The causes of national recessions, their depths, and durations vary considerably. For example, the 2001 recession lasted only 8 months, while the 2007 recession was 18 months long. The nation also experienced different declines in economic activity, as measured by gross domestic product (GDP), due to these recessions. For example, during the 2007 recession GDP decreased 4.1 percent whereas GDP decreased by 0.3 percent during the 2001 recession. Recent economic research suggests that while economic downturns within states generally occur around the same time as national recessions, their timing and duration can vary. States have different industry mixes and resources, and they may enter a downturn before the national recession begins or well after the recession has set in. The timing of a state’s economic downturn is determined by its individual economic condition and revenue structure, which can also affect a state’s capacity to fund its Medicaid program. (See fig. 1 for differences in the timing, depth, and duration of state downturns compared to the national recessions of 2001 and 2007.) Medicaid enrollment, and the state funding needed to support the program, increase during and after national recessions, when the number of people with incomes low enough to qualify for Medicaid coverage rises as economies weaken. Researchers have estimated that for every 1 percent increase in national unemployment, Medicaid enrollment increases by 1 million. Moreover, as the economy weakens, states have reduced revenues with which to fund their share of the Medicaid programs in place prior to the recession. Under the regular FMAP, the federal government pays a larger portion of Medicaid expenditures in states with low per capita income (PCI) relative to the national average, and a smaller portion for states with higher PCIs. Use of PCI was, by design, intended to adjust for differences in state funding ability. PCI also serves as an indicator for the number of people eligible for Medicaid in a given state. The Department of Health and Human Services (HHS) calculates and publishes the regular FMAP for each state for each federal fiscal year based on a statutory formula that incorporates PCI. The regular FMAP for federal fiscal year 2010 for states ranged from 50.00 percent to 75.67 percent, and was calculated using the following formula: FMAPstate = 1 - ( (PCI state)/( PCI U.S. ) PCI is a poor proxy for the size and cost of serving states’ poverty populations, which vary considerably. For example, the elderly and disabled constitute about 25 percent of the Medicaid population, but constitute approximately 67 percent of all Medicaid expenditures. As a result, two states with low PCIs may have very different proportions of elderly persons potentially eligible for Medicaid, and thus very different amounts of Medicaid spending. In addition, the regular FMAP for each state is generally published in the Federal Register a year in advance of the federal fiscal year in which it will apply. For example, regular FMAPs for fiscal year 2011 (which began October 1, 2010) were published November 27, 2009, based on a 3-year average of PCI data from 2006 through 2008. This lag time between the publication and implementation of the regular FMAP provides states with an opportunity to adjust to changing levels of federal assistance. However, it also means that the PCI amounts used to calculate FMAPs for a given fiscal year do not reflect states’ economic conditions for that year. To help states meet additional Medicaid program needs, and to provide fiscal relief, Congress established temporary FMAP increases for states in 2003, 2009, and 2010. Increased FMAPs help states maintain their Medicaid programs during downturns. They may also free up funds states would otherwise have used for Medicaid and make them available to address other state budget needs. The FMAP is a readily available mechanism for providing temporary assistance to states because assistance can be distributed quickly, with states obtaining funds on a quarterly basis through Medicaid’s existing payment system. In 2003, the increased FMAP provided states with $10 billion in assistance. When combined, the increased FMAP formulas in the Recovery Act and the 2010 extension provided states with an estimated $105.1 billion in assistance. These formulas also incorporated three components for calculating the increase: a component that protected states against decreases in FMAP, an across-the-board component, and a component based on a state’s increase in unemployment. (See table 1 for more information on these increased FMAPs for the 2001 and 2007 recessions.) The enactment of PPACA affects federal and state funding of the Medicaid program. For example, PPACA establishes an eligibility threshold for state Medicaid programs by requiring states, beginning on January 1, 2014, to cover a new eligibility group of nonelderly, nonpregnant individuals at or below 133 percent of the FPL. Consequently, the number of individuals who qualify for Medicaid is estimated to increase by 18 million, according to the CMS actuary. The federal government will pay 100 percent of the cost of covering newly eligible individuals in fiscal years 2014, 2015, and 2016, with the federal match gradually reduced to 90 percent by 2020. States will continue to receive the regular FMAP for most