How Medicaid Funding Works: Federal Oversight, State Roles, and Integrity Checks Medicaid functions as a joint federal-state program where Washington provides most funding but requires states to meet eligibility, reporting, and anti-fraud standards under constitutional spending authority. The February 2026 pause of $259 million to one state over alleged irregularities demonstrates routine compliance mechanisms designed to safeguard taxpayer resources while aiming to protect enrollee services. Pe