COVID-19 and Private Health Insurance Coverage: Frequently Asked Questions

Summary: The Coronavirus Disease 2019 (COVID-19) pandemic is affecting communities around the world and throughout the United States, with case counts growing daily. As private health insurance is the predominant source of health coverage in the United States, there is considerable congressional interest in understanding private health insurance coverage of health benefits related to COVID-19. This report addresses frequently asked questions about private health insurance covered benefits and consumer cost sharing related to COVID-19 testing, treatment, and a potential vaccine. It discusses recent legislation, references existing federal requirements and recent administrative interpretations of them in relation to COVID-19, and notes state and private-sector actions.

Summary: Federal and state health insurance requirements may relate to covered benefits and consumer cost sharing, among many other topics. These requirements can vary by coverage type (i.e., individual coverage, fully insured small- and large-group coverage, and self-insured plans). Covered benefits, consumer costs, and other plan features may vary by plan within each type of coverage, subject to applicable federal and state requirements.

Summary: The following bullets summarize federal requirements related to coverage and cost sharing (which includes deductibles, coinsurance, and copayments) of COVID-19 testing, treatment, and vaccination. Additional details are addressed in the report, including the applicability of the requirements to different types of plans; whether the coverage requirements apply even when furnished by out-of-network providers; whether plans are allowed to impose prior authorization or other medical management techniques; and the applicable dates of any coverage requirements.

Summary: COVID-19 Testing . The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ), as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ), requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, as defined by the acts. This coverage must be provided without consumer cost sharing. COVID-19 Treatment . There are no federal requirements that specifically require coverage of COVID-19 treatment. However, the existing federal requirement that certain plans cover a set of 10 categories of essential health benefits (EHB) is potentially relevant to coverage of COVID-19 treatment items and services, depending on state and plan variation with regard to implementation of this requirement. Even where treatment items and services are required to be covered as EHB, cost sharing could apply. COVID-19 Vaccine . As of the date of this report, there is no vaccine against COVID-19 approved by the Food and Drug Administration (FDA) for use in the United States, although several candidates are in development. The CARES Act requires most plans to cover a COVID-19 vaccine, when available, without cost sharing, if it is recommended by the Advisory Committee on Immunization Practices (ACIP). Similarly, most plans must cover, without cost sharing, any other COVID-19 preventive services that are recommended for use by the United States Preventive Services Task Force (USPSTF).

Summary: Some states have also announced relevant requirements on the plans they regulate, and some insurers have reported that they will cover certain relevant benefits. Several organizations are tracking these announcements, as noted in this report.

Summary: Congressional Research Service (CRS) experts on other topics related to private health insurance and COVID-19, including types of plans and coverage of benefits not addressed in this report, are listed in the Appendix for the benefit of congressional clients. For information on other COVID-19 issues, congressional clients can access the CRS Coronavirus Disease resources page at https://www.crs.gov/resources/coronavirus-disease-2019 .

The Coronavirus Disease 2019 (COVID-19) pandemic is affecting communities around the world and throughout the United States, with case counts growing daily. As private health insurance is the predominant source of health coverage in the United States, there is considerable congressional interest in understanding private health insurance coverage of health benefits related to COVID-19 diagnosis, treatment, and prevention.

This report addresses frequently asked questions about covered benefits and consumer cost sharing related to COVID-19 testing, treatment, and a potential vaccine. It discusses recent legislation, references relevant existing federal requirements and recent administrative interpretations of them in relation to COVID-19, and notes state and private-sector actions. It begins with background information on types and regulation of private health insurance plans.

The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ) requires specified types of private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, without consumer cost sharing. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) further addresses private health insurance coverage of COVID-19 testing, and requires coverage of a potential vaccine and other preventive services without cost sharing, if they are recommended by specified federal entities. There are no federal requirements that specifically require coverage of COVID-19 treatment services. However, one or more existing federal requirements are potentially relevant, as discussed in this report. Some states have also announced requirements related to covered benefits and consumer costs, and some insurers have reported that they will voluntarily cover certain relevant benefits.

This report discusses most U.S. private health insurance plans' coverage of health care items and services related to COVID-19, but it generally does not discuss the delivery of those services, insurers' payments to health care providers, or private health insurance coverage of other benefits. The Appendix lists Congressional Research Service (CRS) analysts who can discuss with congressional clients other topics of interest related to private health insurance and COVID-19, including types of plans and coverage of benefits not addressed in this report. Also beyond the scope of this report are public health coverage programs (e.g., Medicare); the domestic and international public health responses to COVID-19; and economic, human services, and other nonhealth issues. For further information on these topics, congressional clients can access the CRS Coronavirus Disease 2019 resources page at https://www.crs.gov/resources/coronavirus-disease-2019 .

The information in this report is current as of its publication date and may be superseded by subsequent congressional or administrative action. Congressional clients may contact the report author and/or the experts listed in the Appendix for questions about further developments. In addition, Centers for Medicare & Medicaid Services (CMS) guidance related to private health insurance and COVID-19 is compiled on its website.

The private health insurance market includes both the group market (largely made up of employer-sponsored insurance) and the individual market (which includes plans directly purchased from an insurer). The group market is divided into small- and large-group market segments; a small group is typically defined as a group of up to 50 individuals (e.g., employees), and a large group is typically defined as one with 51 or more individuals. Employers and other group health plan sponsors may purchase coverage from an insurer in the small- and large-group markets (i.e., they may fully insure ). Sponsors may instead finance coverage themselves (i.e., they may self-insure ). The individual and small-group markets include plans sold on and off the individual and small-group health insurance exchanges, respectively.

Covered benefits, consumer costs, and other plan features may vary by plan, subject to applicable federal and state requirements. The federal government may regulate all the coverage types noted above (i.e., individual coverage, fully insured small- and large-group coverage, and self-insured group plans), and states may regulate all but self-insured group plans. Federal and state requirements may vary by coverage type.

This report focuses on private-sector plans explained above. There are some variations of these coverage types, and there are other types of private health coverage arrangements, which may or may not be subject to the requirements discussed in this report, or for which there may be other policy questions related to COVID-19. These other coverage types are out of the scope of this report, but a number of them are identified in the Appendix , along with resources for further information.

One coverage variation, grandfathered plans , is included in this report because it is explicitly referenced in legislation relevant to COVID-19 and private health insurance coverage. Grandfathered plans are individual or group plans in which at least one individual was enrolled as of enactment of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), and which continue to meet certain criteria. Plans that maintain their grandfathered status are exempt from some, but not all, federal requirements.

Another type of coverage, short-term, limited duration insurance (STLDI or STLD plans), is also included in this report, because it is explicitly excluded from a coverage definition cited by relevant legislation. STLDI is coverage, generally sold in the individual market, which meets certain definitional criteria. The statutory definition of "individual health insurance coverage" excludes STLDI; thus, STLDI is exempt from complying with all federal health insurance requirements applicable to individual health insurance plans.

FAQ: COVID-19 Covered Benefits and Cost Sharing

The remainder of this report addresses private health insurance coverage of COVID-19 testing, treatment, and vaccination, when a vaccine becomes available. Where there are federal requirements related to such coverage, it is useful to understand the following:

Is the service or item required to be covered? If so, is cost sharing allowed? In general, private health insurance cost sharing includes deductibles, coinsurance, and copayments. Are plans allowed to impose prior authorization or other medical management requirements? For example, some insurers require that they (the insurer) provide prior authorization for routine hospital inpatient care, and/or require that primary care physicians provide approval or referrals for specialty care, as a condition for covering the care. Does the coverage requirement depend on how or where the service or item is furnished (e.g., by an in-network versus out-of-network provider)? Under private insurance, benefit coverage and consumer cost sharing is often contingent upon whether the service or item is furnished by a provider that the insurer has contracted with (i.e., whether that provider is in network for a given plan). In instances where a contract between an insurer and provider does not exist, the provider is considered out of network . When does the coverage requirement go into effect? What types of plans are subject to the coverage requirement?

To the extent that information is available, these issues are addressed with regard to private health insurance coverage of COVID-19 testing, treatment, and vaccination. Table 1 summarizes key information.

Prior to the enactment of the FFCRA ( P.L. 116-127 ), there were no federal requirements specifically mandating private health insurance coverage of items or services related to COVID-19 testing.

Section 6001 of the FFCRA requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services, as defined in the act. Per FFCRA, the coverage must be provided without consumer cost sharing, including deductibles, copayments, or coinsurance. Prior authorization or other medical management requirements are prohibited.

