Federal and state public health agencies use a mix of strategies, including funding formulas, to allocate program funds among constituent jurisdictions. The purpose of this article is to illustrate the ways that two federal public health agencies, the Centers for Disease Control and Prevention (CDC) and the Health Resources Services Administration (HRSA), use funding formulas. Because the funding formula used by HRSA's Ryan White HIV CARE Program has been the subject of extensive prior scrutiny,1–3 we will consider other CDC and HRSA programs.
In 2000, the National Academy of Sciences (NAS) convened a Panel on Formula Allocations to review the use of formula funding by federal agencies.4,5 The panel reviewed strategies used in the design of formulas as well as the advantages and limitations of formula allocation methods. The panel concluded that the Office of Management and Budget should establish a Standing Committee on Formula Allocations with a mandate to develop “improved simulation and quality control techniques for use in formula design.”5 To date, such an office has not been established (T. A. Louis, PhD, Chair, NAS Panel on Formula Allocations, written communication, 2006). Moreover, the NAS panel did not substantially consider the potentially unique challenges inherent in funding public health programs aimed at disease prevention.
To illustrate the use of census data and historical precedents in formula-based allocations, we selected a convenience sample of four programs that exemplify these approaches, involve substantial levels of annual funding, and represent different types of program activities. These include the CDC Bioterrorism and Health Emergency Preparedness Program,6 the CDC Pandemic Influenza Planning Program,7,8 the CDC Preventive Health and Health Services Block Grant,9,10 and the HRSA Title V Maternal and Child Health Program.11 We used information publicly available via the Internet to summarize program objectives, the level of funding awarded using formula-based methods, the proportion of funds used to provide minimum funding levels ensured to each grantee, the proportion of funds set aside for special programs, and formula characteristics.
The CDC Bioterrorism and Health Emergency Preparedness Program (Table 1, section A) was prompted by concerns about bioterrorism but is now oriented toward preparing for a broader spectrum of public health threats.6,13 Of the $862 million allocated for this program for the sixth funding year beginning August 2005, $810 million in “base program” funds were allocated to states and other jurisdictions using a funding formula.13 Of this latter amount, 28 percent of funds were spent to pay the minimum funding guaranteed to all jurisdictions, and the remainder was allocated on the basis of population size. Set-asides for urban areas (5% of funds) and border states (<1% of funds) allow for additional preparedness needs for these areas.
Under the one-time CDC supplemental funding program for pandemic influenza planning (Table 1, section B), $100 million of $350 million in program funds was awarded using a population-based formula,7 with funding to states for guaranteed minimums accounting for nearly 30 percent of this amount. In July 2006, the CDC announced that of the $250 million balance, $225 million would be awarded using a formula-based allocation “contingent upon sufficient responses to certain program requirements” from the initial phase, with the remaining $25 million to be awarded competitively.12
The CDC Preventive Health and Health Services Block Grant is a funding resource that allows states substantial flexibility to address needs not met by other programs and to respond to emerging health threats (Table 1, section C).9,10 The block grant represents funds that were previously awarded to states under multiple categorically funded programs, and the amount of funds that each state receives is determined by the proportion that each received under the earlier mix of programs in FY-1981. Of the $129 million in total program funds in FY-2004, approximately $8 were set aside for rape prevention programs, and this latter amount is allocated on the basis of population size.
The HRSA Title V Maternal and Child Health Program funds are allocated to states using a mix of the above strategies (Table 1).11 In FY-2004, total awards were more than $700 million, including $594 million allocated using a formula and $135 awarded competitively. Of the formula-based award, approximately three fourths of funds were allocated using a strategy similar to that of the CDC Preventive Health and Health Services Block Grant, on the basis of proportions of funds that states received in FY-1981 previously under separate programs. The remainder of the funds was awarded on the basis of the proportion of low-income children residing in each state.
Discussion and Conclusions
Major federal public health programs use a variety of formula-based strategies to allocate funds among states and other jurisdictions. These strategies represent a balance between potentially competing interests: simplicity, ability to determine allocations quickly, transparency, relevance to program goals, and meeting states' needs for federal assistance.
The four formulas examined in this article, as well as the HRSA Ryan White formula,1 are relatively simple, and, unlike those used by other government agencies,4,5 none include factors that adjust for regional differences in the cost of providing services or variations in state resources. Although the formulas themselves do not include such adjustments, the impact of these variations may be partly mitigated after awards are made as grantees and federal project officers negotiate the specifics of proposed expenditures or the transfer of unobligated funds from one budget year to another.
The use of funding formulas does not imply that jurisdictions are unaccountable for how they propose to spend funds or have spent prior funds. Although funding levels for each of these programs are set by formulas, the CDC and the HRSA provide comprehensive guidance in program funding announcements, and grantees are required to submit detailed applications that outline how funds will be used, justify proposed expenditures with respect to anticipated costs, and explain how prior year funds have been used.
In addition to the use of formula-based funding for core activities, these programs offer widely varying levels of set-asides for special activities, which may themselves be awarded using a formula or are awarded competitively. Programs funded through competitive set-asides provide an opportunity to foster innovation in addressing emerging problems. All four formulas provide an explicit or de facto level of minimum funding. Although there is little explanation for how minimum levels were set, it is reasonable to assume that minimums resulted from negotiations and compromises in the political and programmatic process of establishing formulas.
