States are facing a more tenuous fiscal climate due to slowing revenue growth and increasing spending demands in state fiscal year (FY) 2026. Recent shifts in economic conditions as well as recent federal actions, including cuts to safety net programs and tax code changes in the recently passed reconciliation law (H.R.1), changes to the Affordable Care Act (ACA) enhanced Marketplace subsidies, federal workforce cuts, and tariff changes, contribute to further fiscal uncertainty for states, though fiscal conditions and the impact of federal changes vary across states. For Medicaid, states are navigating the new “normal” for their programs following the expiration of pandemic-era policies while contending with shifts in state fiscal conditions and longer-term fiscal uncertainty. The Medicaid provisions in H.R.1 are estimated to reduce federal Medicaid spending by $911 billion (or by 14%) over a decade and increase the number of uninsured people by 7.5 million, though the impacts vary by state with spending cuts ranging from 4% to almost one-fifth of all federal Medicaid spending in some states. While many provisions in the new law, including some of the largest sources of federal Medicaid savings such as work requirements and financing changes, do not take effect until FY 2027 or later, many states noted they were anticipating the new law’s implementation and impact. Looking ahead, the challenging fiscal climate and the magnitude of federal Medicaid cuts will make it difficult for states to absorb or offset the reductions.

Leading up to FY 2026, states experienced significant changes in Medicaid spending and enrollment trends (Figure 1). For a three-year period following the onset of the COVID-19 pandemic, states provided continuous Medicaid enrollment in exchange for enhanced federal funding, resulting in record high Medicaid enrollment, declines in the uninsured rate, and shifts in Medicaid spending. Most states began the process of “unwinding” the continuous enrollment provision in late state fiscal year (FY) 2023, and the enhanced federal funding phased down through the end of 2023 (part way through FY 2024). Over the unwinding period, millions of people were disenrolled from Medicaid and enrollment and spending trends shifted once again. By midway through FY 2025, most states had completed unwinding and returned to more typical renewal operations.

This brief analyzes Medicaid enrollment and spending trends for FY 2025 and FY 2026, based on data provided by state Medicaid directors as part of the 25th annual survey of Medicaid directors. 48 states (including the District of Columbia) responded to the 2025 survey, although response rates for specific questions varied. More information on response rates and methodology can be found at the end of the brief. Most officials indicated that their spending projections reflect what is assumed in their states’ adopted budgets and do not account for the recently passed reconciliation law. Key survey findings include the following:

• Medicaid enrollment declined by 7.6% in FY 2025, driven primarily by the unwinding of the continuous enrollment provision. The completion of unwinding renewals as well as competing upward and downward enrollment pressures are expected to result in flat Medicaid enrollment growth (0.2%) in FY 2026.
• Total Medicaid spending growth was 8.6% in FY 2025 and is expected to slow slightly (7.9%) in FY 2026. States are experiencing several significant upward expenditure pressures that outweigh the downward pressure from Medicaid enrollment trends, including rate increases, higher health care needs among enrollees post-unwinding, and increasing long-term care, pharmacy, and behavioral health care costs.
• State Medicaid spending growth was 12.2% in FY 2025 and is projected to slow to 8.5% in FY 2026, similar to total spending growth levels and marking the end of shifts caused by pandemic-era enhanced federal funding. While most of the state (or non-federal) share of Medicaid spending comes from state general funds, there is considerable variation in how much states rely on other non-federal share funding sources and how they account for those other funding sources.
• Almost two-thirds of responding states at the time of the survey thought the chance of a Medicaid budget shortfall in FY 2026 was “50-50”, “likely”, or “almost certain.” A few states are implementing Medicaid spending cuts to address recent budget challenges, and other states may follow as they contend with potential Medicaid budget gaps and look ahead to the implementation of the Medicaid changes in H.R.1.

Context

Medicaid is the primary program providing comprehensive health and long-term care to one in five people living in the U.S. and accounts for nearly $1 out of every $5 spent on health care (and over half of all spending on long-term care). Medicaid is administered by states within broad federal rules and jointly funded by states and the federal government through a federal matching program with no cap. Medicaid is often central to state fiscal decisions as it is simultaneously a significant spending item as well as the largest source of federal revenues for states.

