States finance the nonfederal share of their Medicaid expenditures in large part through general revenues, which consist of revenues from sources including personal and corporate income taxes and sales taxes. States can also use funds raised from local governments and through taxes on healthcare providers to finance the nonfederal share of their Medicaid payments.

Those sources of Medicaid funding have received increased attention because states have used them to create complex financing mechanisms designed to maximize the amount of federal Medicaid funds coming to the states, thereby drawing down federal Medicaid funds without expending much, if any, state general funds.

What Impact Did the ACA Medicaid Expansion Have on State Finances and Enrollment?

Prior to enactment of the ACA, few state Medicaid programs covered non-disabled, non-pregnant adults without dependent children. In addition, the income limits for parents to be Medicaid eligible were significantly lower. Since the ACA, states can choose whether to expand Medicaid coverage to this “expansion” population. As of 2025, 10 states have chosen not to adopt it. In those states, the median income eligibility for parents is 34 percent of the poverty level (rather than 138 percent) and the only state that extends Medicaid to adults without children is Wisconsin.

Under the ACA expansion of Medicaid, the federal government paid 100 percent of the cost of Medicaid expansion coverage from 2014 to 2016. The federal share dropped in subsequent years before settling at 90 percent in 2020 and each year thereafter. By comparison, the federal government pays between 50 and 77 percent of the cost of other Medicaid enrollees, depending on the state. As of 2025, the uninsured rate in the 10 states that have not expanded Medicaid coverage is nearly twice as high as states that have implemented the expansion (14.1 and 7.6 percent, respectively).