The Federal-State Partnership

Medicare is a single national program with one set of rules. Medicaid is the opposite: a partnership in which the federal government sets broad requirements and pays a share of the cost, while each state designs and runs its own program. The practical result is that there is no single “Medicaid.” There are more than fifty, one per state, plus the District of Columbia and the territories.

What is shared and what is not

• Financing is shared. The federal government and the states pay for Medicaid together (Lesson 3 covers how).
• Governance is federal. Congress and CMS set the floor: who must be covered, what benefits are mandatory, and the rules a state must follow to receive federal money.
• Administration is state. Within that floor, states decide optional eligibility groups, optional benefits, how they pay providers, and how they deliver care.

That division is why a sentence like “Medicaid covers X” is almost always incomplete. It covers X in some states and not others, at different payment rates, through different delivery systems.

The scale

Medicaid is the largest source of health coverage in the country. About 100 million people were enrolled at some point during fiscal year 2023, and Medicaid and CHIP together reached more than 32 percent of the US population that year. Total Medicaid spending was $900.3 billion in FY 2023.

Worth remembering: because states administer Medicaid, the program is also a policy laboratory. Much of the value-based care innovation in this course happens because a state chose to try something its neighbor did not.

Why the structure matters for value-based care

Every mechanism in this course runs through the federal-state seam. A state can require value-based arrangements, but only through authorities the federal government provides. It can redesign delivery, but must get federal approval and federal matching dollars to do it. And because each state starts from a different program, “what works in Medicaid” is really “what worked in this state, under these rules, for this population.” Keep that qualifier in mind throughout.

Key takeaways

• Medicaid is a federal-state partnership: shared financing, federal rules, state administration.
• There is no single Medicaid; eligibility, benefits, and payment vary by state.
• It is the largest coverage program in the US, about 100 million enrollees and $900 billion in FY 2023.
• Value-based care in Medicaid always operates through federal authorities that states choose to use.

Sources

• MACPAC, MACStats: Medicaid and CHIP Data Book (December 2024) (opens in a new tab)
• MACPAC, Medicaid 101: Financing (opens in a new tab)