The pandemic, and the ensuing federal and state responses, led to significant changes in Medicaid enrollment and spending. Medicaid enrollment and spending typically increase during recessions, and, as in past economic downturns, Congress enacted legislation during the pandemic that temporarily increased the federal share of Medicaid spending (or “FMAP”) to help states maintain their Medicaid programs. In exchange, states were required to keep individuals continuously enrolled in the program, resulting in record high Medicaid enrollment. Gains in Medicaid as well as ACA Marketplace coverage contributed to significant declines in the uninsured rate. Following the end of the continuous enrollment provision on March 31, 2023 (late FY 2023 for most states), states began the process of “unwinding” (i.e., resuming historically typical eligibility redeterminations and disenrolling individuals found to be no longer eligible for Medicaid), resulting in millions being disenrolled from Medicaid. Most states had completed unwinding by midway through FY 2025, and total Medicaid and CHIP enrollment as of June 2025 was 77.7 million, a 18% decline from total enrollment in March 2023 but still 9% higher than enrollment levels in February 2020, prior to the pandemic. In addition, the enhanced FMAP phased down through end of 2023 (part way through FY 2024). In federal fiscal year (FFY) 2024, total Medicaid spending was $919 billion, with 35% financed by states and 65% paid by the federal government.

State fiscal conditions have also seen substantial shifts since the pandemic began. State economic conditions worsened rapidly when the pandemic hit but recovered quickly, leading to a period of record-breaking revenue and expenditure growth for states. Favorable state fiscal conditions combined with federal fiscal relief allowed states to build up rainy day funds and make investments and expansions, including to Medicaid programs. Given strong revenue growth and budget surpluses, states also adopted some of the largest tax cuts on record, with all almost all states enacting some kind of tax cut since 2021. However, these tax cuts combined with a weaker stock market performance and changes in inflation and consumer consumption patterns led to flat state revenue growth by FY 2023 and FY 2024. Revenue growth continued to slow in FY 2025, though revenue did exceed initial estimates in most states and state fiscal conditions remained generally stable.

For FY 2026, states are facing another year of slow revenue growth and uncertainty in their longer-term fiscal outlook. Enacted FY 2026 state budgets overall include modest increases in state general fund spending and total state spending. However, there is variation across states, with some state budgets including slight declines in total state spending and more budget management strategies like spending cuts or other cost containment measures. States are also contending with increasing spending demands from Medicaid, employee health care, education, housing, and disaster response. Recent changes in economic conditions as well as recent federal actions, including cuts to safety net programs and tax code changes in the recently passed reconciliation law, changes to the ACA enhanced Marketplace subsidies, federal workforce cuts, and tariff changes, have generated additional uncertainty, with some states revising revenue forecasts downward. State rainy day fund capacity is also beginning to decline following all-time highs, though funds remain stronger than before the pandemic. Overall, states appear to be in stable fiscal condition but are facing tighter budget conditions and longer-term fiscal uncertainty.

Trends in Enrollment Growth

Medicaid enrollment declined by 7.6% in FY 2025 but is expected to flatten, growing by only 0.2%, in FY 2026 (Figure 2). Following the onset of the COVID-19 pandemic and start of the Medicaid continuous enrollment provision, enrollment rose sharply in FY 2021 and continued to grow, though more slowly, through FY 2023. Once the continuous enrollment provision ended and states began unwinding-related eligibility redeterminations, Medicaid enrollment declined in FY 2024 and again in FY 2025. Most states either completed unwinding redeterminations by FY 2024 (two-thirds of states) or by midway through FY 2025 (another one-sixth of states), with the remainder noting their redeterminations continued through the second half of FY 2025 or would continue into FY 2026. Medicaid enrollment growth is projected to be flat in FY 2026, though Medicaid enrollment remains above pre-pandemic levels in many states. Notably, there was little variation in state reported enrollment growth rates for FY 2026 (see Methods), with most states reporting little to no growth in enrollment.

While the unwinding continued to be the largest driver of declining enrollment in FY 2025, the completion of unwinding renewals as well as competing upward and downward growth pressures are expected to result in flat enrollment growth in FY 2026.  While about two-thirds of responding states reported that the unwinding was the most significant driver of Medicaid enrollment declines in FY 2025, almost half of responding states also mentioned recent eligibility expansions, including children’s continuous eligibility changes and Medicaid postpartum coverage changes, were putting an upward pressure on enrollment. About a quarter of responding states also reported increases in the populations utilizing long-term care, with some specifically pointing to an aging population in their state. For FY 2026, the completion of unwinding renewals across most states is expected to result in flat enrollment growth, though a few states reported continued downward pressure from unwinding. Some states also noted continued upward pressure from eligibility expansions and long-term care enrollment. Across both FY 2025 and FY 2026, a few states mentioned a strong economy as a significant downward pressure on Medicaid enrollment, while a few other states noted worsening economic conditions in their state as an upward pressure, signaling the variation and uncertainty in state fiscal conditions at this time. Lastly, about a quarter of responding states mentioned they were expecting recent federal changes, including H.R.1, to have a downward impact on enrollment in future years as provisions go into effect.

