This paper demonstrates the application of a mathematical programming model to a longstanding policy issue in the Medicaid reform debate: the redistribution of program funds necessary to achieve equity in eligibility and benefit coverage across states. The model is used to estimate the potential degree of equity achievable in the current Medicaid system given various budgetary and political constraints. Two model simulations, based on a 1979 data set for aged recipients of Supplementary Security Income, are presented. The results indicate that half or more of the interstate differences in spending for this population group are due to actuarial and efficiency factors rather than deviations from equity potential. The implications of eliminating the remaining differences are discussed.