Medicaid has grown exponentially since the mid-1980s, during both conservative Republican and liberal Democratic administrations. How has this happened? The answer is rooted in three political variables: interest groups, political culture, and American federalism. First, interest-group support (from hospitals, nursing homes, and insurers) is more influential than the fragmented group opposition (from underpaid office-based physicians). Second, Medicaid provides a partial counterweight to conservative charges of a federal health care takeover because of the states’ roles in administering the program. Third, Medicaid’s intergovernmental fiscal partnership creates financial incentives for state and federal officials to expand enrollment—expansions that these policy makers often favor, given the program’s increasingly important role in the nation’s health care system. This institutional dynamic is here called catalytic federalism.