[Congressional Record Volume 151, Number 61 (Wednesday, May 11, 2005)]
[Senate]
[Pages S4956-S4958]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Ms. Snowe, Mr. Rockefeller, Mrs. 
        Hutchison, Mr. Reid, and Mr. Jeffords):
  S. 1007. A bill to prevent a severe reduction in the Federal medical 
assistance percentage determined for a State for fiscal year 2006; to 
the Committee on Finance.
  Mr. BINGAMAN. Mr. President, today I am introducing legislation with 
Senators Snowe, Rockefeller, Hutchison, Reid, and Jeffords that would 
increase Medicaid Federal matching payments to 28 States by addressing 
a problem with the Medicaid funding formula that is expected to result 
in a majority of States in the country having their Federal matching 
rate drop this coming fiscal year.
  Our legislation, the ``Medicaid Formula Fairness Act of 2005,'' would 
protect these 28 States from decreases in the amount of Federal funding 
they can expect to receive in fiscal year 2006. For the vulnerable low-
income children, pregnant women, disabled, and senior citizens that the 
Medicaid programs in those 28 States serve. This legislation may be the 
only thing preventing them from losing their health benefits and 
joining the ranks of our Nation's uninsured, which is already at 45 
million people.
  In New Mexico, more than one-in-five or over 400,000 New Mexicans are 
uninsured and the State is facing a $78 million reduction in the 
federal Medicaid matching rate for fiscal year 2006. This is not the 
result of a dramatic upswing in the economy in New Mexico. The most 
recent poverty data from the U.S. Census Bureau actually indicates an 
upswing in the percentage of New Mexicans in poverty at 18 percent--the 
second highest poverty rate in the country.
  Thus, at the very time when there are more people in need of medical 
care through the Medicaid program, the Federal Government is apparently 
reducing its assistance through Medicaid. So how is this possible?
  The first problem is with the Medicaid matching formula itself. It is 
based on per capita income, which was established as a proxy for both 
need and State capacity many years ago. We now have much better data on 
what should be the factors in the Medicaid formula, including poverty 
and total taxable resource measures, but the old proxy of per capita 
income remains.
  Despite numerous reports from the General Accounting Office, the HHS 
inspector general, and outside organizations calling for such an update 
to the Federal Medicaid formula, nothing has happened over the years. 
Rather than fighting that battle again, our legislation acknowledges 
that we are stuck with per capita income as the formula factor. 
Instead, we take issue with how that factor is dropping Federal 
matching rates across the Nation while the national poverty rate 
continues to rise. Again, how is this possible?
  In the fall of 2004, the Centers for Medicare and Medicaid Services, 
CMS, published the Federal Medical Assistance Percentage, or FMAP, for 
fiscal year 2006 based on per capital income, PCI, data from 2001, 
2002, and 2003. According to the Federal Funds Information for States, 
FFIS, Issue Brief in September 2004, changes in the FMAP will 
cause States to lose a net $527 million in Federal matching funds in 
the Medicaid Program with decreases of $867 million to 29 States 
partially offset by increases for 9 States.

  CMS acknowledges that 29 States will lose Federal funding, nine 
States will gain, and the balance of the States will not be impacted by 
the Medicaid changes because the latter group of 12 States are already 
at the statutory minimum FMAP of 50 percent.
  Federal law dictates that the FMAP is determined based on the ``three 
most recent calendar years for which satisfactory data are available 
from the Department of Commerce.'' Thus, for fiscal year 2006, the PCI 
data used is from the years 2001, 2002, and 2003. The Federal intent of 
a 3-year rolling average is to limit the fluctuations that States might 
experience since only one-third of the formula is changed on a yearly 
basis. In other words, Congress felt it important enough to limit the 
fluctuations in the matching rate through the 3-year rolling average of 
PCI data that the result is the use of data from 2001 for the 
calculation of the fiscal year 2006 FMAP.
  However, as analysis by the Oklahoma Health Care Authority indicates, 
in the case of the calculation, of the fiscal year 2006 FMAP, the U.S. 
Department of Commerce's Bureau of Economic Analysis, BEA, performed a 
comprehensive revision of its calculation of PCI in 2003, as it does 
every 4 to 5 years, and provided revised data for previous years as 
well. As a result, CMS changed the 2001 and 2002 PCI data for States in 
the calculation, Consequently, all 3 years of the PCI data were being 
changed rather than just one-third.
  The result is rather dramatic fluctuations--mostly negative--to State 
FMAP calculations, As the FFIS Issue Brief indicated, ``Fifteen States 
are projected to have changes of greater than one percentage point in 
fiscal year 2006, compared to only three for FY 2005.'' Not since 1998 
have the fluctuations been this dramatic.
  According to the Congressional Research Service (CRS), the average 
change in the FMAP between fiscal year 2001 and fiscal year 2002 was 
-0.26 percentage points, for fiscal year 2003 it was +0.32, for fiscal 
year 2004 it was +0.12, and for fiscal year 2005 it was -0.09. Thus, 
over this 4-year period, the average change in the national FMAP was 
less than 0.2 percentage points. However, due in part to the 
rebenchmarking of data by BEA, the fiscal year 2006 change in the FMAP 
will be -0.55 percentage points. Compared to average change over the 
preceeding 4 years, the fiscal year 2006 FMAP change will be almost 
three times as dramatic.
  As a result, 29 States will absorb a decline in the FMAP for fiscal 
year 2006. The Oklahoma Health Care Authority estimates that this will 
cost those States $860 million. The largest projected percentage point 
decreases are for Alaska, -7.42, Wyoming, -3.67, New Mexico, -3.15, 
Oklahoma, -2.27, Maine, -1.99, West Virginia, -1.66, North Dakota, 
-1.64, Vermont, -1.62, Utah, -1.38, Montana, -1.36, Alabama, -1.32, 
Louisiana, -1.25, Nevada, -1.14, and Mississippi, -1.08.
  The largest dollar declines would be experienced by the states of New 
Mexico, -$79 million, Louisiana, -$72 million, Alaska, -$69 million, 
Tennessee, -$68 million, Oklahoma, -$66 million,

