Medicaid Financing and Expenditures
Updated November 10, 2020
Congressional Research Service
https://crsreports.congress.gov
R42640

Medicaid Financing and Expenditures

Summary
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute
medical services as wel as long-term services and supports (LTSS). Medicaid is a federal and
state partnership that is jointly financed by both the federal government and the states.
The federal government’s share for most Medicaid expenditures is cal ed the federal medical
assistance percentage (FMAP). General y determined annual y, the FMAP formula is designed so
that the federal government pays a larger portion of Medicaid costs in states with lower per capita
incomes relative to the national average (and vice versa for states with higher per capita incomes).
Federal Medicaid funding to states is open ended.
The federal government provides states flexibility in determining the composition of the state
share (also referred to as the nonfederal share) of Medicaid expenditures. As a result, there is
significant variation from state to state in how the state share of Medicaid expenditures is
financed.
In 2018, Medicaid represented 16% of national health expenditures; in that year, private health
insurance and Medicare accounted for 34% and 21% of national health expenditures, respectively.
Medicaid is a significant payer in the categories of health spending that includes LTSS and
hospital expenditures. For the other services (such as durable medical equipment, physician and
clinical services, prescription drugs, and dental services), Medicaid accounts for a smal er share
of the national expenditures.
In FY2019, Medicaid expenditures totaled $627 bil ion, with the federal government paying $405
bil ion, or about 65% of the total. Spending on managed care comprised almost half of Medicaid
expenditures on benefits in FY2019, and LTSS accounted for 20% Medicaid expenditures on
benefits. Per-enrol ee Medicaid expenditures for individuals with disabilities and the elderly are
significantly higher than per-enrollee expenditures for adults and children, due in part to the
higher utilization of LTSS among individuals with disabilities and the elderly.
Medicaid expenditures are influenced by economic, demographic, and programmatic factors.
Economic factors include health care prices, unemployment rates, and individuals’ wages. In
addition, state-specific factors, such as programmatic decisions and demographics, affect
Medicaid expenditures and cause Medicaid spending to vary widely from state to state.
During periods of economic downturn, Medicaid program enrollment usual y increases at a faster
rate due to job and income losses; at the same time, state revenue growth general y weakens.
Since the onset of the recession due to the Coronavirus Disease 2019 (COVID-19) pandemic in
February 2020, the growth in Medicaid enrollment has increased and states have experienced
reductions in revenues.
These trends are general y expected to continue, and some states are developing budget reduction
plans that could affect Medicaid programs. States could reduce Medicaid expenditures by no
longer covering optional benefits or populations, reducing provider rates, or imposing Medicaid
provider taxes. In addition to reducing Medicaid expenditures, states are requesting additional
federal financial assistance for Medicaid. The Family First Coronavirus Response Act (FFCRA;
P.L. 116-127) provided federal financial assistance for Medicaid through a 6.2-percentag-point
increase during the COVID-19 public health emergency to the regular FMAP rates for al states,
the District of Columbia, and the territories, and states are requesting for this percentage to be
increased.
The Heroes Act (H.R. 6800), a revised version of the Heroes Act (H.R. 925), and a bil to provide
Coronavirus relief (S. 4800) would provide a 14-percentage-point increase to Medicaid FMAP
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rates for FY2021, and if the COVID-19 public health emergency continues after September 30,
2021, the FMAP increase would return to 6.2 percentage points through the public health
emergency period.
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Introduction
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute
medical services as wel as long-term services and supports (LTSS).1 Medicaid is a federal and
state partnership with both the federal government and the states financing Medicaid. In FY2019,
Medicaid is estimated to have provided health care services to a projected 74 mil ion individuals2
at a total cost of $627 bil ion (including federal and state expenditures).3
Participation in Medicaid is voluntary, though al states, the District of Columbia, and the
territories choose to participate. The federal government sets some basic requirements for
Medicaid, and states have the flexibility to design their own version of Medicaid within the
federal government’s basic framework.
States incur Medicaid costs by making payments to service providers (e.g., for beneficiaries ’
doctor visits) and performing administrative activities (e.g., making eligibility determinations).
The federal government reimburses states for a share of each dollar spent in accordance with their
federal y approved Medicaid state plans.
Medicaid is an entitlement for both states and individuals. The Medicaid entitlement to states
ensures that, so long as states operate their programs within the federal requirements, states are
entitled to federal Medicaid matching funds. Medicaid is also an individual entitlement, which
means that anyone eligible for Medicaid under their state’s eligibility standards is guaranteed
Medicaid coverage, should they apply.
This report’s first section, “Medicaid Financing” provides an overview of Medicaid’s financing
structure, including both federal and state financing issues. The “Medicaid Expenditures” section
of the report discusses Medicaid in terms of national health expenditures, trends in Medicaid
expenditures, economic factors affecting Medicaid, and state variability in spending.
Medicaid Financing
The federal government and the states share the cost of Medicaid. The federal government
reimburses states for a portion (i.e., the federal share or the federal financial participation) of
each state’s Medicaid program costs. Federal Medicaid funding is an open-ended entitlement to
states, which means there is no upper limit or cap on the amount of federal Medicaid funds a state
may receive.

