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GAO-20-571R 1 (2020-07-14)

handle is hein.gao/gaobaebil0001 and id is 1 raw text is: G A O U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 July 14, 2020 The Honorable Ron Johnson Chairman Committee on Homeland Security and Governmental Affairs United States Senate Medicaid: Primer on Financing Arrangements Dear Mr. Chairman: Medicaid-a joint, federal-state program that finances health care coverage for low-income and medically needy populations-covered an estimated 76 million individuals at an estimated cost of $668 billion in fiscal year 2019, about $420 billion of which was federal spending. The federal government and states share responsibility for financing Medicaid expenditures. The Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) that oversees Medicaid, generally matches each state's Medicaid expenditures for health care services according to a statutory formula.1 These expenditures include payments for care provided to Medicaid beneficiaries, such as base payments and supplemental payments to providers. Unlike base payments, which include fee-for-service or capitated payments, supplemental payments are not specifically tied to care for individual enrollees, but may help offset any remaining costs of care for Medicaid enrollees. Federal law requires that states finance at least 40 percent of their share of total Medicaid expenditures through state funds; within limits, however, they can use other funding sources as well. For example, states can finance their nonfederal share of Medicaid expenditures through funds transferred from local governments, known as intergovernmental transfers; or through local government expenditures, known as certified public expenditures. States can also finance the nonfederal share through taxes levied on providers. States can use these financing arrangements to finance any type of Medicaid expenditure. We found in past work that states rely heavily on local government expenditures and taxes on providers to finance supplemental payments, sometimes in ways that lowered the amount the state contributed to Medicaid expenditures while increasing payments to providers and shifting responsibility for a larger share of the payments to the federal government. 2 You asked us to provide information describing Medicaid financing arrangements used by states. Enclosure 1 includes a primer on this topic, describing the most common types of financing arrangements used by states to fund their nonfederal shares of Medicaid 1The formula is designed such that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average. For fiscal year 2020, states' federal matching rates range from 50.00 percent to 76.98 percent. The federal government reimburses states for a portion of their expenditures based on each state's match rate. 2See GAO, Medicaid Financing: States' Increased Reliance on Funds from Health Care Providers and Local Governments Warrants Improved CMS Data Collection, GAO-1 4-627 (Washington, D.C.: July 29, 2014). GAO-20-571R Medicaid Financing Primer Page 1

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