Trends in Spending Growth

Total Medicaid spending growth was 8.6% in FY 2025 and is expected to slow slightly to 7.9% in FY 2026 (Figure 2). Total spending growth increased when the pandemic and continuous enrollment period began before peaking in FY 2022 and starting to slow in FY 2023 and FY 2024 as states completed unwinding-related eligibility redeterminations. Despite unwinding-related Medicaid enrollment declines, total Medicaid spending growth was 8.6% in FY 2025 and is projected to slow slightly to 7.9% in FY 2026. FY 2025 and FY 2026 Medicaid spending growth rates were calculated as weighted averages across all states to provide a snapshot of overall trends (see Methods), but there was considerable variation in state reported annual growth rates. Most responding states reported that Medicaid spending projections for FY 2026 reflect the assumptions used in the state’s adopted budget. Most states also noted that FY 2026 projections did not reflect any federal policy changes under the recently passed reconciliation law, as most states enacted their FY 2026 budgets before the law’s passage and many of the Medicaid provisions do not take effect until FY 2027 or later.

States reported several factors driving growth in total Medicaid spending, including rate increases, higher health care needs among enrollees post-unwinding, and increasing long-term care, pharmacy, and behavioral health care costs. Many responding states noted that enrollment trends were a significant downward pressure in FY 2025 and FY 2026. Beyond enrollment, states did not mention many downward pressures in FY 2025 or FY 2026, though a few states noted downward pressure from pharmacy rebates. However, states are simultaneously experiencing several significant upward expenditure pressures that outweigh the downward pressure from enrollment trends, causing increases in total Medicaid spending (and as a result, spending per enrollee):  

• Over half of responding states cited managed care or provider rate increases as an upward pressure on total spending in FY 2025, FY 2026, or both.
• Almost half of states noted that the enrollees that retained coverage during unwinding have higher health care needs (or higher acuity) and utilize more services than those disenrolled.
• Over one-third of states reported increases in long-term care enrollment and/or increases in utilization of long-term care as an upward pressure on total spending in FY 2025, FY 2026, or both.
• Over one-third of states also reported rising pharmacy costs as a factor driving changes in total spending, with some states noting cost pressure particularly due to emerging high-cost specialty drugs.
• About a quarter of states reported increasing behavioral health costs, including growing use of intensive or specialty behavioral health services or certified community behavioral health clinics (CCBHCs) expansions, as another factor contributing to increases in spending.
• Lastly, about a quarter of states noted inflation or general increases in health care costs as an upward pressure on total spending. KFF’s annual employer health benefits survey found premiums for employer coverage increased in 2025 and are expected to increase further in 2026, with employers noting similar cost pressures such as new prescription drugs, prevalence of chronic disease, and higher utilization of services. 
• States also reported that these recent cost pressures were making it challenging for states to set managed care capitation rates in FY 2026.

State Medicaid spending growth was 12.2% in FY 2025 and is projected to slow to 8.5% in FY 2026, reaching total spending growth levels and marking the end of shifts caused by the pandemic-era enhanced FMAP (Figure 3). The state (or non-federal) share of Medicaid spending typically grows at a similar rate as total Medicaid spending growth unless there is a change in the FMAP. During the Great Recession, state Medicaid spending declined due to fiscal relief from a temporary FMAP increase provided in the American Recovery and Reinvestment Act (ARRA) but increased sharply when that fiscal relief ended. This pattern repeated during the COVID-19 pandemic, when state Medicaid spending declined in FY 2020 and FY 2021 then increased at a slower rate than total spending in FY 2022 due to the pandemic-era enhanced FMAP. State spending growth increased in FY 2023 and peaked in FY 2024 as the enhanced FMAP was phased down. Following the expiration of the enhanced FMAP, state Medicaid spending slowed in FY 2025 and is expected to continue to slow in FY 2026 to match total Medicaid spending growth.