1 For more information about the Medicaid program, see CRS In Focus IF10322, Medicaid Primer, and CRS Report
R43357, Medicaid: An Overview.
2 T his enrollment figure is measured according to person-year equivalents, which represent the average program
enrollment over the course of a year and differ from ever-enrolled counts, which measure the number of people
covered by Medicaid for any period of time during the year. (Christopher J. T ruffer, Kathryn E. Rennie, Lindsey
Wilson, et al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary, Centers for
Medicare & Medicaid Services (CMS), U.S. Department of Health & Human Services (HHS), 2020, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport .)
3 CMS, Form CMS-64 data as of September 15, 2020, at https://www.medicaid.gov/medicaid/financial-management/
state-expenditure-reporting-for-medicaid-chip/expenditure-reports-mbescbes/index.html.
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Federal Share
A primary goal of the federal Medicaid matching arrangement is to share the cost of providing
health care services to low-income residents with the states. The Medicaid financing structure
represents a fiscal commitment on the part of the federal government toward paying at least half
(but not al ) of the cost of Medicaid.4
The federal government’s open-ended financial commitment to Medicaid provides a fiscal
incentive for states to extend Medicaid coverage to more low-income individuals than a state
might choose to fund without the federal Medicaid funding. However, this incentive is
counterbalanced by the requirement for states to share in the cost of Medicaid.5
Although most federal Medicaid funding is provided on an open-ended basis, certain types of
federal Medicaid funding are capped. For instance, federal disproportionate share hospital (DSH)
funding to states cannot exceed a state-specific annual al otment.6 In addition, Medicaid programs
in the territories (i.e., American Samoa, Guam, the Commonwealth of the Northern Mariana
Islands, Puerto Rico, and the Virgin Islands) are subject to annual federal capped funding.7
Another exception to open-ended federal Medicaid funding is the Qualified Individuals program.8
The Federal Medical Assistance Percentage
The federal government’s share of most Medicaid expenditures is established by the federal
medical assistance percentage (FMAP) rate, which general y is determined annual y and varies by
state according to each state’s per capita income relative to the U.S. per capita income.9 The
formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per
capita incomes, and it provides lower FMAP rates to states with higher per capita incomes.
FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. In FY2021,
FMAP rates range from 50% (13 states) to 77.76% (Mississippi).10
The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures,
but exceptions to the regular FMAP rate have been made for certain states (e.g., the District of
Columbia and the territories), situations (e.g., during economic downturns), populations (e.g.,
individuals covered by the Patient Protection and Affordable Care Act’s [ACA, P.L. 111-148 as
amended] Medicaid expansion and certain women with breast or cervical cancer), providers (e.g.,
Indian Health Service facilities), and services (e.g., family planning and home health services). In

4 Andy Schneider and David Rousseau, The Medicaid Resource Book, Kaiser Commission on Medicaid and the
Uninsured, Publication Number 2236, January 17, 2003; T eresa A. Coughlin and Stephen Zuckerman, States’ Use of
Medicaid Maxim ization Strategies to Tap Federal Revenues: Program Im plications and Consequences, T he Urban
Institute, June 2002.
5 Ibid.
6 T he federal Medicaid statute requires that states make disproportionate share hospital (DSH) payments to hospitals
treating a disproportionate share of low-income patients. For more information about Medicaid DSH payments, see
CRS Report R42865, Medicaid Disproportionate Share Hospita l Paym ents.
7 For more information about the federal Medicaid funding for the territories, see CRS In Focus IF11012, Medicaid
Financing for the Territories.
8 States pay Medicare Part B premiums for Medicare beneficiaries with income between 120% and 135% of the federal
poverty level (FPL) and limited assets (referred to as qualifying individuals), up to a specified dollar allotment.
9 For more detail about the federal medical assistance percentage (FMAP), see CRS Report R43847, Medicaid’s
Federal Medical Assistance Percentage (FMAP).
10 Department of Health and Human Services, “Federal Financial Participation in State Assistance Expenditures;
Federal Matching Shares for Medicaid, the Children’s Health Insurance Program, and Aid to Needy Aged, Blind, or
Disabled Persons for October 1, 2020 T hrough September 30, 2021, ” 84 Federal Register 66204, December 3, 2019.
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addition, the federal share for most Medicaid administrative costs does not vary by state and is
general y 50%.
During the Coronavirus Disease 2019
Process for Federal Medicaid Funds
(COVID-19) public health emergency period,
Getting to States
the Family First Coronavirus Response Act
States incur Medicaid costs by making payments for
(FFCRA; P.L. 116-127) provides a 6.2-
services (e.g., for beneficiaries’ doctor visits or
percentage-point increase to the regular FMAP
payments to managed care organizations) and
rates for al states, the District of Columbia,
performing administrative activities (e.g., making
eligibility determinations). After a state has made
and the territories that meet certain
Medicaid expenditures, it can draw down federal
conditions.11 The FFCRA FMAP increase
matching funds.
began on January 1, 2020 (the first day of the
The Medicaid financing structure is set up so that states
calendar quarter in which the COVID-19
can draw down federal Medicaid matching funds on a
public health emergency period began), and
real-time basis through commercial banks and the
the FFCRA FMAP increase is set to end on the
Federal Reserve System against a continuing letter of
credit certified by the Secretary of the Treasury in
last day of the calendar quarter in which
favor of the state payee. Then, the federal government
COVID-19 public health emergency period
reconciles state Medicaid expenditures on a quarterly
ends.12
basis.
The Centers for Medicare & Medicaid Services (CMS)
Medicaid and the Federal
makes quarterly grant awards to states to cover the
federal share of Medicaid expenditures based on the
Budget Process
quarterly estimates states submitted to CMS on the
Form CMS-37. Each state must submit a Form CMS-64
As discussed above, Medicaid is a federal
no later than 30 days after the end of each quarter with
entitlement to states, and in federal-budget
the state’s accounting of actual recorded expenditures.
parlance entitlement spending is categorized
CMS then reviews the expenditures reported on the
as mandatory spending, which is also referred
CMS-64 to reconcile the states’ estimates from the
CMS-37 with the actual documented expenditures to
to as direct spending. Although most
ensure that the reported expenditures are al owable
mandatory spending programs bypass the
under the Medicaid statute and the Medicaid state plan.
annual appropriations process and
If CMS is uncertain as to whether a particular state
automatical y receive funding each year
expenditure is al owable, then CMS must notify the
according to either permanent or multiyear
state and provide an opportunity for a hearing. If the
appropriations in the substantive law,
state does not comply, CMS may withhold payment or
disal ow claims for federal Medicaid matching funds
Medicaid is funded in the annual
until the issue has been resolved.
appropriations acts. For this reason, Medicaid
is referred to as an appropriated entitlement.13
The level of spending for appropriated entitlements, similar to other entitlements, is based on the
benefit and eligibility criteria established in law. The amount of budget authority provided in
appropriations acts for Medicaid is based on budget projections for meeting the funding needs of
the program. Although most changes to the Medicaid program are made through statute, the fact

