COD E R E D

2( State per capita income)⎞( ) ⎥ ⎥ ⎤⎟*0.National per capita income⎠ ⎦⎡ ⎛− ⎢ ⎜45⎢⎣⎝12The state matching percentages are updated every fiscal year for each state based on incomedata from the most recent three-year period, and cannot go below 50 percent or above 83percent for the federal share. Program costs are matched at different rates: programadministration is generally matched at 50 percent, administration services that must beperformed by skilled professional medical staff are matched at 75 percent, and family planningservices and certain information systems costs are matched at 90 percent. Each state mustfund the remaining portion of its program from state funds (e.g., if a state’s FMAP is 60 percent,the other 40 percent of each dollar spent on Medicaid must come from the state, or to put itanother way, the federal government gives the state $1.50 for every dollar of state funds used).States may use local government funding for no more than 60 percent and taxes on health careproviders for no more than 25 percent of the state match. 19 Because there is a floor of 50percent on the federal match, states that are wealthier than the national per capita incomereceive what amounts to a higher match than their relative income entitles them to.As stated above, one of the exceptions to a state’s regular FMAP is the federal matching ratefor family planning services under Medicaid, which are matched at 90 percent. “Familyplanning” is not defined in federal law, so states can create their own definitions, as long as theyfollow federal, state, and Medicaid policies. 20 CMS’s State Medicaid Manual states that familyplanning services eligible for the 90 percent matching rate are counseling; patient education;examination and treatment; lab tests; contraceptive methods, procedures, pharmaceuticals, anddevices; and infertility services, including sterilization reversals. 21 Services not eligible for 90percent matching are hysterectomy, other medically needed procedures not performed forfamily planning purposes such as removal of an intrauterine device due to infection, abortion,and transportation for family planning services. 22 Some abortions would also not qualify for theregular Medicaid state matching rate—federal funds cannot pay for abortions except ininstances of rape or incest, or where the life or long-term health of the mother would beendangered if she carried the fetus to term. States can create their own policies and use statefunds for abortion services. 23In federal fiscal year (FFY) 1997, total spending on Medicaid (medical and administration for allprograms) was $166 billion, of which $94 billion was the federal share. This increased eachyear to FFY 2001, when total spending was $228 billion and the federal share was $130billion. 24 Medicaid spending grew at its slowest rate in history in the mid to late 1990s, at anaverage of 3.6 percent a year from 1995 to 1999. However, in 2000 and 2001 Medicaidspending increased by double-digit rates, and in 2002 was projected to grow by an average of 9percent a year for the next decade. 25 The federal share of Medicaid spending was $147.5billion in FFY 2002 and $160.7 in FFY 2003. Federal Medicaid expenditures are projected toincrease to $177.3 billion in FFY 2004, $182.1 billion in FFY 2005, and $192.2 billion in FFY2006. 26In 1995, Congress passed legislation to replace the current Medicaid program with block grantsthat would provide the states with a fixed amount of money and much more flexibility regardingeligibility and benefits, but President Clinton vetoed the bill. 27 The Bush Administration’s FY2004 and 2005 budgets reintroduced Medicaid block grants, as discussed later in this paper.B-7