While most of the state (or non-federal) share of Medicaid spending comes from state general funds, there is considerable variation in how much states rely on other non-federal share funding sources and how they account for those other funding sources. Without adjusting for accounting differences across states, states reported that general funds accounted for a median of 70% of the non-federal share in FY 2026 enacted budgets, while provider taxes accounted for 18% and funds from local governments or other sources accounted for 6% (this is relatively similar to 2018 data on non-federal share funding sources reported by the Government Accountability Office (GAO) and 2024 data on general fund spending from the National Association of State Budget Officers (NASBO)). However, there was substantial variation in the extent to which states relied on various funding sources as well as considerable variation in state accounting procedures and how states categorized specific non-federal share revenue sources. For example, a few states noted that provider taxes and/or local government funds went directly into the general fund, making it difficult to parse out the individual funding sources. The reconciliation law includes new limits on provider taxes, prohibiting all states from establishing new provider taxes or from increasing existing taxes and reducing existing provider taxes for states that have adopted the ACA expansion. As these changes restrict a key source of state Medicaid funding, how states finance the non-federal share will likely shift in the coming years.  

Almost two-thirds of responding states at the time of the survey thought the chance of a Medicaid budget shortfall in FY 2026 was “50-50”, “likely”, or “almost certain.” This is a slight increase from last year’s survey that found over half of states were facing a Medicaid budget shortfall, highlighting the increasing uncertainty in state fiscal conditions. A few states have also begun implementing budget management strategies like spending cuts or cost containment measures. States are facing uncertainty in their longer-term fiscal outlook due to slowing revenues, increasing cost pressures, shifting economic conditions, and recent federal changes. More states may consider Medicaid cuts as they contend with current Medicaid budget gaps and look ahead to the implementation of the Medicaid changes in the reconciliation law.

KFF commissioned Health Management Associates (HMA) to survey Medicaid directors in all 50 states and DC to identify and track trends in Medicaid spending, enrollment, and policymaking. Given differences in the financing structure of their programs, the U.S. territories were not included in this analysis. This is the 25th annual survey, conducted at the beginning of each state fiscal year from FY 2002 through FY 2026. State fiscal years begin on July 1 in most states except for: New York on April 1; Texas on September 1; Alabama, Michigan, and District of Columbia on October 1. The KFF/HMA Medicaid survey for this report was sent to each Medicaid director in June 2025. 48 states provided survey responses by October 2025; Florida, Kansas, and Mississippi did not respond to this year’s survey.

Medicaid Enrollment Growth: The average annual Medicaid enrollment growth rate for FY 2026 was calculated using weights based on Medicaid and CHIP preliminary monthly enrollment data for June 2025 published by CMS. For FY 2026, 46 states reported Medicaid enrollment growth rates. The data reported for FY 2025 and FY 2026 for Medicaid spending and FY 2026 for Medicaid enrollment are weighted averages, and therefore, data reported for states with larger enrollment and spending have a greater effect on the national average.

Historical enrollment trend data for FY 1998 to FY 2013 reflects the annual percentage change from June to June of monthly enrollment data for Medicaid beneficiaries collected from all states and DC. Enrollment trend data for FY 2014 to FY 2025 reflects growth in average monthly enrollment based on KFF analysis of the Medicaid & CHIP Monthly Applications, Eligibility Determinations, and Enrollment Reports from CMS for all 50 states and DC. Note that several states have revised monthly enrollment data as far back as June 2017 to better align with reporting criteria for the CMS, Medicaid & CHIP Monthly Applications, Eligibility Determinations, and Enrollment Reports. Data for months prior to June 2017 have not been revised and may use slightly different criteria for reporting monthly enrollment and generally result in larger enrollment totals.

Medicaid Spending Growth: For FY 2025 and FY 2026, annual rates of growth for Medicaid spending were calculated as weighted averages across all states. 48 states reported Medicaid expenditure growth rates for FY 2025 and FY 2026. Weights for spending were derived from net Medicaid expenditure data (including collections and adjustments) for FY 2024 from the CMS-64 Financial Management Reports and adjusted for state fiscal years.

FY 2024 spending growth rate is also derived from net Medicaid expenditure data (including collections and adjustments) from the CMS-64 Financial Management Reports, adjusted for state fiscal years. We estimate state fiscal year spending by summing 75% of spending from the same federal fiscal year with 25% of spending from the previous federal fiscal year. Historic Medicaid spending for FY 2022 and earlier are based on estimates prepared for KFF by the Urban Institute using CMS Form 64 reports.