The definition of testing that must be covered was expanded by Section 3201 of the CARES Act ( P.L. 116-136 ). In addition, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Treasury issued an FAQ document on April 11, 2020 (hereinafter, "Tri-Agency April 11 FAQ"), on the private health insurance coverage requirements in FFCRA and the CARES Act. Together, the acts and guidance require coverage of certain tests and services, as summarized below.

Specified COVID-19 diagnostic tests, including both molecular (e.g., polymerase chain reaction, or PCR, tests) and serological tests (i.e., antibody tests), and the administration of such tests are covered. "Items and services furnished to an individual during [visits, as specified below] that result in an order for or administration of [an applicable COVID-19 test], but only to the extent such items and services relate to the furnishing or administration of such product or to the evaluation of such individual for purposes of determining the need of such individual for such product." This definition could encompass additional diagnostic testing associated with the visit. However, it would not encompass treatment for COVID-19-associated illnesses.

The coverage requirements apply to the specified items and services when furnished at visits including to health care provider offices, urgent care centers, emergency rooms, and "nontraditional" settings, including drive-through testing sites. The requirements apply to both in-person and telehealth visits.

FFCRA does not specify whether its coverage requirements apply when the test is furnished by an out-of-network provider. However Section 3202 of the CARES Act addresses insurer payments to in-network and out-of-network providers. In addition, the Tri-Agency April 11 FAQ clarifies that the FFCRA coverage requirements apply both in network and out of network.

The coverage requirements in FFCRA apply only to the specified items and services that are furnished during the COVID-19 public health emergency period described in that act, as of the date the FFCRA was enacted (March 18, 2020).

These requirements apply to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. This includes grandfathered individual or group plans, which are exempt from certain other federal private health insurance requirements. Per the definition of individual health insurance coverage cited in the act, the requirements do not apply to STLDI.

In recent weeks, some states have announced coverage requirements, and some insurers have clarified or expanded their policies, regarding coverage of COVID-19 testing, among other services. However, states cannot regulate self-insured plans, and insurer announcements do not necessarily apply to those plans either. FFCRA does apply to self-insured group plans in addition to the other plan types discussed above.

To the extent that state requirements about or plans' voluntary coverage of COVID-19 testing did not extend as far as FFCRA and CARES Act requirements, the federal laws supersede them. However, state requirements and plans' voluntary coverage may exceed applicable federal requirements, as long as they do not prevent the implementation of any federal requirements.

Even though federal law now requires most plans to cover specified COVID-19 testing services without cost sharing, it may be useful for consumers to contact their insurers or plan sponsors to understand their coverage. Subject to applicable federal and state requirements, coverage of the COVID-19 test and related services and items may vary by plan.

Are Plans Required to Cover COVID-19 Treatment?

Essential Health Benefits Guidance on COVID-19 Coverage

Although FFCRA requires certain plans to cover specified COVID-19 testing services without cost sharing, neither FFCRA nor the CARES Act mandates coverage of COVID-19 treatment services. There is no federal requirement specifically mandating private health insurance coverage of items or services related to COVID-19 treatment. However, one or more existing federal requirements are potentially relevant, subject to state implementation and plan variation.

There is a federal statutory requirement that certain plans cover a core set of 10 categories of essential health benefits (EHB). However, states, rather than the federal government, generally specify the benefit coverage requirements within those categories. Current regulation allows each state to select an EHB-benchmark plan. The benchmark plan serves as a reference plan on which plans subject to EHB requirements must substantially base their benefits packages. Because states select their own EHB-benchmark plans, there is considerable variation in EHB coverage from state to state.

On March 5, 2020, and March 12, 2020, CMS issued guidance addressing the potential relevance of EHB requirements to coverage of COVID-19 treatment, among other benefits, subject to variation in states' EHB-benchmark plan designations. According to the March 12 document, "all 51 EHB-benchmark plans currently provide coverage for the diagnosis and treatment of COVID-19" (emphasis added), but coverage of specific benefits within the 10 categories of EHB (e.g., hospitalization, laboratory services) may vary by state and by plan.

The March 12 document suggests that coverage of medically necessary hospitalizations would include coverage of medically necessary isolation and quarantine during the hospital admission, subject to state and plan variation. Quarantine in other settings, such as at home, is not a medical benefit. The document notes, "however, other medical benefits that occur in the home that are required by and under the supervision of a medical provider, such as home health care or telemedicine, may be covered as EHB," subject to state and plan variation.

The March 12 document confirms that "exact coverage details and cost-sharing amounts for individual services may vary by plan, and some plans may require prior authorization before these services are covered." In other words, even where certain treatment items and services are required to be covered as EHB in a state, cost-sharing and medical management requirements could apply, subject to applicable federal and state requirements. In addition, cost sharing and other coverage details may vary for services furnished by out-of-network providers.

Individual and fully insured small-group plans are subject to EHB requirements. Large-group plans, self-insured plans, grandfathered plans, and STLDI are not.

Whether or not certain treatment services are defined as EHB in a state, other state benefit coverage requirements may be relevant to COVID-19 treatment. Plans may also voluntarily cover benefits. See " State and Private-Sector Actions " below.

Certain Federal Requirements Related to Cost Sharing

Other existing federal requirements are also relevant to consumer cost sharing on COVID-19 treatment services, to the extent that such treatments are covered by the consumer's plan, and largely to the extent that they are defined by a state as EHB.

For example, plans must comply with annual l imits on consumers' out-of-pocket spending (i.e., cost sharing, including deductibles, coinsurance, and copayments) on in-network coverage of the EHB. If certain treatment services are defined as EHB in a state, and are furnished by an in-network provider, consumers' out-of-pocket costs for the plan year would be limited as discussed below. If certain treatment services are not defined as EHB in a state, and/or are furnished by out-of-network providers, this out-of-pocket maximum would not necessarily apply.

In 2020, the out-of-pocket limits cannot exceed $8,150 for self-only coverage and $16,300 for coverage other than self-only. This means that once a consumer has spent up to that amount in cost sharing on applicable in-network benefits, the plan would cover 100% of remaining applicable costs for the plan year.

The out-of-pocket maximum applies to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. The requirement does not apply to grandfathered plans or STLDI.

As stated above, in recent weeks, some states have announced coverage requirements related to COVID-19 testing services and items, and some insurers have clarified or expanded their policies to include relevant coverage. Some of these state and insurer statements also address coverage of treatment services. However, as discussed above, states cannot regulate self-insured plans, and insurer announcements do not necessarily apply to those plans either.

Coverage, cost sharing, and the application of medical management techniques (e.g., prior authorization) can vary by plan, subject to applicable federal and state requirements. It may be useful for consumers to contact their insurers or plan sponsors to understand their coverage of services and items related to COVID-19 treatment.

Will Plans Be Required to Cover a COVID-19 Vaccine?

CARES Act and Existing Preventive Services Coverage Requirements

As of the date of this report, there is no vaccine against COVID-19 approved by the Food and Drug Administration (FDA) for use in the United States, although several candidates are in development. Prior to the enactment of the CARES Act, there were no federal requirements specifically mandating private health insurance coverage of items or services related to a COVID-19 vaccine.

However, per an existing federal requirement (Â§2713 of the Public Health Service Act [PHSA]) and its accompanying regulations, most plans must cover specified preventive health services without cost sharing. This includes any preventive service recommended with an A or B rating by the United States Preventive Services Task Force (USPSTF); or any immunization with a recommendation by the Advisory Committee on Immunization Practices (ACIP), adopted by the Centers for Disease Control and Prevention (CDC), for routine use for a given individual. These coverage requirements apply no sooner than one year after a new or revised recommendation is published.

Requirements of PHSA Section 2713 apply to individual health insurance coverage and to small- and large-group plans, whether fully insured or self-insured. The requirements do not apply to grandfathered plans or to STLDI. By regulation, plans are generally not required to cover preventive services furnished out of network. They are allowed to use "reasonable medical management" techniques, within provided guidelines. Cost sharing for office visits associated with a furnished preventive service may or may not be allowed, as specified in regulation.

