicaid director letters and  written responses to frequently asked questions, and the agency continues  to work with states individually to resolve any compliance issues that may  arise.
Despite these restrictions, however, states are able to make certain other  adjustments to their Medicaid programs without risking their eligibility for  increased FMAP funds. For example, the Recovery Act does not prohibit  states from reducing optional services, or reducing provider payment  rates. States also continue to have flexibility in how they finance the  nonfederal share of Medicaid payments. Specifically, provided they  comply with federal limits, states may rely on various financing  arrangements, such as provider taxes, certified public expenditures (CPE),  or intergovernmental transfers (IGT), to generate the nonfederal share of  payments. (See table 1.)
section_title: States Have Accessed Most Available Funds and Used Them to Support Medicaid Enrollment Growth
paragraphs: States have accessed most of the increased FMAP funds available to them  through the Recovery Act, despite most having to make adjustments to  their Medicaid programs to become eligible for the funds. Nearly every  state used the funds to cover increased Medicaid enrollment, which grew  by over 14 percent nationally between October 2007 and February 2010.
subsections: section_title: States Have Accessed Most Available Increased FMAP Funds and Made Program Adjustments to Comply with the Act
paragraphs: Through the end of the third quarter of FFY 2010, states had drawn down a  total of $60.8 billion in increased FMAP funds—95 percent of the funds  available at that point, or 70 percent of the total estimated $87 billion in  increased FMAP that was provided through the Recovery Act. If current  spending patterns continue, we estimate that the states will draw down  $82 billion by December 31, 2010—about 94 percent of the estimated total  allocation of $87 billion. CMS distributed the increased FMAP funds to  states through an existing payment system, thereby providing states with  timely access to the funds. Within 3 months of enactment, all but one state  had drawn down the increased FMAP funds.
Most states reported making at least one adjustment to their Medicaid  programs in order to be eligible for the increased FMAP funds, and 25  states reported making multiple adjustments. Twenty-nine states reported  making adjustments to comply with the act’s prompt payment  requirement, and 26 states reported making adjustments to the act’s  maintenance of eligibility requirement. For example, several states  reported that they were in the process of replacing antiquated claims  payment systems or implementing programming changes to existing  systems to be able to comply with the prompt payment requirement.  Specifically, Hawaii and South Carolina adjusted their claims payment  systems to identify claims on a daily basis and developed reporting  mechanisms to monitor compliance with the act’s prompt payment  requirement. In terms of adjustments states made to comply with the  maintenance of eligibility requirement, Vermont reported that it eliminated  premium increases that it had imposed on certain beneficiaries, and  Arizona reported reversing a policy that had increased the frequency at  which it determined program eligibility. In addition, 13 states reported  making adjustments to the act’s requirement on contributions by political  subdivisions, and 4 states reported making adjustments to comply with the  act’s requirement related to rainy day funds.
When asked about the difficulty of complying with the act’s requirements  in order to access funds, states most frequently reported that meeting the  prompt payment requirement posed a high level of difficulty. Nine states  reported having not met the prompt payment requirement at some point  since the Recovery Act was enacted, with the total number of days  reported by a state ranging from 1 day to 48 days. Eight states have either  applied for or received a waiver from meeting the prompt payment  requirement from CMS. (See app. III for additional information on the  increased FMAP grant awards and drawdown amounts for each state.)
section_title: States Used Increased FMAP Funds to Maintain Their Programs in Light of Enrollment Growth
paragraphs: For FFY 2010 through the first quarter of FFY 2011, nearly all states  reported using or planning to use funds freed up by the increased FMAP to  cover increased Medicaid caseloads (45 states), maintain Medicaid  eligibility (44 states), and to maintain Medicaid benefits and services   (44 states). Additionally, the majority of states also reported using or  planning to use these funds to help support general state budget needs,  maintain institutional provider payment rates, and maintain practitioner  payment rates. Despite the variety of purposes for which states used the  increased FMAP funds, when asked about the sufficiency of the funds,  fewer than half of states (18 states) reported that the 2010 funds were  sufficient for the stated purposes of the act—to provide fiscal relief to  states and to maintain states’ Medicaid programs.