11 For more information about the Family First Coronavirus Response Act (FFCRA; P.L. 116-127) FMAP increase and
the conditions for states to receive this increase, see CRS Report R46346, Medicaid Recession-Related FMAP
Increases.
12 T he public health emergency period is defined in paragraph (1)(B) of §1135(g) of the Social Security Act as a public
health emergency declared by the HHS Secretary pursuant to §319 of the Public Health Service Act. T his refers to the
public health emergency declared by the HHS Secretary on January 31, 2020, with respect to the Coronavirus Disease
2019 (COVID-19) outbreak. T he determination was made retroactive to January 27, 2020.
13 For more information about appropriated entitlements, see CRS Report RS20129, Entitlements and Appropriated
Entitlem ents in the Federal Budget Process.
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that Medicaid is subject to the annual appropriations process provides an opportunity for
Congress to place funding limitations on specified activities in Medicaid, such as the
circumstances under which federal funds can be used to pay for abortions.14
The appropriations bil usual y provides Medicaid with (1) funding for the fiscal year considered
in the appropriations bil and (2) an advance appropriation for the first quarter of the following
fiscal year.15 For instance, the Further Consolidated Appropriations Act, 2020 (P.L. 116-94),
provided Medicaid with $273.2 bil ion for FY2020 and an advance appropriation of $139.9
bil ion for the first quarter of FY2021.
State Share
The federal government provides broad guidelines to states regarding al owable funding sources
for the state share of Medicaid expenditures. However, to a large extent, states are free to
determine how to fund their share of Medicaid expenditures. As a result, there is significant
variation from state to state in funding sources.
States can use state general funds (i.e., personal-income, sales, and corporate-income taxes) and
“other state funds” (i.e., provider taxes,16 local government funds,17 tobacco settlement funds,
etc.) to finance the state share of Medicaid. Federal statute al ows as much as 60% of the state
share to come from local government funding.18 Federal regulations also stipulate that the state
share not be funded with federal funds (Medicaid or otherwise).19 In state fiscal year 2018, on
average, 73% of the state share of Medicaid expenditures was financed by state general funds,
and the remaining 27% was financed by other state funds.20
A few funding sources have received a great deal of attention over the past couple decades
because states have used these funds in financing mechanisms designed to maximize the amount
of federal Medicaid funds coming to the state. For example, some states have used financing
mechanisms that involve the coordination of fund sources, such as provider taxes,
intergovernmental transfers (IGTs), or certified public expenditures (CPEs), and payment
policies, such as DSH and non-DSH supplemental payments, to draw down federal Medicaid
funds without expending much, if any, state general funds.21

