19 States Helped, 30 Hurt in GAO Medicaid Formula

WASHINGTON —  A General Accounting Office official said Friday that a more equitable formula for distributing federal Medicaid dollars to states would result in 30 states losing money but 19 needier states receiving more funds.

The funding formula for Medicaid, the government’s health insurance plan for the poor, is unfair because it is based on states’ per capita income, Janet Shikles of the GAO told a House Government Operations subcommittee.

Shikles said a more accurate picture of a state’s ability to fund its share of Medicaid could be drawn if the formula considered the state’s total revenue income and poverty rates--not per capita income. She said that the GAO was also suggesting that the federal government’s guaranteed share be reduced to 40% from 50%.

Under the GAO plan, 30 states would be losers and 19 would be winners, with figures unavailable for Arizona or the District of Columbia. Nine of the 19 states would receive an additional $100 million or more, Shikles said.

In the GAO proposal, Florida would be the biggest winner financially, netting 51% more funds, and Wyoming would be the biggest loser, receiving 61.7% less.

To illustrate why per capita is a poor indicator of a state’s poverty level, Shikles paired Arkansas and Utah, which have almost the same average per capita income. The formula treats them as if they had the same poverty rate, but census data shows Arkansas with a poverty rate of 32% and Utah, 20%.

Among the states that would receive more money under the GAO proposal are California, with an 8.8% increase; New Mexico, 19.1%; New York, 12.1%, and Texas, 27%. Included in the states that would lose money are Alaska, a 39.6% decrease; Colorado, 12.6%; Hawaii, 15.2%; Nevada, 20.7%; Oregon, 0.7%, and Washington, 4.4%.

The GAO has been presenting its view on the funding formula to Congress since 1983. But Gail Wilensky, administrator of the Health Care Financing Administration, which runs Medicaid, said no changes in the formula should occur until there are discussions for overhauling the entire program.

Arkansas Gov. Bill Clinton, who testified he wants the federal government to halt Medicaid mandates for two years, said that he is all in favor of the formula change, acknowledging that it would hurt many states.

“The formula should be changed,” Clinton said in an interview. “If you do it on a per capita basis, it obscures the (existence) of poor people in New York and California,” he said, referring to two of the 19 states that would see increases in federal dollars under the proposed formula.