United States General Accounting Office GAO Report to the Honorable Dianne Feinstein, U.S. Senate July 2003 MEDICAID FORMULA Differences in Funding Ability among States Often Are Widened GAO-03-620 July 2003 MEDICAID FORMULA Differences in Funding Ability among Highlights of GAO-03-620, a report to the States Often Are Widened Honorable Dianne Feinstein, United States Senate A primary goal in establishing The Medicaid formula narrows the average difference in states’ funding Medicaid’s statutory formula, ability by 20 percent but often widens the gap between individual states and whereby states with lower per the national average. Although the receipt of federal matching aid moves 30 capita incomes (PCI) receive states closer to the national average, making the average difference in higher rates of federal funding ability smaller, it also moves 21 states farther away from the reimbursement for program costs, was to narrow differences among average, widening the average difference. These 21 states include 3 that are states in their ability to fund among the states with the largest populations in poverty—California, Medicaid services. States’ ability to Florida, and New York. After federal matching aid is added, states’ funding fund services depends on their ability ranges from 26 percent below the national average for two states to financial resources in relation to 179 percent above for another. Because of the formula’s current structure, their number of and costs to serve in many instances, two states devoting similar proportions of their own people in poverty. GAO and others resources to Medicaid can spend very different amounts per person in have testified before Congress that poverty. For example, in fiscal year 2000, California and Wisconsin each the current formula does not devoted about $8 for every $1,000 of their own state resources toward address wide differences among Medicaid. However, under the current formula, Wisconsin receives a states in their ability to fund their relatively high federal matching rate despite its relatively high ability to fund Medicaid programs and that the formula’s reliance on PCI is the program services, whereas California receives a low federal matching rate primary cause. GAO was asked to despite its relatively low ability to fund program services. With the addition determine the extent to which the of federal matching aid, Wisconsin is enabled to spend more than twice what formula narrows these differences California is able to spend per person in poverty ($7,532 versus $3,731). and to identify factors that impede further narrowing of differences. Two factors constrain the formula from further decreasing differences in states’ funding ability. First, PCI is not a comprehensive indicator of a To evaluate the extent to which the state’s total available resources and is a poor measure of the size of and cost formula narrows differences in to serve a state’s people in poverty. Second, the statutory provision that states’ funding ability, GAO used an guarantees no state will receive less than a 50 percent matching rate benefits alternative to PCI that more many states that already have above-average resources to fund health care directly measures states’ resources, number of people in poverty, and for their populations in poverty. For example, 2 of the 11 states that benefit cost of providing services to this the most from the 50 percent “floor” receive matching rates that are 35 and population. Using this measure, 20 percentage points higher, respectively, than the rates they would receive GAO determined the effect of the based solely on their PCI. current formula by comparing states’ funding ability before and GAO received comments on a draft of this report from two external after receiving their federal reviewers who have Medicaid formula expertise. They generally agreed with matching aid. If differences in the analysis and provided technical comments, which were incorporated as funding ability were eliminated, the appropriate. formula would have reduced differences by 100 percent. www.gao.gov/cgi-bin/getrpt?GAO-03-620. To view the full product, including the scope and methodology, click on the link above. For more information, contact Kathryn G. Allen at (202) 512-7118. Contents Letter 1 Results in Brief 4 Background 5 Medicaid Formula Narrows Differences in Some States’ Funding Ability and Widens Differences in Others 6 Use of PCI and 50 Percent Floor Inhibits Formula’s Ability to Further Narrow Differences in States’ Funding Ability 14 Comments from External Reviewers 20 Appendix I Legislative History and Description of the Matching Formula 21 Legislative History of the Medicaid Formula 21 Current Medicaid Matching Formula 22 Appendix II Methodology 25 Measuring States’ Funding Ability 25 Measuring State Resources 30 Measuring People in Poverty and the Costs to Provide Them Program Services 32 Calculating States’ Ability to Fund Medicaid Services without and with Value of Federal Matching Aid Added 41 Comparing Proportion of States’ Resources Devoted to Medicaid with Their Total Spending per Person in Poverty 43 Tables Table 1: States Benefiting from Minimum Matching Rate Provisions, Fiscal Year 2002, and Their Matching Rates without the Minimums 19 Table 2: Medicaid Matching Rates for Fiscal Years 2002-2004 23 Table 3: States’ Ability to Fund Program Services without and with the Value of Fiscal Year 2000 Federal Matching Aid Added 28 Table 4: Comparison of PCI with TTR, 3-Year Averages, 1996-98 30 Table 5: Distribution of Population in Poverty, by Age Group, 5- Year Averages, 1995-99 33 Table 6: Weights for Age Groups to Reflect Cost Differences and Medicaid Program Participation 35 Table 7: Comparison of Official and Cost-Adjusted Poverty Rates, 5-Year Averages, 1995-99 37 Table 8: Wage, Rent, and Health Care Cost Indexes, by State 40 Page i GAO-03-620 Medicaid Formula Table 9: States’ Funding Ability without and with the Value of Fiscal Year 2000 Federal Matching Aid Added 42 Table 10: Proportion of State Resources Devoted to Medicaid per $1,000 of TTR Compared with Total Medicaid Spending per Person in Poverty, Cost Adjusted, Fiscal Year 2000 44 Figures Figure 1: States’ Funding Ability Compared with the National Average, without and with the Value of Federal Matching Aid Added 8 Figure 2: Proportion of State Resources Devoted to Medicaid, Compared with Total (State plus Federal) Medicaid Spending, Fiscal Year 2000 11 Figure 3: Proportion of State Resources Devoted to Medicaid Compared with Program Spending per Person in Poverty, as a Percentage of the National Average, Selected States, Fiscal Year 2000 13 Figure 4: States’ per Capita TTR and PCI, 1996-98 15 Figure 5: Comparison of States’ PCIs with Their People in Poverty, Cost Adjusted 17 Page ii GAO-03-620 Medicaid Formula Abbreviations BEA Bureau of Economic Analysis BLS Bureau of Labor Statistics CMS Centers for Medicare & Medicaid Services CPS Current Population Survey DSH disproportionate share hospital EPSDT Early and Periodic Screening, Diagnostic, and Treatment FMAP Federal Medical Assistance Percentage FPL federal poverty level GSP Gross State Product HUD Department of Housing and Urban Development PCI per capita income PPS Prospective Payment System SIC Standard Industrial Classification SPI state personal income SSA Social Security Administration TTR Total Taxable Resources This is a work of the U.S. Government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. It may contain copyrighted graphics, images or other materials. Permission from the copyright holder may be necessary should you wish to reproduce copyrighted materials separately from GAO’s product. Page iii GAO-03-620 Medicaid Formula United States General Accounting Office Washington, DC 20548 July 10, 2003 The Honorable Dianne Feinstein United States Senate Dear Senator Feinstein: Created in 1965, Medicaid is the largest federal program assisting states in financing medical and health-related services for certain categories of the country’s low-income population. In fiscal year 2000,1 Medicaid served about 43 million beneficiaries and had expenditures totaling about $196 billion, $111 billion of which was financed by the federal government and the rest financed by the states.2 The federal share of total Medicaid program costs is determined using a statutory formula that calculates the portion of each state’s Medicaid expenditures that the federal government will pay, known as the Federal Medical Assistance Percentage (FMAP), referred to in this report as the federal matching rate.3 The formula calculates the federal matching rate for each state on the basis of its per capita income (PCI) in relation to national PCI. States with a low PCI receive a higher federal matching rate, and states with a high PCI receive a lower rate. The Medicaid statute also provides for a 50 percent minimum federal matching rate (“50 percent floor”) that reflects a federal commitment to fund at least half the cost of each state’s program.4 One of the goals of the formula has been to narrow differences among states in their ability to fund Medicaid services, which is determined by a state’s financial resources in relation to its low-income population. By providing higher matching rates to states with low PCI, it was expected that these states would be in a better position to provide health care 1 Fiscal year 2000 is the latest year for which Medicaid data on spending and the number of beneficiaries served were available. 2 Medicaid programs operate in the 50 states, the District of Columbia, and five U.S. territories. In this report, “states” refers to the 50 states and the District of Columbia. 3 Three other programs—the State Children’s Health Insurance Program, Adoption Assistance, and Foster Care—also use the Medicaid matching formula to establish federal matching rates. These three programs accounted for an additional $7.49 billion in federal funding in fiscal year 2000. 