Resource and Cost Adjustment in the Design of Allocation Funding Formulas in Public Health Programs

In a statistical test of cost adjustors, average salaries and per capita income had the greatest effect on the reallocation of federal public health funds.

Federal agencies try to use the appropriate measure when distributing funds to public health programs. For instance, when allocating funds to the Ryan White HIV CARE program, the Health Resources Services Administration (HRSA) uses data from AIDS surveys.

Economic differences among states complicate the task of maximizing the impact of federal dollars. Public health officials can use cost adjustors to account for high costs of labor, rent, and transportation that might otherwise drag on a program’s ability to use the funds it receives. This assessment of public health financing measures tested the effect of cost adjustments using three hypotheticals and one actual federal public health program: (1) Preparedness; (2) Smoking Cessation; (3) General Wellness; and (4) the CDC Preventive Health and Health Services block grant (actual program).

Key Findings:

  • Adjustments for higher salaries and per capita income resulted in 5 to 6 percent of funds being re-allocated.
  • The adjustments for salary cost increased funding in four states.
  • The adjustments for income disparity had the least impact on funding allocation.

This article presents the results of testing cost adjustors in public health funding formulas. The findings suggest that any rational approach to funding allocation should consider the need for cost adjustors.