Definition of Medicaid Spending. Total Medicaid spending includes all payments to Medicaid providers for Medicaid-covered services provided to enrolled Medicaid beneficiaries. Medicaid spending also includes special disproportionate share hospital (DSH) payments that subsidize uncompensated hospital care for persons who are uninsured and unreimbursed costs of care for persons on Medicaid. Total Medicaid spending does not include Medicaid administrative costs and federally mandated state “Clawback” payments to help finance the Medicare Part D prescription drug benefit for Medicaid beneficiaries who are also enrolled in Medicare. States are also asked to exclude costs for the Children’s Health Insurance Program (CHIP). Total Medicaid spending includes payments financed from all sources, including state funds, local contributions, and federal matching funds. Historical state Medicaid spending refers to all non-federal spending, which may include local funds and provider taxes and fees as well as state general fund dollars.

The July 2025 budget reconciliation law, known as the One Big Beautiful Bill, established the Rural Health Transformation Program (referred to here as the “rural health fund”), which will distribute $50 billion to states with approved applications. The rural health fund was created to help offset the impact on rural areas of the law—which includes an estimated $911 billion in federal Medicaid spending reductions over ten years, including an estimated $137 billion in rural areas based on KFF estimates. The fund was also motivated by ongoing concerns about the financial vulnerability of many rural hospitals. CMS has indicated that the funds are intended to be used for investments in “system transformation” rather than for “perpetual operating expenses.” Funds can be used to support rural areas in a variety of ways, including by promoting prevention and chronic disease management interventions, supporting collaboration among rural health facilities, and recruiting clinical workers to rural areas. However, payments to providers for care cannot exceed 15% of total funds, though providers could benefit in other ways, such as through investments in existing buildings and infrastructure (restricted to 20% of total funds).

The law states that half of the fund ($25 billion) will be distributed equally to states with approved applications (i.e., without regard to need) while granting the Centers for Medicare & Medicaid (CMS) broad discretion over how to distribute the remaining funds. In September 2025, CMS released a Notice of Funding Opportunity (NOFO) explaining that the remainder ($25 billion) would be distributed across approved states based on measures of state need ($12.5 billion), as well as the quality of proposed initiatives, state policy, and other factors. The state application deadline was on November 5, 2025. CMS is required to make award decisions by the end of the year and plans to distribute the first $10 billion in January 2026.

This brief provides estimates of how $37.5 of the $50 billion fund could be distributed across states if all states are approved for funding. This $37.5 billion includes the portions of the fund that can be calculated or estimated based on available data, i.e., the $25 billion that will be distributed equally across states and the $12.5 billion that will be distributed based on CMS’s evaluation of measures of state need (such as the size of a given state’s rural population). Estimates of the latter are based on data from the Sheps Center, which are based on criteria specified by CMS in the NOFO using information available to the public. DC and Puerto Rico and the other U.S. territories are ineligible for funding and so were excluded from the analysis. Estimated awards in text are rounded to the nearest $10 million or to the nearest $10 per rural resident, as applicable. See Methods for more details.

Awards from the $37.5 billion (of the $50 billion) could range from an estimated $550 million (in Rhode Island) to just over $1 billion (in Texas) over five years if all states were approved for funding. These differences are relatively modest compared to the wide variation across states in rural health needs.

Actual awards based on the first $37.5 billion would differ if CMS does not award funding to every state or if the agency decides to reduce awards for a given state over time. Actual awards to states may also differ if CMS uses different data to allocate funds or applies different criteria when distributing funds than what was indicated in the NOFO. For example, when evaluating the share of hospitals receiving Medicaid disproportionate share hospital (DSH) payments, CMS is expected to use more current data than are available to the public.

States could receive more than the estimates in this analysis, because totals will include their portion of the $12.5 billion that will be distributed based on CMS’s discretionary scoring of state policy, state initiatives, and other factors, and these scores are not yet known. State initiatives will be scored based on their quality by a merit review panel. This analysis will be updated after CMS announces the first year of funding.

Estimated Awards

Estimated Awards From $37.5 Billion of the $50 Billion Rural Health Fund Could Range From $550 Million to Just Over $1 Billion Over Five Years if All States Were Approved for Funding

If the $37.5 billion is distributed to all states, states will receive $750 million over five years, on average, with estimates ranging from $550 million in Rhode Island to just over $1 billion in Texas (Figure 1). Estimated awards for most states (32) are within 10% of the $750 million average (i.e., between $675 million and $825 million), despite wide variation in rural health needs.