4 42 U.S.C. § 1396d(b)(1) (2000). Page 1 GAO-03-620 Medicaid Formula services to low-income populations. (App. I contains a legislative history of the formula.) In 1995, we and other witnesses testified before the Senate Committee on Finance that the current Medicaid formula did not adequately address wide differences among states in their ability to fund program services and that the formula’s reliance on PCI is the primary cause. Witnesses generally testified that PCI is an unreliable indicator of states’ ability to fund Medicaid programs.5 Because the formula has not been changed since the program’s inception and concerns persist regarding its performance with respect to narrowing differences in states’ ability to fund program services, you asked us to address the following questions: (1) To what extent does the Medicaid formula reduce differences in states’ ability to fund program services? (2) What factors prevent the formula from further narrowing differences in states’ funding ability? To evaluate the extent to which the formula narrows differences in states’ ability to fund program services, we defined a state’s ability to fund its Medicaid programs as the financial resources potentially subject to state taxation relative to its number of low-income residents, adjusted for the cost of providing health care to them.6 For state resources, we used Total Taxable Resources (TTR), a measure of all income potentially subject to taxation that is either produced within a state or received by state residents from out-of-state sources. TTR is reported annually by the 5 U.S. General Accounting Office, Medicaid: Matching Formula’s Performance and Potential Modifications, GAO/T-HEHS-95-226 (Washington, D.C.: July 27, 1995); Jerry Cromwell, testimony before the Senate Committee on Finance, Improvements in the Federal Medicaid Matching Formula; and Robert P. Strauss, testimony before the Senate Committee on Finance, Revising the Medicaid Reimbursement Formula in an Era of Fiscal Austerity, 104th Congress, 1st sess., July 27, 1995. 6 We measured states’ funding ability on the basis of potentially taxable resources and potentially eligible participants in Medicaid so that our measure of funding ability, before federal matching aid is taken into account, does not reflect the influence of states’ individual policy choices. The matching formula also affects states’ decisions about the amount and type of Medicaid services they provide and therefore affects the availability of health care to low-income individuals as well. However, we did not evaluate the formula’s performance in terms of equalizing access to care because of the high degree of uncertainty in predicting how individual states’ spending decisions are affected by changes in matching rates. Page 2 GAO-03-620 Medicaid Formula Department of the Treasury.7 To determine the number of low-income people in each state (“people in poverty”), we obtained the Bureau of the Census’s counts of people with incomes at or below the federal poverty level (FPL).8 We adjusted the counts of people in poverty to reflect (1) the higher cost of serving the elderly, who utilize health care services at higher rates than other age groups, and (2) geographic differences in the cost of medical personnel, facilities, and supplies used to deliver health care services. To adjust for age differences in people in poverty, we used data on Medicaid spending by age group from the Department of Health and Human Services’ (HHS) Centers for Medicare & Medicaid Services (CMS).9 We used 5-year averages of people in poverty for each age group for 1995 through 1999 to increase the reliability of the state-level population counts because they are subject to statistical error, especially in smaller states. To measure geographic differences in the cost of medical personnel, facilities, and supplies, we used data from the Department of Labor’s Bureau of Labor Statistics (BLS) and from the Department of Housing and Urban Development (HUD). We compared states’ funding ability from their own resources with their funding ability after their resources have been augmented to include the value of the federal Medicaid matching aid they receive. Throughout this report, we refer to augmenting a state’s taxable resources this way as state funding ability with the “value” of federal matching aid included. If differences in funding ability were completely eliminated by adding the value of federal matching aid, the formula would have reduced differences in states’ funding ability by 100 percent. We did our work between June 2001 and June 2003 in accordance with generally accepted government auditing standards. (App. II provides a more detailed discussion of our methodology.) 7 We used 3-year averages of TTR (for 1996 through 1998) to parallel the use of 3-year averages of PCI in the current formula (see app. I for a more detailed description of the current formula). 8 The federal government bases Medicaid eligibility on a variety of categorical and income- related factors, and states may expand their programs beyond the minimum requirements. As a result of the flexibility given states in administering their Medicaid programs, except for children and pregnant women, there is no federal minimum income level below which individuals must be covered under Medicaid that can be used as a basis for measuring potentially eligible low-income individuals. 9 We used CMS data on average per capita Medicaid spending for elderly (aged 65 and over) and other beneficiaries to determine how much to weight the numbers of people in poverty who are elderly to reflect the higher cost to provide them services. Page 3 GAO-03-620 Medicaid Formula The current Medicaid formula narrows the average differences in states’ Results in Brief funding ability by 20 percent, but it often widens the gap between individual states and the national average. Although the formula moves 30 states closer to the national average funding ability after they receive their federal matching aid, making the average differences in funding ability smaller, it moves 21 states farther away, including 3 states that have 30 percent of the nation’s population in poverty—California, Florida, and New York. After the value of federal matching aid is added, states’ funding ability ranges from 26 percent below the national average for two states to 179 percent above the national average for another. Because of the formula’s current structure, in many instances two states devoting roughly the same proportion of their resources to Medicaid are able to spend very different amounts per person in poverty. For example, in fiscal year 2000, Wisconsin and California devoted the same proportion of their states’ own resources to fund their Medicaid programs (about $8 per $1,000 of TTR). Yet, after receiving federal matching aid, Wisconsin’s funding ability was almost 50 percent above the national average and California’s was 26 percent below the national average. Because the current Medicaid matching formula does not reflect the fact that Wisconsin has fewer people in poverty and lower costs to provide health care services to its population in poverty than California, Wisconsin’s federal matching aid enables it to spend more than twice what California could spend per person in poverty—$7,532 compared with $3,731. Two factors prevent the Medicaid formula from further narrowing differences in states’ funding abilities. First, the formula uses PCI to calculate the federal matching rate, but it is a poor proxy measure for the components of funding ability—states’ resources and the size of and costs to serve their populations potentially eligible for Medicaid services. Second, the 50 percent minimum federal matching rate disproportionately benefits states that already have above-average resources to fund health care for their populations in poverty. The 50 percent “floor” thus prevents further narrowing of funding abilities by giving some states federal matching rates significantly higher than they would otherwise receive without the floor. We received comments on a draft of this report from two external reviewers with Medicaid formula expertise. They generally agreed with our analysis and provided technical comments, which we incorporated as appropriate. Page 4 GAO-03-620 Medicaid Formula Medicaid eligibility is determined by several factors, including an Background individual’s or a family’s income in relation to the FPL, age, and eligibility for certain other federal program benefits. For example, federal law requires state programs to cover pregnant women and children under age 6 if their family income is at or below 133 percent of the FPL, children under age 19 in families with incomes at or below the FPL, and individuals who receive Supplemental Security Income because they have disabling conditions.10 For most covered populations, state Medicaid programs are required to offer certain benefits, such as physician services, inpatient and outpatient hospital services, and nursing facility and home health services. State Medicaid programs must provide Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services for most children,11 intended as comprehensive, periodic evaluations of children’s health and developmental history, that include vision, hearing, and dental screening. States’ Medicaid programs can differ dramatically because states may expand their programs beyond the minimum requirements to cover, for example, individuals whose incomes exceed federally mandated eligibility thresholds and optional services, such as prosthetic devices and prescription drugs. For example, a state may extend Medicaid eligibility to certain population groups, such as pregnant women who have family incomes above 133 percent of the FPL, or make optional services such as prescription drugs available to its entire covered population. Since the Medicaid program began, total program costs have been apportioned between states and the federal government using a formula that provides more generous federal matching aid to states with lower PCI.12 The use of PCI in federal grant formulas dates to 1946, when it was 10 In the majority of states, individuals who receive SSI are automatically eligible for Medicaid. Eleven states have more restrictive Medicaid eligibility standards through section 1902(f) of the Social Security Act. These 11 states are often referred to as “209(b) states” because the origin of this authority was section 209(b) of the Social Security Amendments of 1972. Pub. L. No. 92-603, 86 Stat. 1329, 1381 (codified as amended at 42 U.S.C. § 1396a(f) (2000)). 11 EPSDT services are optional for the medically needy population, a category of individuals who generally have too much income to qualify for Medicaid but have “spent down” their income by incurring medical care expenses. See 42 U.S.C. § 1396(a)(10)(C) (2000). 