Medicaid Funding Formula Changes

Pursuant to a congressional request, GAO provided information on the proposed changes to Medicaid funding formulas under H.R. 3507. GAO noted that: (1) states with large numbers of poor and disabled persons receive less federal assistance than states with larger numbers of poor and weaker tax bases; (2) states that offer extensive services and provide high provider reimbursement rates receive more federal funding; (3) the revised Medicaid formula would link the amount of federal aid a state receives to the number of poor people in need of Medicaid services; (4) over 90 percent of the federal formula grant programs target funding on the basis of need; (5) H.R. 3507 would realign federal Medicaid funding over a number of years, so that funding is more related to state need rather than state spending patterns; (6) H.R. 3507 would place greater weight on the number of elderly and disabled people that require expensive services; and (7) the proposed formula change would enable states with low funding to acquire more federal funds.