14 T his limitation is commonly referred to as the Hyde Amendment. For more information about the Hyde Amendment,
see CRS Report RL33467, Abortion: Judicial History and Legislative Response.
15 Advance appropriations become available for obligation one or more fiscal years after the budget year covered by the
appropriations act. For more information about advance appropriations, see CRS Report R43482, Advance
Appropriations, Forward Funding, and Advance Funding: Concepts, Practice, and Budget Process Considerations.
16 Federal statute and regulations define a provider tax as a health care-related fee, assessment, or other mandatory
payment for which at least 85% of the burden of the tax revenue falls on health care providers. For more information
about Medicaid provider taxes, see CRS Report RS22843, Medicaid Provider Taxes.
17 Local governments and local government providers can contribute to the state share of Medicaid payments through
intergovernmental transfers (IGT s) or certified public expenditures (CPEs). For IGT s, a local government transfers
funds to the state government to be used to finance Medicaid. When CPEs are used to fund the state share, the local
government certifies its Medicaid expenditures to the state, and then the state claims the federal Medicaid matching
funds.
18 §1902(a)(2) of the Social Security Act.
19 42 C.F.R. 433.51(c).
20 National Association of State Budget Officers, State Expenditure Report: 2019 State Expenditure Report Fiscal
Years 2017-2019, 2020, at https://www.nasbo.org/reports-data/state-expenditure-report.
21 Supplemental payments are Medicaid payments made to providers that are separate from and in addition to the
standard payment rates for services rendered to Medicaid enrollees. Often, providers receive supplemental payments in
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Medicaid Expenditures22
Medicaid expenditures account for a significant and growing portion of total health expenditures
in the United States. Enrollment increases due to expansions of eligibility and economic
downturns account for much of Medicaid’s expenditure growth over time. However, Medicaid
expenditures also are influenced by economic, demographic, and programmatic factors. In
addition, there is considerable variation in Medicaid spending from state to state due to
demographic differences, state policy choices, utilization of services, and provider payment rates.
Medicaid and National Health Expenditures
In 2018, Medicaid represented 16% of national health expenditures; in that same year, private
health insurance and Medicare accounted for 34% and 21% of national health expenditures,
respectively.23 Figure 1 shows Medicaid as a percentage of national health expenditures from
1966 (the first year Medicaid was in operation) through 2018.
Over time, Medicaid has become one of the largest payers in the U.S. health care system. Since
the start-up years (i.e., 1966 through 1971), Medicaid expenditures have grown as a percentage of
national health expenditures, with just a few exceptions.24 Since 2015, Medicaid has been
decreasing slightly each year as a percentage of national health expenditures. In each year from
2015 through 2018, Medicaid spending has increased, but at slower rate than other categories of
national health expenditures, mainly due to slower rate of growth for Medicaid enrollment.25

a lump sum. For more information about Medicaid supplemental payments, see CRS Report R45432, Medicaid
Supplem ental Paym ents.
22 Data in this section are provided for different years (i.e., calendar year 2018, FY2017 , or FY2019) because Medicaid
data are collected from states at different times for different purposes. For each type of expenditure, the most recent
data are provided.
23 CMS, “National Health Expenditures by T ype of Service and Source of Funds, CY 1960-2018,” National Health
Expenditure Accounts, December 17, 2019.
24 For example, for the years 1982 through 1984, Medicaid expenditure growth decreased due to a three-year reduction
to the federal Medicaid matching rate. In addition, Medicaid expenditures as a percentage of natio nal health
expenditures dropped from 15% in 2005 to 14% in 2006 due to prescription drug coverage for dual -eligible
beneficiaries moving from Medicaid to Medicare Part D beginning on January 1, 2006, which resulted in a substantial
reduction in Medicaid prescription drug spending.
25 Micah Hartman, Anne B. Martin, Joseph Benson, et al., “National Health Care Spending In 2018: Growth Driven By
Accelerations In Medicare And Private Insurance Spending,” Health Affairs, December 5, 2019.
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Figure 1. Medicaid as a Percentage of National Health Expenditures
(1966-2018)

Source: Centers for Medicare & Medicaid Services (CMS), “National Health Expenditures by type of service and
source of funds, CY 1960-2018,” National Health Expenditure Accounts, December 17, 2019.
Medicaid is a major payer in some categories of national health expenditures and accounts for a
smal er share of other categories of expenditures. Figure 2 shows that in 2018, Medicaid was a
major payer in the categories of spending that include LTSS,26 with Medicaid paying 58% of
expenditures in the other health, residential, and personal care category;27 35% of home health
expenditures; and 30% of nursing care facilities and continuing care retirement communities.28
Medicaid accounted for 17% of hospital expenditures. For the other services, in 2018, Medicaid
accounted for a smal er share of the national expenditures, with Medicaid paying 15% of durable
medical equipment, 11% of physician and clinical expenditures, 10% of prescription drugs, 9% of
dental expenditures, and 7% of other professional expenditures. Medicaid did not have any
expenditures for non-durable medical products in 2018.

26 Long-term services and supports (LT SS) refer to a broad range of health and health-related services and supports
needed by individuals who lack the capacity for self-care due to a physical, cognitive, or mental disability or condition.
27 T he two largest components of the other residential and personal care category are (1) residential intellectual and
developmental disability, mental health, and substance abuse facilities and (2) Medicaid home- and community-based
services waiver27 expenditures, which are both LT SS. T he expendit ures for each of these two categories make up a
little less than a third of the total expenditures for the category.
28 LT SS expenditures are included in the following national health expenditures categories: nursing care facilities and
continuing care retirement communities; home health; and other health, residential, and personal care. However, the
other health, residential, and personal care category includes non -LT SS expenditures, such as school health and
worksite health care.
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Figure 2. Percentage Distribution of National Health Expenditures by Type of
Service and Source of Funds
(2018)