Section 3203 of the CARES Act requires specified plansâthe same types as those subject to PHSA Section 2713âto cover a COVID-19 vaccine, when available, and potentially other COVID-19 preventive services, if they are recommended by ACIP or USPSTF, respectively. This coverage must be provided without cost sharing. Section 3203 also applies an expedited effective date for the required coverage: 15 business days after an applicable ACIP or USPSTF recommendation is published. Otherwise, requirements of Section 3203 mirror the existing requirements under PHSA Section 2713. The requirement to cover COVID-19 vaccination and other preventive services is not time limited, whereas the FFCRA requirement to cover COVID-19 testing is limited to the duration of a declared COVID-19 public health emergency. See " Are Plans Required to Cover COVID-19 Testing? "

Some of the state and insurer announcements about coverage of COVID-19 benefits, discussed earlier in this report, reference coverage of a potential vaccine. However, pending development and approval of the vaccine, and pending the implementation of the CARES Act requirements related to COVID-19 vaccine coverage, it is premature to discuss potential variations in coverage of the vaccine at the state or plan level. It may still be useful for consumers to contact their insurers or plan sponsors to understand their coverage of services and items related to a potential COVID-19 vaccine.

Appendix. Resources for Questions about Private Health Insurance and COVID-19

This report has focused on coverage of COVID-19 testing, treatment, and vaccination by most types of private health insurance plans. CRS analysts are also available to congressional clients to discuss other topics of interest related to private health insurance and COVID-19, including

coverage of COVID-19 benefits by types of private plans not specifically addressed in this report; other issues related to private coverage of COVID-19 benefits; private coverage of certain other benefits of concern during this pandemic, or of services furnished via telehealth; and issues related to private health insurance enrollment and premium payments.

The following table lists examples of such topics of interest, any relevant legislative or administrative resources, any relevant CRS resources, and names of appropriate CRS experts for the benefit of congressional clients. Besides the CRS reports listed below that provide background on relevant topics, also see CRS reports on health provisions in recent COVID-19 legislation:

CRS Report R46316, Health Care Provisions in the Families First Coronavirus Response Act, P.L. 116-127 , and CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136) .

The information in this report is current as of its publication date and may be superseded by subsequent congressional or administrative action. Congressional clients may contact the report author and/or experts listed below for questions about further developments. In addition, CMS guidance related to private health insurance and COVID-19 is compiled on its website.


Exceptions to the Budget Control Act’s Discretionary Spending Limits

Summary: The Budget Control Act of 2011 (BCA; P.L. 112-25 ) established statutory limits on discretionary spending for FY2012-FY2021. There are currently separate annual limits for defense discretionary and nondefense discretionary spending.

Summary: The law specifies that spending for certain activities, such as responding to a national emergency or fighting terrorism, will receive special budgetary treatment. This spending is most easily thought of as being exempt from the spending limits. Formally, however, the BCA states that the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. As a result, these types of spending are referred to as "adjustments."

Summary: Two adjustmentsâfor spending designated as emergency or for Overseas Contingency Operations (OCO)âhave made up the vast majority of the spending. (These adjustments are uncapped and can be used for broad purposes.) Five other adjustments are capped and can be used for more specific programs or purposes, and two additional adjustments address potential technical issues that can arise in enforcing the spending limits.

Summary: According to information provided by the Office of Management and Budget (the agency responsible for evaluating compliance with the discretionary spending limits), in the seven fiscal years that have concluded since the discretionary spending limits were instituted, approximately $891 billion of spending has occurred under these adjustments. Spending for OCO made up 73% of the total, and spending for emergencies made up 20%.

Summary: In addition to the adjustments specified in the BCA, the 21 st Century Cures Act (Division A of P.L. 114-255 ) provided that a limited amount of appropriations for specified purposes are to be exempt from the discretionary spending limits. As of the date of this report, the Cures Act is unique in providing an exemption of this kind.

T he Budget Control Act of 2011 (BCA; P.L. 112-25 ), which was signed into law on August 2, 2011, includes statutory limits on discretionary spending for FY2012-FY2021, often referred to as "spending caps." There are currently separate annual limits for defense discretionary and nondefense discretionary spending. (The defense category consists only of discretionary spending in budget function 050, "national defense." The nondefense category includes discretionary spending in all other budget functions. ) Each discretionary spending limit is enforced separately through sequestration.

Discretionary spending that is provided for certain purposes is effectively exempt from the spending limits. This means that when compliance with the discretionary spending limits is evaluated, these special types of spending are treated differently:

Adjustments . The law specifies that spending for certain activities, such as responding to a national emergency or fighting terrorism, will receive special budgetary treatment. This spending is most easily thought of as being exempt from, or an exception to, the spending limits. Formally, however, the BCA states that the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. As a result, these types of spending are referred to as "adjustments." (The reference here to "adjustments to the limits" should be distinguished from statutory changes that have been enacted since 2011 increasing the spending limits.) These adjustments are not formally made until after the spending legislation has been enacted. Therefore, references to the discretionary spending limits typically refer to the spending limit level before the permitted adjustments have been included. 21 st Century Cures Act spending exempt from the limits . In addition to the adjustments specified in the BCA, the 21 st Century Cures Act (Division A of P.L. 114-255 ), enacted on December 13, 2016, provided that a limited amount of appropriations for specified purposes (at the National Institutes for Health and the Food and Drug Administration and for certain grants to respond to the opioid crisis) are to be subtracted from any cost estimate provided for the purpose of enforcing the discretionary spending limits. As of the date of this report, the Cures Act is unique in providing a statutory exemption of this kind.

These adjustments and the Cures Act exemptions complicate conversations and information related to overall discretionary spending amounts. When references are made to total discretionary spending, those figures may include spending that is provided under the adjustments authority as well as the Cures Act exemptions. However, when references are made to the discretionary spending limits, typically they do not include the spending that occurs as part of the adjustments or the Cures Act exemptions. More information is provided below on each adjustment and the Cures Act.

Spending Not Subject to the Limits, Formally Referred to as Adjustments

While the categories of spending described below are often thought of as being exempt from the spending limits, in fact the enactment of such spending allows for a subsequent upward adjustment of the discretionary limits to accommodate the spending. For this reason, we refer to these categories of spending as "adjustments." Permissible adjustments to the discretionary spending limits are specified in Section 251(b) of the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177 (2)), unless otherwise noted.

The Office of Management and Budget (OMB) is responsible for evaluating compliance with the discretionary spending limits. To provide transparency to the process of evaluating such compliance, OMB is required to submit sequestration reports to Congress. In these reports, and in the President's annual budget submission, OMB is required to calculate the permissible adjustments and to specify the discretionary spending limits for the fiscal year and each succeeding year.

The sections below provide more detailed information on the adjustments. These adjustments vary greatly. Two adjustmentsâOverseas Contingency Operations (OCO) and emergency spendingâhave made up the vast majority of the spending. These adjustments are uncapped and can be used for broad purposes. Five other adjustments are capped and can be used for specific programs or purposes. Two additional adjustments address potential technical issues that can arise in enforcing the spending limits.

Spending Under the BCA Limits and Adjustments, FY2012-FY2018

The most recent adjustment totals provided by OMB can be seen in Figure 1 and are detailed in Table A-1 . Trends in adjustments amounts can be seen in Figure 2 . According to OMB, in the seven fiscal years since the discretionary spending limits were instituted, approximately $891 billion of spending has been provided under these adjustments. (This does not include levels for FY2019, which has not yet concluded.) Spending for OCO totaled approximately $646 billion during the period, making up 73% of the total spending permitted under the adjustments. Spending for OCO ranged from a low of approximately $74 billion (FY2015 and FY2016) to a high of approximately $104 billion (FY2017). Spending provided under the emergency spending designation totaled approximately $178 billion during the period, making up 20% of total spending provided under the adjustments. Most of this amount was provided for a single fiscal year (approximately $110 billion in FY2018). The other seven adjustments made up about 7% of total spending occurring under the adjustments.

Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT)

Adjustments are made to the spending limits to accommodate enacted spending that has been designated as being for Overseas Contingency Operations/Global War on Terrorism (referred to in this report as OCO). There is no statutory limit on the amount of spending that may be designated for OCO, meaning that Congress and the President can together designate any amount they agree upon. There is no statutory definition of what activities are eligible to be designated for OCO. The only requirements associated with this designation are that (1) the legislation must specify that the spending is for OCO, (2) each account within an appropriations bill that will be for OCO must be designated separatelyâmeaning that an entire bill that includes several separate accounts cannot have a "blanket" OCO designationâand (3) the President must also designate the spending as being for an OCO requirement.

It is not unusual for Congress to include language stating that spending designated for OCO is available only if the President also designates it as being for OCO. Further, the language typically states that the President designate "all such amounts" or none.

For example, in March 2018, the Consolidated Appropriations Act (CAA) of 2018 ( P.L. 115-141 ) included OCO designations for many accounts. Two such accounts are included below:

For an additional amount for "Military Personnel, Army", $2,683,694,000: Provided , That such amount is designated by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985.

