Federal Financial Participation (FFP) Available to States to Help Offset their Medicaid Spend

From the desk for Craig Douglas-VP of Payer and Member Relations at VGM Group

At the end of 2017, and stemming from language contained within the 21st Century CURES Act, the Medicaid directors in every state received a letter from CMS which outlined the amount of Federal Financial Participation (FFP) that was available to states to help offset their Medicaid spend. The maximum amount of FFP available to states was limited to Medicare rates. In essence, if a state paid out more than Medicare rates, they would be “on the hook” financially for any overage above the Medicare fee schedule. This left many states scrambling to adjust their Medicaid fee schedules going forward, so that they wouldn’t be on that proverbial financial hook for payments made that were above and beyond the Medicare rates.

With the release of the IFR last week, Medicare allowable rates for rural areas have been increased for the final 7 months of 2018. Therefore, at least for claims in rural areas, states will be eligible for additional funds via the Federal Financial Participation (FFP) on the Medicaid book of business handled by the states directly (rather than through an MCO). Since the IFR increases Medicare’s reimbursement rates in rural areas, and since many states have large areas that are considered rural, the upper payment limit, and therefore the FFP available to the states on those claims, will be higher for claims submitted in rural areas with dates of service between 6/1/18 and 12/31/18.

As states were scrambling to make decisions and trying to get or remain in compliance with the new guidance from CMS, many of them chose to set their Medicaid fee schedules to match the Medicare fee schedule that was in place at the beginning of the year. The information that they were using to make those decisions has now changed, so perhaps their decision should change as well. Since the IFR has changed the Medicare rates and therefore the amount of FPP available to states on their rural Medicaid claims, we encourage all of you to remain engaged (or re-engage) with your state Medicaid programs and ask them to adjust their Medicaid fee schedules based on the Medicare rates that will be in place for the remainder of 2018.

Feel free to reach out to me if you have additional questions.

Craig Douglas
Vice President of Payer and Member Relations
The VGM Group
Office: 877-218-2825