U.S. Senator Daniel K. Akaka (D - Hawaii) today introduced legislation to increase Medicaid payments to Hawaii and offset the higher costs in the state of providing medical care to low-income children, elderly, and disabled. Senator Akaka first authored and introduced this legislation in the 105th Congress. The Balanced Budget Act of 1997 included report language acknowledging the merit of a Federal Medical Assistance Percentage (FMAP) rate hike for Hawaii.

The federal share of Medicaid payments varies depending on each state's ability to pay--wealthier states bear a larger share of the cost of the program, and thus have lower FMAP rates. Per capita income is used as the measure of state wealth. Because per capita income in Hawaii is high, the state's FMAP rate is at the lowest level--50 percent. Hawaii is one of only a dozen states whose FMAP rate is at the 50 percent level. Senator Akaka's bill would increase Hawaii's FMAP rate from 50 percent to 59.8 percent.

The current FMAP formula is unfair to Hawaii since it does not factor in data on our higher cost of living, poverty rate, and unemployment rate. The cost of living in Honolulu is 83 percent higher than the average of all metropolitan areas tracked by the U.S. Census Bureau. For the state as a whole, the cost of living is more than one-third higher than the rest of the U.S. Hawaii's Cost of Living Index ranks it as the highest in the country.

"The cost of living in Hawaii greatly exceeds the cost of living in the mainland states," Akaka said. "Per capita income is a poor measure of a state's ability to bear the cost of Medicaid services. Ignoring cost of living factors and other economic indicators shortchanges Hawaii in reimbursements.

"Hawaii is committed to providing for the public welfare while striving for more efficient delivery of government services. Increasing the FMAP rate for Hawaii responds to health service needs in the state and gives our state a fairer share of Medicaid assistance."

Other government programs take the high cost of living in Hawaii into account and funding is adjusted accordingly. These include Medicare prospective payment rates, food stamp allocations, school lunch programs, housing insurance limits, and military living expenses. "These examples reflect the recognition that our higher cost of living should be taken into account," Akaka noted. "The need to fund 50 percent of the cost of the Medicaid program puts an increasing strain on the state's resources. Adjusting the FMAP rate for Hawaii is an equitable solution to an unfair situation."