12 Matching rates are calculated using the following formula: 2 State PCI Federal Matching Rate = 1.00 − 0.45 U.S. PCI Page 5 GAO-03-620 Medicaid Formula chosen as a proxy for a state’s ability to fund public services. Consistent with the purpose described in the formula’s legislative history, PCI is used as a proxy for both state resources and the low-income population. As a state’s PCI increases, relative to the national average, the formula provides for a decreasing federal matching rate, meaning the federal government shares a smaller portion of a state’s costs. By statute, the federal matching rate may range from 50 percent to 83 percent.13 The formula’s multiplier, currently 0.45, represents the state’s share of its total Medicaid costs for a state with PCI equal to the national average, and the federal government thus pays a 55 percent share of total costs. The Medicaid formula reduces by 20 percent the differences among states Medicaid Formula in their ability to fund program services, compared with the national Narrows Differences average funding ability. While the formula narrows differences for 30 states, making the average difference in funding ability smaller, it moves in Some States’ 21 states farther away from the national average, making the average Funding Ability and difference wider. These 21 states include 3 that are among those with the largest populations in poverty—California, Florida, and New York. Widens Differences in Because of the formula’s current structure, in many instances, two states Others devoting the same proportion of their own resources toward funding Medicaid services are unable, after receiving federal matching aid, to spend the same amounts per person in poverty, adjusted for cost differences related to age and geographic location. Formula Reduces Overall Because state resources, numbers of people in poverty, and the cost of Differences in States’ serving this population vary widely across the states, there also are wide Funding Ability by 20 differences in states’ ability to fund health care services. Considering these indicators of state funding ability, Alaska has the highest funding ability— Percent exceeding the national average by 119 percent—and Mississippi has the lowest funding ability—46 percent below the national average, as measured using states’ TTR and the number of people in poverty, adjusting the poverty count for age and geographic cost differences (see fig. 1). Nationwide, the average difference between a state’s funding ability and 13 In fiscal year 2003, Mississippi had the highest federal matching rate of any state—76.6 percent. Page 6 GAO-03-620 Medicaid Formula that of the average state is 22.7 percent.14 Nineteen states have funding ability 25 percent or more above the national average, and 10 states have funding ability 25 percent or more below the national average. After the value of federal matching aid is added to states’ own resources, the average difference in states’ funding ability drops from 22.7 percent to 18.1 percent. This represents a 20 percent reduction of aggregate differences in states’ funding ability.15 After the receipt of federal matching aid, differences in states’ funding abilities ranged from 26 percent below the national average for California and New York to 179 percent above for Alaska. 14 The average difference in states’ funding ability is calculated by comparing each state’s funding ability with the average funding ability of all states and calculating the average difference (both positive and negative), weighting each state by its number of people in poverty. 15 In an absolute sense, the federal matching rate enhances the funding ability of all states. By comparing each state’s funding ability with the average funding ability for all states, our measure of funding ability is a relative, rather than an absolute, measure of differences in funding ability. As a consequence, while states with low funding ability receiving a relatively low federal match are helped in an absolute sense, in a relative sense they move farther below a new, higher national average funding ability, resulting in relatively larger differences in states’ funding ability. Page 7 GAO-03-620 Medicaid Formula Figure 1: States’ Funding Ability Compared with the National Average, without and with the Value of Federal Matching Aid Added Page 8 GAO-03-620 Medicaid Formula Note: GAO analysis of data from HHS, HUD, and the Departments of Commerce, Labor, and the Treasury. Funding Ability of 21 The aggregate 20 percent reduction of differences in states’ funding ability States Moves Farther from under the formula masks the effect of the formula on individual states. For Average State’s Funding example, as shown in figure 1, consistent with the formula’s goals, the one- quarter of states with the lowest funding ability before the match move Ability after Federal Match closer to the average state’s funding ability after the value of the federal Is Added match is added.16 In total, 30 states move closer to the national average after adding the federal match. However, as the right panel of figure 1 shows, adding the value of federal matching aid often has inconsistent effects. For example, including the value of federal matching aid moves Alaska’s and Utah’s funding ability farther above, rather than closer to, the national average funding ability. This happens because PCI does not adequately reflect that these two states have fewer people in poverty than the national average. In addition, Utah has lower-than-average costs to provide health care services. The current formula actually moves 21 states farther above or below the average: • Four of the 21 states—California, Florida, Hawaii, and New York—have below-average funding ability before federal matching aid is added and move farther below the average after federal matching aid is added. These 4 states have approximately 31 percent of the nation’s people in poverty. For example, California’s funding ability drops from 15 percent below the average to 26 percent below the average and New York’s funding ability drops from 12 percent below the average to 26 percent below the average. These two states thus rank last in terms of state funding ability after the value of federal matching aid is added. • Thirteen states that have above-average funding ability before adding the value of federal matching aid move farther above the average after it is added.17 For example, Utah’s funding ability is 73 percent above the national average before the federal match is added but increases to 155 percent above the national average after the match. • Of the 4 remaining states, 3—Idaho, Maine, and North Dakota—have below-average funding ability before the match is added and above- 16 In decreasing order of funding ability before adding the value of the federal match, these states are Tennessee, Kentucky, Oklahoma, Montana, Arizona, South Carolina, Louisiana, District of Columbia, Alabama, Arkansas, West Virginia, New Mexico, and Mississippi. 17 The states, listed from highest to lowest funding ability, are Alaska, Utah, Wisconsin, Indiana, Wyoming, Iowa, Kansas, Missouri, Nebraska, Vermont, Ohio, Oregon, and South Dakota. Page 9 GAO-03-620 Medicaid Formula average funding ability after the match is added. For the fourth state— Rhode Island—the reverse is true: Rhode Island has above-average funding ability before the match and below-average funding ability after the match is added. Many States Devoting the States commit widely varying proportions of their own financial resources Same Proportion of Their to fund Medicaid benefits. For example, in fiscal year 2000, New York Own Resources to devoted $18.16 per $1,000 of its TTR toward its Medicaid program,18 roughly 5 times the proportion of resources that Utah devoted ($3.74 per Medicaid Cannot Spend $1,000) (see left panel of fig. 2). States’ Medicaid cost-adjusted spending Comparable Amounts per per person in poverty varies as well. For example, Alaska’s combined Person federal and state spending was over $10,000 per person in poverty, while Nevada’s spending was approximately $2,500 per person in poverty (see right panel of fig. 2). 18 The TTR amount used in these calculations is a 3-year average, 1996-98. Page 10 GAO-03-620 Medicaid Formula Figure 2: Proportion of State Resources Devoted to Medicaid, Compared with Total (State plus Federal) Medicaid Spending, Fiscal Year 2000 Page 11 GAO-03-620 Medicaid Formula Note: GAO analysis of data from HHS, HUD, and the Departments of Commerce, Labor, and the Treasury. a Medicaid spending per person is total spending (state and federal) per person in poverty after adjusting for cost differences related to age and geographic location. Because the federal matching formula does not fully eliminate differences in states’ funding ability, states devoting similar proportions of their own resources to Medicaid cannot spend the same amounts per person in poverty, cost adjusted, with federal matching aid factored in. In addition, because the formula further increases the already high funding ability of some states and decreases the low funding ability of others, these spending differences can be quite large. For example, in fiscal year 2000, both California and Wisconsin devoted roughly the same proportion of their own resources to fund program benefits—about $8 per $1,000 of taxable resources—which was close to the national average ($8.37) proportion of resources states devoted to Medicaid that year. However, the current formula moved California’s below-average funding ability farther below the national average and increased Wisconsin’s above- average funding ability farther above. This occurred because Wisconsin receives a high federal match despite its relatively high funding ability, whereas California receives a low federal match despite its relatively low funding ability. Once federal matching aid was factored in, with their nearly identical funding effort, Wisconsin is enabled to spend more than twice what California could spend per person in poverty—$7,532 compared with $3,731. Similarly, Florida and Iowa each devoted $6.48 per $1,000 in state resources toward their Medicaid programs. After adding the federal match, Iowa could spend $6,729 per person in poverty, cost adjusted, while Florida could spend just $3,160 per person. (See fig. 3.) Page 12 GAO-03-620 Medicaid Formula Figure 3: Proportion of State Resources Devoted to Medicaid Compared with Program Spending per Person in Poverty, as a Percentage of the National Average, Selected States, Fiscal Year 2000 Notes: Spending