Medicaid Formula:

Fairness Could Be Improved

T-HRD-91-5: Published: Dec 7, 1990. Publicly Released: Dec 7, 1990.

Additional Materials:


Gregory J. McDonald
(202) 512-7225


Office of Public Affairs
(202) 512-4800

GAO discussed the formula used to share the cost of Medicaid between the federal and state governments. GAO noted that: (1) the current distribution formula to determine the federal share of Medicaid costs used per-capita income; (2) per-capita income did not reflect all of the income that states were potentially able to tax; (3) per-capita income understated the revenue-raising capacity of states with comparatively high percentages of business income; (4) the Department of the Treasury estimated states' total taxable resources (TTR) to measure income produced within the state and income state residents received, including that received from out-of-state resources; (5) per-capita income did not accurately measure poverty incidence, which resulted in some states receiving greater financing for the poor than other states; (6) replacing per-capita income with more accurate measures of states' financing capacities and poverty rates would offset the fiscal disadvantage that low-tax-base, high-poverty-rate states faced under the existing formula; and (7) lowering the guaranteed 50-percent federal share would also help to equalize the Medicaid burden facing state taxpayers.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The staff believe no action will be taken in the coming year.

    Matter: Congress should consider revising the Medicaid distribution formula to use better indicators of states' financing capabilities and poverty rates and reduce the minimum federal share.


Explore the full database of GAO's Open Recommendations »

Mar 23, 2018

Mar 19, 2018

Mar 8, 2018

Feb 20, 2018

Feb 8, 2018

Feb 5, 2018

Jan 30, 2018

Jan 23, 2018

Jan 17, 2018

Looking for more? Browse all our products here