The FMAP for each state defines the percentage shares of federal and state funding for Medicaid payments associated with a particular federal fiscal year (October 1 – September 30). If FMAP is 0.60 the federal share of a Medicaid payment will be 60%, and the state share will be 40%. In other words, in order to obtain federal Medicaid assistance, the state must contribute 40 cents of each Medicaid dollar paid to a service provider. If FMAP is 0.60, and the state contributes $1 toward a Medicaid payment, the federal share will be $1.50, for a total payment of $2.50. Thus the state receives a return on this dollar of 150% or a multiple of 1.5–sometimes referred to as the multiplier.
The state portion of Medicaid payments is assumed by the federal authorities to be based on state and/or local government revenues. Routine Medicaid payments typically are funded through state legislative appropriations, as are some supplemental payments. However, many states fund part of their Medicaid programs through local governmental entities such as cities, counties, hospital districts, and Local Provider Participation Funds (LPPFs). In such cases, the “state” portion of the Medicaid payment is sent to the state from the local entity by means of an on-line Inter- Governmental Transfer (IGT).
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Last Modified: September 13, 2016
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