per person in poverty includes cost adjustments for differences in age and geographic location. GAO analysis of data from HHS, HUD, and the Departments of Commerce, Labor, and the Treasury. Page 13 GAO-03-620 Medicaid Formula Two factors prevent the Medicaid formula from further reducing Use of PCI and 50 differences in states’ funding ability. First, PCI—the single measure used Percent Floor Inhibits to establish federal matching rates—is not a comprehensive measure of state resources and is a poor proxy for the size of and cost to serve a Formula’s Ability to state’s population in poverty. Second, special statutory provisions, Further Narrow including the minimum 50 percent federal matching rate, give several states with already high funding ability a higher federal matching rate than Differences in States’ they would receive without these provisions. Funding Ability PCI Is Not a PCI is an inadequate measure of states’ funding ability because it is an Comprehensive Measure incomplete measure of states’ resources, it is a poor proxy for the size of a of States’ Resources and Is state’s population in poverty, and it does not take into account differences in the cost of providing health care services to people in poverty. As an a Poor Proxy for the Size indicator of state resources, PCI measures income received by state of and Cost to Provide residents, such as wages, rents, and interest income, but it does not Services to Their People in include other sources of income potentially subject to state taxation, such Poverty as corporate income produced within the state but not received by state residents. For example, PCI especially understates the taxable resources in energy-exporting states, such as Alaska and Wyoming, and in states that house numerous corporate headquarters, such as Delaware. By comparison, because TTR comprises the income included in PCI as well as income from other sources, such as corporate income and capital gains, states’ TTR exceeds PCI by about 32 percent nationwide.19 As shown in figure 4, which compares states’ TTR with PCI, states whose resources are particularly poorly represented by PCI include the District of Columbia, Delaware, Alaska, and Wyoming. 19 For a discussion of TTR, see Department of the Treasury, Office of Economic Policy, Treasury Methodology for Estimating Total Taxable Resources, TTR (Washington, D.C.: Oct. 1, 1998; revised November 2002). http://www.treas.gov/offices/economic- policy/resources/index.html?IMAGE.X=28\&IMAGE.Y=9 (See “Summary of Current Methodology for Estimating TTR”) (downloaded June 4, 2003). Page 14 GAO-03-620 Medicaid Formula Figure 4: States’ per Capita TTR and PCI, 1996-98 District of Columbia Connecticut New Jersey Massachusetts New York Maryland Illinois Nevada Colorado Delaware New Hampshire Minnesota Alaska Washington Virginia California Rhode Island Hawaii Pennsylvania Florida Michigan Ohio Wisconsin Nebraska Oregon Georgia Kansas Missouri Texas North Carolina Indiana Iowa Wyoming Vermont Tennessee Arizona South Dakota Maine North Dakota South Carolina Louisiana Kentucky Alabama Oklahoma Utah Idaho Arkansas New Mexico Montana West Virginia Mississippi 0 10,000 20,000 30,000 40,000 50,000 60,000 Dollars TTR PCI Sources: Departments of Commerce and the Treasury. Notes: TTR comprises the income included in PCI as well as income from other sources, such as corporate income and capital gains. GAO analysis of data from the Departments of Commerce and the Treasury. Page 15 GAO-03-620 Medicaid Formula Using PCI to measure the size of a state’s low-income population assumes that the lower a state’s PCI, the greater its population in poverty. However, two states with similar PCIs may differ widely in their percentages of people in poverty. In addition, PCI is not a good proxy for the differences in the cost of providing health care services that are related to the ages of the population served and the geographic area in which services are provided. Persons who are elderly typically use health care services at higher rates than adults and children and therefore cost more to serve. Two states with low PCIs may have very different proportions of elderly persons potentially eligible for Medicaid. In addition, costs to provide health care services vary widely depending on geographic location because wages and other costs of office space vary regionally. For example, the District of Columbia and Connecticut have similar PCIs, but the share of the District’s population in poverty is more than twice Connecticut’s. Health care costs also are 10 percent higher in the District than in Connecticut. (Fig. 5 compares state rankings by PCI and by people in poverty, adjusted for cost differences related to age and geographic location.) Page 16 GAO-03-620 Medicaid Formula Figure 5: Comparison of States’ PCIs with Their People in Poverty, Cost Adjusted Note: GAO analysis of data from HHS, HUD, and the Departments of Commerce, Labor, and the Treasury. Page 17 GAO-03-620 Medicaid Formula a People in poverty refers to people with incomes at or below the FPL, adjusted for cost differences related to age and geographic location. Minimum Federal Match Because of the 50 percent floor, 11 states received higher federal matching Generally Helps States rates in fiscal year 2002 than they would have if their rates had been based That Already Have High only on their PCI. Two others—Alaska and the District of Columbia— received special federal matching rates set in statutes that gave them Funding Ability higher matching rates than they would have received solely on the basis of PCI.20 (See table 1.) 20 Alaska’s current higher matching rate was authorized by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 to address inadequacies in the national calculation and establish more equitable matching rates for the state. Pub. L. No. 106-554, App. F, § 706, 114 Stat. 2763, 2763A-577. The District of Columbia’s higher matching rate was authorized by the Balanced Budget Act of 1997 at the time comprehensive policy changes realigning the financial relationship between the District and federal government also were enacted. Pub. L. No. 105-33, § 4725 and tit. XI, 111 Stat. 251, 518 and 712. Page 18 GAO-03-620 Medicaid Formula Table 1: States Benefiting from Minimum Matching Rate Provisions, Fiscal Year 2002, and Their Matching Rates without the Minimums Numbers in percent Funding ability without federal Federal match (as a Minimum matching rate percentage of federal without Percentage national matching minimum point State average) rate match difference Alaska 219 57.38 53.01 -4.37 New Hampshire 179 50.00 47.36 -2.64 Connecticut 176 50.00 14.99 -35.01 Colorado 165 50.00 46.22 -3.78 Delaware 162 50.00 48.13 -1.87 New Jersey 160 50.00 29.60 -20.40 Maryland 143 50.00 42.32 -7.68 Minnesota 143 50.00 48.03 -1.97 Illinois 131 50.00 46.09 -3.91 Massachusetts 131 50.00 32.27 -17.73 Nevada 126 50.00 46.62 -3.38 New York 88 50.00 37.14 -12.86 District of Columbia 71 70.00 12.99 -57.01 Source: HHS. Notes: States are listed in decreasing order of funding ability. GAO analysis of data from HHS. Eleven of these 13 states (all except the District of Columbia and New York) had above-average funding ability in fiscal year 2002. Their receipt of a higher federal matching rate than they would have received without statutory minimums increases the overall differences in funding ability among the states. Connecticut and New Jersey benefit the most from the statutory minimums, receiving—as a result of the 50 percent floor— matching rates that are 35 and 20 percentage points higher, respectively, than the rates they would have received based solely on their PCI. Receiving a higher matching rate than what the formula provides on the basis of PCI enables these states to spend more on program benefits per person in poverty than states with less funding ability that devote a higher percentage of their resources to funding program benefits. The statutory minimums benefit the District of Columbia and New York by providing them a higher matching rate than they would otherwise have. Because these two states have below-average funding ability, the minimum matching provisions have the effect of moving them closer to the funding ability of the average state and thus help to reduce overall differences in Page 19 GAO-03-620 Medicaid Formula funding ability among the states. For example, New York’s funding ability without the value of federal matching aid added is 12 percent below the average funding ability; with the value of federal matching aid added, its funding ability is farther from the average funding ability—26 percent below the average. Without the floor, New York’s matching rate would be 37 percent, rather than 50 percent. Therefore, the 50 percent minimum brings New York’s funding ability closer to the average funding ability than it would be with the matching rate it would receive without the minimum. We received comments on our draft report from two external reviewers Comments from who have Medicaid formula expertise. The reviewers generally agreed External Reviewers with our analysis and provided technical comments, which we incorporated as appropriate. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this report to appropriate congressional committees and will make copies available to others on request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please call me at (202) 512-7118 or Jerry Fastrup at (202) 512-7211. Major contributors to this report include Richard Horte, Robert Dinkelmeyer, Michael Williams, Elizabeth T. Morrison, and Michael Rose. Sincerely yours, Kathryn G. Allen Director, Health Care—Medicaid and Private Health Insurance Issues Page 20 GAO-03-620 Medicaid Formula Appendix I: Legislative History and Appendix I: Legislative History and Description of the Matching Formula Description of the Matching Formula This appendix summarizes the legislative history that led to the use of per capita income (PCI) in the Medicaid matching formula and describes how matching rates are calculated. The current formula is an outgrowth of variable rate matching formulas Legislative History of first discussed by Congress in the late 1940s. Senate reports accompanying the Medicaid Formula the Social Security Act Amendments of 1946 first articulated, in the case of public assistance, the rationale for a variable rate matching formula based on state PCI: Federal grants-in-aid for public assistance are intended to help in aiding the aged and blind persons and dependent children in all parts of the country and to some extent to equalize the financial burden throughout the Nation. . . . The present 50 percent basis of Federal participation does not recognize differences in the ability of States to finance public assistance, nor does it recognize the greater incidence of poverty in States with low economic resources. To assist their needy people, the low income States must make greater tax effort than States with larger resources where relatively fewer persons are in 1 need. The Social Security Amendments of 1958 established a PCI-based variable rate matching formula, with certain maximums, for public assistance and reimbursement of medical providers. Under this formula, federal matching rates ranged from a minimum of 50 percent for high-income states to a maximum of 65 percent for low-income states.2 The Social Security Amendments of 1960 increased the maximum matching rate from 65 percent to 80 percent.3 1 S. Rep. No. 79-1862, at 15 (1946), reprinted in 1946 U.S.C.C.A.N. 1510, 1525. In conference, a variable rate was adopted, but not one based on state PCI. S. Conf. Rep. No. 79-2724, at 8 (1946), reprinted in 1946 U.S.C.A.N.N. 1552, 1555. 