In both its costs and the number of its enrollees, Medicaid is the largest means-tested transfer program in the United States. It is also a fundamental part of the health care system, providing health insurance to low-income families, indigent seniors, and disabled adults. In 2011, Medicaid covered over 68 million individuals at a cost to state and federal governments of nearly $400 billion (Centers for Medicare and Medicaid Services [CMS] 2013a). Federal Medicaid expenditures, which historically have averaged between 50 and 60 percent of total program expenditures, represent about 8 percent of the federal budget and nearly 2 percent of gross domestic product (Congressional Budget Office 2014). In 2012, the median state spent 22.4 percent of its budget on Medicaid (National Association of State Budget Officers 2013). Because it finances different types of services for different groups of beneficiaries, it is often noted that Medicaid is essentially four public insurance programs in one (Gruber 2003). First, Medicaid is the primary source of Thomas Buchmueller is the Waldo O.