The Basics

Medicaid Financing
February 2, 2015


William J. Scanlon, PhD, Consultant


This publication provides an overview of how the Medicaid program is financed. It explains how the federal and state shares of funding are determined, briefly describes disproportionate share hospital payments and how those are affected by the Patient Protection and Affordable Care Act of 2010, and outlines financing mechanisms states have used to maximize federal Medicaid matching funds.

Related Materials

See also "Medicaid Eligibility and Benefits" (The Basics, February 2, 2015).

For a more in-depth discussion of FMAP, see "Medicaid Financing: How the FMAP Formula Works and Why It Falls Short" (Issue Brief No. 828, December 11, 2008).

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