Nonetheless, 46 states reported that the increased FMAP was a major  factor in their efforts to support Medicaid enrollment growth which, from  October 2007 through February 2010, increased 14.2 percent nationally,  which is significantly higher than in previous years. The rate of growth  peaked between January 2009 and July 2009, increasing by 5 percent  during this 7-month period. (See fig. 2.)
Enrollment growth across the states varied considerably—ranging from  about 1 percent in Tennessee and Texas to almost 38 percent in Nevada.  Twenty-three states experienced a 10 to less than 20 percent enrollment  increase, with 16 states experiencing an enrollment increase of 20 percent  or greater. (See fig. 3.) While the magnitude of the enrollment increase  across states was largely due to the economic downturn, program  expansions and enrollment outreach initiatives implemented in some  states prior to the economic downturn also contributed to enrollment  growth. Despite states’ declining revenues, however, the act’s maintenance  of eligibility requirement made the increased FMAP contingent on states  not adopting more restrictive Medicaid eligibility standards,  methodologies, or procedures than those that were in place on July 1,  2008.
When examining regional variation in enrollment growth, states in the  western region of the country most commonly had enrollment increases  above the national increase of just over 14 percent (11 of 13 states), while  states in the northeast region were least likely to have enrollment  increases over the national increase (4 of 9 states). Various factors likely  contributed to these regional variations. For example, when compared to  national averages, most states in the western region experienced higher  than average growth in unemployment (8 of 13 states) and poverty rates   (7 of 13 states) during the recession, and higher rates of uninsurance prior  to the recession (11 of 13 states). Low enrollment growth in the northeast  region may be due, in part, to the fact that many of these states have  historically had higher Medicaid income-eligibility levels when compared  to states in other regions. For example, in 2009, the majority of states in  the northeast extended Medicaid coverage to parents with incomes over  150 percent of the federal poverty level (FPL). In contrast, the majority of  states in the southern and western regions generally limited program  eligibility to parents under 75 percent of the FPL.
Across the states, most enrollment growth was attributable to children, a  population that comprises over half of total Medicaid enrollment, and is  sensitive to economic downturns. However, the highest rate of increase  during this period occurred among the nondisabled, nonaged adult  population. Specifically, from October 2007 through February 2010,  enrollment among the nondisabled, nonaged adult population increased by  nearly 30 percent, compared to an increase of nearly 15 percent for  children. (See fig. 4.)
Of the 29 states with readily available information on the geographic  distribution of Medicaid enrollment increases, 21 states reported that the  increase was generally distributed evenly across the state, and 8 states  reported that the increase was concentrated in certain urban or rural  counties. For example, Arizona Medicaid officials reported that the largest  enrollment increase occurred in Maricopa County—the state’s largest  county that includes Phoenix and Scottsdale. Pennsylvania officials  reported that the concentration of enrollment growth was mixed between  one rural county and two urban counties—Montgomery and Cumberland.  (See app. IV for more information on adjustments made by states to  comply with Recovery Act requirements and states’ uses of funds freed-up  by the increased FMAP. See app. V for additional information on  enrollment changes in the states and the largest U.S. insular areas.)
section_title: Most States Reported Taking Actions to Sustain Their Medicaid Programs, but Federal Legislation Will Influence Future Program Adjustments
paragraphs: Most states are concerned about their ability to sustain their Medicaid  programs once the increased FMAP funds are no longer available, and  have taken actions or proposed actions to address program sustainability.  However, states’ efforts to make future program adjustments will be  influenced by recent legislation, including PPACA, and the subsequent  extension of the increased FMAP through June 2011.
