This paper explores the determination of state Medicaid provision in the United States and
quantifies the effects of federal subsidization on Medicaid provision. The US federal
government matches every state at least one dollar for each dollar that the state spends on
Medicaid. We measure the effect of the subsidy by constructing a multi-regional,
heterogeneous-agent, dynamic general equilibrium model with incomplete insurance
markets and calibrating it to the US economy. In the model, state governments take the …