Review of New Jersey's Compliance With the Reserve or Rainy Day Fund Requirement for the Increased Federal Medical Assistance Percentage Under the American Recovery and Reinvestment Act

The Federal Government pays its share of a State's medical assistance expenditures under Medicaid based on the Federal medical assistance percentage (FMAP), which varies depending on the State's relative per capita income. The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides, among other initiatives, fiscal relief to States to protect and maintain State Medicaid programs in a period of economic downturn. For the recession adjustment period (October 1, 2008, through December 31, 2010), the Recovery Act provides an estimated $87 billion in additional Medicaid funding based on temporary increases in States' FMAPs. Under the Recovery Act, a State is not eligible for the increased FMAP if any amounts attributable (directly or indirectly) to such an increase are deposited in or credited to any reserve, or "rainy day," fund.

Our review found that New Jersey complied with the Recovery Act reserve fund requirement for receiving the increased FMAP. Specifically, the State did not use additional Medicaid funding to supplement any reserve account. Therefore, we have no recommendations.