The Senate and House health reform bills would expand Medicaid to 133 percent to 150 percent of the federal poverty level respectively. In both scenarios the federal government would pay virtually all the costs for the newly eligible groups but continue to pay for most current eligibles at current matching rates. This creates significant inequities as well as introduces new administrative complexities. This analysis, however, shows that it is possible to distribute increased federal payments in multiple alternative ways that could avoid the problems, provide fiscal relief to states, and solve existing financing problems as well.