2 Pub. L. No. 85-840, § 505, 72 Stat. 1013, 1050. Before this, payments to medical providers were reimbursed up to a certain maximum dollar amount at a uniform rate of 50 percent for all states. S. Rep. No. 85-2388, at 39 (1958), reprinted in 1958 U.S.C.C.A.N. 4212, 4259. 3 Pub. L. No. 86-778, sec. 601(f), § 6(c), 74 Stat. 924, 991. Page 21 GAO-03-620 Medicaid Formula Appendix I: Legislative History and Description of the Matching Formula When Medicaid was created in 1965, it (1) was structured as an open- Current Medicaid ended entitlement for eligible low-income individuals without limits on the Matching Formula maximum dollar amount subject to reimbursement, as in predecessor programs;4 (2) increased the federal government’s total nationwide share financed from 50 to 55 percent; and (3) raised the maximum federal matching rate from 80 to 83 percent.5 The statutory matching formula, known as the Federal Medical Assistance Percentage (FMAP), used for calculating matching rates is 2 State PCI FMAP = 1.00 − 0.45 U.S. PCI The current matching formula is calibrated with a 0.45 “multiplier.” The value of the multiplier determines the percentage of a state’s Medicaid spending for which the state is responsible. For example, using the 0.45 multiplier, a state with a PCI equal to the U.S. average would receive a federal matching rate of 55 percent (1 - 0.45 = 0.55). A smaller multiplier of 0.40 would raise the federal matching rate for all states and would raise the matching rate for a state with the national average PCI from 55 percent to 60 percent, whereas a higher multiplier of 50 percent would reduce the federal matching rate for a state with average PCI from 55 percent to 50 percent. Relative PCI is intended to represent states’ funding ability, which is a combination of states’ resources and states’ people in poverty.6 Consistent with this intent, squaring PCI has the effect of making PCI appear in the formula twice, thus reflecting both state resources and people in poverty. Squaring PCI magnifies the difference between the state’s and the national average PCI. For example, if a state’s PCI is 90 percent of the national average, the squared value of its relative PCI would be 81 percent (0.9 x 0.9 = 0.81), resulting in a federal matching rate of 64 percent (that is, 1.00 - 0.45 x 0.81 = 0.64), rather than the 60 percent rate the state would receive if relative income was not squared (that is, 1.00 - 0.45 x 0.9 = 0.60). If PCI 4 Social Security Amendments of 1965, Pub. L. No. 89-97, sec. 121, § 1905(b), 79 Stat. 286, 344. 5 See U.S. General Accounting Office, Changing Medicaid Formula Can Improve Distribution of Funds to States, GAO/GGD-83-27 (Washington, D.C.: Mar. 9, 1983) for a more complete description of the legislative history of the Medicaid formula. 6 A state’s relative PCI is its PCI when expressed as a percentage of the U.S. average PCI. Page 22 GAO-03-620 Medicaid Formula Appendix I: Legislative History and Description of the Matching Formula were a good proxy for people in poverty, squaring would be appropriate since squaring would reflect the effect on states’ funding ability of both resources and people in poverty. However, to the extent that PCI does not accurately reflect state resources and people in poverty, squaring magnifies this inaccuracy. The Department of Health and Human Services (HHS) is responsible for calculating matching rates under the formula. HHS is required to calculate matching rates 1 year before the fiscal year in which they are effective, using a 3-year average of the most recently available PCI data reported by the Department of Commerce. Thus, fiscal year 2003 matching rates were calculated at the beginning of fiscal year 2002 using a 3-year average of PCI for 1998 through 2000. Publicly announcing matching rates a year in advance of their use allows states time to make program changes in response to changes in the rate at which the federal government will reimburse eligible program costs. However, the combination of a 1-year lag between the computation of state matching rates and their implementation, coupled with the fact that a 3-year average of PCI is used, also means that the distribution of states’ matching rates reflects economic conditions that existed several years earlier. Federal matching rates for fiscal years 2002 through 2004 are shown in table 2. Table 2: Medicaid Matching Rates for Fiscal Years 2002-2004 Fiscal year State 2002 2003 2004 Alabama 70.45 70.60 70.75 Alaska 57.38 58.27 58.39 Arizona 64.98 67.25 67.26 Arkansas 72.64 74.28 74.67 California 51.40 50.00 50.00 Colorado 50.00 50.00 50.00 Connecticut 50.00 50.00 50.00 Delaware 50.00 50.00 50.00 District of Columbia 70.00 70.00 70.00 Florida 56.43 58.83 58.93 Georgia 59.00 59.60 59.58 Hawaii 56.34 58.77 58.90 Idaho 71.02 70.96 70.46 Illinois 50.00 50.00 50.00 Indiana 62.04 61.97 62.32 Iowa 62.86 63.50 63.93 Kansas 60.20 60.15 60.82 Kentucky 69.94 69.89 70.09 Page 23 GAO-03-620 Medicaid Formula Appendix I: Legislative History and Description of the Matching Formula Fiscal year State 2002 2003 2004 Louisiana 70.30 71.28 71.63 Maine 66.58 66.22 66.01 Maryland 50.00 50.00 50.00 Massachusetts 50.00 50.00 50.00 Michigan 56.36 55.42 55.89 Minnesota 50.00 50.00 50.00 Mississippi 76.09 76.62 77.08 Missouri 61.06 61.23 61.47 Montana 72.83 72.96 72.85 Nebraska 59.55 59.52 59.89 Nevada 50.00 52.39 54.93 New Hampshire 50.00 50.00 50.00 New Jersey 50.00 50.00 50.00 New Mexico 73.04 74.56 74.85 New York 50.00 50.00 50.00 North Carolina 61.46 62.56 62.85 North Dakota 69.87 68.36 68.31 Ohio 58.78 58.83 59.23 Oklahoma 70.43 70.56 70.24 Oregon 59.20 60.16 60.81 Pennsylvania 54.65 54.69 54.76 Rhode Island 52.45 55.40 56.03 South Carolina 69.34 69.81 69.86 South Dakota 65.93 65.29 65.67 Tennessee 63.64 64.59 64.40 Texas 60.17 59.99 60.22 Utah 70.00 71.24 71.72 Vermont 63.06 62.41 61.34 Virginia 51.45 50.53 50.00 Washington 50.37 50.00 50.00 West Virginia 75.27 75.04 75.19 Wisconsin 58.57 58.43 58.41 Wyoming 61.97 61.32 59.77 Source: HHS. Note: GAO compiled data from HHS. Page 24 GAO-03-620 Medicaid Formula Appendix II: Methodology Appendix II: Methodology This appendix describes our methodology for measuring the extent to which the current Medicaid matching formula reduces differences in states’ funding abilities and the data, and their sources, we used to measure the elements of states’ funding ability. While we considered alternative indicators of state resources, people in poverty, and the cost of health care, and we chose those indicators we believed were most appropriate, we did not perform an exhaustive comparative analysis of other potential indicators, nor did we attempt to develop new indicators. Measuring States’ Funding Ability Funding Ability from State We defined a state’s ability to fund Medicaid services as the economic Resources resources a state is potentially able to tax to fund its Medicaid program relative to the number of persons with incomes below the federal poverty level (FPL), adjusted for the cost of providing health care to them. Specifically, we took into account differences in the utilization of health care services by children, adults, and the elderly, and we developed an index for the differences in the cost of health care personnel and the cost of medical facilities and supplies used to provide the services. We calculated state funding ability according to the following formula: State Funding Ystate Ability From = P ∗c Own Resources state state state where Y = State resources potentially subject to state taxation P = People with incomes below the FPL, adjusted for differences in service utilization by children, adults, and the elderly c = Index of the cost of factors in the provision of health care services (e.g., health care personnel, medical facilities, and supplies). Page 25 GAO-03-620 Medicaid Formula Appendix II: Methodology We explain later in this appendix how we adjusted the counts of people in poverty for differences in service utilization and in the cost of personnel, facilities, and supplies. State Funding Ability with Federal matching aid, in effect, adds to a state’s ability to fund program the Value of Federal costs from its own resources. For example, when federal matching aid Matching Aid Added pays for half the cost of a state’s program, it effectively doubles that state’s ability to fund program services. The higher the federal matching rate, the more federal matching aid contributes to a state’s ability to fund Medicaid services. In general, a state’s funding ability after the value of its federal matching aid is added can be determined using the following formula: Medicaid Funding Ability 1 Ystate = with Federal Matching Aid state 1 − FMAPstate state ∗ c state P where FMAP = State’s federal matching rate Y = State resources potentially subject to state taxation P = People with incomes below the FPL, adjusted for differences in service utilization by children, adults, and the elderly c = Index of the cost of factors in the provision of health care services (e.g., health care personnel, medical facilities, and supplies). The first term after the equals sign represents the multiple by which a state’s matching rate increases the state’s funding ability. For example, if a state receives a