Medicaid Formula Alternatives

Pursuant to a congressional request, GAO provided information on alternative Medicaid distribution formulas to determine what states' reimbursements would be using minimum guaranteed federal reimbursement rates. GAO found that: (1) the current Medicaid formula has not reduced the differences in state medical care coverage for the poor or the burden of financing program benefits among states or targeted funds to states with the greatest needs; (2) the 50-percent minimum federal contribution allows states with large tax bases and low poverty rates to finance their programs with minimum tax burdens; (3) in fiscal year 1991, the alternative reimbursement formulas would have reallocated 3 to 5 percent of all Medicaid assistance among all 50 states; (4) the 50-percent minimum reimbursement rate would have increased aid in 17 states and reduced aid in 34 states; and (5) the 40-percent minimum formula would have increased aid in 24 states and reduced aid in 27 states.