GAO Report: Formula Would Provide Targeted, Immediate Assistance to States During National Economic Downturns - November 15, 2011

According to a Nov. 10 report released by the U.S. Government Accountability Office (GAO), the institution of a temporary increased Federal Medical Assistance Percentages (FMAP) formula would offer a timely, targeted way of providing states with temporary Medicaid assistance in the event of a national economic downturn. A sustained decrease in a threshold number of states’ (26 in the prototype formula) employment-to-population (EPOP) ratio would automatically trigger an FMAP increase to a state, and assistance would end when fewer than the threshold number of states show a sustained decrease in their EPOP ratio. The targeted assistance would be calculated based on a state’s increase in employment and reductions in total wages and salaries.

GAO used the 2007 recession as an example to evaluate the prototype formula. According to the report, the proposed assistance would better facilitate state budget planning, provide states with greater financial stability, and better align federal assistance with the impact of an economic downturn on states.