federal match of 75 percent, its funding ability is increased by a factor of 4 [(1/(1 - 0.75) = 4]. Calculating the Reduction To measure the effect of the current formula in reducing differences in of Differences in States’ states’ funding ability, we compared differences between each state’s Funding Ability funding ability before and after the value of federal matching aid is added and calculated the percentage reduction in these differences. In performing these calculations, we measured each state’s funding ability relative to the average funding ability of all states. The resulting indexes of states’ funding abilities provide a means of comparing relative differences Page 26 GAO-03-620 Medicaid Formula Appendix II: Methodology in states’ ability to fund their Medicaid programs. We used the weighted absolute mean deviation as a quantitative measure of differences in states’ funding ability. This statistic is a measure of average differences in states’ funding ability. It is calculated by taking the absolute value of each state’s index of relative funding ability and computing the arithmetic average of these differences, using the following formula: 51 ∑w ⋅ X s =1 s s − X AVG Mean Absolute Deviation = 51 ∑w s =1 s where Xs = A state’s funding ability index XAVG = Weighted average of all states’ funding ability indexes ws = A state’s weighting factor (people in poverty). In calculating the mean absolute deviation, we took into account differences in the potential size of state programs by using the number of people living in poverty in each state. We chose the mean absolute deviation rather than the more commonly used weighted standard deviation because the latter, by squaring differences between each state’s funding ability and the national average funding ability, gives much greater weight to states at the extreme ends of the distribution of states’ funding abilities, resulting in a measure that is more sensitive to extreme values and thus less likely to reflect the norm. We calculated the mean absolute deviation in states’ funding ability both without and with the value of federal matching aid added. Calculating the percentage change in the two mean absolute deviations measures the extent to which the current formula reduces differences in states’ funding ability. For example, if the current formula completely eliminated differences in states’ funding ability, total funding ability of all states would equal the average of all states, and the mean absolute deviation would be zero, representing a 100 percent reduction in differences in states’ funding ability (the maximum possible). Alternatively, if the formula had no effect in reducing differences in states’ funding ability, the Page 27 GAO-03-620 Medicaid Formula Appendix II: Methodology mean absolute deviation in states’ funding ability with the value of federal matching aid taken into account would be the same as the mean absolute deviation in states’ funding ability from their own resources. In this case, there would be no change in the mean absolute deviation, meaning that the matching formula had no effect in reducing relative differences in states’ funding ability. Table 3 shows each state’s index of Medicaid funding ability without and with the value of its federal matching aid. Table 3: States’ Ability to Fund Program Services without and with the Value of Fiscal Year 2000 Federal Matching Aid Added State Medicaid funding ability (percentage of national average) (1) (2) Without federal With FY 2000 federal a State matching aid matching aid Alabama 65 89 Alaska 219 279 Arizona 73 98 Arkansas 61 94 California 85 74 Colorado 165 138 Connecticut 176 147 Delaware 162 136 District of Columbia 71 102 Florida 81 78 Georgia 96 101 Hawaii 98 84 Idaho 94 131 Illinois 131 110 Indiana 148 162 Iowa 147 166 Kansas 126 132 Kentucky 79 112 Louisiana 72 101 Maine 95 117 Maryland 143 120 Massachusetts 131 110 Michigan 111 103 Minnesota 143 123 Mississippi 54 97 Missouri 123 130 Montana 73 119 Page 28 GAO-03-620 Medicaid Formula Appendix II: Methodology State Medicaid funding ability (percentage of national average) (1) (2) Without federal With FY 2000 federal a State matching aid matching aid Nebraska 122 131 Nevada 126 106 New Hampshire 179 150 New Jersey 160 134 New Mexico 55 88 New York 88 74 North Carolina 94 105 North Dakota 92 132 Ohio 111 112 Oklahoma 76 112 Oregon 111 117 Pennsylvania 108 98 Rhode Island 101 92 South Carolina 73 102 South Dakota 105 152 Tennessee 80 91 Texas 86 93 Utah 173 255 Vermont 121 134 Virginia 125 108 Washington 141 123 West Virginia 56 92 Wisconsin 150 153 Wyoming 147 174 Sources: HHS and the Departments of Commerce, Labor, and the Treasury. Note: GAO calculations are based on data from HHS and the Departments of Commerce, Labor, and the Treasury. a Funding ability without federal matching aid was calculated using an average of state taxable resources for 1996 through 1998. The mean absolute deviation of states’ funding ability before taking into account the value of federal matching aid (column 1 of table 3) yielded an average difference in states’ relative funding ability of 22.7 percent. The mean absolute deviation in states’ funding ability after taking into account the value of federal matching aid (column 2 of table 3) yielded an average difference of 18.1 percent. This difference represents a 20 percent overall reduction in differences in states’ funding ability as a result of adding federal matching aid. Page 29 GAO-03-620 Medicaid Formula Appendix II: Methodology As the indicator of state resources in the formula, PCI includes income Measuring State received by state residents (“personal income”), such as wages, rents, and Resources interest income, but excludes other important taxable income. For example, PCI excludes corporate income not received as income by state residents, such as undistributed corporate profits and dividends received by people who reside out-of-state. An ideal resources measure would count all income that states are able to tax. Even certain types of income that states exempt from taxation or tax at preferential rates should be counted as potentially taxable income because these enhance taxpayers’ ability to pay all taxes levied in the state. We used Total Taxable Resources (TTR), as reported by the Department of the Treasury, to measure state resources because it comprises the income included in PCI as well as income from other sources, such as corporate income and capital gains, and thus it is a more comprehensive indicator of income than PCI alone.1 TTR includes personal income received by state residents as well as income produced within a state but received by individuals who reside out-of-state (which is considered a portion of the Gross State Product (GSP)). As indicated in table 4, nationwide, the TTR measure of income is 32 percent larger than PCI. Table 4: Comparison of PCI with TTR, 3-Year Averages, 1996-98 State PCI TTR per capita Percentage difference Alabama $21,194 $26,884 27 Alaska 27,001 42,755 58 Arizona 22,842 29,947 31 Arkansas 20,310 26,324 30 California 26,867 35,057 30 Colorado 28,014 36,340 30 Connecticut 35,507 48,047 35 Delaware 27,872 47,020 69 District of Columbia 36,067 51,503 43 Florida 25,756 32,267 25 Georgia 24,756 33,364 35 Hawaii 26,209 35,220 34 Idaho 21,035 27,399 30 1 Another possible measure of a state’s resources is the Representative Tax System developed by the Advisory Commission on Intergovernmental Relations. We did not use this measure in our analysis because data on this measure are not available on an annual basis. Page 30 GAO-03-620 Medicaid Formula Appendix II: Methodology State PCI TTR per capita Percentage difference Illinois 28,442 37,421 32 Indiana 23,902 31,493 32 Iowa 23,785 32,282 36 Kansas 24,388 32,456 33 Kentucky 21,241 28,774 35 Louisiana 21,272 31,520 48 Maine 22,376 28,205 26 Maryland 29,305 38,019 30 Massachusetts 31,448 41,141 31 Michigan 25,608 31,558 23 Minnesota 27,773 35,996 30 Mississippi 18,981 24,480 29 Missouri 24,251 32,314 33 Montana 20,291 25,436 25 Nebraska 24,832 33,481 35 Nevada 28,383 38,887 37 New Hampshire 27,776 39,760 43 New Jersey 32,492 44,438 37 New Mexico 20,296 29,533 46 New York 30,661 41,470 35 North Carolina 24,194 32,076 33 North Dakota 21,577 29,298 36 Ohio 24,897 32,450 30 Oklahoma 21,152 26,412 25 Oregon 24,817 34,477 39 Pennsylvania 26,096 33,239 27 Rhode Island 26,589 35,002 32 South Carolina 21,444 27,809 30 South Dakota 22,603 31,700 40 Tennessee 23,450 30,323 29 Texas 24,201 32,931 36 Utah 21,135 29,010 37 Vermont 23,487 30,344 29 Virginia 26,869 36,788 37 Washington 26,912 35,271 31 West Virginia 19,400 25,379 31 Wisconsin 24,863 32,456 31 Wyoming 23,615 41,920 78 United States $25,949 $34,299 32 Source: Departments of Commerce and the Treasury. Notes: Data reflect 3-year averages of TTR and PCI. GAO analysis of data from the Departments of Commerce and the Treasury. Page 31 GAO-03-620 Medicaid Formula Appendix II: Methodology While TTR is a more comprehensive measure of state resources than PCI, recent definitional changes to GSP and state personal income (SPI) data made by the Bureau of Economic Analysis (BEA) may have implications for the methodology used by the Department of the Treasury to calculate TTR. For example, BEA has changed its treatment of the value of services provided by government-owned fixed assets that are now included in GSP and benefit payments of government employee pension plans, which are now excluded from SPI. Since the Treasury initially developed the TTR methodology, it has not reported why definitional changes made by BEA should or should not be reflected in TTR. In the case of the changes to government pension plans, the Treasury has reported it is currently studying whether they necessitate any modifications to the TTR methodology. To measure people in poverty, we adjusted the Bureau of the Census’s Measuring People in estimates of people in households with incomes at or below the FPL for Poverty and the Costs (1) differences in the cost of providing health care services to children, adults, and the elderly (to account for the higher health care costs for the to Provide Them elderly) and (2) geographic differences in the cost of providing health care Program Services services (such as wages and salaries of health care professionals and the rental cost of medical facilities).2 Measuring the Number of We obtained estimated counts of people living in poverty from the Bureau People in Poverty of the Census’s Current Population Survey (CPS). Because the CPS sample sizes for individual states are especially small when disaggregated by age cohorts, they are subject to greater statistical error than a sample representing all age groups. To improve the accuracy of these estimates, we averaged poverty counts over the 5-year period 1995 through 1999. We used the FPL as a basis for making cross-state comparisons of the number of people in poverty. (See table 5.) 