Financing

The federal government and the states share responsibility for financing Medicaid. Historically, the federal share has averaged about 57 percent. With the new adult group under the Medicaid expansion receiving 100 percent federal match, the average federal share has increased to over 60 percent starting in 2014 (OACT 2016). General revenues fund federal spending for Medicaid, in contrast to Medicare, where funds in large part come from dedicated revenue sources that include payroll taxes and beneficiary premiums. Funding for the nonfederal, or state, share of Medicaid comes from a variety of sources; at least 40 percent must be financed by the state and up to 60 percent may come from local governments. In state fiscal year 2012, 69 percent of funds came from state general revenues, 16 percent from local governments (including intergovernmental transfers and certified public expenditures), 10 percent from health care related taxes, and 5 percent from other sources (GAO 2014).

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Health Care Related Taxes in Medicaid

August 2012 |

Financing the Medicaid program is a shared responsibility of the federal and state governments. Each state makes its own decisions, within federal requirements, regarding how to finance its share of the Medicaid program. States generate their share through state general revenue, contributions from local governments including providers operated by local governments, and other revenue sources […]
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