[[Page S4957]]

Alabama, -$55 million, and Maine, -$47 million.
  FFIS adds, ``While the changes in FY 2006 are significant, for many 
states they only add to previous reductions. Thirteen states (Alaska, 
Kentucky, Louisiana, Maine, Montana, New Mexico, North Dakota, 
Oklahoma, Rhode Island, Vermont, West Virginia, Wisconsin, and Wyoming) 
will experience three consecutive reductions--from the fiscal relief 
FMAP to the base FMAP in FY 2004 to a second reduction in FY 2005 and a 
third in FY 2006. The cumulative 5-year reduction for a number of 
States is large, and for many unprecedented--Wyoming (-10.37), Alaska 
(-9.97), North Dakota (-4.14), Vermont (-3.91), Oklahoma (-3.33), Maine 
(-3.22), and South Dakota (-3.24).''
  The loss in funds to these 29 States is already resulting in planned 
cuts in benefits and services to Medicaid eligible recipients, such as 
low-income children, pregnant women, the elderly and disabled, and 
decreased reimbursement to Medicaid providers, including physicians, 
hospitals, nursing homes, community health centers, etc.
  In an effort to minimize the dramatic fluctuations in the Fiscal Year 
2006 FMAP, this legislation would limit the loss of States in the FMAP 
to 0.5 percentage points, which restores $442 million of the lost 
Medicaid dollars to 18 States. The bill would also give 10 additional 
States a higher FMAP if changes to PCI for 2001 and 2002 were not 
retroactively applied by CMS. This translates to approximately $229 
million for a total of $671 million. This is still far less than the 
$860 million lost to the 29 States by FMAP reductions.
  Therefore, this legislation I am introducing with Senator Snowe and 
others does not hold States entirely harmless. However, it does limit 
the losses in Federal Medicaid matching funds that States are expected 
to absorb due to problems with the use of per capita income as a factor 
in the Medicaid formula but also in how it is used. Our legislation 
mitigates those problems, and does so with the expressed intent of 
preventing millions of additional Americans from joining the ranks of 
the uninsured as many of our States will be forced to undertake cuts to 
the Medicaid program to make up for lost Federal funding.
  Specifically, the bill allows States to get the better of: 1. the 
FMAP as calculated by CMS; 2. a recalculated FMAP without retroactively 
changing the 2001 and 2002 per capita income data; or, 3. a hold 
harmless limiting the reduction in the FMAP to 0.5 percentage points.
  In New Mexico, for example, the ``Medicaid Formula Fairness Act of 
2005'' would restore $66 million of the $78 million that New Mexico is 
scheduled to lose due to the drop in the Federal Medicaid matching 
rate. The other 27 States that would benefit from the legislation and 
the estimated amount they would receive are as follows: Texas--$113 
million, New Mexico--$66 million, Alaska--$64 million, Oklahoma--$52 
million, Louisiana--$43 million, Maine--$35 million, Alabama--$34 
million, West Virginia--$27 million, Tennessee--$27 million, Florida--
$25 million, Mississippi--$22 million, Arizona--$22 million, Nevada--
$17 million, Arkansas--$14 million, Utah--$14 million, North Carolina--
$14 million, Wyoming--$13 million, Vermont--$10 million, Wisconsin--$9 
million, Rhode Island--$8 million, Georgia--$8 million, Oregon--$6 
million, North Dakota--$6 million, Montana--$6 million, South 
Carolina--$6 million, Idaho--$5 million, South Dakota--$3 million, and 
Kansas--$2 million.
  I would like to thank the Oklahoma Health Care Authority, including 
Mike Fogarty and Stephen Weiss, for their outstanding work in analyzing 
the problem with the Fiscal Year 2006 FMAP and for their technical 
assistance and counsel toward the introduction of this legislation. I 
would also like to thank Senators Snowe, Rockefeller, Hutchison, Reid, 
and Jeffords for providing bipartisan support as original cosponsors of 
this important legislation.
  I ask unanimous consent that the text of the bill and a letter be 
printed in the Record.
  There be no objection, the material was ordered to be printed in the 
Record.

