The formula used to determine the percentage of matching funds the federal government will pay for state Medicaid programs leads to wide variations in federal subsidies among the states, a new report by the General Accounting Office says.
The report says the formula, based on average per capita income in each state, is a "poor proxy measure" for states' funding ability, because it does not include states' resources and their actual Medicaid outlays.
Also, the formula involves a 50% minimum federal contribution, which disproportionately benefits states that have above-average resources, according to the report, which was issued Sunday.
While federal matching aid pushes 30 states closer to the national average, making the average difference in funding ability smaller, it also moves 21 states farther away from the average, widening the difference, the report says.
The report, requested by Sen. Dianne Feinstein, (D-Calif.), compares Medicaid funding for California and Wisconsin in 2000. With the addition of federal matching aid, Wisconsin can spend $7,532 per person in poverty, more than twice the $3,731 California spends.
While both Wisconsin and California earmarked about $8 for every $1,000 of its own resources toward Medicaid, Wisconsin received a relatively high federal matching rate despite its relatively high ability to fund program services, the report explained.
California, on the other hand, received a low federal matching rate despite its relatively low ability to fund program services.
View the GAO report.