Some states with relatively small rural populations could receive a disproportionate share of the $37.5 billion based on other factors. For example, Alaska has a small total population and the fifth smallest rural population in the country, but it could receive the fifth largest award from the $37.5 billion ($940 million). Most of the extra dollars that Alaska is estimated to receive from the $12.5 billion based on state need reflect the fact that a portion would go exclusively to the five states with the largest land area. Alaska is the largest state in the country and could receive $260 million from that pool.

---

Figure 1

---

As noted above, the $37.5 billion evaluated in this brief includes the $25 billion that will be distributed equally across states and the $12.5 billion that will be distributed based on measures of state need (Figure 2). Each state with an approved application would receive $500 million over five years from the $25 billion distributed equally across states if all states receive funding. If not all states are approved for funding, states with approved applications will receive more.

States will receive $250 million over five years, on average, from the $12.5 billion to be allocated based on state needs (again, assuming all states are approved for funding). Estimated awards from that $12.5 billion pool range from $50 million in Rhode Island to $530 million in Texas.

The remaining $12.5 billion of the $50 billion fund—which is based on state initiatives, state policy, and other factors—will result in additional funds for some or all states with approved applications, but cannot be estimated yet because of uncertainty about how CMS will score these factors (which, for example, will depend in part on whether states commit to certain policy changes in their applications and follow through over time).

---

Figure 2

---

Distribution Based on State Need

A Quarter of the $50 Billion Fund, $12.5 Billion, Will be Distributed Based Exclusively on Specific Measures of State Need

Of the $50 billion fund, a quarter ($12.5 billion) will be distributed based exclusively on specific measures of state need as defined by CMS (see below). In addition, $8 billion will be distributed based on the quality of state initiatives as determined by CMS (see below); that evaluation may take state needs into account to some degree, but the extent to which it will do so is unclear. State initiatives will be evaluated based on strategy, projected impact, sustainability beyond the funding period, and other factors, according to CMS.

Based on criteria published by CMS, the $12.5 billion based exclusively on measures of state need will be distributed as follows:

• 40% of the $12.5 billion is based on the rural population and number of rural health care facilities in a state (20% each). CMS has published how it plans to define “rural” for purposes of distributing these dollars, though there are many potential ways of doing so. For example, CMS uses a broad definition of “rural hospitals” that includes all hospitals in areas classified as rural by the Health Resources & Services Administration (HRSA) (which itself is broader than some definitions) as well as any other hospital that receives certain Medicare rural payment designations or that is classified by Medicare as urban but reclassified as rural for certain payment purposes.
• 20% of the $12.5 billion is based on uncompensated care as a percent of operating expenses among all hospitals (i.e., not just those in rural areas). Uncompensated care tends to be higher in states that have not expanded Medicaid under the Affordable Care Act, such as Texas and Georgia. Further, CMS is using data from 2021; uncompensated care may have dropped over time among states that have recently expanded Medicaid (like Oklahoma and Missouri in 2021 and North Carolina and South Dakota in 2023).
• 24% of the $12.5 billion is based on the share of the population in rural areas and the share in frontier regions (12% each). These factors do not account for the total size of the population in each state or the size of rural health care systems (which is also the case for three other factors, like land area). As a result, states with a relatively large share of the population living in rural and frontier areas but relatively small rural populations and few rural hospitals may still receive a greater than average share of these dollars (e.g., as is the case for Alaska, North Dakota, and Wyoming) while the reverse may be true for states with large rural populations and many rural hospitals (e.g., as is the case for California, Florida, and Texas). Nonetheless, as noted above, 20% of the $12.5 billion is based directly on rural population and 20% on rural facilities.
• 10% of the $12.5 billion will be based on land area and will only go to the five largest states. These five states could each receive large allocations from this pool (ranging from an estimated $240 to $260 million if all were approved for funding), while states just outside of the top five and all other states will not receive funds based on land mass.
• 6% of the $12.5 billion is based on the share of all hospitals (not just those in rural areas) receiving Medicaid disproportionate share hospital (DSH) payments. Medicaid DSH status is based in part on the extent to which hospitals care for Medicaid and other low-income patients but also on specific criteria that vary across states.