subsections: section_title: States’ Actions to Address Program Sustainability Include New or Altered Financing Arrangements and Reductions to Provider Payments
paragraphs: Forty-eight states reported concerns regarding the sustainability of their  Medicaid programs after Recovery Act funding is no longer available,  with most states reporting that the factors driving their concerns included  the increased share of the state’s Medicaid payments in 2011, and the  projection of the state’s economy, tax revenues, and Medicaid enrollment  growth for 2011. To address program sustainability, 46 states have taken  actions—such as introducing new Medicaid financing arrangements and  reducing or freezing practitioner payment rates—and 44 states reported  implementing multiple actions. Most commonly, states implemented new  financing arrangements or altered existing ones—such as provider taxes,  IGTs, and CPEs—to generate additional revenues to help finance the  nonfederal share of their Medicaid programs. In addition, most states  also reported that they proposed making additional changes to their  Medicaid programs for the remainder of fiscal year 2010 or for fiscal year  2011. (See fig. 5.)
Twenty-eight states reported that they reduced or froze Medicaid payment  rates to certain Medicaid providers in response to concerns about program  sustainability. For example, in December 2009, Iowa implemented  across-the-board rate reductions for most providers ranging from 2.5 to   5 percent, which will remain in effect until June 30, 2011. Similarly,  Maryland reduced or froze payments for physicians and hospitals, and for  long-term care services and home- and community-based services. States  also reported reducing benefits and services, changing prescription drug  formularies, or increasing beneficiary copayments or premiums. Four  states—Florida, Illinois, Mississippi, and Texas—and the District of  Columbia reported that they did not implement any changes in response to  their concerns about program sustainability; however, Medicaid officials  in most of those states and the District told us that they were considering  future changes.
In addition to these program changes, over half the states reported making  administrative changes that could affect Medicaid application processing  time, such as decreasing the number of staff or staff hours available for  processing Medicaid applications, increasing furlough days, and  decreasing the number of Medicaid intake facilities. Despite these actions,  most states kept pace with the increasing number of applications they  received. Specifically, of the 33 states reporting data, 25 processed on  average at least 95 percent of applications they received each month.  (See app. IV for additional information on state actions to address  program sustainability. App. VI provides more information on changes to  states’ share of Medicaid payments when increased FMAP is no longer  available.)
section_title: States’ Efforts to Make Future Program Adjustments Will Be Influenced by Federal Legislation
paragraphs: States indicated that legislation to extend the increased FMAP funding  would help address their concerns about program sustainability. At the  time of our survey, legislation extending the increased FMAP had been  proposed, but not enacted. Despite uncertainties about the availability of  the increased FMAP beyond December 2010, however, 30 states had  assumed a 6-month extension of the increased FMAP in their fiscal year  2011 budgets without any changes to the way it is calculated as provided  for under the Recovery Act, and only 9 of these states had contingency  plans in place if such legislation was not enacted.
On August 10, 2010, Congress passed legislation amending § 5001 of the  Recovery Act to extend the increased FMAP through June 30, 2011, but at  a lower level. Specifically, under the amendments to the Recovery Act,  states’ increased FMAP rates will decrease by at least 3 percentage points  beginning on January 1, 2011, and continue to be phased down to their  regular FMAP rates by July 1, 2011. For states that had assumed an  unmodified extension of the increased FMAP, the available federal funds  will be less than anticipated. However, without the extension, we estimate  that states, on average, would have faced a nearly 11 percentage point  decrease in their FMAP rates on January 1, 2011. The additional 6 months  of increased FMAP funding will allow states more time to adjust as they  return to their regular FMAP rates. How states will fare as they return to  their regular FMAP rates will vary depending on each state’s unique  economic circumstances and the size of their Medicaid population.  Officials from several states indicated that the loss of increased FMAP  funds would distress their state’s budget, requiring the state to make  additional program reductions, as the following examples illustrate.
Wisconsin Medicaid officials reported that the state would need to reduce  Medicaid expenses by $1 billion annually, or about 20 percent of the state’s  Medicaid budget, and are considering several options, including  eliminating the state’s prescription drug program for seniors and several  rate reform initiatives.
