Medicaid is vastly more important than Medicare or private insurance in funding long-term care (LTC). However, states vary tremendously in their commitment to Medicaid LTC. This article advances knowledge of the origins, nature, and implications of this variation. After examining the degree of variation in state spending on Medicaid LTC, we show how federal policy has over the past fifty years steadily increased state discretion to shape these services. This decentralization largely reflects the potency of the intergovernmental lobby—governors and other state officials—in influencing federal policy. While fueling state variation, the intergovernmental lobby has also provided valuable political support that has helped Medicaid grow and resist retrenchment. After considering policy options that could mitigate Medicaid LTC inequities rooted in state differences, we assess how the catalytic forces that have fueled growth in Medicaid LTC may be insufficient to protect the program from future erosion.