The Kaiser Family Foundation has released a brief examining the Federal Medical Assistance Percentages (FMAP) for determining federal Medicaid funding to states.  The authors outline how the FMAP formula works, examines how funding has changed since the beginning of Medicaid, and projects FMAPs in 2013 and beyond. 

From the report:

Medicaid, which pays for health and long-term care services for over 60 million low-income Americans, is financed jointly by states and the federal government. Medicaid financing works through a variable matching mechanism known as the Federal Medical Assistance Percentage (FMAP), which determines the federal and state shares of Medicaid costs based on a state’s per capita personal income relative to the national average. There have been discussions over the history of the program to change the formula in order to utilize alternative or more timely data. However, such changes would result in dramatically different results across states, and these efforts have proved unsuccessful.

Full report: An Overview of Changes in the Federal Medical Assistance Percentages (FMAPs) for Medicaid (PDF |  374.45 KB)

Kaiser Family Foundation.  (2011).  An overview of changes in the Federal Medical Assistance Percentages (FMAPs) for Medicaid.