                                S. 1007

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicaid Formula Fairness 
     Act of 2005''.

     SEC. 2. LIMITATION ON SEVERE REDUCTION IN THE MEDICAID FMAP 
                   FOR FISCAL YEAR 2006.

       (a) Limitation on Reduction.--In no case shall the FMAP for 
     a State for fiscal year 2006 be less than the greater of the 
     following:
       (1) Half percentage point decrease.--The FMAP determined 
     for the State for fiscal year 2005, decreased by 0.5 
     percentage points.
       (2) Computation without retroactive application of 
     rebenchmarked per capita income.--The FMAP that would have 
     been determined for the State for fiscal year 2006 if the per 
     capita incomes for 2001 and 2002 that was used to determine 
     the FMAP for the State for fiscal year 2005 were used.
       (b) Scope of Application.--The FMAP applicable to a State 
     for fiscal year 2006 after the application of subsection (a) 
     shall apply only for purposes of titles XIX and XXI of the 
     Social Security Act (including for purposes of making 
     disproportionate share hospital payments described in section 
     1923 of such Act (42 U.S.C. 1396r-4) and payments under such 
     titles that are based on the enhanced FMAP described in 
     section 2105(b) of such Act (42 U.S.C. 1397ee(b))) and shall 
     not apply with respect to payments under title IV of such Act 
     (42 U.S.C. 601 et seq.).
       (c) Definitions.--In this section:
       (1) FMAP.--The term ``FMAP'' means the Federal medical 
     assistance percentage, as defined in section 1905(b) of the 
     Social Security Act (42 U.S.C. 1396d(b)).
       (2) State.--The term ``State'' has the meaning given such 
     term for purposes of title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.).

     SEC. 3. REPEAL.

       Effective as of October 1, 2006, section 2 is repealed and 
     shall not apply to any fiscal year after fiscal year 2006.


                                American Hospital Association,

                                   Washington, DC, March 28, 2005.
     Hon. Jeff Bingaman,
     U.S. Senate,
     Washington, DC.
       Dear Senator Bingaman: On behalf of our 4,700 hospital, 
     health care system, and other health care provider members, 
     and our 31,000 individual members, the American Hospital 
     Association (AHA) is writing to express our support for your 
     legislation to limit FY 2006 Medicaid federal medical 
     assistance percentage (FMAP) reductions.
       Recently the Bureau of Economic Affairs in the Department 
     of Commerce re-benchmarked per capita income for states, and 
     the Centers for Medicare & Medicaid Services (CMS) 
     retroactively applied the changes. The Medicaid FMAP uses a 
     three-year rolling average to smooth out dramatic changes in 
     the states' matching rates from year-to-year. By 
     retroactively applying the new benchmark, however, CMS 
     undermined the rationale of the three-year rolling average; 
     therefore 22 states will see their FMAP drop by more than 0.5 
     percentage points in FY 2006--a reduction of an estimated 
     $752 million in FY 2006. About $550 million of this is due to 
     the retroactive recalculation.
       The prospect of more Medicaid hospital payment reductions 
     due to decreased federal Medicaid funding is a serious threat 
     to the viability of hospitals and the patients they serve. We 
     realize that it is critical that states provide their share 
     of the state-federal Medicaid funding match in order for 
     vulnerable citizens to obtain and retain health care coverage 
     and health services. Your legislation would help states by 
     limiting the FMAP drop to 0.5 percent, restoring $468 million 
     of the funds that are lost due to the recalculation of per 
     capita income.
       We applaud your leadership on this issue and support 
     enactment of this legislation.
           Sincerely,
                                                     Rick Pollack,
                                         Executive Vice President.