Source: CMS, “National Health Expenditures by Source of Funds and Type of Expenditure: Calendar Years
2011-2018,” National Health Expenditure Accounts, December 17, 2019.
Notes: Other third-party payers and programs includes worksite health care, Indian Health Services, workers’
compensation, the Maternal and Child Health program, vocational rehabilitation, other federal programs,
Substance Abuse and Mental Health Services Administration grants, other state and local programs, and school
health.
The categories of spending that include long-term services and supports expenditures are other health,
residential, and personal care expenditures; home health expenditures; and nursing care facilities and continuing
care retirement communities.
Medicaid estimates are based primarily on financial information reports filed by the state Medicaid agencies on
Form CMS-64. These data have a category for capitated payments (including managed care), but the information
does not break down managed care spending by service. For the National Health Expenditure Accounts (NHEA),
Medicaid managed care payments are reduced by administrative costs and then al ocated to NHEA service
categories based on the distribution of Medicaid fee-for-service spending for selected services in the state.
CHIP: State Children’s Health Insurance Program
DOD: Department of Defense
VA: Department of Veterans Affairs
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Trend in Medicaid Expenditures
Over time, much of Medicaid’s expenditure growth has been due to federal or state expansions of
Medicaid eligibility criteria, and the ACA Medicaid expansion has significantly increased
Medicaid expenditures since 2014.29 Figure 3 shows actual Medicaid expenditures from FY1997
to FY2019 and projected Medicaid expenditures from FY2020 through FY2027 broken down by
state and federal expenditures. In FY2019, Medicaid spending on services and administrative
activities in the 50 states, the District of Columbia, and the territories totaled $627 bil ion (see
Table A-1 for FY2019 state-by-state expenditures). Medicaid expenditures are estimated to grow
to $1,007.9 bil ion in FY2027.30
Figure 3. Federal and State Actual and Projected Medicaid Expenditures
(FY1997 to FY2027)

Source: Actual expenditures are from Form CMS-64 Data as of September 15, 2020, and the projected
expenditures are from the CMS Office of the Actuary’s 2018 Actuarial Report on the Financial Outlook for Medicaid.
Notes: The expenditures shown in this figure include al Medicaid expenditures, which include both
administrative and benefit spending. These expenditures exclude state Medicaid Fraud Control Units, Medicaid
survey and certification of nursing and intermediate care facilities, and the Vaccines for Children program.
Historical y, the federal share of Medicaid was about 57% of total Medicaid expenditures, but the
federal share has increased since FY2014 due to the enhanced federal matching rates for the ACA

29 Rachel Garfield et al., Enrollment-Driven Expenditure Growth: Medicaid Spending during the Economic Downturn,
FFY2007-2010, Kaiser Commission on Medicaid and the Uninsured, Publication #8309, May 2012; Christopher J.
T ruffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018 Actuarial Report on the Financial Outlook for Medicaid ,
Office of the Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/
ActuarialStudies/MedicaidReport .
30 HHS, CMS, Form CMS-64 data, September 15, 2020; Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson, et
al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary, CMS, HHS, 2020, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport .
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Medicaid expansion.31 Federal Medicaid expenditures totaled $405 bil ion, or 65% of total
Medicaid spending, in FY2019, and state Medicaid expenditures were $222 bil ion, which was
35% of total Medicaid spending.32
The federal share of Medicaid expenditures is estimated to decrease to 62% for FY2020 through
FY2027.33 However, these estimates were prepared prior to the COVID-19 public health
emergency. With the FFCRA 6.2-percentage-point increase to the FMAP rates, the federal share
of Medicaid is expected to be higher than previously estimated.
Medicaid Expenditures by Service Type
Most Medicaid expenditures (i.e., 95% in FY2019) are for medical assistance (or
nonadministrative) payments. In FY2019, Medicaid spending on medical assistance grew by an
estimated 1.7%, which is less than the annual percentage increases for FY2016 (4.6%), FY2017
(3.9%), and FY2018 (2.7%). The slower growth in Medicaid expenditures in recent years is the
result of slowing Medicaid enrollment growth and per-enrollee Medicaid expenditure growth.34
Figure 4 shows medical assistance payments by service type for FY2019. Managed care, which
includes payments to managed care organizations,35 primary care case management,36 and non-
comprehensive prepaid health plans,37 accounted for 49% of Medicaid expenditures. LTSS, which
include nursing facility and home- and community-based services, made up 20% of al Medicaid
expenditures.38 Hospitals received 7% of total Medicaid expenditures in return for services
provided to Medicaid fee-for-service enrollees at the payment rates set by states.39

31 For 2020 and subsequent years, the federal government reimburses states for 90% of the Medicaid expenditures for
newly eligible individuals who gained Medicaid eligibility due to the ACA Medicaid expansion. For more information
about the ACA Medicaid expansion, see CRS In Focus IF10399, Overview of the ACA Medicaid Expansion .
32 CMS, Form CMS-64 data as of September 15, 2020.
33 Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018 Actuarial Report on the Financial Outlook
for Medicaid, Office of the Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Research/ActuarialStudies/MedicaidReport .
34 Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018 Actuarial Report on the Financial Outlook
for Medicaid, Office of the Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Research/ActuarialStudies/MedicaidReport .
35 States contract with managed care organizations to provide a comprehensive package of benefits to enrolled
Medicaid beneficiaries, primarily on a capitated basis (i.e., a set amount per enrollee regardless of the services utilized).
36 Under primary care case management, states contract with primary care physicians to provide case management
services to Medicaid enrollees. For these enrollees, other services generally are provided on a fee -for-service basis.
37 States contract with health plans to provide non-comprehensive benefits (e.g., inpatient behavioral health care or
dental care).
38 For more information about LT SS, see CRS Report R43328, Medicaid Coverage of Long-Term Services and
Supports.
39 Hospitals also receive a significant portion of both the Medicaid DSH funding and the supplemental payments.
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Figure 4. Medicaid Benefit Expenditures by Service Type
(FY2019)

