| Ei1 | is Medicaid expenditures in State i at MFS levels. |
| Ei2 | is Medicaid expenditures in State i at actual 1990 Medicaid fee levels. |
| p̃i | is the percent change in the Medicaid fee index in State i associated with increasing fees to MFS levels. |
| q̃i | is the percent change in services per enrollee in State i, q̃i = p̃ iε. |
| ε | is the elasticity of services per enrollee with respect to the Medicaid fee index. |