Colorado Medicaid officials reported that the state would need to reduce  Medicaid expenditures by an estimated $250 million, in addition to  approximately $320 million the state has already cut. The state reported  that the additional expenditure reduction would require drastic cuts to  optional programs, benefits, and provider rates.
In addition, the recently enacted PPACA includes several provisions that  affect states’ Medicaid programs, and states will need to take into account  these provisions when considering additional adjustments to their  programs. Specifically, the maintenance of eligibility requirement under  PPACA precludes states from receiving federal Medicaid funding if they  apply eligibility standards, methods, or procedures, under their plan or a  waiver, that are more restrictive for adults than those in effect on the date  of PPACA’s enactment until the date the Secretary of HHS determines that  a health insurance exchange established by the state is fully operational,  which must be no later than January 1, 2014.
PPACA also provides states with an opportunity to obtain additional  Medicaid funds, either immediately or in the future. For example, PPACA  requires states to cover all persons under 65 who are not already eligible  under mandatory eligibility groups up to 133 percent of the FPL by 2014,  but states have the option to expand eligibility immediately and to receive  federal funds for these individuals. As of August 12, 2010, Connecticut  and the District have obtained CMS approval to shift eligible low-income  adults from existing state health care programs into Medicaid. The act  also includes provisions to facilitate states’ use of home- and community- based long-term care services.
section_title: Agency Comments
paragraphs: In commenting on a draft of this report, HHS provided technical  comments, which we incorporated as appropriate. HHS did not comment  on our findings.
We are sending copies of this report to the Secretary of HHS, the  Administrator of the Centers for Medicare & Medicaid Services, and other  interested parties. In addition, the report will be available at no charge on  the GAO Web site at http://www.gao.gov.
If you or your staff members have any questions, please contact me at  (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: To examine the extent to which states have accessed increased Federal  Medical Assistance Percentage (FMAP) funds, we reviewed data provided  by two divisions within the Department of Health and Human Services  (HHS)—the Centers for Medicare & Medicaid Services (CMS) and the  Office of the Assistant Secretary for Planning and Evaluation—on  increased FMAP rates and Medicaid grant awards under the Recovery Act  for federal fiscal years (FFY) 2009 and 2010. We analyzed data on  increased FMAP rates to determine the proportion of each state’s increase  attributable to the three components prescribed in the act: the across-the- board component, the hold harmless component, and the unemployment  component. We compared preliminary fourth quarter FFY 2010 increased  FMAP rates to the 2011 regular FMAP rates to estimate the percentage  increase in states’ share of Medicaid payments once the increased FMAP is  no longer available.
We also analyzed CMS data on increased FMAP funds to determine each  state’s total available grant award for FFYs 2009 and 2010 and the  percentage each state had drawn from their available grants as of June 30,  2010. Based on these drawdown rates, we projected the total amount of  increased FMAP funds that states would draw down by December 31,  2010. We interviewed CMS officials to understand how they compiled data  on increased FMAP funds and to clarify anomalies we identified in the  data. We also discussed CMS officials’ oversight of the Medicaid funds  provided under the Recovery Act and specifically addressed their  oversight of states’ actions to comply with the act’s eligibility requirements  for increased FMAP. We also reviewed relevant CMS guidance, including a  sample of increased FMAP grant award letters, a fact sheet, frequently  asked questions documents, and state Medicaid director letters related to  the act.
To examine how states used the increased FMAP funds and how states  planned to sustain their Medicaid program once the increased FMAP funds  are no longer available, we administered a Web-based survey to the  Medicaid directors or their designated contacts in all states in August 2009  and in March 2010, and obtained a response rate of 98 and 100 percent,  respectively. The surveys asked states to provide information on a variety  of topics, including their uses of increased FMAP funds, monthly Medicaid  enrollment from October 2007 through February 2010, adjustments made  in response to the act’s requirements, and any concerns they had about the  longer-term sustainability of their Medicaid programs. We pretested the  surveys with Medicaid officials from four states. We reviewed all survey  responses, and where appropriate, included these responses in the report.  As needed, we followed up with Medicaid officials in selected states to  clarify responses, to request corrected enrollment data, or to obtain  additional information on their compliance with certain Recovery Act  requirements.