Largest and Smallest Awards

Texas, California, New Mexico, Montana, and Alaska Are Expected to Receive the Largest Amounts From the $37.5 billion, Reflecting Differences Based on CMS Criteria of State Need

Estimated awards for these five states range from $940 to $1,030 million over five years from the $37.5 billion (Figure 1). As noted, $25 billion of the $37.5 billion will be distributed equally across states, meaning that any differences across states relate to the $12.5 billion distributed based on measures of state need ($12.5 billion). Most of the extra dollars that these five states are estimated to receive relative to others are attributable to the states’ relatively large land area, one of several factors used to allocate funds based on state need (Figure 3). Estimated awards based on this factor range from $240 million in New Mexico to $260 million in Alaska. Only the five largest states would receive funding from this pool based on their land area.

---

Figure 4

---

Missouri, Mississippi, North Carolina, Georgia, and Oklahoma could receive the next largest awards from the $37.5 billion, with estimates ranging from $820 to $840 million over five years. These states are estimated to receive more funds than average because they have relatively large rural populations and numbers of rural facilities and had relatively high levels of hospital uncompensated care in the year evaluated, among other factors. Despite these differences, their estimated awards are only roughly 10 percent more than the average award across all states ($750 million over five years) from the $37.5 billion.

Rhode Island, Massachusetts, Delaware, Connecticut, and New Jersey could have the lowest awards from the $37.5 billion, with estimates ranging from $550 to $610 million over five years. These are all relatively small states in or near the Northeast that rank relatively low on most factors, including rural population and the number of rural facilities.

Payments Per Rural Resident Could Vary Widely

Ten States Could Receive Less Than $375 Per Rural Resident Over Five Years While 11 States Could Receive More Than $1,500, Before Disbursements Based on State Policy, Initiatives, and Other Factors

Estimated awards from the $37.5 billion are partially, but not closely, tied to rural population, resulting in large differences in the amount each state could receive per rural resident. Assuming all states receive funds, the average award per rural resident across all states would be $590, but this amount per rural resident would vary widely across states. Texas could receive the least amount per rural resident ($240) while Rhode Island could receive the largest amount ($22,150, an outlier) (Figure 3). This in part reflects the fact that estimated state awards vary much less than differences in rural populations, principally due to the equal distribution of the first $25 billion across all states with approved applications but also reflecting the structure of the $12.5 billion distributed based on measures of need (only 20% of which is directly based on rural population).

Additional Factors Affecting Awards

Most of the Remaining $12.5B Will be Distributed Based on State Policy and CMS’s Evaluation of States’ Proposed Initiatives

Of the remaining $12.5 billion, $8 billion (64%) is expected to be distributed across states based on the quality of their proposed initiatives, $3.75 billion (30%) based on state policies, and $0.75 billion (6%) based on other factors. It is not yet clear how, and how much, this portion of the award will differ across states, or the extent to which these funds will align with different measures of rural health needs.

According to CMS, the first bucket ($8 billion) will be distributed based on a qualitative review of a state’s proposed initiatives and, in later years, the state’s progress in implementing their plan. Proposed initiatives will be scored by a merit review panel selected by CMS. Panel members have not been announced to the public.

The second bucket ($3.75 billion) will be distributed based on whether a state has adopted, made progress towards adopting, or committed to adopting certain policies. Some of these policies aim to promote competition among health care providers, such as by expanding scope of practice for nurse practitioners and other non-physicians. Among other factors, three measure states’ progress in implementing certain Make America Health Again (MAHA) policies.

The remaining funds ($750 million) will be distributed based on other factors, such as the share of dual eligibles in integrated care plans and the quality of Medicaid and Children’s Health Insurance Program (CHIP) data reporting to CMS.

Looking Ahead

CMS will decide which states to fund by the end of the year, and how to allocate the first year of funding across states. The agency will allocate $10 billion per year to states with approved applications over a five-year period (fiscal years 2026 through 2030), and it plans to distribute the first round of $10 billion in January 2026. CMS will use the same funding formula for each year, but the distribution of funds across states will likely change over time. This is in part because a quarter of the funds—i.e., the $12.5 of $50 billion excluded from analyses in this brief—is based on factors that are likely to change over time, including states’ progress in implementing policy changes and their proposed initiatives. The distribution could also change over time depending on whether CMS chooses to withhold, reduce, or recover funds from a given state for noncompliance or other reasons.

