Utah officials who administer health-care programs for the poor take issue with a funding proposal they say is flawed and could hurt Utah's needy residents.

The General Accounting Office testified Friday before a House panel that the federal government should replace the per capita income formula it uses to make Medicaid payments. Utah officials disagree.The office, which is a congressional investigative agency, contends that what it calls rich states get too much money and poor states don't get enough. It has proposed a formula that, if adopted, would cost Utah's Medicaid budget nearly $50 million in federal matching funds.

At issue is the formula which determines the ratio of federal matching funds to state dollars each state will draw down to cover the costs of health care for low-income beneficiaries.

Utah receives one of the best matches, about $3 in federal money for each $1 spent by the state.

"The formula does not target most federal funds to states with the greatest needs . . . those with weak tax bases and high concentrations of poor people," GAO's Janet Shikles told the Government Operations subcommittee on human resources and intergovernmental relations.

The formula now in use is based solely on per capita income. The GAO recommends that the government use a formula that takes into account the number of people in poverty and the availability of "taxable resources" like business earnings and dividends distributed to out-of-state shareholders.

In 1989, Utah received $172 million in federal funds. Under the GAO's proposal, Utah's share would have been $123 million.

Shikles called the present formula "misleading" because two states with the same per capita income can have differing poverty rates. Utah and Arkansas, she said, both have per capita incomes of $11,000. But Utah has a 20 percent poverty rate and Arkansas has 32 percent poverty.

"That's ridiculous," said Rod Betit, director of the Division of Health Care Financing, which administers the state's Medicaid program. "It's distorted. If we're talking true per capita income, the variations are averaged out. If we don't have as many people in poverty, then we certainly have fewer people in the upper income brackets and more people on the brink of poverty."

The committee is considering whether states could bear a bigger share of the cost of Medicaid, which cost the federal government and states about $61 billion in 1989. Panelists say a change is being considered because of federal budget restraints. But if the committee approved a change, it would still have to work its way through the system, a process Betit said could "take quite some time."