For an additional amount for "Military Personnel, Navy", $377,857,000: Provided , That such amount is designated by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985.

In addition, Section 6 of the act stated:

Each amount designated in this Act by the Congress for Overseas Contingency Operations/Global War on Terrorism pursuant to section 251(b)(2)(A)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985 shall be available (or rescinded, if applicable) only if the President subsequently so designates all such amounts and transmits such designations to the Congress.

The President then formally designated the spending as being for OCO:

In accordance with section 6 of the Consolidated Appropriations Act, 2018 (H.R. 1625; the "Act"), I hereby designate for Overseas Contingency Operations/Global War on Terrorism all funding (including the rescission of funds) and contributions from foreign governments so designated by the Congress in the Act pursuant to section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985, as outlined in the enclosed list of accounts.

The details of this action are set forth in the enclosed memorandum from the Director of the Office of Management and Budget.

Not all of OCO spending falls within the statutory definition of defense (050). For example, in FY2017, of the approximate $104 billion of discretionary spending designated as OCO, $21 billion was in the nondefense category. Likewise, while a majority of OCO spending appears in the Department of Defense appropriations bill, it also commonly appears in the Department of State, Foreign Operations, and Related Programs appropriations bill as well as the Department of Homeland Security appropriations bill and the Military Construction, Veterans Affairs, and Related Agencies appropriations bill.

Adjustments may also be made to the spending limits to accommodate enacted spending that has been designated as being an "emergency requirement." There is no statutory limit on the amount of spending that may be designated for emergencies, meaning that Congress and the President can together designate any amount they agree upon. Likewise, there is no statutory classification of what activities are eligible to be designated as an emergency requirement. The only statutory requirements are that (1) the legislation must specify that the spending is for an emergency requirement, (2) each account within an appropriations bill that will be for "emergency requirements" must be designated separatelyâmeaning that an entire bill that includes several separate accounts cannot have a "blanket" emergency requirement designationâand (3) the President must also designate the spending as being for an emergency requirement.

It is not unusual for Congress to include language stating that the spending designated for emergency is available only if the President also designates it as being for an emergency. Further, the language typically states that the President designate "all such amounts" or none.

For example, in October 2017, the Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017 ( P.L. 115-72 ), was enacted, which included emergency requirement designations for several accounts. One such account is included below:

For an additional amount for "Wildland Fire Management", $184,500,000, to remain available through September 30, 2021, for urgent wildland fire suppression operations: Provided, That such funds shall be solely available to be transferred to and merged with other appropriations accounts from which funds were previously transferred for wildland fire suppression in fiscal year 2017 to fully repay those amounts: Provided further, That such amount is designated by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985.

In addition, Title II of the act states:

Sec. 304. Each amount designated in this division by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985 shall be available only if the President subsequently so designates all such amounts and transmits such designations to the Congress.

After this legislation was enacted, the President formally designated the spending as an emergency requirement.

In accordance with section 304 of division A of the Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017 (H.R. 2266; the "Act"), I hereby designate as emergency requirements all funding (including the repurposing of funds and cancellation of debt) so designated by the Congress in the Act pursuant to section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985, as outlined in the enclosed list of accounts.

Adjustments may also be made to the spending limits to accommodate certain enacted spending that has been designated as being for disaster relief. The BCA defines disaster relief as activities carried out pursuant to a determination under Section 102(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

Adjustment amounts permitted under the disaster relief designation are limited and are calculated pursuant to a statutory formula. Not all spending that is enacted to provide for disaster relief includes this designation. Congress may provide funds for the purpose of disaster relief but allow the spending to count against the discretionary spending limits, or it may designate the spending as an emergency requirement, particularly when the level of disaster relief being provided would exceed the amount permitted under the disaster relief adjustment. For example, the Bipartisan Budget Act of 2018 included appropriations related to Hurricanes Harvey, Irma, and Maria of $23.5 billion for the Federal Emergency Management Agency's Disaster Relief Fund for major disasters declared pursuant to the Stafford Act. However, that spending was designated as an emergency requirement and therefore employed the emergency adjustment described above, as opposed to the disaster relief adjustment, which is capped.

The formula used to determine the maximum amount permitted under the disaster relief adjustment was amended by the CAA of 2018, and, as described below, the new formula is to apply to FY2019 and beyond.

OMB is required by law to include in its Sequestration Update Report a preview estimate of the adjustment for disaster relief for the upcoming fiscal year. For example, OMB included a preview estimate of $7.366 billion as the cap for disaster relief adjustment in its Sequestration Update Report for 2018 (released on August 18, 2017). Subsequently, appropriations were enacted in the CAA of 2018 providing $7.366 billion for FY2018 for the Federal Emergency Management Agency's Disaster Relief Fund in the FY2018 Department of Homeland Security Appropriations Act (division F of the CAA of 2018).

The formula used to calculate the limit for the disaster relief adjustment for FY2018 and earlier required that the annual adjustment for disaster relief not exceed "the average funding provided for disaster relief over the previous 10 years, excluding the highest and lowest years," plus the amount by which appropriations in the previous fiscal year was less than the average funding level, often referred to as carryover.

Under this formula, if the carryover from one year was not used in the subsequent year, it could not carry forward for a subsequent year. According to OMB, this "led to a precipitous decline in the funding ceiling as higher disaster funding years began to fall out of the 10-year average formula." According to OMB, the limit for the adjustment fell from a high of $18.43 billion in 2015 to a low of $7.366 billion in 2018.

The CAA of 2018 altered the formula for the disaster relief adjustment in ways "that will ultimately increase the funding ceiling," according to OMB. The formula for FY2019 and beyond comprises the total of

the average funding provided for disaster relief over the previous 10 years, excluding the highest and lowest years; 5% of the total appropriations provided either (1) since FY2012 or (2) in the previous 10 yearsâwhichever is lessâsubtracting any amount of budget authority that was rescinded in that period with respect to amounts provided for major disasters declared pursuant to the Stafford Act and designated by the Congress and the President as being for emergency requirements (as described above); and the cumulative net total of the unused carryover for FY2018, as well as unused carryover for any subsequent fiscal years.

OMB has stated that under this formula, the potential adjustment limit for disaster relief for FY2019 would be capped at $14.965 billion.

The CAA of 2018 included a new adjustment that applies to FY2020-FY2027 for wildfire suppression.

Adjustments may be made to the spending limits to accommodate enacted spending that provides an amount for wildfire suppression operations in the Wildland Fire Management accounts at the Departments of Agriculture or Interior. The law states that the adjustments may not exceed the amounts shown below for each of FY2020-FY2027. However, the law allows such an adjustment to accommodate "additional new budget authority" for wildfire suppression in excess of the average costs for wildfire suppression operations as reported in the President's budget request for FY2015, which is $1.394 billion. Unlike some of the adjustments described above, this adjustment does not require a separate ad ditional designation from the President.

The BCA includes two separate adjustments to accommodate spending related to ensuring that certain program funding is spent appropriately, safeguarding against waste, fraud, and abuse. While these two adjustments are separate under the law, they are often grouped together in budget totals, as in Table A-1 .

Continuing Disability Reviews and Redeterminations21

As originally enacted, the BCA permits adjustments to the spending limits to accommodate enacted spending for two types of program integrity activities conducted by the Social Security Administration: (1) continuing disability reviews, which are periodic medical reviews of Social Security disability beneficiaries and Supplemental Security Income (SSI) recipients under the age of 65; and (2) redeterminations, which are periodic financial reviews of SSI recipients. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) expanded the types of program integrity activities for which the adjustments are permitted. The expanded definition may also accommodate spending for (3) cooperative disability investigation units, which investigate cases of suspected disability fraud; (4) fraud prosecutions by Special Assistant United States Attorneys; and (5) work-related continuing disability reviews, which are periodic earnings reviews of Social Security disability beneficiaries.

The adjustments may not exceed the amounts shown below for each of FY2012-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for program integrity activities in excess of $273 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President.

As an example, in March 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), included related spending for continuing disability reviews, redeterminations, and other specified activities:

Of the total amount made available under this heading, not more than $1,735,000,000, to remain available through March 31, 2019, is for the costs associated with continuing disability reviews under titles II and XVI of the Social Security Act, including work-related continuing disability reviews to determine whether earnings derived from services demonstrate an individual's ability to engage in substantial gainful activity, for the cost associated with conducting redeterminations of eligibility under title XVI of the Social Security Act, for the cost of co-operative disability investigation units, and for the cost associated with the prosecution of fraud in the programs and operations of the Social Security Administration by Special Assistant United States Attorneys: Provided , That, of such amount, $273,000,000 is provided to meet the terms of section 251(b)(2)(B)(ii)(III) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and $1,462,000,000 is additional new budget authority specified for purposes of section 251(b)(2)(B) of such Act.