Source: Congressional Research Service (CRS) analysis of CMS, Form CMS-64 Data as of September 15, 2020.
Notes: Prescription drug expenditures are net of rebates. The other service category includes any expenditure
type that amounts to less than 1% of total Medicaid expenditures, such as laboratory services, rural health,
targeted case management, physical therapy, etc. Long-term services and supports comprise spending for nursing
facility services, home health services, home- and community-based services, personal care services, etc.
Managed care is a system for delivering care in which Medicaid enrol ees get most or al of their services through
an organization under contract with the state. ICF/DD is an optional Medicaid benefit that enables states to
provide comprehensive and individualized health care and rehabilitation services to individuals to promote their
functional status and independence. DSH and non-DSH supplemental payments are Medicaid payments made to
providers that are separate from and in addition to the standard payment rates for services rendered to
Medicaid enrol ees.
DSH: Disproportionate Share Hospital
ICF/DD: Intermediate care facility for individuals with developmental disabilities
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Per-Enrollee Medicaid Expenditures
In Medicaid, there are five main eligibility groups: children, adults, expansion adults,40 the aged,
and individuals with disabilities. Per-enrollee Medicaid expenditures across these groups
averaged an estimated $7,871 in FY2017.41 However, as shown in Figure 5, per-enrollee
expenditures varied significantly by eligibility group, with the estimated per-enrollee
expenditures by eligibility group ranging from $3,836 for children to $20,359 for individuals with
disabilities.42
Figure 5. Estimated Expenditures Per Medicaid Enrollee by Major Eligibility Groups
(FY2017)

Source: Christopher J. Truffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018 Actuarial Report on the Financial
Outlook for Medicaid, Office of the Actuary, CMS, U.S. Department of Health & Human Services, 2020, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Medica idReport.
Notes: Enrol ment is measured in person-year equivalents, which is the average enrol ment over the course of
the year. This chart does not include expenditures for DSH, the territories, or adjustments (i.e., net adjustments
of benefits from prior periods and the difference between expenditures and outlays). These estimates of per
enrol ee spending by eligibility group are based on data from 2013 or 2014 for most States, which is the most
recent data available. As a result, these estimates of expenditures per enrol ee by eligibility category are less
reliable than in the past and the actual expenditures per enrol ee by eligibility group could vary significantly from
the estimates.

40 Expansion adults are adults made newly eligible for Medicaid under the Patient Protection and Affordable Care Act
(ACA, P.L. 111-148 as amended) beginning in 2014 pursuant to SSA §1902(a)(10)(A)(i)(VIII). For more information
about the ACA Medicaid expansion, see CRS In Focus IF10399, Overview of the ACA Medicaid Expansion.
41 T he estimates of per enrollee expenditures excludes Medicaid expenditures for DSH, the territories, and
administrative costs. In addition, this figure is based on Medicaid enrollment measured by person -year equivalents,
which is the average enrollment over the course of a year. Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson,
et al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary, CMS, HHS, 2020, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport .
42 T hese estimates of per enrollee spending by eligibility group are based on data from 2013 or 2014 for most states,
which are the most recent data available. As a result, these estimates of expenditures per enrollee by eligibility category
are less reliable than in the past and the actual expenditures per enrollee by eligibility group could vary significantly
from the estimates.
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One reason the aged and disabled populations have higher per-enrollee expenditures is because
these populations consume most of the LTSS, which comprise 20% of al Medicaid expenditures
(see Figure 4). Another reason for the difference in per-enrollee expenditures by eligibility group
is that children and adults tend to be healthier and therefore tend to have lower health care costs
than the aged and disabled populations, even though a significant number of nondisabled adults
are pregnant women, who have higher costs on average than other nondisabled adults.
In FY2017, the aged and disabled populations together accounted for about 23% of Medicaid
enrollment and 53% of Medicaid expenditures. In comparison, the other populations (i.e.,
children, adults, and expansion adults) accounted for about 78% of Medicaid enrollment and 46%
of Medicaid expenditures.43
Even though these differences are substantial, the estimates understate the total health
expenditures for the aged and disabled populations because many aged and disabled individual
also are enrolled in Medicare (referred to as dual-eligible individuals). For dual-eligible
individuals, Medicare is the primary payer before Medicaid.44 The per-enrollee expenditures
shown in Figure 5 reflect only the Medicaid expenditures, and Medicare expenditures for the
dual-eligible individuals are not included.
Factors Affecting Medicaid Expenditures
Medicaid expenditures are influenced by economic, demographic, and programmatic factors.
Economic factors include health care prices, unemployment rates, and individuals’ wages.
Demographic factors include population growth and the age distribution of the population.
Programmatic factors include state decisions regarding which optional eligibility groups and
services to cover and how much to pay providers. Other factors include the number of eligible
individuals who enroll and their utilization of covered services.
Medicaid enrollment is affected by economic factors, which in turn impact Medicaid
expenditures. Medicaid is a countercyclical program, which means Medicaid enrollment growth
tends to accelerate when the economy weakens and tends to slow when the economy gains
strength. People become eligible for Medicaid during economic downturns because they lose
their jobs, experience reductions in income, or lose access to health benefits.45 For instance, since
the onset of the recession due to the COVID-19 pandemic in February 2020 through July 2020,
Medicaid enrollment has increased by 6.7%, national y.46
State Variability in Medicaid Spending
Figure 6 shows that total Medicaid spending is highly concentrated, with the seven most
populous states (California, New York, Texas, Pennsylvania, Florida, Ohio, and Il inois)
accounting for almost half of Medicaid expenditures in FY2019 (see Table A-1 for FY2019 state-