2 We have excluded disproportionate share hospital (DSH) payments from this analysis. These hospitals receive additional Medicaid reimbursement because they serve a disproportionate number of Medicaid and other low-income patients. We have excluded these payments from our analysis because the federal government uses a different distribution formula from the regular Medicaid program. Page 32 GAO-03-620 Medicaid Formula Appendix II: Methodology Table 5: Distribution of Population in Poverty, by Age Group, 5-Year Averages, 1995-99 Percentage who are Official poverty a b c State count Children Adults Elderly Alabama 684,401 44 44 11 Alaska 52,434 47 50 3 Arizona 773,651 49 44 7 Arkansas 418,593 43 44 14 California 5,213,675 48 46 6 Colorado 356,379 42 52 6 Connecticut 307,435 46 44 10 Delaware 73,643 47 43 11 District of Columbia 111,071 43 46 12 Florida 2,040,854 41 47 12 Georgia 1,024,452 47 44 9 Hawaii 138,433 42 49 9 Idaho 166,135 49 44 7 Illinois 1,335,576 49 42 9 Indiana 485,926 39 50 10 Iowa 273,851 44 47 9 Kansas 275,646 45 44 12 Kentucky 568,739 41 48 10 Louisiana 811,417 47 44 10 Maine 132,323 39 47 14 Maryland 437,917 42 44 14 Massachusetts 653,754 43 46 11 Michigan 1,064,367 47 43 10 Minnesota 437,201 46 43 11 Mississippi 518,149 45 44 11 Missouri 554,936 42 46 11 Montana 143,838 46 47 7 Nebraska 176,270 42 44 13 Nevada 181,524 46 45 9 New Hampshire 91,519 42 45 12 New Jersey 680,727 39 47 13 New Mexico 411,507 51 42 8 New York 2,945,784 45 45 10 North Carolina 931,440 42 46 12 North Dakota 81,831 44 44 12 Ohio 1,308,010 46 45 9 Oklahoma 486,474 42 47 11 Oregon 410,697 45 49 7 Page 33 GAO-03-620 Medicaid Formula Appendix II: Methodology Percentage who are Official poverty a b c State count Children Adults Elderly Pennsylvania 1,322,801 42 47 12 Rhode Island 107,019 40 43 17 South Carolina 539,744 46 42 12 South Dakota 86,713 45 42 13 Tennessee 784,910 43 47 10 Texas 3,149,475 48 44 9 Utah 163,467 51 44 5 Vermont 61,026 42 49 9 Virginia 686,279 39 48 13 Washington 584,612 43 50 7 West Virginia 299,257 36 50 14 Wisconsin 448,444 46 45 10 Wyoming 57,957 45 45 9 United States 35,052,282 45 45 10 Source: Department of Commerce. Note: Percentages may not add to 100 across age groups because of rounding. a Population under age 21 with income at or below the FPL. b Population aged 21 to 64 with income at or below the FPL. c Population aged 65 and over with income at or below the FPL. Adjusting Poverty Counts Official poverty counts are not a good proxy for the low-income for Differences in Costs to population because they do not take into account the higher cost of Serve Children, Adults, and serving elderly individuals. For example, elderly individuals represented 27 percent of Medicaid beneficiaries in fiscal year 2000, the latest year for the Elderly which data are available. However, because they are more intensive users of the health care system and utilize more expensive long-term care services, elderly persons accounted for 66 percent of all Medicaid spending that year. To account for differences in costs to serve each group, we weighted the numbers of children, adults, and the elderly. We calculated Medicaid spending per beneficiary for each age group nationwide, then compared spending per beneficiary for each age group with average spending per beneficiary for all age groups. We used a 5-year average of Medicaid spending per beneficiary derived from data reported by the Centers for Medicare & Medicaid Services (CMS) for fiscal years 1995 through 1999. The results suggest that, nationwide, elderly beneficiaries utilize health Page 34 GAO-03-620 Medicaid Formula Appendix II: Methodology care services at about two-and-one-half times the rate of the average Medicaid beneficiary, and children utilize services at less than half the rate of the average beneficiary. (See the cost weight index column in table 6.) Table 6: Weights for Age Groups to Reflect Cost Differences and Medicaid Program Participation Average annual Average Adjusted spending per Cost weight participation cost a b c Age group beneficiary (index) rate (index) weight Elderly (aged 65 or older) $9,005 2.5 1.4 3.5 Adults (aged 21-64) $4,729 1.3 0.7 1.0 Children (under age 21) $1,483 0.4 1.2 0.5 All groups $3,532 1.0 1.0 1.0 Sources: Department of Commerce and HHS. Note: GAO analysis of data from the Department of Commerce for 1995 through 1999 and data from HHS for 1994 through 1998. a Index is spending per recipient for each age group divided by average spending per recipient for all age groups. b Index is the percentage of people in each age group receiving Medicaid benefits, expressed as a ratio to the average of all groups. c Calculated by multiplying the cost weight index by the participation rate index. To adjust for differences in program participation across age groups, we compared the number of Medicaid beneficiaries by age group with the number of people in poverty. We compared these counts with the national average participation rates for all Medicaid beneficiaries. We calculated the adjusted cost weight by multiplying the cost weight index by the average participation rate index. We calculated a weighted count of people in poverty for each state by applying the adjusted cost weights in the last column of table 6 to poverty counts by age group, according to the following formula: Number in Weighted Number in Number in Poverty Poverty = 3.5 Over + 1.0 Poverty + 0.5 Poverty Under Count Aged 21 to 64 Age 21 Age 65 In table 7, the columns representing official poverty rates report the percentage of people in poverty based on the official government poverty Page 35 GAO-03-620 Medicaid Formula Appendix II: Methodology statistics reported by the Bureau of the Census. The age-weighted columns are the percentages of people in poverty after weighting children, adults, and the elderly. Comparing the percentages in the official poverty rate columns with the percentages after age-weighting illustrates the effect of differences in utilization rates by age cohort. For example, Florida’s official poverty rate is revised upward from 14.0 percent to 15.3 percent when weighted for age differences. Similarly, the District of Columbia’s poverty rate increases from about 21.1 percent to about 22.7 percent after weighting.3 3 The age and health care use cost-adjusted poverty rates in table 7 will be discussed in the next section, in which we describe the cost adjustments made for differences in medical care costs. Page 36 GAO-03-620 Medicaid Formula Appendix II: Methodology Table 7: Comparison of Official and Cost-Adjusted Poverty Rates, 5-Year Averages, 1995-99 Age and health care use Official poverty rate Age-weighted poverty rate cost-adjusted poverty rate Percentage Percentage Percentage Percentage of of U.S. Percentage in of U.S. Percentage of U.S. State people in poverty poverty rate poverty poverty rate in poverty poverty rate Alabama 15.9 122 16.9 128 16.0 121 Alaska 8.2 63 6.9 52 7.2 54 Arizona 16.5 126 15.2 115 15.7 119 Arkansas 16.3 125 18.3 138 16.4 124 California 15.9 122 14.2 108 15.7 118 Colorado 9.0 69 8.4 63 8.5 64 Connecticut 9.3 71 9.4 71 10.4 78 Delaware 9.9 75 10.2 77 11.1 84 District of Columbia 21.1 162 22.7 172 27.7 209 Florida 14.0 108 15.3 116 15.6 118 Georgia 13.6 104 13.6 103 13.4 102 Hawaii 11.6 89 11.9 90 13.7 104 Idaho 13.6 104 12.6 95 11.3 85 Illinois 11.1 85 11.0 83 11.0 83 Indiana 8.4 64 8.9 68 8.3 63 Iowa 9.6 74 9.7 73 8.5 64 Kansas 10.7 82 11.4 86 10.1 76 Kentucky 14.7 112 15.4 117 14.2 107 Louisiana 19.0 145 19.2 145 17.1 130 Maine 10.7 82 12.5 94 11.6 87 Maryland 8.6 66 9.9 75 10.3 78 Massachusetts 10.7 82 11.3 86 12.1 92 Michigan 10.8 83 10.9 83 10.9 82 Minnesota 9.2 71 9.8 74 9.7 73 Mississippi 18.9 145 19.6 149 17.5 132 Missouri 10.4 80 11.2 85 10.3 78 Montana 16.0 123 15.0 114 13.1 99 Nebraska 10.6 81 11.8 90 10.4 79 Nevada 10.5 80 10.4 79 11.9 90 New Hampshire 7.7 59 8.5 64 8.5 64 New Jersey 8.5 65 9.6 73 10.8 82 New Mexico 22.6 173 21.2 161 19.8 150 New York 16.1 123 16.5 125 17.9 136 North Carolina 12.8 98 13.9 105 13.6 103 North Dakota 13.0 99 14.1 106 12.4 94 Ohio 11.6 89 11.7 88 11.2 85 Oklahoma 14.8 114 15.7 119 13.5 102 Oregon 12.5 95 11.8 89 11.9 90 Pennsylvania 11.1 85 12.0 91 11.9 90 Page 37 GAO-03-620 Medicaid Formula Appendix II: Methodology Age and health care use Official poverty rate Age-weighted poverty rate cost-adjusted poverty rate Percentage Percentage Percentage Percentage of of U.S. Percentage in of U.S. Percentage of U.S. State people in poverty poverty rate poverty poverty rate in poverty poverty rate Rhode Island 11.2 86 13.6 103 13.6 103 South Carolina 14.3 109 15.1 114 14.9 113 South Dakota 12.3 94 13.5 102 12.0 90 Tennessee 14.2 109 14.5 110 14.2 107 Texas 16.1 124 15.8 119 14.8 112 Utah 7.9 61 7.0 53 6.5 49 Vermont 10.3 79 10.6 80 9.6 73 Virginia 10.4 79 11.8 89 11.6 88 Washington 10.4 79 10.0 75 9.7 73 West Virginia 17.0 131 20.1 152 18.0 136 Wisconsin 8.6 66 8.7 66 8.3 62 Wyoming 12.0 92 12.1 91 10.8 82 United States 13.1 100 13.2 100 13.2 100 Sources: HHS, and the Departments of Commerce, Housing and Urban Development (HUD), and Labor. Note: GAO analysis of data from HHS, HUD, and the Departments of Commerce and Labor. Adjusting Poverty Counts The cost of providing health care services is affected by three factors: (1) for Differences in the Cost the cost of the personnel who provide the services (wages, for example), of Providing Health Care (2) the rental cost of facilities in which the services are provided, and (3) the cost of medical equipment and supplies. Services We used the average wage per worker in the health industry (Standard Industrial Classification (SIC) code 8000), produced by the Bureau of Labor Statistics (BLS), to measure the cost of personnel for 1996 through 1998. The BLS cost data cover personnel in a wide variety of settings, including offices, clinics, hospitals, and medical and dental laboratories, as well as health care providers who work for home health agencies. To measure the cost of facilities through which services