NC’s Price of Medicaid Expansion: And the Federal Gov’s Contribution

Exactly  how much has the federal government contributed to NC Medicaid?  Throughout the years, I’ve heard 75%, 2/3, and as low as 60%.  So I wanted to find out exactly how much the federal government gives North Carolina. I also wanted to compare the percentage to other states. And what will change if NC expands Medicaid? What changes?

Turns out that the Centers for Medicare and Medicaid (“CMS”) offers the historical stats I wanted.

In 2009 (the data for 2010 is not available yet, although it seems that by 2013 the data should be available), North Carolina’s population was 9,380,884.  1,974,287 of those residents were Medicaid enrolled.

In 2009, total Medicaid pay-outs were $10,888,466,523.00 (Yes, folks, that is ten BILLION).

The federal government paid $7,818,867.023.00 or 71.81%.  The State paid $3,069,599,500.00 or 28.29%. The federal government’s 2009 contribution to NC’s Medicaid was higher than the national average, which was 66.30% in 2009.  However, that was not always the case. In 2008, the federal government contributed 64.22% to NC’s Medicaid expenditures. Although it is important to note that in 2008, the national average declined to 57.03%. So NC was still above average.

But why the huge discrepancy? Why in 2008 does the federal government, on average, pay for a little over half the states’ Medicaid costs, and, in 2009, pay, on average, 2/3 of the states’ Medicaid costs?

The federal government pays states for a specified percentage of program expenditures, called the Federal Medical Assistance Percentage (FMAP).

FMAP varies by state based on criteria such as per capita income. The regular average state FMAP is 57%, but ranges from 50% (the minimum) for wealthier states up to 75% in states with lower per capita incomes (the maximum regular FMAP is 82 %). 

This all sounds, to me, like a lot of statistical jargon.  So I went to NC’s historical FMAPs. According to, NC’s FMAP in 2009 was 74.51%. But, according to CMS, the actual federal Medicaid payment was 71.81%. So why the difference? Maybe one of the websites incorrectly calculated the FMAP.  If so, it seems (just by gut) that CMS would have the actual Medicaid costs; thus providing more accurate data.  The State Health Facts website also projected NC’s FMAP up through 2013, so again, it appears that the State Health Facts’ data were more projections.  Just in case you were wondering, the State Health Facts website projected NC’s FMAP for 2013 as 65.51%.

Why will it go down? Apparently, all the factors that contribute to NC’s FMAP.

Well, we also have to consider Obamacare or the Affordable Care Act (ACA). If NC expands Medicaid, from 2014-2016, the federal government will cover 100% of our Medicaid costs (not ALL Medicaid costs) but 100% of costs to cover newly-covered Medicaid recipients.  For example, if the projections are correct and 700,000 more North Carolinians will be covered if NC accepts the ACA, than the federal government will pay for 100% of the newly-eligible 700,000 Medicaid recipients, or, in other words, the federal government will pay 100% of approximately 35% of NC Medicaid costs. The rest of the NC Medicaid costs in 2014, or 65% of overall Medicaid costs, will be paid by the federal government at the normal FMAP amount (somewhere between 60-66%)

Let’s throw out some more projections: Remember, in 2009, the State paid $3,069,599,500.00 or 28.29%. But the FMAP was high at 71.81%. The State Health Facts website projected NC’s FMAP as 65.51% in 2013.  So let’s use 65.51% for 2014 when it is projected that 700,000 more North Carolinians will be Medicaid recipients. In 2009, 1,974,287 people in North Carolina were Medicaid recipients.  For the sake of simplicity, let’s say that by 2014 the number rounds up to 2,000,000 and the projected 700,000 additional Medicaid recipients occurred, as predicted, for a grand total of 2,700,000 North Carolina residents depending on Medicaid.

If we paid $10,888,466,523.00 for 1,974,287 people (both federal money and state money), I think it is a safe approximation that we would pay approximately $11,000,000,000.00 (this number is merely for this example) for 2,000,000 people (the increase in money is for an estimated additional 25,713 Medicaid recipients and the decrease in our projected FMAP). The additional 700,000 Medicaid recipients would cost approximately another $3,850,000,000.00 (assuming about 35% increase is correct with 700,000 more Medicaid recipients).

Thus the projected  grand total of Medicaid costs to NC in 2014 (if NC expands Medicaid) will be approximately $14,738,466,523.00.  The federal government, based on these estimations, will pay approximately $3,850,000,000 (100% of newly-eligible persons’ Medicaid costs) + $7,150,000,000 (65% of regular Medicaid costs based on the FMAP) for a total of 11,000,000,000.00.  Leaving the $3,738,466,523.00 for North Carolina to pay.

Seems pretty sweet, right? I mean, our Medicaid costs do not increase terribly and the federal government pays for way more Medicaid costs in NC. However, this sweet deal does not last. Starting sometime after 2016 (the federal government states that the decrease will be “phased in”), the federal government’s portion for the newly-eligible Medicaid recipients decreases from 100% to 90%.

For NC, just the 10%  increase in 2017 means approximately $1,100,000,000.00, increasing NC’s costs for Medicaid payments to up around $4.8 billion. In NC Medicaid history, NC has never paid over 4 billion. But NC will pay way over $4.8 billion in only four years under the ACA.

This is not a blog against Medicaid expansion. I am merely pointing out the financial undertakings and consequences if NC expands. If NC expands, NC must be ready to pay for the Medicaid program.


About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on January 26, 2013, in Affordable Care Act, CMS, Federal Law, Federal Medical Assistance Percentage, Legislation, Medicaid, Medicaid Expansion, Medicaid Funds, North Carolina, Obamacare and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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