43 T otals do not add to 100% due to rounding. Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018
Actuarial Report on the Financial Outlook for Medicaid, Office of the Actuary, CMS, HHS, 2020, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport .
44 Christopher J. T ruffer, Kathryn E. Rennie, Lindsey Wilson, et al., 2018 Actuarial Report on the Financial Outlook
for Medicaid, Office of the Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Research/ActuarialStudies/MedicaidReport .
45 For more information about the impact of recessions on the Medicaid programs, see CRS Report R46346, Medicaid
Recession-Related FMAP Increases.
46 CMS, Medicaid and CHIP Eligibility and Enrolment Performance Indicators data, as of October 30, 2020.
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by-state expenditures).47 State variation in Medicaid per-enrollee expenditures is significant, with
per-enrollee Medicaid expenditures ranging from $4,717 in Alabama to $12,061 in Alaska for
FY2013.48
Figure 6. States’ Share of Total Medicaid Expenditures
(FY2019)

Source: CRS analysis of CMS, Form CMS-64 Data as of September 15, 2020.
Notes: The expenditures shown in this figure include al Medicaid expenditures, which include both
administrative and benefit spending. These expenditures exclude state Medicaid Fraud Control Units, Medicaid
survey and certification of nursing and intermediate care facilities, and the Vaccines for Children program.
Some of the state variation in Medicaid per-enrollee expenditures is due to demographic
differences across states. For instance, states with lower-than-average proportions of elderly and
disabled Medicaid enrollees and higher-than-average proportions of Medicaid enrollees who are
children and adults would be expected to have lower-than-average per-enrol ee Medicaid
expenditures. However, state policy choices regarding optional populations and services cause
variation in Medicaid spending. Other reasons for state variation in Medicaid per-enrollee
expenditures include variation in utilization and provider payment rates.

47 U.S. Census Bureau, “T able 1. Annual Estimates of the Resident Population for the United States, Regions, States,
and Puerto Rico: April 1, 2010 to July 1, 2019 (NST -EST 2019-01),” December 2019.
48 Medicaid and CHIP Payment and Access Commission, December 2019 MACStats: Medicaid and CHIP Data Book,
“EXHIBIT 22. Medicaid Benefit Spending Per Full-Year Equivalent (FYE) Enrollee by State and Eligibility Group,”
December 2019, at https://www.macpac.gov/publication/medicaid-benefit -spending-per-full-year-equivalent -fye-
enrollee-by-state-and-eligibility-group/.
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Conclusion
Medicaid is jointly financed by the federal government and the states. In FY2019, Medicaid
expenditures totaled $627 bil ion, with the federal government paying $405 bil ion, or about 65%
of the total. States paid the remaining $222 bil ion, or 35%, of Medicaid expenditures.
In recent years, the growth in Medicaid expenditures has slowed due to the slowing of growth in
Medicaid enrollment and per-enrollee Medicaid expenditures. The recession that began in
February 2020 might reverse this trend. Medicaid enrollment growth has increased during the
first few months of the recession, which also is expected to result in increased Medicaid
expenditures.49
These increased Medicaid expenditures might put additional pressure on state budgets. States
already have experienced a reduction in revenues since the beginning of the recession.50 Since
Medicaid expenditures are expected to increase and state revenues are expected to continue to be
lower than estimated, some states are establishing budget reduction plans that likely will impact
Medicaid programs. States received some financial assistance in the FFCRA in the form of a
FMAP increase of 6.2 percentage points, and states also are requesting additional federal
financial assistance for Medicaid.
The Heroes Act (H.R. 6800) and a revised version of the Heroes Act (H.R. 925) include a
provision that would provide a 14-percentage-point increase to Medicaid FMAP rates for
FY2021, and if the COVID-19 public health emergency continues after September 30, 2021, the
FMAP increase would return to 6.2 percentage points through the public health emergency
period. The House of Representatives passed H.R. 6800 on May 15, 2020, and H.R. 925 on
October 1, 2020. A bil to provide Coronavirus relief (S. 4800) that includes the same FMAP
provision as H.R. 6800 and H.R. 925 was introduced in the Senate on October 29, 2020.

49 Centers for Medicare & Medicaid Services, Medicaid and CHIP Enrollment Trends Snapshot, October 30, 2020, at
https://www.medicaid.gov/sites/default/files/2020-10/july-medicaid-chip-enrollment -trend-snapshot.pdf.
50 Shelby Kerns, State Revenues Decline for First Time Since the Great Recession, With the Worst Still to Come,
National Association of State Budget Officers, September 9, 2020, at https://www.nasbo.org/blogs/shelby-kerns1/2020/
09/08/state-revenues-decline-for-first-time-since-the-gr.
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Appendix. Medicaid Expenditures by State
Table A-1 provides the most recent Medicaid expenditures for each state, the District of
Columbia, and the territories, including both the federal and state shares of spending on benefits,
administrative services, and total Medicaid expenditures. These Medicaid expenditures exclude
spending for State Medicaid Fraud Control Units, Medicaid survey and certification of nursing
and intermediate care facilities, and the Vaccines for Children program.
Table A-1. FY2019 Medicaid Expenditures for Benefits and Administration for the
States, the District of Columbia, and the Territories
($ in mil ions)
State Program
Benefits
Administration
Total Medicaid

