On March 24, the Centers for Medicare and Medicaid Services (CMS) issued guidance related to the temporary increase in the federal Medicaid matching rate (FMAP) included in the Families First COVID-19 response legislation (P.L. 116-127). As we have explained, Families First would increase the FMAP by 6.2 percentage points for all states and territories starting January 1, 2020 through the end of the public health emergency. As a condition of the FMAP increase, during the emergency, states may not cut Medicaid eligibility or impose more restrictive eligibility procedures, charge higher premiums, disenroll currently enrolled or newly enrolled beneficiaries or fail to cover COVID-19 testing and treatment without cost-sharing.
The new CMS guidance clarifies that the Families First FMAP increase would benefit the Children’s Health Insurance Program (CHIP) as well. Because the formula used to calculate each state’s CHIP matching rate is based on the regular FMAP, the FMAP increase would result in an increase of 4.34 percentage points for each state and territory’s CHIP matching rate during the duration of the public health emergency.
In the current fiscal year (2020), this means the average CHIP matching rate would rise from about 81.5% to 85.84%. In fiscal year 2021, the average CHIP matching rate would rise from about 70% to 74.34% if the public health emergency extends past September. (The average CHIP matching rate is lower in 2021 because of the scheduled expiration of a temporary 11.5 percentage point increase in 2020 provided in the most recent CHIP reauthorization law, as explained here.) The attached table includes a comparison of the prior law CHIP matching rates and the new increased CHIP matching rates for the states and territories in 2020 and 2021.
Based on the latest Congressional Office CHIP baseline and assuming the public health emergency extends through the end of calendar year 2020, states would receive roughly $860 million in additional federal CHIP funding. This estimate, however, likely dramatically understates the benefits of the matching rate increase. It does not account for any higher CHIP enrollment due to the economic downturn and greater CHIP spending per beneficiary due to the costs of COVID-19 screening and treatment.
The guidance does not indicate if and how CMS will adjust states’ fiscal year 2020 annual allotments to account for the higher CHIP matching rate, as such allotments have already been provided to states. Without such adjustments, states may not be able to obtain the full benefit of the CHIP matching rate increase if they have insufficient federal CHIP funding in 2020 (though many states likely had unspent funds from fiscal year 2019 allotments that rolled over into 2020 which they are spending before using 2020 allotments). Notably, there would be more than enough in national allotment funding to accommodate any allotment increases. However, because states’ annual CHIP allotments in fiscal year 2021 will be “rebased” (that is, recalculated based on states’ actual CHIP spending in 2020, including the effects of the Families First matching rate increase), the 2021 allotments should be sufficient to account for any Families First CHIP matching rate increase that remains in effect.