  Ms. SNOWE. Mr. President, I am pleased to join Senator Bingaman 
today, along with Senators Rockefeller, Hutchison, Reid, and Jeffords, 
in introducing the Medicaid Formula Fairness Act of 2005. This 
legislation will provide a temporary increase in Medicaid Federal 
matching payments to 28 States and thereby avoid a significant loss 
funds which would otherwise occur due to a precipitous and unpredicted 
drop in the Federal matching rate for these States next year.
  Medicaid provides essential medical care to low-income children, 
pregnant women, parents of dependent children, senior citizens, and 
people with disabilities and functions as a critical safety net for our 
most vulnerable populations. Enrollment in the Medicaid program has 
grown by nearly one-third since the beginning of 2001, as the numbers 
of those in poverty and individuals without private health insurance 
continues to increase. In Maine, where we have an older and less 
wealthy population, more than 300,000 people were enrolled in Medicaid 
last year. One in five individuals in the State now receives health 
care services through MaineCare, the State's Medicaid program.

[[Page S4958]]

  States have experienced severe fiscal stress during the last few 
years, with sharp declines in revenues and budget shortfalls. This 
economic downturn, from which many States are only now emerging, has 
continued to leave many families jobless and without health insurance, 
forcing to turn to Medicaid. This has put an enormous strain on the 
States such as Maine which are already strapped with budget shortfalls. 
Many States reduced Medicaid benefits last year and even more 
restricted Medicaid eligibility in an effort to satisfy their budgetary 
obligations.
  The formula for calculating the Federal matching rate, known as the 
Federal Medical Assistance Percentage, FMAP, which determines the 
Federal Government's share of Medicaid expenditures, has contributed to 
the Medicaid problems that States are facing. The FMAP formula is 
designed so that the Federal Government pays a larger portion of 
Medicaid costs in States with a per capita income lower than the 
national average. Since Maine is a relatively poor State with a 
disproportionately large low-income elderly population, it has had a 
favorable Federal-State match in recent years, 66 percent in 2004. This 
translated to $1.4 billion in Federal dollars last year--two-thirds of 
MaineCare's $2 billion in Medicaid spending.
  The size of Maine's Medicaid population means that any change in the 
FMAP has a disproportionately significant impact on Maine's budget. 
This year, Maine's Federal matching rate decreased from 66.01 percent 
to 64.89 percent, a drop of more than one percent. The change in FMAP 
for FY2006 is even greater and will cause 28 States, including Maine, 
to lose a significant amount of Federal matching funds next year. 
Maine's Federal matching rate will drop nearly two points, from 64.89 
percent to 62.9 percent next year, which will result in Maine losing 
$46.7 million in Federal matching funds.
  Under existing Federal law, the FMAP is determined based on the three 
most recent calendar years for which data is available from the 
Department of Commerce. This 3 year ``look back'' captures a period of 
time that is not necessarily reflective of a State's current financial 
situation. The FMAP for FY 2003, for example, was calculated in 2001 
for the fiscal year beginning October 2002. The FY 2003 FMAP was 
determined on the basis, of State per capita income over the 3 year 
period of 1998 through 2000, when State economies were growing 
significantly. Yet in 2003, when this matching rate was in effect, a 
serious economic downturn was affecting many State budgets, and that 
downturn has contributed greatly to the growth of Medicaid for several 
years now.
  We recognized this situation in the last Congress and provided for 
State fiscal relief by providing a temporary increase in the Federal 
Medicaid matching rate, which provided $10 billion in fiscal relief to 
States during fiscal 2003 and 2004, when we passed the Jobs and Growth 
Tax Relief Reconciliation Act of 2003 but that temporary Federal fiscal 
relief has now ended.
  This Congress has reached a budget agreement which, among its terms, 
calls for reductions of $10 billion in Medicaid spending over the next 
5 years. At this time, therefore, it is especially crucial that we 
continue to provide sufficient Federal matching funds for Medicaid, 
which has worked so well over the last 40 years. Our legislation is 
intended to be just a short term fix, for fiscal year 2006. It is my 
hope that we will see the creation of a Medicaid Commission to 
undertake a comprehensive review of the Medicaid program and make 
recommendations on how to make Federal matching payments more equitable 
with respect to the States and the populations they serve, as well as 
how to make them more responsive to changes in States' economic 
conditions.
  However, today, states such as Maine are facing dramatic and 
unpredictable fluctuations to their State FMAP formulas. This 
legislation would limit the percentage decrease to a half percentage 
point for fiscal year 2006 and help mitigate the drastic effects that a 
severe loss Federal funding would have on our Medicaid population next 
year.
  I therefore urge my colleagues to join us supporting this legislation 
to help sustain funding for Medicaid in fiscal year 2006 to help ensure 
that this critical health care safety net remains intact next year for 
those who need it most.

                          ____________________