From the Kaiser Family Foundation: Medicaid Financing: How Does it Work and What are the Implications?

One of the major types of federal grants.

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Medicaid represents $1 out of every $6 spent on health care in the US and is the major source of financing for states to provide coverage to meet the health and long-term needs of their low-income residents. The Medicaid program is jointly funded by states and the federal government. There has been renewed interest in how Medicaid is financed in light of the additional federal financing for the Medicaid expansion under the Affordable Care Act (ACA) as well as ongoing budget discussions at the federal level. This brief reviews how the Medicaid program is financed as well as the implications for budgets, responsiveness to state policy choices and need, the links between Medicaid spending and state economies.