How is Medicaid funded by the federal government and the states?

Medicaid is a joint program funded by both the federal government and individual states. The federal government provides a significant portion of the funding, typically covering 50 to about 80 percent of a state's Medicaid costs.12

Under the Patient Protection and Affordable Care Act, the funding structure for newly eligible beneficiaries was designed to change over time. Initially, the federal government planned to cover the entire cost for these new enrollees. Following this initial period, the federal share was scheduled to decrease gradually, eventually stabilizing at approximately 90 percent.13

It is important to note that in the Affordable Care Act cases (2012), the U.S. Supreme Court upheld the expansion of Medicaid but ruled that Congress could not coerce states into participating by threatening to withhold federal funding for existing beneficiaries.12