Medicaid and fiscal federalism during the COVID‐19 pandemic

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We analyze the effects of the COVID‐19 pandemic on state and local government finances, with an emphasis on health spending needs and the role of the Medicaid program. We first find that enhanced federal matching funds are roughly the same size as expected increases in state Medicaid costs nationwide over the entirety of the federal budget window. Second, we show that there is substantial variation in states' exposure to increases in Medicaid program costs. Third, we show that the formulas through which fiscal relief has been distributed impact the extent to which aid targets the states experiencing the greatest need.