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Congressional Research Service
Informing th legislitive dbate sinco 1914
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, the Commonwealth
of the Northern Mariana Islands [CNMI], Guam, Puerto
Rico, and the U.S. Virgin Islands [USVI]) 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 Social Security Act (SSA) 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 USVI, most of the eligibility
and benefit requirements for the states apply. However, the
Government Accountability Office (GAO) has documented
that these three territories had not met these requirements.
Medicaid financing for the territories is different from the
financing for the states and DC. Federal Medicaid funding
to the states and DC is open-ended, but 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.
Federal Medicaid Funding
Federal Medicaid funding for the territories comes from
different sources: annual federal capped funding and SSA
Section 1935(e) funding. In addition, Puerto Rico may
receive additional federal Medicaid funding (1) if Puerto
Rico establishes a floor for Medicaid physician payment
rates and (2) if certain program integrity conditions are met.
American Samoa, CNMI, Guam, and the USVI are eligible
for additional federal Medicaid funding for improving,
updating, or enhancing a Medicaid data system.
Annual Federal Capped Funding
The main source of federal Medicaid funding for the
territories is the annual federal capped funding. For all the
territories, once the cap is reached, 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, (2)
design and operation of the claims and eligibility systems,
and (3) services for citizens of Freely Associated States (the
Marshall Islands, Micronesia, and Palau). Also, for Puerto
Rico and USVI, Medicaid Fraud Control Unit expenditures
Updated June 22, 2023
are disregarded. For American Samoa, CNMI, Guam, and
USVI, the Medicaid data systems improvement
expenditures are disregarded.
The annual federal capped funding for the territories was
supplemented by various sources of federal funding from
July 1, 2011, through December 31, 2019. Then, as shown
in Table 1, the FY2020 and FY2021 annual federal capped
funding for the territories was significantly increased to be
comparable to what the territories had received in recent
years through the combination of the annual federal capped
funding and the supplemental Medicaid funding.
For FY2022, the Centers for Medicare & Medicaid Services
(CMS) construed the effect of the amendments that
provided federal Medicaid funding to the territories in
FY2020 and FY2021 as providing federal Medicaid
funding to the territories comparable to the annual federal
capped funding provided in either FY2020 (for Puerto
Rico) or FY2021 (for the other territories).
Table 1. Annual Federal Capped Funding,
FY20 1 9-FY2023
($ in millions)
FY19 FY20 FY21 FY22 FY23
American $12 $86 $86 $88 $90
Samoa
CNMI 7 63 62 64 66
Guam 18 131 130 133 137
Puerto 367 2,716 2,809 2,943 3,275
Rico
USVI 18 129 128 131 135
Total $422 $3,125 $3,215 $3,360 $3,704
Source: Communication from Centers for Medicare & Medicaid
Services (CMS) June 2019 for FY2019; Social Security Act § 108(g)
for FY2020 and FY2021; CMS letters to territories September 2021
for FY2022; and communication from CMS April 2023 for FY2023.
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
USVI = U.S. Virgin Islands. May not sum to totals due to rounding.
FY20 19 funding was supplemented by other funding sources.
Currently, the annual federal capped Medicaid funding is
determined differently for American Samoa, CNMI, Guam,
and USVI than for Puerto Rico.
The annual federal capped funding for Medicaid for
American Samoa, CNMI, Guam, and USVI varies by
territory and increases annually according to the change in
the medical component of the Consumer Price Index for All
Urban Consumers (CPT-U). The FY2023 annual federal](ViewImageLocal?handle=hein.crs/govemaf0001&div=1&collection=&method=preview&ext=.png&size=3)