Since the Medicaid program was enacted as part of the Social Security Amendments of 1965 (P.L. 89-97), Medicaid financing has been a shared responsibility of the federal government and the states, with states receiving federal matching funds toward allowable state expenditures and each state administering its own program within federal guidelines. For most Medicaid service expenditures, the federal share of costs is determined by each state’s federal medical assistance percentage (FMAP), which is determined each year based on a state’s per capita income relative to the national average.
This issue brief provides information on the components of Medicaid financing, including federal matching rates and exceptions, state funding sources, and the process used by states to claim federal matching funds.