Adjustments are made to the spending limits to accommodate enacted spending that specifies an amount for health care fraud and abuse control, but the adjustment may not exceed an amount specified in statute.

The law states that the appropriations act must specify an amount for the health care fraud and abuse control program at the Department of Health and Human Services. The law states further that the adjustments may not exceed the amounts shown below for each of FY2012-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for health care fraud and abuse control in excess of $311 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President.

As an example, in March 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), included related spending for health care fraud and abuse control:

In addition to amounts otherwise available for program integrity and program management, $745,000,000, to remain available through September 30, 2019â¦. Provided further, That of the amount provided under this heading, $311,000,000 is provided to meet the terms of section 251(b)(2)(C)(ii) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and $434,000,000 is additional new budget authority specified for purposes of section 251(b)(2)(C) of such Act.

Reemployment Services and Eligibility Assessments

The Bipartisan Budget Act of 2018 ( P.L. 115-123 ), enacted in February 2018, included a new adjustment for FY2019-FY2021.

Adjustments may be made to the spending limits to accommodate enacted spending that specifies an amount for grants to states under Section 306 of the Social Security Act (42 U.S.C. Â§506). The law states further that the adjustments may not exceed the amounts shown below for each of FY2019-FY2021. However, the law allows such an adjustment to accommodate "additional new budget authority" for reemployment services and eligibility assessments in excess of $117 million. Unlike some of the adjustments described above, this adjustment does not require a separate additional designation from the President.

The BCA provided that adjustments may be made to the spending limits to address changes in concepts and definitions. The law requires that OMB calculate such an adjustment when the President submits the budget request and that such changes may be made only after consultation with the House and Senate Appropriations Committees and the House and Senate Budget Committees. Further, the law states that such consultation with the committees shall include written communication that affords the committees an opportunity to comment before official action is taken.

The law states that such changes "shall equal the baseline levels of new budget authority and outlays using up-to-date concepts and definitions, minus those levels using the concepts and definitions in effect before such changes."

It appears that no adjustments have been made to accommodate changes in concepts and definitions since enactment of the BCA in 2011. However, the discretionary spending limits in effect between 1991 and 2002 similarly permitted adjustments to accommodate changes in concepts and definitions. During that period, such adjustments were made as a result of a reclassification that shifted programs between the mandatory and the discretionary categories. Other adjustments were made for accounting changes made by the Federal Credit Reform Act of 1990 and changes in budgetary treatment and estimating methodologies.

Technical Adjustment (Allowance) for Estimating Differences

It is common for legislation to be enacted each year that permits an adjustment to the discretionary spending limits for that fiscal year in the event that the limits would be breached as a result of estimating differences between the Congressional Budget Office (CBO) and OMB. For example, the Financial Services and General Government appropriations act for FY2018 included this provision:

If, for fiscal year 2018, new budget authority provided in appropriations Acts exceeds the discretionary spending limit for any category set forth in section 251(c) of the Balanced Budget and Emergency Deficit Control Act of 1985 due to estimating differences with the Congressional Budget Office, an adjustment to the discretionary spending limit in such category for fiscal year 2018 shall be made by the Director of the Office of Management and Budget in the amount of the excess but the total of all such adjustments shall not exceed 0.2 percent of the sum of the adjusted discretionary spending limits for all categories for that fiscal year.

For that particular fiscal year, OMB had estimating differences with CBO, which OMB stated "would cause OMB estimates to exceed both caps." These estimating differences were $4 million for the defense category and $554 million for the nondefense category. OMB stated that the maximum allowable adjustment for estimating differences for FY2018 was $2.81 billion and that the amount of estimating differences ($558 million) was within the allowable adjustment. OMB adjusted the caps upward by the amounts of the estimating differences noted.

21st Century Cures Act Spending Not Subject to the Limits

Title I in Division A of the 21 st Century Cures Act ( P.L. 114-255 ), enacted in December 2016, authorized appropriations for programs and activities related to health care, research, and opioid abuse. The act also established a distinctive budgetary mechanism related to certain authorizations that is different from the adjustments described above but has a similar effect. Specifically, the act established three accounts: the National Institutes of Health (NIH) Innovation Account, the Food and Drug Administration (FDA) Innovation Account, and the Account for the State Response to the Opioid Crisis. The act then transferred funds from the General Fund of the Treasury to these accounts and authorized those funds to be appropriated for specific dollar amounts in specific fiscal years. Those funds were not to be available for obligation until they were appropriated in appropriations acts each fiscal year.

The act further stated that when appropriations are enacted for such authorized activitiesâup to the authorized amount each fiscal yearâthose appropriations are to be subtracted from any cost estimate provided for the purpose of enforcing the discretionary spending limits. This effectively exempts any spending provided for these activities between FY2017 and FY2026 from the spending caps.

Specifically, the bill provides such exceptions for the accounts and amounts shown in below. In each case, the exemptions apply only to the years included in the respective table.

Appendix. Discretionary Spending Limits and Adjustments Under the BCA


Medicaid Recession-Related FMAP Increases

Summary: Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs by making payments to service providers (e.g., for doctor visits) and performing administrative activities (e.g., making eligibility determinations), and the federal government reimburses states for a share of these costs. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The FMAP varies by state and is inversely related to each state's per capita income. For FY2020, FMAP rates range from 50% (13 states) to 77% (Mississippi).

Summary: Medicaid is a countercyclical program, which means that the rate of growth for Medicaid enrollment tends to accelerate when the economy weakens and tends to slow when the economy gains strength. During recessions, growth in the unemployment rate results in an increase in the rate of growth for Medicaid enrollment, which increases the rate of growth for Medicaid expenditures at the same time that state revenues decline. Reduced state revenues can make it difficult for states to continue financing their Medicaid program, especially with the recession-related growth in Medicaid enrollment.

Summary: Federal fiscal relief to states is provided during recessions through adjustments to the FMAP rate because this process for getting federal Medicaid funding to states is already in place. Many states have indicated that past FMAP increases allowed the states to prevent further reductions to their Medicaid programs and other portions of their state budgets.

Summary: The federal government provided states with temporary FMAP rate increases to provide states with fiscal relief on two past occasions: in response to the 2001 recession through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ) and in response to the Great Recession through the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 , as amended by P.L. 111-226 ). The JGTRRA FMAP increase provided a 2.95 percentage point increase to FMAP rates for the last two quarters of FY2003 and the first three quarters of FY2004. The ARRA FMAP increase provided an across-the-board increase, along with an unemployment-related increase for eligible states. The ARRA across-the-board increase was a 6.2 percentage point FMAP increase, starting in the first quarter of FY2009 and lasting through the first quarter of FY2011; the increase phased down to 3.2 and 1.2 percentage points for the second and third quarters of FY2011, respectively.

Summary: Most recently, the Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ) added a temporary Medicaid FMAP increase of 6.2 percentage points beginning January 1, 2020, and continuing through the Coronavirus Disease 2019 (COVID-19) public health emergency period. Although the country had not officially entered into a recession at the time FFCRA was enacted, a recession with significant increases in the unemployment rate was expected in the near term.

Summary: The recession-related FMAP increases have similar components, but there are differences. Similarities of all three of these recession-related FMAP increases include across-the-board FMAP increases; requirements to maintain Medicaid eligibility standards that are no more restrictive than they were prior to the FMAP increases; and requirements to ensure that states do not increase the percentage that local governments contribute to Medicaid expenditures.

Summary: However, there are differences in how the recession-related FMAP increases were determined. For instance, the JGTRRA and ARRA FMAP increases included hold-harmless provisions that kept the states' regular FMAP rates from declining, and these increases excluded certain Medicaid expenditures from the FMAP increases. The ARRA FMAP increase had an unemployment-related increase that the JGTRRA and FFCRA increases did not have. Also, the JGTRRA FMAP increase did not have additional requirements for states, but ARRA and FFCRA have differing sets of additional requirements for states to adhere to in order to qualify for the FMAP increases.

M edicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services, as well as long-term services and supports. Historically, Medicaid eligibility generally has been limited to low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities. Since 2014, however, states have had the option to cover nonelderly adults with income up to 133% of the federal poverty level (FPL) under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) Medicaid expansion.

