As the largest jointly funded policy, Medicaid has been a locus of tension between federal and state government since it was created. This paper tries to determine the factors that influence Medicaid expenditures by focusing on the federal and state relationship, and tries to show how this relationship and state institutional factors affect Medicaid policy implementation. This paper considers intergovernmental relations as an important institutional arrangement to maximize policy benefits based on the rational choice approach and federalism. This paper found that factors separately influence total Medicaid expenditures and the State share amount, for Medicaid reflects state spending behavior depending on the relationship with the federal government. Also this paper found that federal and state relationship influences increase or decrease of Medicaid benefits per recipient.