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HRD-93-18R 1 (1993-03-31)

handle is hein.gao/gaobackhi0001 and id is 1 raw text is: GAO United State' General Accounting Office Washington, D.C. 20548 Human Resources Division B-25 1296 March 31, 1993 The Honorable Daniel P. Moynihan 148953 United States Senate Dear Senator Moynihan: This letter responds to your request that we prepare two simulations that would demonstrate the effect of alternative formulas, which use poverty counts, for improving the distribution of Medicaid funds among the states. You requested that two options be explored, one with the current minimum guaranteed federal reimbursement rate at 50 percent and the second with the reimbursement rate reduced to 40 percent. We have constructed tables comparing states' actual reimbursement under the Medicaid program with what states' reimbursement would have been under rates calculated using each alternative formula. These changes are options that we suggested in our report Changing Medicaid Formula Can Improve Distribution of Funds To States (GAO/GGD-83-27, Mar. 9, 1983); these are similar to an option described in our December 1990 testimony before the House of Representatives, Committee on Government Operations, Subcommittee on Human Resources and Intergovernmental Relations (Medicaid Formula: Fairness Could Be Improved (GAO/T-HRD-91-5, Dec. 7, 1990). In the 1983 report and the 1990 testimony, we noted that the current Medicaid formula is intended to reduce differences among the 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. These variations occur, 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. These variations also occur 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. GAO/HRD-93-1SR Medicaid Formula Alternatives

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