Healthcare in the United States is neither purely federal nor purely state. It’s a layered system where both levels of government hold significant power, often overlapping in ways that create real complexity for the people navigating it. The federal government runs major insurance programs like Medicare and sets baseline standards, while states regulate insurance markets, license doctors, and design their own versions of programs like Medicaid. Understanding which level controls what helps explain why your healthcare options can change dramatically depending on where you live.
Why Both Levels of Government Are Involved
The U.S. Constitution doesn’t mention healthcare. The Tenth Amendment reserves all powers not specifically granted to the federal government to the states, and public health has historically fallen squarely into that category. States hold broad “police powers” to protect the health, safety, and welfare of their residents, which is why they’ve traditionally controlled things like disease quarantines, hospital regulations, and medical licensing.
The federal government’s healthcare authority comes through other constitutional powers, primarily the ability to tax, spend, and regulate interstate commerce. Congress used its spending power to create Medicare and Medicaid, and its commerce power to pass the Affordable Care Act. So long as federal laws are crafted within these constitutional boundaries, they override conflicting state laws. But that boundary is contested constantly, and courts regularly weigh in on where federal authority ends and state authority begins.
What the Federal Government Controls Directly
The clearest example of federal healthcare is Medicare, the insurance program for people 65 and older (and some younger people with disabilities or kidney failure). Medicare is funded by federal payroll taxes, administered by the federal Centers for Medicare and Medicaid Services (CMS), and follows the same rules in every state. Eligibility is based on your work history and contributions to Social Security. If you or a spouse paid into the system for enough working quarters, you qualify for premium-free hospital coverage at 65.
The federal government also runs entire healthcare delivery systems. The Veterans Health Administration operates over 150 medical centers and 780 community clinics across the country, making it the largest integrated health care system in the nation. The Department of Defense runs military health facilities, and the Indian Health Service provides care to eligible Native Americans and Alaska Natives. In these systems, the federal government isn’t just paying for care or writing rules. It owns the hospitals, employs the doctors, and manages operations directly.
At the regulatory level, several federal agencies set nationwide standards. The FDA approves drugs, vaccines, and medical devices before they can reach patients. The CDC provides disease surveillance, epidemiological expertise, and public health guidance. CMS oversees laboratory quality through federal certification requirements. These functions apply uniformly across states.
What States Control
States are the primary regulators of health insurance. Under the McCarran-Ferguson Act, passed in 1945, Congress explicitly declared that state regulation of insurance “is in the public interest” and that no federal law should be interpreted to override state insurance regulations unless it specifically says so. This means each state’s insurance commissioner sets rules for the plans sold within its borders, including what those plans must cover, how much insurers can charge, and how consumer complaints are handled.
States also control who is allowed to practice medicine. Every doctor, nurse, pharmacist, and therapist needs a license from the state where they work. State medical boards set their own requirements for education, exams, and continuing education, and they have the authority to discipline or revoke a practitioner’s license. This is why a doctor licensed in Texas can’t simply start seeing patients in California without obtaining a separate license.
Public health enforcement is another area where states take the lead. During COVID-19, this became especially visible. States issued their own emergency orders, mask mandates, and business restrictions, sometimes in direct conflict with federal guidance. Courts struck down several attempts by federal agencies to impose nationwide public health measures, including the CDC’s eviction moratorium and its mass transportation mask order. Meanwhile, some state courts also pushed back on their own governors and health departments. Wisconsin’s supreme court overturned the state health department’s emergency order in 2020, and courts in Georgia, Kentucky, Michigan, and Ohio similarly limited executive emergency powers.
Where Federal and State Authority Overlap
Medicaid is the clearest example of shared responsibility. The federal government sets minimum standards and provides at least half the funding, but each state designs and administers its own version of the program. The federal share of Medicaid costs ranges from 50% in wealthier states to as high as 76.9% in Mississippi for fiscal year 2025, with a statutory maximum of 83%. This means a low-income adult in one state might qualify for comprehensive Medicaid coverage while a person with the same income in a neighboring state gets nothing.
That gap became more pronounced after the Affordable Care Act. The ACA offered states the option to expand Medicaid to cover nearly all adults earning up to 138% of the federal poverty level (about $21,597 for an individual in 2025), with the federal government picking up the vast majority of the cost. As of now, 41 states including Washington, D.C. have adopted the expansion, while 10 states have not. If you live in a non-expansion state and earn too much for traditional Medicaid but too little for marketplace subsidies, you may fall into a coverage gap that exists purely because of your state’s decision.
The ACA’s health insurance marketplaces show a similar split. For plan year 2026, 21 states run their own insurance exchanges where residents shop for coverage, while 2 states operate their own exchanges on the federal technology platform. The remaining states use the federal HealthCare.gov marketplace. Whether you’re buying through a state-run exchange or the federal one, the plans must meet ACA minimums, but states running their own exchanges can add requirements, customize outreach, and set their own enrollment timelines.
How This Affects Your Coverage
The practical result of this split is that where you live shapes your healthcare options in ways that go well beyond personal choice. Your state determines whether you qualify for Medicaid, what your insurance plan must cover beyond federal minimums, which providers are available to you, and how aggressively consumer protections are enforced. Two people with identical incomes and health needs can face very different realities depending on which side of a state line they live on.
If you move to a new state, your health insurance situation can change significantly. Your current plan may not operate in the new state, your Medicaid eligibility could shift, and your doctors may not be licensed there. Even within federal programs like Medicare, the providers who accept it and the supplemental plans available to you vary by location.
The tension between federal and state control isn’t static. It shifts with new legislation, court rulings, and changes in administration. Federal agencies periodically push the boundaries of their authority, states push back, and the courts redraw the lines. The system you’re navigating today is the product of decades of these negotiations, and it will continue to evolve.