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September 3, 2022

Understanding FMAP and How it Impacts the Healthcare Industry

by admin

Medicaid is the primary source of healthcare financing for states, allowing them to provide medical services and long term care to their low-income residents. While participation in this program is voluntary, all the U.S. states are participants. However, different states implement the program differently in terms of covered services, eligibility criteria, and delivery of services. 

The states and the federal government combine to fund the Medicaid program. The federal government reimburses the states for their expenditures on the program through FMAP — federal medical assistance percentage. Read on to learn more about FMAP and its impact on the healthcare industry.

What Is FMAP?

FMAP is a financing arrangement in which the federal government guarantees matching funds to states for their payments on Medicaid services. However, various exemptions to the FMAP rate are made for certain services, providers, populations, and states. 

How is FMAP calculated?

The federal medical assistance percentage (FMAP) is calculated each year using a formula described in the Social Security Act, where a state’s per capita income is compared to the U.S. per capita income. The states with lower incomes get higher reimbursement, while those with higher incomes get lower reimbursement. 

In addition to the FMAP match rate, there is the enhanced FMAP (eFMAP) rate. This one is provided for administration and services under the State Children’s Health Insurance Program (CHIP). When a state bolsters its Medicaid program using CHIP funds instead of Medicaid funds, the eFMAP applies. The eFMAP is derived by reducing the state share on regular FMAP by 30%.

The FMAPs and eFMAPs for fiscal years 2020 and 2023 are here

Temporal Increases to FMAP 

Since March 2020, the Covid-19 pandemic has ravaged the economy, leading to the loss of jobs and the closure of businesses. Medicaid is a countercyclical program, meaning there are more enrollments during economic downturns and less enrollment when the economy is doing great. 

With more enrollments into the program comes an increase in Medicaid expenditures at a time when state revenues are declining. This makes it difficult for states to finance their Medicaid program, necessitating the need to adjust FMAP match rates. 

The Families First Coronavirus Response Act, in response to the economic constraints brought by the pandemic, authorized a 6.2% increase in federal Medicaid spending. The increased federal support became effective January 1, 2020, and is set to run through the quarter in which the COVID Public Health Emergency (PHE) period ends. 

On March 11, 2021, President Joe Biden signed the American Rescue Plan (ARP) Act of 2021. Under section 9817 of the ARP, qualifying states would get a 10% point increase to the FMAP for Medicaid expenditures on home- and community-based services (HCBS). In estimation, this is about $12.7 billion pumped into the Medicaid program from matching funds. The FMAP rate increase is set to run up to March 31, 2025

How Healthcare Providers Can Benefit From Taking Advantage of FMAP Rate Increases

Healthcare providers can leverage the increased healthcare billing availed to the ARP to improve their delivery of long-term services to Medicaid beneficiaries. For example, there is an ongoing 5% HCBS increment in mental health, outpatient treatment, and rehab services in New York. Healthcare companies can use the increased funding to improve their mental health programs and offer community-based services for people with mental health conditions. 

The ARP also provides an ongoing 40% HCBS increment in Health and Recovery Plan (HARP) and Community Oriented Recovery and Empowerment (CORE) in New York. Healthcare providers should strive to provide high-quality patient-centered clinical care across multiple healthcare settings for the HARP population. 

Healthcare companies can also use the FMAP rate increment to increase workforce recruitment, especially for direct support professionals. This could be accompanied by employee retention measures such as tuition reimbursement, longevity payments, shift differential pay, and targeted loan forgiveness. On top of that, they should develop training and certification programs for these professionals to improve the quality of services given to persons requiring long-term care. 

Compliance With FMAP and eFMAP Supplemental Payments

As part of the ARP, the federal government provides 100% FMAP for LTSS provided to eligible patients through the Indian Health Service (HIS) or tribal programs. In all states, the care services availed to Medicaid-eligible American Indians or Alaska Natives in tribal facilities can be reimbursed by the Centers for Medicare and Medicaid Services (CMS) at 100% FMAP. 

If you’re a healthcare provider offering LTSS and want to qualify for 100% FMAP for tribal programs, here are the conditions you need to meet:

  • Your tribal health department must provide or at least oversee LTSS. You can achieve this by developing a funding agreement between your tribal health department and tribal aging department to provide LTSS or ensuring your LTSS program is under the tribal health department. 
  • LTSS must be included in a tribe’s 638 contract
  • Your health department must bill your state’s Medicaid office for LTSS

In addition, section 9811 of the ARP indicates that all Medicaid beneficiaries must get covered for COVID-19 vaccine administration without cost-sharing. This includes beneficiaries in groups that receive limited benefits. The new coverage requirement also applies to CHIP enrollees.

There is also a temporary FMAP of 100% for amounts used by the state for vaccines and their administration. The 100% match applies even when Covid-19 vaccination is offered as part of a benefit. A good example is when it’s offered as an accompanying service in a Medicaid nursing facility.

When COVID-19 vaccines are federally purchased, providers should not bill for the vaccine doses, while states shouldn’t make claims to Medicaid for federal financial participation for the vaccine doses. Instead, providers should bill, and states should make claims for vaccine administration. Also, any billing or claim should apply from the date when the ARP was enacted, that is, March 11, 2021. 

Fiscal Reporting Requirements for FMAP Funding

Part of the FMAP rate increase goes to funding mental health services. However, the Office of Mental Health — through its Community Budget and Financial Management (CBFM) group — has fiscal reporting requirements for FMAP funding. These include:

  • A Quarterly Expenditure Report must be used for all federally funded contracts, purchase orders, and state aid letters awards given to local providers and local government units. 
  • Providers must follow Generally Accepted Accounting Principles (GAAP) when reporting expenses and revenues within the Consolidated Fiscal Report. They should also submit the Quarterly Reports at the end of every calendar quarter until they have exhausted their grant reward. 
  • The complete Expenditure report must be sent via email to CBFM-FedralUnit& by the set reporting deadlines. It should be accompanied by all backup documentation for expenses claimed. 
  • The Expenditure report must have the following subject line:

Quarterly Expenditure Report – Title of Project – Provider Name –Contract or PO Number

Ensure 100% FMAP Compliance With Empeon

If you are a healthcare provider, the FMAP temporary changes can help you improve the scope and quality of your services. Part of this may include expanding your workforce, although this comes with various challenges, from the recruitment process to the management of the employees. With the recent FMAP rate increased funding, you may even need to change the payment plans of your existing employees, making the process further complicated. Not forgetting the challenge of maintaining compliance with FMAP and eFMAP supplemental payments. 

At Empeon, we are committed to making technology work for you. Using our smart and intuitive software tools and systems, you can effectively handle talent management, payroll and compliance, benefits administration, and reporting with minimal hassle. Book a demo today to learn how we can help you comply with FMAP requirements.

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