are delivered, we used apartment rents as reported by the Department of Housing and Urban Development (HUD) because data on commercial office space rental rates in the health sector of the economy were not available. Apartment rental rates were an appropriate alternative because the same factors that affect the cost of office space (for example, population density and income) affect housing rental rates, and apartment rental rates are likely to more closely mimic office space costs than would owner- occupied housing units. In addition, data are available for apartment Page 38 GAO-03-620 Medicaid Formula Appendix II: Methodology rentals by the size of the unit, which allowed us to take size differences into account. Data on the geographic differences in the cost of medical equipment and supplies were not readily available. Because medical equipment and supplies generally are purchased in national markets, we assumed that the costs of these items do not vary across states. We calculated an index of health industry wage rates and apartment rents (our proxy for the rental cost of medical facilities). For medical supplies, we used a cost index of 1.0 for all states to reflect the assumption that these costs do not vary across states. We then combined the three factors into an overall index of the cost of health care services by state, weighting each factor on the basis of its respective proportion of the total cost of health care services. Personnel costs represent the greatest share of health care costs, as much as 75 percent of total costs, according to one study.4 We constructed our cost index conservatively by reducing the personnel cost weight to 60 percent. We applied a cost weight of 30 percent for medical equipment and supplies and other miscellaneous costs that are assumed to be the same across states. The remaining 10 percent is the cost weight for rent. Using these cost weights is likely to understate cross-state cost differences. Nineteen states had health care costs estimated to be at least 10 percent above or below the national average. The states with costs 10 percent or more above the national average were California, Connecticut, the District of Columbia, Hawaii, Nevada, and New Jersey. States with lower costs tended to be southern or midwestern states. (See table 8.) 4 Gregory Pope, Adjusting the Alcohol, Drug Abuse, and Mental Health Services Block Grant for Allocations for Poverty Population and Cost of Service (Needham, Mass.: Health Economics Research, Inc., Mar. 30, 1990). Page 39 GAO-03-620 Medicaid Formula Appendix II: Methodology Table 8: Wage, Rent, and Health Care Cost Indexes, by State Percentage of national average Wage index (3-year averages, Rent index Health care cost State 1996-98) (FY 2000) index Alabama 96 70 95 Alaska 104 124 105 Arizona 106 98 103 Arkansas 88 67 89 California 112 127 110 Colorado 101 107 101 Connecticut 113 125 110 Delaware 114 104 109 District of Columbia 131 133 122 Florida 103 100 102 Georgia 100 91 99 Hawaii 119 139 115 Idaho 87 75 90 Illinois 100 104 100 Indiana 92 82 93 Iowa 83 74 87 Kansas 85 77 89 Kentucky 92 69 92 Louisiana 87 72 89 Maine 90 88 93 Maryland 105 113 104 Massachusetts 106 131 107 Michigan 101 93 100 Minnesota 99 93 99 Mississippi 87 66 89 Missouri 91 74 92 Montana 82 77 87 Nebraska 84 77 88 Nevada 122 110 114 New Hampshire 99 112 100 New Jersey 114 134 112 New Mexico 92 81 93 New York 109 132 109 North Carolina 99 84 98 North Dakota 85 71 88 Ohio 96 85 96 Oklahoma 83 69 86 Oregon 101 99 101 Pennsylvania 99 94 99 Page 40 GAO-03-620 Medicaid Formula Appendix II: Methodology Percentage of national average Wage index (3-year averages, Rent index Health care cost State 1996-98) (FY 2000) index Rhode Island 99 108 100 South Carolina 101 79 99 South Dakota 85 77 89 Tennessee 100 76 98 Texas 92 90 94 Utah 90 95 93 Vermont 85 97 91 Virginia 98 98 99 Washington 94 106 97 West Virginia 88 66 90 Wisconsin 95 85 95 Wyoming 87 76 90 United States 100 100 100 Sources: HHS, HUD, and the Department of Labor. Notes: States in bold have health care costs estimated to be 10 percent or more above or below the national average. GAO analysis of data from HHS, HUD, and the Department of Labor. We compared states’ ability to fund Medicaid services without and with Calculating States’ the value of federal matching aid added. Column 1 of table 9 shows states’ Ability to Fund funding ability: states’ TTR per person in poverty adjusted for differences in the cost of providing them health care services. Column 2 shows states’ Medicaid Services effective fiscal year 2000 federal matching rates used in the analysis5 and without and with column 3 shows the resulting “multipliers” (i.e., 1/(1 - FMAP)) that reflect the effect of federal matching on states’ funding ability. Funding ability Value of Federal with federal aid is shown in column 4. Matching Aid Added 5 To calculate effective matching rates we divided each state’s federal matching aid by its total Medicaid spending, net of DSH and certain other costs. Page 41 GAO-03-620 Medicaid Formula Appendix II: Methodology Table 9: States’ Funding Ability without and with the Value of Fiscal Year 2000 Federal Matching Aid Added (1) Funding ability from (4) state resources (2) Funding ability with (dollars per person in Effective FY 2000 (3) federal matching aid State poverty)a FMAP (percentage) FMAP multiplier (col. 1 x col. 3) Alabama $169,683 69.64 3.29 $558,840 Alaska 570,409 67.26 3.05 1,742,447 Arizona 189,505 69.19 3.25 615,081 Arkansas 158,718 73.11 3.72 590,165 California 222,437 52.06 2.09 463,963 Colorado 429,969 50.08 2.00 861,380 Connecticut 459,835 50.02 2.00 920,046 Delaware 422,823 50.20 2.01 848,991 District of Columbia 184,951 70.93 3.44 636,309 Florida 211,705 56.60 2.30 487,803 Georgia 251,548 60.01 2.50 628,961 Hawaii 256,566 51.03 2.04 523,891 Idaho 244,092 70.29 3.37 821,587 Illinois 341,369 50.15 2.01 684,770 Indiana 386,661 61.84 2.62 1,013,136 Iowa 382,676 63.14 2.71 1,038,320 Kansas 328,243 60.09 2.51 822,538 Kentucky 205,683 70.62 3.40 700,085 Louisiana 187,290 70.37 3.38 632,139 Maine 246,614 66.31 2.97 732,052 Maryland 374,141 50.18 2.01 750,931 Massachusetts 342,550 50.13 2.01 686,922 Michigan 289,686 55.17 2.23 646,136 Minnesota 372,580 51.69 2.07 771,185 Mississippi 140,227 76.89 4.33 606,653 Missouri 320,009 60.58 2.54 811,740 Montana 190,431 74.49 3.92 746,413 Nebraska 319,214 61.00 2.56 818,427 Nevada 327,582 50.45 2.02 661,158 New Hampshire 467,893 50.08 2.00 937,274 New Jersey 417,976 50.07 2.00 837,128 New Mexico 142,227 74.19 3.87 551,081 New York 229,337 50.11 2.00 459,721 North Carolina 244,355 62.61 2.67 653,542 North Dakota 238,866 70.97 3.45 822,897 Ohio 289,509 58.72 2.42 701,375 Oklahoma 198,643 71.63 3.53 700,263 Oregon 288,765 60.42 2.53 729,556 Pennsylvania 281,796 53.84 2.17 610,540 Page 42 GAO-03-620 Medicaid Formula Appendix II: Methodology (1) Funding ability from (4) state resources (2) Funding ability with (dollars per person in Effective FY 2000 (3) federal matching aid State poverty)a FMAP (percentage) FMAP multiplier (col. 1 x col. 3) Rhode Island 264,602 53.77 2.16 572,326 South Carolina 189,300 70.18 3.35 634,851 South Dakota 274,528 71.07 3.46 948,856 Tennessee 209,859 63.19 2.72 570,142 Texas 224,158 61.54 2.60 582,883 Utah 452,178 71.65 3.53 1,595,085 Vermont 315,610 62.39 2.66 839,259 Virginia 325,551 51.90 2.08 676,811 Washington 367,374 52.08 2.09 766,584 West Virginia 145,611 74.80 3.97 577,734 Wisconsin 392,390 58.88 2.43 954,178 Wyoming 383,724 64.63 2.83 1,084,827 United States $260,851 56.83 2.32 $624,935 Sources: HHS and the Department of the Treasury. Notes: Calculations were done with unrounded numbers, not the rounded numbers shown in the table. GAO analysis of data from HHS and the Department of the Treasury. a Funding ability without federal matching aid was calculated using an average of TTR for 1996 through 1998. The data used to show the relationship between a state’s effort to fund Comparing Medicaid benefits from its own financial resources and its total Medicaid Proportion of States’ spending per person in poverty, shown in figure 2, are displayed in table 10. Resources Devoted to Medicaid with Their Total Spending per Person in Poverty Page 43 GAO-03-620 Medicaid Formula Appendix II: Methodology Table 10: Proportion of State Resources Devoted to Medicaid per $1,000 of TTR Compared with Total Medicaid Spending per Person in Poverty, Cost Adjusted, Fiscal Year 2000 State financial resources Total Medicaid spending State per $1,000 of TTR per person in poverty Alabama $6.08 $3,397 Alaska 5.84 10,178 Arizona 4.64 2,851 Arkansas 6.35 3,747 California 8.04 3,731 Colorado 6.26 5,391 Connecticut 8.99 8,274 Delaware 7.35 6,242 District of Columbia 8.51 5,417 Florida 6.48 3,160 Georgia 6.15 3,869 Hawaii 7.51 3,935 Idaho 5.07 4,166 Illinois 7.79 5,332 Indiana 6.07 6,153 Iowa 6.48 6,729 Kansas 6.23 5,127 Kentucky 7.40 5,179 Louisiana 5.59 3,533 Maine 10.93 7,999 Maryland 7.38 5,544 Massachusetts 11.43 7,849 Michigan 9.12 5,895 Minnesota 9.20 7,094 Mississippi 6.19 3,757 Missouri 7.82 6,345 Montana 5.13 3,826 Nebraska 7.26 5,941 Nevada 3.83 2,533 New Hampshire 7.32 6,864 New Jersey 7.00 5,857 New Mexico 6.12 3,370 New York 18.16 8,347 North Carolina 7.77 5,075 North Dakota 6.64 5,467 Ohio 7.77 5,449 Oklahoma 5.12 3,586 Oregon 7.26 5,299 Pennsylvania 11.29 6,891 Page 44 GAO-03-620 Medicaid Formula Appendix II: Methodology State financial resources Total Medicaid spending State per $1,000 of TTR per person in poverty Rhode Island 14.27 8,170 South Carolina 6.40 4,061 South Dakota 4.92 4,671 Tennessee 11.04 6,296 Texas 5.58 3,252 Utah 3.74 5,964 Vermont 10.32 8,661 Virginia 5.10 3,455 Washington 8.71 6,679 West Virginia 7.22 4,170 Wisconsin 7.89 7,532 Wyoming 3.85 4,171 United States $8.37 $5,056 Sources: HHS and the Departments of Commerce, Housing and Urban Development, and the Treasury. Note: GAO analysis of data from HHS and the Departments of Commerce, Housing and Urban Development, and the Treasury. (290010) Page 45 GAO-03-620 Medicaid Formula The General Accounting Office, the audit, evaluation and investigative arm of GAO’s Mission Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is Obtaining Copies of through the Internet. 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Medicaid Formula: Differences in Funding Ability among States Often Are Widened
Published by the Government Accountability Office on 2003-07-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)