Medicaid is jointly financed by the federal government and the states. The federal government's share of most Medicaid expenditures is called the federal medical assistance percentage (FMAP). The remainder is referred to as the state share.

Medicaid is a countercyclical program, meaning the rate of growth for Medicaid enrollment tends to accelerate when the economy weakens and tends to slow when the economy gains strength. During recessions, the rate of growth for Medicaid enrollment increases, which also increases the rate of growth for Medicaid expenditures at the same time that state revenues are decreasing.

The federal government provided states with fiscal relief through temporary FMAP rate increases in response to the 2001 recession (March 2001 through November 2001) and the Great Recession (December 2007 through June 2009). The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ), enacted on March 18, 2020, recently added a temporary Medicaid FMAP increase, beginning January 1, 2020, and continuing through the Coronavirus Disease 2019 (COVID-19) public health emergency period.

This report begins with an overview of the FMAP rate. Then, it discusses the recession-related impact on the Medicaid program based on the experiences of the 2001 recession and the Great Recession. The final section of this report describes the three recession-related FMAP increases and compares them according to their various aspects, such as time periods for the FMAP increases, the amounts of the increases, and the requirements for states to receive the increases.

The FMAP rate generally is determined annually and varies by state according to each state's per capita income relative to the U.S. per capita income. The formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per capita incomes, and it provides lower FMAP rates to states with higher per capita incomes.

FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. For a state with an FMAP of 60%, the state gets 60 cents back from the federal government for every dollar the state spends on its Medicaid program. In FY2020, FMAP rates range from 50.00% (13 states) to 76.98% (Mississippi).

The FMAP formula relies on each state's per capita personal income in relation to the U.S. average per capita personal income. The national economy is basically the sum of all state economies. As a result, the national response to an economic change is the sum of the state responses to economic change. If more states (or larger states) were to experience an economic decline, the national economy would reflect this decline to some extent. However, the extent of the total decline would be offset by states with small decreases or even increases (i.e., states with growing economies). The U.S. per capita personal income, because of this balancing of positive and negative, usually has only a small percentage change each year. Because the FMAP formula compares state changes in per capita personal income (which can have large changes each year) with changes in the U.S. per capita personal income, states' FMAP rates often change from year to year. For most of the states experiencing annual FMAP rate changes, the change has been be less than one percentage pointâbut that can translate to a significant dollar amount.

The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states (e.g., the District of Columbia and the territories), situations (e.g., during economic downturns), populations (e.g., ACA Medicaid expansion population and certain women with breast or cervical cancer), providers (e.g., Indian Health Service facilities), and services (e.g., family planning and home health services).

The FMAP is also used to determine the federal share of other federal programs. For instance, it is used to determine the federal share of spending for foster care maintenance, adoption assistance, and guardianship assistance payments authorized by Title IV-E of the Social Security Act. The FMAP rate is also used to determine the relative federal and state shares of the "mandatory matching funds" provided by the Child Care Entitlement to States. In addition, it determines the federal share of funding under the Temporary Assistance for Needy Families (TANF) Contingency Funds and the federal share of collections under the Child Support Enforcement program.

Separate from the regular FMAP rate, the enhanced FMAP (E-FMAP) rate is provided for services and administration under the State Children's Health Insurance Program (CHIP), subject to the availability of funds from a state's federal allotment for CHIP. The E-FMAP rate is calculated by reducing the state share under the regular FMAP rate by 30%.

Medicaid expenditures are influenced by a number of economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates, and individuals' wages. Demographic factors include population growth and the age distribution. Programmatic factors include changes to eligibility and benefits or other program changes. Other factors include the number of eligible individuals who enroll and their utilization of covered services.

Medicaid is a countercyclical program. During recessions, growth in the unemployment rate results in an increase in the rate of growth for Medicaid enrollment, which increases the rate of growth for Medicaid expenditures at the same time that state revenues decline. Reduced state revenues can make it difficult for states to continue financing their Medicaid programs, especially with the recession-related growth in Medicaid enrollment. The effect of recessions on Medicaid enrollment, Medicaid expenditures, and state tax revenues are generally not isolated to the recession period and can continue after the recession has officially ended.

Individuals and their dependents may become eligible for Medicaid because they experience reductions in their incomes due to reduced hours or job loss. During economic downturns, the number of individuals with reduced hours or job losses increases, and the rate of job losses are considerably higher among low-income workers. This increases the number of individuals eligible for Medicaid.

Individuals and their dependents also may lose access to employer-sponsored health insurance. When individuals have reduced hours or experience job loss, they may lose the health insurance coverage they had through their employer for themselves and their dependents. These individuals may be eligible for the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage, which provides temporary access to a former employer's health insurance. However, employers are not required to pay for the cost of COBRA coverage, which may be more expensive than an individual's prior cost of insurance.

Some individuals, or their dependents, might already be Medicaid eligible and have employer-sponsored health insurance. During economic downturns, employers may lower the amount they contribute to the cost of health benefits or decide to no longer provide health insurance coverage to these employees. This increase in the cost of or loss of employer-sponsored health insurance may result in these individuals enrolling for Medicaid coverage.

As discussed below, there is a relationship between the unemployment rate and Medicaid enrollment. The ACA Medicaid expansion, which was implemented after the last recession, is expected to increase the effects of a recession on Medicaid enrollment.

Medicaid Enrollment Growth During Recent Recessions

Medicaid enrollment follows economic cycles, with enrollment growth increasing at a faster rate during economic downturns and Medicaid enrollment growth increasing at a slower rate when economic conditions improve.

The U.S. Government Accountability Office (GAO) analyzed federal Medicaid enrollment data during the 2001 recession and the Great Recession. GAO found that during the 2001 recession, the national unemployment rate increased from 4.3% to 5.5%, and total Medicaid enrollment increased by approximately 2 million (or 5.6%). GAO also found that during the Great Recession, the national unemployment rate grew from 5.0% to 9.5%, and Medicaid enrollment rose by nearly 4.3 million (or 9.7%).

Potential Impact of Medicaid Expansion on Enrollment Growth

The ACA Medicaid expansion that went into effect in 2014 is expected to increase the effects of a recession on Medicaid enrollment. As there has not been a recession since states have had the option to implement the Medicaid expansion, there is no experience available to quantify the impact.

During the Great Recession, Medicaid eligibility in most states was not available to many of the individuals who lost their jobs. This is because nonelderly adults without dependent children were not eligible for Medicaid. Prior to the Medicaid expansion, Medicaid eligibility for nonelderly adults, in most states, was limited to individuals with disabilities, pregnant women, and parents of poor children. Also, states' Medicaid income eligibility thresholds for parents were significantly lower than the income eligibility level for the Medicaid expansion of up to 133% of FPL.

As a result of the Medicaid expansion, the percentage of adults eligible for Medicaid during future periods of high unemployment is expected to be larger than in the past. An increase in the rate of enrollment growth for the Medicaid expansion in response to an increase in the unemployment rate would have less of an impact on state budgets than an increase in the rate of enrollment growth for the traditional Medicaid populations because the federal matching rate for the Medicaid expansion is 90%, which is higher than the regular FMAP rate. Although the state share of the Medicaid expansion is 10% of the expenditures, the increase in the enrollment for the Medicaid expansion during economic downturns could contribute to states' budget pressures.

Medicaid Expenditures and State Revenues

Increases in Medicaid enrollment growth during economic downturns generally result in an increased rate of growth for total Medicaid expenditures. As with Medicaid enrollment, when the economic conditions improve, Medicaid expenditure growth tends to slow.

At the same time that unemployment rate increases during economic downturns cause Medicaid enrollment and expenditures to increase at a faster rate, states general revenues are negatively affected. During the 2001 recession, states experienced a 4.2% decline in state tax revenue from state FY2001 to state FY2002.

In the study described in the " Medicaid Enrollment Growth During Recent Recessions " section, GAO also looked at the impact of the Great Recession on total state tax revenues. Nationally, GAO found that the Great Recession led to a 10.2% decline in state tax revenues from the fourth quarter of 2007 to the fourth quarter of 2009. The impact of the Great Recession on state tax revenue varied significantly from state to state. Although state tax revenue for most states (44 states and the District of Columbia) decreased, these revenue decreases ranged from 1% in Iowa to 23% in Arizona.

