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Medicaid Financing for the Territories
Medicaid is a joint federal-state program that finances the
delivery of medical services for low-income individuals.
The territories (i.e., American Samoa, Commonwealth of
the Northern Mariana Islands [CNMI], Guam, Puerto Rico,
and the U.S. Virgin Islands) operate Medicaid programs
under rules that differ from those applicable to the 50 states
and the District of Columbia (DC).
American Samoa and CNMI operate their Medicaid
programs under the Section 19020) waiver authority. Under
these waivers, the only Medicaid requirements that may not
be waived are (1) the federal medical assistance percentage
(FMAP) rate (i.e., federal matching rate); (2) the annual
federal capped funding; and (3) the requirement that
Medicaid payments are for services otherwise coverable.
For Guam, Puerto Rico, and the U.S. Virgin Islands, most
of the eligibility and benefit requirements for the states
apply. However, the Government Accountability Office has
documented that these three territories do not cover all of
the federally mandated coverage groups or benefits.
Medicaid financing for the territories is different from the
financing for the states. Federal Medicaid funding to the
states and DC is open-ended, but the Medicaid programs in
the territories are subject to annual federal capped funding.
The FMAP rate for the territories is not determined using
the FMAP formula used for the states and DC.
The federal Medicaid funding for the territories comes from
a few different sources. The permanent source of federal
Medicaid funding for the territories is the annual federal
capped funding, which has been supplemented by various
funding sources since July 1, 2011.
Figure 1 shows the proportion of each territory's federal
Medicaid funding from annual federal capped funding and
additional Medicaid funding in FY2020. The aggregate
total of the annual federal capped funding for the territories
is $431.5 million, and the aggregate additional federal
Medicaid funding for all the territories is $3.1 billion. After
each territory spends through its capped funding, it has
access to additional federal Medicaid funding.
Usually, the territories also receive Section 1935(e) of the
Social Security Act (SSA) funding in addition to the annual
federal capped funding, but for FY2020 and FY2021, the
1935(e) funding comes out of the additional Medicaid
funding. Section 1935(e) funding is sometimes referred to
as the enhanced allotment program (or EAP), and
territories receive these funds in lieu of their residents being
eligible for low-income subsidies under Medicare Part D.
The territories can use this funding to provide prescription
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Updated May 27, 2020
drug coverage under Medicaid for low-income Medicare
beneficiaries.
Figure I. Proportion of Federal Medicaid Funding
from Annual Capped Funding and Additional Funding
(FY2020)
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80%
13 0% 2 125 13%
0 %. - - -.... ........... ...
Aneo Copped Funding \ Additior-o Mediid iurdirg
Source: SSA §1 108(g)(2) and (6); Medicaid and CHIP Payment and
Access Commission, Medicaid and CHIP in the Territories, April 2020.
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
USVI = U.S. Virgin Islands.
The Medicaid programs in the territories are subject to
annual federal capped funding. These Medicaid cap
amounts vary by territory and increase annually according
to the change in the medical component of the Consumer
Price Index for All Urban Consumers. Once the cap is
reached, absent additional federal funding, the territories
assume the full cost of Medicaid services or, in some
instances, may suspend services or cease payments to
providers until the next fiscal year.
Certain Medicaid expenditures are disregarded for purposes
of the annual federal capped funding, such as (1) Medicaid
Electronic Health Record Incentive Program payments and
(2) design and operation of the claims and eligibility
systems. Also, for Puerto Rico and the U.S. Virgin Islands,
Medicaid Fraud Control Unit expenditures are disregarded.
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Prior to the Patient Protection and Affordable Care Act
(ACA; P.L. 111-148, as amended), all five territories
typically exhausted their federal Medicaid annual federal
capped funding before the end of the fiscal year. For this
reason, the ACA included additional Medicaid federal
funding for all of the territories. Certain territories received
additional federal funding through the Consolidated
Appropriations Act, 2017 (P.L. 115-31); the Bipartisan
Budget Act of 2018 (P.L. 115-123); and the Additional
Supplemental Appropriations for Disaster Relief Act, 2019
(P.L. 116-20). All of these funds expired on either
September 30, 2019, or December 31, 2019.
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