We analyzed the Medicaid enrollment data obtained from the surveys to  determine total enrollment growth and percentage change in enrollment  for each state between October 2007 and February 2010. We also analyzed  the enrollment data to determine the extent to which each Medicaid  subpopulation—children, aged individuals, disabled individuals, and adults  (nonaged, nondisabled)—contributed to overall enrollment growth during  this period. We analyzed the survey data on Medicaid applications to  determine any changes in states’ processing volumes and rates over this  period. We did not independently verify these data; however, we reviewed  all survey responses and federal Medicaid data for internal consistency,  validity, and reliability. Based on these activities, we determined these  data were sufficiently reliable for the purpose of our report.
In addition, we analyzed other state economic and fiscal data—such as  poverty rates, unemployment rates, and Medicaid eligibility levels—to  examine their relationship to overall Medicaid enrollment growth within  states and regions. We also reviewed data prepared by Federal Funds  Information for States, an organization that tracks and reports on the fiscal  impact of federal budget and policy decisions on state budgets and  programs. Finally, we reviewed relevant provisions of the Patient  Protection and Affordable Care Act, and other legislation that affect states’  Medicaid programs.
We conducted a performance audit for this review from December 2009 to  August 2010 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Regular and Preliminary Increased Fourth Quarter 2010 FMAP Rates and Components of the Increase
paragraphs: Preliminary  increased FMAP,  fiscal year 2010,  North Dakota is the only state that did not receive an increase to its preliminary FMAP rate due to  qualifying increases in the state’s unemployment rate during the period.
section_title: Appendix III: Increased FMAP Grant Awards and Funds Drawn Down
paragraphs: Appendix III: Increased FMAP Grant Awards  and Funds Drawn Down  (Dollars in thousands)
Increased FMAP grant  award for FFY 2009  and first three  quarters of FFY 2010  97 (Dollars in thousands)
section_title: Appendix IV: State-Reported Adjustments to Medicaid Programs and Uses of Funds Freed Up by the Increased FMAP
paragraphs: Maintain  Medicaid  payment  rates for  (CHIP) ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  State also reported using funds to expand Medicaid eligibility levels.
State reported using funds to finance local or state public health insurance programs other than  Medicaid or CHIP.
State did not provide responses to this survey.
State reported using funds to increase Medicaid payment rates for practitioners.
State reported using funds to increase Medicaid payment rates for institutional providers.
Finance local  public health  programs or  (programs  other than  Medicaid)
Finance local  public health  programs or  (programs  other than  Medicaid) ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  ●  State reported using or planning to use funds to increase Medicaid payment rates for practitioners.
State also reported using or planning to use funds to increase Medicaid payment rates for  institutional providers.
State also reported using funds to expand Medicaid eligibility levels.
section_title: Appendix V: Medicaid Enrollment and Enrollment Changes by Subpopulation Group from October 2007 through February 2010
paragraphs: Due to limitations in enrollment data reported by certain insular areas, we were unable to conduct  complete analyses.
section_title: Appendix VI: Estimated Changes in States’ FMAP Rates and Share of Medicaid Payments
paragraphs: Percentage  increase in state  share of Medicaid  For the portion of federal fiscal year 2011 not in the Recovery Act recession adjustment period (i.e.,  after December 31, 2010), the Patient Protection and Affordable Care Act (PPACA) will provide  Louisiana with an FMAP of 68.04 (rather than the current FMAP of 63.61).
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact name above, the following team members made  key contributions to this report: Susan Anthony, Assistant Director; Emily  Beller; Laura Brogan; Ted Burik; Julianne Flowers; Zachary Levinson;  Drew Long; and Kevin Milne.