Medicaid accounts for almost 20% of state general fund expenditures, and it is the second largest category of general fund expenditures for states. The reduction in state tax revenue during economic downturns can make it difficult for states to finance the state share of Medicaid, especially while Medicaid enrollment and expenditures are increasing. Since most states are required to balance their budgets, the reduced state tax revenues and increased Medicaid expenditures, among other budget pressures, may lead states to increase taxes, reduce expendituresâincluding for the Medicaid programâor both.

In response to the 2001 recession, 34 states reduced Medicaid expenditures by freezing or reducing provider payments, eliminating coverage for optional services, increasing premiums, and increasing copayments for prescription drugs. As a result of the Great Recession, 31 states froze or reduced Medicaid provider rates or increased Medicaid provider taxes, and other states reduced prescription drug costs and limited or eliminated coverage for optional services, such as mental health or dental care.

The impacts of recessions on Medicaid enrollment, Medicaid expenditures, and state tax revenues have continued even after the recessions have officially ended. For example, the 2001 recession officially ended in November 2001, but state tax revenue continued to decline through the second quarter of 2002, and the national unemployment rate remained above prerecession levels through June 2003. Medicaid enrollment increased at higher than average rates of growth through 2003.

Although the Great Recession officially ended in June 2009, 25 states continued to experience unemployment rates above 9%, until at least December 2010. Some states were still feeling the effects of the recession in 2011 and 2012. The timing and duration of the continued impact of national recessions on states have varied according to the economic conditions and revenue structures of each state, along with the mix of each state's industries and resources.

In the past, two laws have provided states with fiscal relief through temporary FMAP rate increases due to recessions: the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 , as amended by P.L. 111-226 ). In addition, the Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ) recently provided a temporary FMAP increase during the COVID-19 public health emergency period.

As noted by GAO, "the FMAP is a readily available mechanism for providing temporary assistance to states because assistance can be distributed quickly, with states obtaining funds on a quarterly basis through Medicaid's existing payment system." The increased FMAP rates help states maintain their Medicaid programs during economic downturns. Also, the increased FMAP rates effectively reduce the state share of Medicaid expenditures for states, allowing states to use the state funding that would have been used for the state share of Medicaidâif there were not a recession-related FMAP rateâfor non-Medicaid state budget needs.

As shown in Table 1 , the recession-related FMAP increases have similar components, but there are differences. All three recession-related FMAP increases had across-the-board increases to the regular FMAP rates as their main component. The JGTRRA across-the-board increase of 2.95 percentage points was lower than the 6.2 percentage point across-the-board increases for ARRA and FFCRA. The ARRA across-the-board increase phased out at the end of the time period for the FMAP increase, but the other two increases do not phase down. In addition, the JGTRRA and ARRA FMAP increases included hold-harmless provisions that kept states' regular FMAP rates from declining, and these increases did not apply to certain Medicaid expenditures that use the regular FMAP rate. The FFCRA FMAP increase, however, does not exclude Medicaid expenditures that use the regular FMAP rate. Also, the ARRA FMAP increase included an unemployment-related additional increase to the FMAP, but the JGTRRA and FFCRA FMAP increases do not. JGTRRA and FFCRA applied the FMAP increases to the territories and provided the territories additional federal Medicaid funding, but ARRA gave the territories a choice of the across-the-board FMAP increase, along with increased funding or a larger increase in funding without an FMAP increase.

All three of the recession-related FMAP increases have requirements for states in order to qualify for the FMAP increase. For example, all three FMAP increases require states to maintain Medicaid eligibility standards that are no more restrictive than those that were in effect on a certain date. All three also prohibit states from increasing the percentage local governments are required to contribute to the state share of Medicaid. The JGTRRA FMAP increase did not have additional requirements for states, but the ARRA and FFCRA FMAP increases include differing sets of additional requirements for states, which are listed in Table 1 .

The following sections provide summaries of the recession-related FMAP rate increases from JGTRRA, ARRA, and FFCRA, as well as the time period for the FMAP increases, the amount of the increases, and the requirements for states to receive them.

As part of the state fiscal relief for FY2003 and FY2004 included in JGTRRA, FMAP rates for the 50 states, the District of Columbia, and the territories were held harmless and increased in the last two quarters of FY2003 and the first three quarters of FY2004. This provision was statutorily limited to $10 billion. Table A-1 shows JGTRRA FMAP increases for the 50 states, the District of Columbia, and the territories.

The FMAP rates were increased by an across-the-board 2.95 percentage points for each state (i.e., the 50 states, the District of Columbia, and the territories). The FMAP increase did not apply to Medicaid disproportionate share hospital (DSH) payments and Medicaid payments that were matched using the E-FMAP (e.g., breast and cervical cancer treatment).

The hold-harmless provision kept the FMAP rates from declining during that period. Specifically, for FY2003, if a state's FY2002 FMAP rate was higher than the FY2003 rate (without the 2.95 percentage point increase), then the FY2002 rate was substituted for the FY2003 rate for the last two quarters of FY2003. Similarly in FY2004, if a state's FY2003 FMAP rate was higher than the FY2004 rate (without the 2.95 percentage point increase), then the FY2003 rate was substituted for the FY2004 rate for the first three quarters of FY2004.

To qualify for the JGTRRA FMAP increase, a state could not have had a Medicaid plan with more restrictive eligibility rules than the plan in effect on September 2, 2003. If a state restored program eligibility to the levels in effect on September 2, 2003, then the state would have qualified for the increased FMAP rate for the entire quarter in which eligibility was reinstated.

States also needed to ensure that local governments were not required to contribute a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required on April 1, 2003, for the last two quarters of FY2003 and the first three quarters of FY2004.

In addition to the JGTRRA FMAP increase, JGTRRA increased the federal Medicaid funding available for each of the territories by 5.9%.

The JGTRRA FMAP increase was provided to states in FY2003 and FY2004, well after the recession ended in November 2001. All states received the same FMAP increase, and the increase was not based on need using measures such as unemployment rates or state tax revenues.

States indicated that the JGTRRA FMAP increase prevented states from making additional cuts to the Medicaid program and other portions of state budgets. Specifically, 36 states said the JGTRRA FMAP increase helped to fund increased Medicaid expenditures, and 31 states said the increase allowed states to minimize or postpone Medicaid cuts or freezes.

ARRA provided an FMAP rate increase to states, which was later extended by P.L. 111-226 . The ARRA FMAP rate increase lasted for nine quarters, starting October 2008 and continuing through December 2010, and totaled an estimated $89 billion. This temporary FMAP rate increase was extended by six months as part of P.L. 111-226 âthe extension totaled an estimated $16.1 billion. With the extension, the ARRA FMAP rate increase ran for a total of 11 quarters, from the first quarter of FY2009 through the third quarter of FY2011 (i.e., October 2008 through June 2011), subject to certain requirements. Table B-1 shows the ARRA FMAP increase for the 50 states and the District of Columbia.

For a "recession adjustment period" that began with the first quarter of FY2009 and ran through the third quarter of FY2011 (i.e., October 2008 through June 2011), ARRA held all states harmless from any decline in their regular FMAP rates throughout the period. All states (i.e., the 50 states and the District of Columbia) received an across-the-board increase of 6.2 percentage points to their regular FMAP rates until the last two quarters of the period, at which point the across-the-board percentage point increase phased down to 3.2 and then 1.2 percentage points.

Throughout the period, states with unemployment rates that had increased by certain amounts in a quarter received an additional unemployment-related increase. There were three tiers of this unemployment-related increase. See "ARRA Unemployment-Related FMAP Increase" for details about the unemployment related increase, including how it was calculated.

The ARRA FMAP increase was not available to the territories, but each territory was allowed to make a one-time choice between (1) an FMAP rate increase of 6.2 percentage points along with a 15% increase in its annual capped funding or (2) the regular FMAP rate along with a 30% increase in its capped funding. All territories chose the latter.

The full amount of the temporary ARRA FMAP rate increase applied to most Medicaid expenditures, but not to the following Medicaid expenditures: (1) DSH payments, (2) Medicaid payments that were matched using the E-FMAP (e.g., breast and cervical cancer treatment), and (3) most expenditures for individuals who were eligible for Medicaid because of a state expansion of eligibility implemented after July 1, 2008.

To receive ARRA FMAP rate increases, states were required to do the following: (1) ensure their Medicaid "eligibility standards, methodologies, and procedures" were no more restrictive than those that were in effect on July 1, 2008; (2) comply with requirements for prompt payment of health care providers under Medicaid; (3) not deposit or credit the additional federal funds paid as a result of the increase to any reserve or rainy day fund; (4) ensure that local governments did not pay a larger percentage of the state's nonfederal Medicaid expenditures (or a greater percentage of the nonfederal share of Medicaid DSH payments) than otherwise would have been required on September 30, 2008; and (5) submit a report to the Secretary of the Department of Health and Human Services regarding how the additional federal funds paid as a result of the temporary FMAP increase were expended. P.L. 111-226 added a requirement for the last six months (i.e., January 1, 2011, through June 30, 2011) that states certify that they would request and use the funds.

