Medicaid: Matching Formula's Performance and Potential Modifications

Pursuant to a congressional request, GAO discussed the formula used to share the cost of the Medicaid program between the federal and state governments. GAO noted that: (1) the Medicaid matching formula, which relies on per capita income as a measure of state wealth, has not significantly reduced wide differences in states' Medicaid programs; (2) large disparities persist in states' Medicaid coverage and types of services as well as in the burdens state taxpayers bear in financing state programs; and (3) the formula could be enhanced by using more direct measures to determine states' funding capacities, adjustors for geographic differences in the cost of health care, and a reduced guaranteed federal minimum match.