Issue Brief 10-17
April 27, 2010

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) contains provisions that increase Medicaid grants to states for 27 months by increasing their Federal Medical Assistance Percentages (FMAPs), the share of state programs paid by the federal government. The bonus increases can change each quarter based on recent state unemployment rates compared to a base rate. The preliminary quarterly unemployment bonuses are calculated when preliminary unemployment data for the month prior to the start of the quarter are released by the Bureau of Labor Statistics (BLS). Those quarterly FMAPs are recalculated once final unemployment data for the month are available.  

On April 16, 2010, BLS published preliminary state unemployment data for March 2010. Publication of these data permit calculation of the preliminary third quarter ARRA FMAPs for federal fiscal year (FY) 2010 and, as a result, preliminary Medicare Part D clawback multipliers for the same period. In the third quarter bonus calculation, the annual update to the historical unemployment data released by BLS last month is used to adjust the base rate (states’ lowest three-month average unemployment rate since January 2006). Even with this change, FFIS estimates show that third quarter ARRA FMAPs are identical to second quarter FMAPs.  

FFIS also uses the new data to estimate ARRA FMAPs for the last two quarters of the adjustment period (July 1, 2010-December 31, 2010). ARRA requires that the bonus increases for these quarters rely on data for the three consecutive-month period beginning with December 2009 or January 2010, whichever results in a higher FMAP increase. At the same time, the hold-harmless period for the unemployment bonuses expires on July 1, 2010. According to FFIS calculations, 41 states and the District of Columbia will remain at the highest tier during the last two quarters, while two states could drop to a lower tier.