individuals who meet the Medicaid eligibility requirements that each state had in place prior to the enactment of PPACA. Past recessions hampered states’ ability to fund increased Medicaid enrollment and maintain existing services. Within this broad national trend, however, there was significant variation among states in terms of their increases in Medicaid enrollment and revenue losses. Further, these enrollment increases and revenue declines continued after the national recessions ended, and states made additional adjustments to their Medicaid programs. Medicaid enrollment increased during past recessions, in part due to increased unemployment, which led more individuals to become eligible for the program. During the 2001 recession—March 2001 through November 2001—the national unemployment rate increased from 4.3 to 5.5 percent, and total Medicaid enrollment increased by 5.6 percent, which added approximately 2 million enrollees to the Medicaid program. During the 2007 recession, from December 2007 through June 2009, the unemployment rate grew from 5.0 to 9.5 percent, while Medicaid enrollment rose by 9.7 percent—adding nearly 4.3 million enrollees to the program. Although Medicaid enrollment increased nationally during the 2001 and 2007 recessions, the percentage change varied considerably at the state level. All new Medicaid enrollment was not attributable to past recessions, as some states expanded eligibility or received waivers that increased the size of their programs. In 2001, changes in enrollment ranged from an increase of 12.4 percent in Mississippi’s Medicaid program to a decline of 5.6 percent in New Jersey. The 2007 recession also showed variation. From December 2007 through December 2009, Nevada experienced 32 percent enrollment growth in its Medicaid program, while Tennessee’s Medicaid program enrollment remained steady. Although the magnitude of the enrollment increases across states was largely due to the economic downturn, program expansions and enrollment outreach activities implemented in some states also contributed to enrollment growth. Figure 2 shows the changes in Medicaid enrollment among the states and the District of Columbia during the 2007 recession. As economic activity slowed during the 2001 and 2007 recessions, states’ revenues decreased, which hampered states’ ability to fund their existing Medicaid services and support new enrollment. For example, due to the 2007 recession, total state tax revenues declined by 10.2 percent from the fourth quarter of 2007 to the fourth quarter of 2009. However, the depth and duration of states’ economic downturns varied. As shown in figure 3, 44 states and the District of Columbia experienced decreases in tax revenue during the 2007 recession; for example, Iowa experienced a 1 percent revenue decrease, while revenue declined 23.1 percent in Arizona. Over this same period, North Dakota’s tax revenue increased by 6.9 percent. As a result of the revenue decreases and Medicaid enrollment increases brought on by the 2001 and 2007 recessions, states took steps to contain Medicaid costs. For example, in response to the 2001 recession, 34 states took actions to reduce costs that included freezing or reducing provider payments; capping program enrollment; eliminating coverage for optional services; and increasing premiums and copayments for prescription drugs. Revenue decreases due to the 2007 recession prompted 31 states to cut health care programs by reducing or freezing provider rates or increasing provider taxes. Other states took steps to control prescription drug costs, amend enrollment criteria for optional eligibility groups, and limit or eliminate coverage for optional services, such as mental health or dental care. After the 2001 and 2007 recessions ended, Medicaid enrollment remained high or increased in most states, even as revenues continued to decrease or remain below their prerecession levels. As the economic downturns persisted, states remained hampered by both effects in their ability to fund Medicaid and other state programs. According to NASBO, Medicaid is the largest component of state budgets. Therefore, to balance their budgets, states implemented a variety of actions to contain costs, such as modifying eligibility criteria, limiting benefits, and instituting new or higher copayments. Following the 2001 recession, which ended in November of that year, the national unemployment rate remained above prerecession levels, peaking at 6.3 percent in June 2003—19 months after the recession was declared over. In the second quarter of 2002, state tax revenue dropped by 3.2 percent, continuing a decline that started during the 2001 recession. Further, Medicaid enrollment increased by 9.5 percent in 2002, and by another 5.1 percent in 2003. As a consequence in 2002, states instituted additional Medicaid enrollment requirements, such as waiting lists, increased premiums, and changes in optional eligibility categories. In some cases, a state’s enrollment increase was due to policy changes. For example, the most significant factor driving Utah’s enrollment growth was the state’s decision to extend a limited benefit package to parents and adults without children in fiscal year 2003. In June 2009—the designated end of the 2007 recession—the national unemployment rate was 9.5 percent and rising, reaching 10.1 percent in October 2009.