Medicaid is a needs-based, entitlement program that is designed to help states meet the costs of necessary health care for low-income and medically needy populations. When a Medicaid State Plan is approved by the Centers for Medicare & Medicaid Services (CMS), states qualify to receive Federal matching funds to finance Medicaid services (see Box). States have substantial flexibility to design their programs within broad Federal requirements related to eligibility, services, program administration, and provider compensation.
Federal Medical Assistance Percentage (FMAP)
The Federal governments share of medical assistance expenditures under each states Medicaid program, known as the Federal medical assistance percentage, is determined annually by a formula that compares the states average per capita income level with the national average. States with higher per capita incomes are reimbursed smaller shares of their costs. By law, FMAP cannot be lower than 50 percent or higher than 83 percent. States are also reimbursed for 50 percent of administrative costs. For fiscal year 2009, the FMAP ranged from 50 percent in California and several other states to 75.84 percent in Mississippi.2