A key challenge in formula design is relating program objectives to data sources and calculation methods. For the CDC Bioterrorism and Health Emergency Preparedness Program, ideally, the allocation would take into account the threat and potential impact of bioterrorism and other specific public health emergencies in various jurisdictions, but quantifying the risk and impact of this mix of events in a way that could be reliably integrated into a formula would be extraordinarily difficult. The use of population size therefore serves as a cumulative proxy for these risks. In parallel with this CDC program, the HRSA has funded the same grantees under its National Bioterrorism Hospital Preparedness Program using a formula that similarly guarantees a minimum amount to each grantee plus an additional amount based on population, with total awards to states increasing from $125 million in FY-2002 to nearly $500 million in FYs 2003–2005.14,15 In its FY-2005 continuation guidance, the HRSA alerted grantees that beginning in FY-2006, it would move away from formula-based funding and that future funding would be “influenced increasingly” by “the risks and likely medical consequences of various forms of terrorism and other public health emergencies” as well as awardees' prior performance and the “relative merits of applicants' proposed initiatives toward selected preparedness priorities as determined by national competition.”16 Making allocations using a more competitive and risk- and performance-based approach must have proved too ambitious, however, as the HRSA apparently postponed plans to move in this direction and simply stated in its FY-2006 announcement that “independent review will not be necessary since these are formula grants.”17 In contrast to variations among states in the risks of bioterrorism and other public health emergencies, pandemic influenza could affect virtually all states within a relatively narrow time frame. Given the potential for near universal susceptibility to infection, the size of a state's total population is a simple proxy for the resources that would be required to respond to a pandemic.
The CDC Preventive Health Services and the HRSA Title V Maternal and Child Health block grants both incorporate historical funding proportions, set in 1981, in their allocation method. This strategy ensures stability in state funding allocations and thus facilitates planning for use of funds, but it may not reflect the evolution of needs and interstate differences in growth rates or health trends in the intervening decades. The CDC and HRSA mitigate this problem to varying degrees, the former by allocating block grant funds for rape prevention using current population data and the latter by allocating a proportion of funds based on current numbers of low-income children—the target population for “safety-net” services supported by the Title V program.
While the HRSA Ryan White HIV CARE Program formula has been the subject of intense scrutiny,1–3 much less attention has been focused on other Department of Heath and Human Services formulas. Altogether, the practice and science of formula-based allocations represents an underdeveloped domain of research in the field of public health systems financing. Future research should focus on the impacts of alternative formula strategies, including procedures for defining funding minimums and ways that funding formulas can provide incentives for improving program performance. The prior work of the NAS Panel on Funding Allocations provides a strong foundation for such research,4,5 although additional attention is needed to the implications of formula options for prevention programs.
1. Committee on the Ryan White CARE Act: Data for Resource Allocation, Planning and Evaluation. Institute of Medicine of the National Academies. Measuring What Matters: Allocation, Planning, and Quality Assessment for the Ryan White CARE Act
. Washington, DC: National Academies Press; 2004.
2. US Government Accountability Office. HIV/AIDS: Changes Needed to Improve the Distribution of Ryan White CARE Act and Housing Funds
. Washington, DC: US Government Accountability Office; February 2006. GAO-06-332.
3. Martin EG, Pollack HA, Paltel AD. Fact, fiction, and fairness: resource allocation under the Ryan White CARE Act. Health Aff
4. Jabine TB, Louis TA, Schirm AL, eds. Choosing the Right Formula: Initial Report Panel on Formula Allocations
. Committee on National Statistics, Division of Behavioral and Social Sciences and Education, National Research Council of the National Academies. Washington, DC: National Academies Press; 2001.
5. Louis TA, Jabine TB, Gerstein MA, eds. Statistical Issues in Allocating Funds by Formula
. Panel on Formula Allocations, Committee on National Statistics, Division of Behavioral and Social Sciences and Education, National Research Council of the National Academies. Washington DC: National Academies Press; 2003.
6. Centers for Disease Control and Prevention. Cooperative agreement guidance for public health emergency preparedness. Program Announcement AA154—2006 (budget year 7).
7. US Department of Health and Human Services. HHS announces $100 million to accelerate state and local pandemic influenza preparedness efforts. News release, January 12, 2006.
8. Centers for Disease Control and Prevention. Cooperative agreement guidance for public health emergency preparedness. FY05 Guidance Pandemic Influenza Supplements: Phase 1.
9. Centers for Disease Control and Prevention. Programs in brief: chronic disease prevention. Preventive Health Services Block Grant (PHHS).
10. FederalGrantsWire. Preventive Health and Health Services Block Grant (93.991).
11. Health Resources and Services Administration. Maternal and Child Health Bureau. Understanding Title V of the Social Security Act: a guide to the provisions of the Federal Maternal and Child Health Block Grant.
12. Centers for Disease Control and Prevention. Pandemic influenza guidance supplement to the 2006 Public Health Emergency Preparedness Cooperative Agreement Phase II, issued July 10, 2006.
13. Centers for Disease Control and Prevention. Cooperative agreement guidance for public health emergency preparedness. Program Announcement AA154—2005 (budget year 6), Appendix V: funding table.
14. Lister SA. An overview of the U.S. public health system in the context of emergency preparedness. Congressional Research Service, Library of Congress. Order Code RL31719, updated March 17, 2005.
15. Health Resources and Services Administration. National Bioterrorism Hospital Preparedness Program (NBHPP).
16. Health Resources and Services Administration. National Bioterrorism Hospital Preparedness Program. FY 2005 continuation guidance. HRSA Announcement Number 5-U3R-05-001, July 1, 2005.
17. Health Resources and Services Administration. National Bioterrorism Hospital Preparedness Program. Program guidance, Fiscal Year 2006. New Announcement Number HRSA 06-067, release date July 2, 2006.