Objective To isolate the effect of greater inpatient cost‐sharing on Medicaid entry among Medicare beneficiaries. Data Sources Medicare administrative data (years 2007–2010) were linked to nursing home assessments and area‐level socioeconomic indicators. Study Design Medicare beneficiaries who are readmitted to a hospital must pay an additional deductible ($1,100 in 2010) if their readmission occurs more than 59 days following discharge. In a regression discontinuity analysis, we take advantage of this Medicare benefit feature to test whether beneficiaries with greater cost‐sharing have higher rates of Medicaid enrollment. Data Extraction Methods We identified 221,248 Medicare beneficiaries with an initial hospital stay and a readmission 53–59 days later (no deductible) or 60–66 days later (charged a deductible). Principal Findings Among beneficiaries in low‐socioeconomic areas with two hospitalizations, those readmitted 60–66 days after discharge were 21 percent more likely to join Medicaid compared with those readmitted 53–59 days following their initial hospitalization (absolute difference in adjusted risk of Medicaid entry: 3.7 percent vs. 3.1 percent, p = .01). Conclusions Increasing Medicare cost‐sharing requirements may promote Medicaid enrollment among low‐income beneficiaries. Potential savings from an increased cost‐sharing in the Medicare program may be offset by increased Medicaid participation.