Federal
State
Total
Federal
State
Total
Federal
State
Total

Alabama
$4,243
$1,637
$5,880
$132
$85
$216
$4,375
$1,722
$6,096
Alaska
1,528
568
2,096
100
48
147
1,628
616
2,244
American Samoa
46
7
53
3
0
3
48
7
55
Arizona
10,109
3,059
13,168
210
104
314
10,319
3,163
13,482
Arkansas
5,230
1,613
6,843
273
128
401
5,503
1,741
7,244
California
52,919
34,937
87,856
3,798
2,446
6,243
56,717
37,382
94,099
Colorado
5,311
3,891
9,202
207
109
316
5,517
4,000
9,518
Connecticut
4,820
3,348
8,168
238
124
362
5,058
3,472
8,531
Delaware
1,461
784
2,246
66
35
101
1,528
819
2,347
District Of
2,125
767
2,892
149
82
231
2,274
849
3,123
Columbia
Florida
14,858
9,526
24,384
436
309
745
15,294
9,835
25,129
Georgia
7,359
3,493
10,852
367
211
579
7,726
3,704
11,430
Guam
106
7
113
3
0
3
108
8
116
Hawai
1,396
782
2,178
70
32
102
1,467
814
2,281
Idaho
1,525
618
2,143
79
45
123
1,604
662
2,266
Il inois
10,932
7,538
18,470
564
321
885
11,496
7,859
19,356
Indiana
8,885
3,554
12,439
355
200
555
9,240
3,754
12,994
Iowa
3,439
1,761
5,200
102
50
153
3,542
1,811
5,352
Kansas
2,061
1,541
3,602
128
69
197
2,189
1,610
3,799
Kentucky
7,964
2,243
10,208
212
91
303
8,176
2,334
10,510
Louisiana
8,433
3,209
11,642
264
141
405
8,698
3,350
12,047
Maine
1,885
982
2,867
104
48
152
1,989
1,030
3,019
Maryland
7,067
4,663
11,730
341
184
524
7,408
4,847
12,254
Massachusetts
9,647
7,766
17,413
740
487
1,227
10,386
8,253
18,640
Michigan
12,974
5,284
18,258
502
229
731
13,476
5,513
18,989
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Medicaid Financing and Expenditures

State Program
Benefits
Administration
Total Medicaid

Minnesota
7,227
5,494
12,721
475
323
798
7,702
5,817
13,519
Mississippi
4,210
1,296
5,507
121
54
175
4,331
1,350
5,681
Missouri
6,950
3,585
10,535
239
137
376
7,189
3,722
10,910
Montana
1,442
416
1,858
64
29
94
1,506
446
1,952
CNMI
49
10
59
1
0
1
50
10
60
Nebraska
1,135
1,007
2,142
82
41
124
1,217
1,048
2,266
Nevada
2,948
1,030
3,979
135
66
201
3,084
1,096
4,179
New Hampshire
1,098
887
1,985
100
42
142
1,199
928
2,127
New Jersey
9,386
6,523
15,909
568
374
941
9,953
6,897
16,850
New Mexico
4,153
1,109
5,263
150
79
229
4,303
1,188
5,492
New York
41,098
16,997
58,094
1,276
839
2,115
42,373
17,836
60,209
North Carolina
9,151
4,445
13,596
548
242
790
9,699
4,687
14,386
North Dakota
693
471
1,164
86
25
111
779
495
1,275
Ohio
16,017
7,449
23,466
614
430
1,043
16,630
7,879
24,509
Oklahoma
3,072
1,688
4,760
124
80
204
3,196
1,769
4,965
Oregon
6,927
2,500
9,427
317
193
510
7,244
2,693
9,936
Pennsylvania
18,706
13,374
32,080
561
320
881
19,267
13,694
32,961
Puerto Rico
2,489
-36
2,453
156
0
156
2,646
(36)
2,609
Rhode Island
1,562
1,024
2,586
117
62
179
1,679
1,087
2,765
South Carolina
4,495
1,811
6,306
252
122
374
4,747
1,932
6,680
South Dakota
552
347
899
30
21
50
582
368
949
Tennessee
6,680
3,412
10,092
488
204
692
7,168
3,616
10,784
Texas
23,361
16,664
40,026
893
567
1,460
24,254
17,232
41,486
Utah
1,902
822
2,724
118
56
174
2,020
878
2,899
Vermont
971
667
1,638
108
56
164
1,079
723
1,802
Virgin Islands
112
26
138
12
2
14
124
28
151
Virginia
6,337
4,970
11,307
329
184
513
6,666
5,154
11,820
Washington
8,259
4,869
13,128
743
619
1,362
9,001
5,489
14,490
West Virginia
3,093
834
3,926
132
51
183
3,225
884
4,109
Wisconsin
5,452
3,681
9,133
250
143
393
5,701
3,824
9,525
Wyoming
307
277
584
58
20
77
365
297
662
Total
386,159
211,226
597,385
18,587
10,958
29,545
404,746
222,184
626,930
Source: Centers for Medicare & Medicaid Services, CMS-64 data, as of September 15, 2020.
Notes: May not sum to totals due to rounding.
CNMI: Commonwealth of the Northern Mariana Islands.
a. Figures presented in this table may change if states revise their expenditure data after this date.

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Author Information

Alison Mitchell

Specialist in Health Care Financing

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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Congressional Research Service
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