Replace FMAP with Medicaid funding system that better accounts for seniors, government report says

Share this content:

The federal government could distribute Medicaid dollars to states more effectively by looking at data that better reflects the needs of nursing home residents and workers, according to a new report from the Government Accountability Office.

Medicaid — which is the main payer for long-term care nationwide — is funded at both the state and federal level, with the federal contribution currently determined through the Federal Medical Assistance Percentage (FMAP). The FMAP is based solely on how a state's per-capita income (PCI) relates to the national per-capita income.

“We have noted that PCI, the sole measure included in the FMAP formula, is an incomplete measure of states' resources, is a poor proxy for the size or characteristics of the states' population in need of Medicaid services, and does not take into account geographic differences in the cost of providing health care services,” the GAO report states.

If the federal government looked at a variety of data sources that reveal how costs and demand for service differ in various locations, it could distribute Medicaid dollars more equitably, according to the GAO. Recommended data sources include the Bureau of Labor Statistics' Occupational Employment Statistics and the American Community Survey.

These would be good data sources in part because they include information specific to nursing homes, the GAO report notes. The OES includes wage data for nursing home workers and the ACS includes income information about nursing home residents.

Click here for the full report.