FMAP rate increases reduced the amount of state funding required to maintain a given level of Medicaid services. For states that contemplated cuts in order to slow the growth of or reduce Medicaid spending (e.g., by eliminating coverage of certain benefits, freezing or reducing provider reimbursement rates, or increasing cost-sharing or premiums for beneficiaries), increased federal funding enabled them to avoid those cuts.

For others, the state savings that resulted from an FMAP rate increase were used for various purposes that were not limited to Medicaid. For example, 36 states reported that they used funds from the ARRA FMAP rate increase to close or reduce their Medicaid budget shortfall, and 44 states used the funds to close or reduce state general fund shortfalls.

In addition to avoiding cuts to Medicaid, the Congressional Budget Office (CBO) indicated in 2009 that providing additional federal aid to states that were facing fiscal pressures would probably stimulate the economy. However, CBO noted that the effects would vary. Federal aid to states with relatively healthy budgets would have provided little stimulus if the aid were used to build up rainy day funds (a prohibited use of the ARRA FMAP rate increase), rather than to increase spending or reduce taxes. One study found the ARRA FMAP increase "had an economically large and statistically robust positive effect on employment."

GAO determined that the ARRA FMAP increase was better timed than the JGTRRA FMAP increase because the ARRA FMAP increase began during the recession, when all states were experiencing Medicaid enrollment increases and state tax revenue decreases. GAO also found that the ARRA FMAP increase was better targeted than the JGTRRA FMAP increase because the ARRA increase included unemployment-related adjustments for certain states.

FFCRA provides an increase to the FMAP rate for all states, the District of Columbia, and the territories of 6.2 percentage points, beginning on the first day of the calendar quarter in which the COVID-19 public health emergency period began (i.e., January 1, 2020) and ending on the last day of the calendar quarter in which the last day of the COVID-19 public health emergency period ends. Table C-1 shows the FY2020 FMAP rates for the states, the District of Columbia, and the territories and those FMAP rates plus 6.2 percentage points.

To receive this increased FMAP rate, states, the District of Columbia, and the territories are required to (1) ensure that their Medicaid "eligibility standards, methodologies, and procedures" are no more restrictive than those that were in effect on January 1, 2020; (2) not impose premiums exceeding the amounts in place as of January 1, 2020; (3) provide continuous coverage of Medicaid enrollees during the COVID-19 public health emergency period; and (4) provide coverage (without the imposition of cost sharing) for testing services and treatments for COVIDâ19 (including vaccines, specialized equipment, and therapies).

Another condition to receive the FFCRA FMAP increase is that states, the District of Columbia, and the territories cannot require local governments to fund a larger percentage of the state's nonfederal Medicaid expenditures for the Medicaid state plan or Medicaid DSH payments than what was required on March 11, 2020.

The FFCRA FMAP increase does not apply to most FMAP exceptions, including the FMAP exceptions for the ACA Medicaid expansion, family planning, and home health services. However, the FFCRA FMAP increase does apply to a few FMAP exceptions. For Community First Choice services, the FFCRA FMAP increase is added to the six percentage point FMAP increase under Section 1915(k) of the Social Security Act, if the expenditures otherwise qualify. Also, FMAP exceptions calculated based on the regular FMAP use the regular FMAP plus the FFCRA FMAP increase for the calculation. These FMAP exceptions are for individuals eligible on the basis of breast and cervical cancer, Certified Community Behavioral Health Clinics, and Money Follows the Person.

In addition to the territories receiving the FFCRA FMAP increase, FFCRA increases the federal Medicaid funding available for each territory in FY2020 and FY2021. The aggregate additional funding for the territories increases from $3.0 billion to $3.1 billion in FY2020 and from $3.1 billion to $3.2 billion in FY2021.

In the past, GAO developed a prototype formula for temporary FMAP increases. One of the key components of the GAO prototype was making the temporary FMAP increase automatic so the FMAP increase could begin closer to the onset of a national recession. Although the FFCRA does not provide an automatic increase, the FFCRA FMAP increase is starting prior to an expected economic downturn.

The FMAP rate has been used as a means to provide fiscal relief to states in response to the 2001 recession, the Great Recession, and current economic conditions due to the COVID-19 public health emergency. These recession-related FMAP increases have been provided at times when states have experienced growth in unemployment rates that results in increases in the rate of growth for Medicaid enrollment, which in turn increases the rate of growth for Medicaid expenditures at the same time that state revenues decline.

These recession-related FMAP increases are similar but have some significant differences. All three of these recession-related FMAP increases have across-the-board FMAP increases; requirements to maintain Medicaid eligibility standards that are no more restrictive than they were prior to the FMAP increases; and requirements to ensure that states do not increase the percentage that local governments contribute to Medicaid expenditures.

However, the JGTRRA and ARRA FMAP increases included hold-harmless provisions that kept the states' regular FMAP rates from declining, and these increases excluded certain Medicaid expenditures from the FMAP increases. The ARRA FMAP increase had an unemployment-related increase that the JGTRRA and FFCRA increases did not have. Also, the JGTRRA FMAP increase did not have additional requirements for states, but ARRA and FFCRA have differing sets of additional requirements for states to adhere to in order to qualify for the FMAP increases.

In addition, many states indicated that the JGTRRA and ARRA FMAP increases provided fiscal relief that allowed the states to prevent further reductions to the Medicaid programs and other portions of their state budgets.

Appendix A. Jobs and Growth Tax Relief Reconciliation Act of 2003 FMAP Increase

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ) included a provision that increased federal medical assistance percentage (FMAP) rates for the 50 states, the District of Columbia, and the territories during the last two quarters of FY2003 and the first three quarters of FY2004. The FMAP rates were held harmless and increased by an across-the-board 2.95 percentage points for each state (i.e., the 50 states, the District of Columbia, and the territories). The JGTRRA FMAP increases were subject to certain requirements for states. For more detail about the JGTRRA FMAP increase, see " JGTRRA FMAP Increase ." Table A-1 shows states' regular FMAP rates and JGTRRA FMAP rates for FY2003 and FY2004.

Appendix B. American Recovery and Reinvestment Act of 2009 FMAP Increase

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) provided a temporary FMAP rate increase to the 50 states and the District of Columbia that was later extended by P.L. 111-226 . With the extension, the ARRA FMAP increase lasted from the first quarter of FY2009 through the third quarter of FY2011 (i.e., October 2008 through June 2011).

ARRA held all states harmless from any decline in their regular FMAP rates throughout the period. Under the ARRA FMAP increases, all states (i.e., the 50 states and the District of Columbia) received an across-the-board increase of 6.2 percentage points to their regular FMAP through the first quarter of FY2011, at which point the across-the-board percentage point increase phased down to 3.2 and then 1.2 percentage points for the second and third quarters of FY2011, respectively.

Throughout the period, states with unemployment rates that had increased by certain amounts for a quarter received an additional unemployment-related increase. There were three tiers of the unemployment-related increase. See "ARRA Unemployment-Related Increase" for details about the unemployment-related increase, including how it was calculated.

The ARRA FMAP increases were subject to certain requirements for states. For more information about the ARRA FMAP increases and these requirements, see " ARRA FMAP Increase ."

Table B-1 shows the FMAP rate increases under ARRA and extended by P.L. 111-226 for each quarter, from the first quarter of FY2009 through the third quarter of FY2011. Table B-2 provides an example of how the FMAPs under ARRA with the hold-harmless and the unemployment-related increases were calculated for the second quarter of FY2010.

Appendix C. Families First Coronavirus Response Act FMAP Increase

The Families First Coronavirus Response Act (FFCRA; P.L. 116-127 ) provides an increase to the FMAP rate for the 50 states, the District of Columbia, and the territories of 6.2 percentage points, beginning on the first day of calendar quarter in which the public health emergency period began (i.e., January 1, 2020) and ending on the last day of the calendar quarter in which the last day of the public health emergency period ends. See the " FFCRA FMAP Increase " section for information about the state requirements for receiving the FFCRA FMAP increase. Table C-1 shows states' FY2020 FMAP rates and those FMAP rates plus the 6.2 percentage points added by FFCRA.