We analyze potential reforms to Medicaid financing through the lens of fiscal federalism. Because substantial dollars are at stake, both the economic and political sides of intergovernmental transfers have high relevance in this setting. We show that changes in Medicaid financing formulas can...

The federal Medicaid statute provides states an incentive to tax hospitals (even otherwise tax-exempt ones) as a means of raising revenue and then leverage federal matching funds by returning at least some of the tax back to the hospitals in the form of Medicaid supplemental payments. The...

Medicaid’s federal-state matching system of financing is the nation’s largest example of fiscal federalism. Using generous federal subsidies, the Affordable Care Act incentivized states to expand Medicaid, which became a state option in the aftermath of a 2012 Supreme Court ruling. As of...