Politicians talk about Medicaid as if the money comes from somewhere else. It doesn’t. In fiscal year 2024, total Medicaid spending hit $957.4 billion, according to the Medicaid and CHIP Payment and Access Commission. The federal government paid about $620.4 billion. States paid about $337.0 billion. Both piles come from taxpayers. If you want to understand the budget fight in Washington and in your state capitol, start with how Medicaid is funded.
This is not a rant about who deserves coverage. It is a clear look at the match formula, the expansion premium, and the open-ended structure that makes every new dollar of state spending pull more federal money in behind it. Once you see the plumbing, the incentives stop looking mysterious.
The Core Deal: How Medicaid Is Funded Through FMAP
Medicaid is a joint federal-state program. States run it under federal rules. The federal government then reimburses a share of each state’s allowable spending. That share is the Federal Medical Assistance Percentage, or FMAP.
The Congressional Research Service explains the basic formula: the federal share rises when a state’s per capita income is below the national average, and falls when it is above. The statute sets a floor of 50% and a ceiling of 83%. For FY 2025, CRS reports regular FMAP rates ranging from 50% in ten higher-income states to 76.9% in Mississippi. The District of Columbia’s rate is fixed in law at 70%. Most administrative costs get a flat 50% federal match.
In plain English: for traditional Medicaid, a state at the floor puts up one dollar and Washington matches it with one dollar. A poorer state can put up roughly one dollar and get more than three dollars back. That is not a rounded appropriation. It is an open-ended match on whatever the state spends that qualifies.
What Taxpayers Actually Paid in FY 2024
MACPAC’s Exhibit 16, built from CMS-64 expenditure reports, puts total Medicaid spending at $957.4 billion in FY 2024. Of that, the federal share was $620.4 billion and the state share was $337.0 billion. MACPAC separately notes that the federal share of Medicaid benefit spending was about 64.7% that year, down from 69% in FY 2023 after the temporary pandemic FMAP boost wound down.
On MACPAC’s longer trend series (Exhibit 10), total Medicaid spending rose from $495 billion in FY 2014 — the first year of the ACA expansion — to $949 billion in FY 2024. Enrollment climbed, then partially fell after continuous-coverage rules ended. Spending did not snap back with it. Spending per enrollee jumped as the remaining caseload got sicker and more expensive on average.
So when someone says “the federal government pays for Medicaid,” they are describing only part of the ledger. Your federal tax bill funds the match. Your state tax bill — or the provider taxes and transfers states use to raise their share — funds the rest. There is no third wallet.
Expansion vs. Traditional: The 90% Match
The Affordable Care Act created a separate deal for the expansion population — mostly adults under age 65 with incomes up to 138% of the federal poverty level. After a phase-down from a temporary 100% federal match, that group has been financed at a 90% federal / 10% state rate since 2020. KFF’s financing explainer and CRS both treat that enhanced rate as the standing rule for newly eligible expansion adults.
That is a much sweeter deal than traditional Medicaid. A 50% FMAP state pays half for a child or a person with a disability on the old pathways, but only a dime on the dollar for an expansion adult. KFF reported about 19.8 million people in the expansion group as of June 2025 — roughly a quarter of total Medicaid enrollment. Forty-one states including D.C. have adopted expansion; ten have not.
The political lock-in is obvious. Once a state expands, rolling it back means either dumping coverage or suddenly paying the regular FMAP on a large adult population. Several states wrote “trigger” laws that automatically revisit expansion if the 90% rate falls. That is how a temporary enhanced match becomes a permanent budget fixture.
Why the Match Distorts State Incentives
Open-ended matching is not the same as a capped grant. If a state expands optional benefits, raises hospital rates, or leans on provider taxes to juice its “state share,” federal dollars follow. KFF puts it bluntly: there is a guarantee of federal matching payments with no pre-set limit. Conservatives have pointed at that design for years because it rewards spending growth more than frugality.
During downturns, Congress often adds a temporary FMAP bump so states do not cut eligibility while revenues fall. That may be politically popular. It also trains state budget offices to treat Medicaid as the softest place to grow, because every state dollar buys more than a dollar of program. The pandemic continuous-coverage period showed the other side of the same coin: enrollment and federal outlays surged, then the unwind was messy and costly per remaining enrollee.
We have made a related point on food aid in Four More States Take Soda Off SNAP: when Washington writes an open check with soft rules, states and vendors fill the space. Medicaid’s match is a bigger version of that problem, measured in hundreds of billions.
How Medicaid Funding Hits Your Family Budget
Federal Medicaid outlays compete with interest on the debt, defense, and everything else in the unified budget. We flagged that squeeze in Interest on the National Debt Just Beat Defense Spending. State Medicaid spending crowds schools, roads, and tax relief in every statehouse. You pay on both sides whether you ever walk into a Medicaid office.
Health costs outside Medicaid are climbing too. Our coverage of ACA open enrollment premiums and the KFF employer premium survey showed the same pressure in private coverage. Medicaid is not sealed off from that market. When hospitals and plans raise prices, the Medicaid bill rises with them — and the match multiplies whatever states agree to pay.
A Conservative Fix for How Medicaid Is Funded
Coverage for the truly needy — children in poverty, people with disabilities, older Americans who need long-term care — is a legitimate public duty. The funding design is what needs discipline. Three reforms follow from the numbers:
- Clearer budgets, not blank matches. Move toward per-enrollee caps or block structures that force tradeoffs up front, instead of an open-ended promise to match whatever states spend.
- Work requirements where they fit. Able-bodied working-age adults on the expansion pathway should face the same expectation of work or job training that other safety-net programs already use. Eligibility should track need, not become a permanent second track next to private insurance.
- End the match games. Provider-tax schemes and other financing gimmicks that inflate the “state share” just to pull down more federal dollars should be tightened. If a state wants a bigger program, it should raise honest state revenue — and face honest voters.
None of that requires pretending Medicaid is free, or pretending every cut is cruelty. It requires admitting that how Medicaid is funded — a permanent federal match with no ceiling, plus a 90% expansion premium — is why the program keeps outgrowing the rest of the budget. Taxpayers already pay twice. The least Washington and the states can do is stop writing the check with their eyes closed.
Sources: MACPAC Exhibit 16 (FY 2024 spending); MACPAC Exhibit 10 (enrollment and spending trends); CRS Report R43847 on FMAP; KFF, Medicaid Financing: The Basics; KFF Medicaid Expansion Enrollment.
