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HRD-93-17R 1 (1993-03-02)

handle is hein.gao/gaobackgb0001 and id is 1 raw text is: I.ajI,) a I United States GAO General Accounting Office Washington, D.C. 20548 Human Resources Division B-251296 March 2, 1993 ~ 11111A The Honorable Connie Mack 148639 United States Senate Dear Senator Mack: This letter responds to your request for a table comparing states' actual funding amounts under the Medicaid program with what they would have received if the same total spending on benefits and administration had been reimbursed at rates calculated using an alternative formula. The alternative formula we used for this calculation is that introduced by you in S. 856 during the 102nd Congress. The alternative formula you proposed is based on suggested changes described in our December 1990 testimony before the -ouse Committee on Government Operations' Subcommittee on Human Resources and Intergovernmental Relations, (MEDICAID FORMULA: Fairness Could Be Improved, GAO/T-HRD-91-5, December 7, 1990. In our testimony, we noted that the current Medicaid formula is intended to reduce differences among states in medical care coverage of the poor and distribute fairly the burden of financing program benefits among the states. However, these objectives have not been met because benefits vary substantially among states and states face varying burdens in financing the cost of providing for those in need. This happens, in part, because the formula does not target most federal funds to states with the greatest needs; that is, those with weak tax bases and high concentrations of poor people. It also occurs because the minimum 50 percent federal contribution enables states with relatively large tax bases and low poverty rates to finance their programs with relatively low state tax burdens. To better promote Congressional intent, we suggested replacing per capita income, used in the current formula, with two other factors: (1) Total Taxable Resources (TTR) and (2) people in poverty. We also suggested reducing the minimum federal reimbursement percentage below its current value of 50 percent. We believe the TTR provides a better measure of a state's ability to fund program services from their own resources and that poverty counts provide a better and more direct measure of those people in need of Medicaid services. If these changes are made, lowering the minimum GAO/HRD-93-17R, Medicaid Formula Alternative

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