It is not clear what share of the $50 billion fund will go to rural hospitals and other rural health care providers or the extent to which any direct and indirect benefits of the fund will offset their losses under the reconciliation law. While some policymakers promoted the rural health fund as a way to support rural hospitals, the funds can also be used for much broader purposes. CMS has indicated that the funds are intended to be used for investments in “system transformation” rather than “perpetual operating expenses.” CMS has stipulated that payments to hospitals and other providers for patient care cannot exceed 15% of total funds, though providers could benefit in other ways, such as through investments in existing buildings and infrastructure (which are restricted to 20% of total funds). Evaluating the implications for rural hospitals will depend on how CMS allocates funds to states and how much of these funds states distribute to rural hospitals, other providers, and for other state initiatives.

Of the $50 billion rural health fund, half ($25 billion) will be distributed equally among states with approved applications and half ($25 billion) will be distributed among approved states based on a set of 23 factors, weighted to varying degrees, as detailed by CMS in the Notice of Funding Opportunity (NOFO). CMS refers to the first half as “baseline funding” and the second half as “workload funding.” Weighted scores based on the workload funding factors will total to 100 points across all states. A state’s share of the $25 billion will depend on their total weighted score divided by 100, and its share of funds distributed based on a given factor will equal their weighted score for that factor divided by 100. The reconciliation law determined the overall allocation of baseline and workload funding, but gave CMS discretion to define more specifically how the workload funding would be distributed.

Of the $37.5 billion evaluated in this brief, $25 billion reflects the baseline funding that will be distributed equally across states with approved applications, as described in the law. If all states are approved for funding, each state would, by definition, receive $500 million over five years from this pool of funding. If not all states are approved for funding, the $25 billion of baseline funding will be distributed equally among states with approved applications only, meaning that each would receive more than $500 million.

The other $12.5 billion of the $37.5 billion evaluated will be based on CMS measures of state need. This corresponds to the half ($12.5 billion) of the workload funding that will be distributed based on seven factors that CMS refers to as “rural facility and population factors” (three of which are based on measures listed in the reconciliation law). Appendix Table 1 includes details about these factors based on the NOFO. We obtained estimated scores by state for each of these factors and their weighted total by state from the UNC Sheps Center Rural Facility and Population Score Estimates by State, as updated on October 24, 2025. The Sheps Center generated these estimates based on their interpretation of the NOFO and available data.

We converted estimated scores for a given factor into a dollar amount by: (1) calculating the share of workload funding distributed based on that factor (i.e., multiplying $25 billion by the weight for that factor) and (2) multiplying the result by the state share of the distribution based on that factor (i.e., the score divided by 100). Each state’s total distribution from the $12.5 billion based on state need is the sum of the factor allocations calculated in (2).

We calculated the total award from the $37.5 billion as $500 million per state plus the estimated award from the $12.5 billion. To calculate the award per rural resident, we divided by the state rural population as defined by CMS for the first factor, which was available from the Sheps Center estimates.

This analysis does not include the second half of the workload funding ($12.5 billion) that will be distributed based on state initiatives, state policy, and other factors, but cannot be estimated yet because of uncertainty about how CMS will score these factors. We do describe what share of the $12.5 will be distributed based on state initiatives, state policy, and other factors based on the weights assigned to each of the factors included in these three buckets. Some of these factors (health and lifestyle, individuals dually eligible for Medicare and Medicaid, remote care services, and data infrastructure)—representing 30% of the $12.5 billion—will be scored by evaluating how states rank based on a weighted average of measures from two buckets. For example, health and lifestyle factors will be evaluated based on the state rank of a weighted average of their score on certain state initiatives (75%) and the adoption of a certain policy (25%). The contribution of each bucket in those cases cannot be fully disentangled because of the structure of the calculation, which involves a ranking of a weighted average. In those cases, we apportioned the funding from these factors to each bucket based on the weights used to generate the weighted average (e.g., 75% or 25%).

Key Takeaways

• On October 1^st the U.S. federal government shut down after Congress failed to pass a stopgap spending bill to keep it funded. Now in its sixth week, the shutdown marks the longest lapse in federal funding in U.S. history. Congress remains at a standstill over whether to extend the Affordable Care Act’s enhanced premium tax credits (ePTCs). About three quarters of the public continue to say Congress should extend the expiring tax credits, including more than nine in ten (94%) Democrats, three in four (76%) independents, and half of Republicans. As the debate continues, this poll shows that partisan loyalties among the public are deepening, with Republicans split over whether they want Congress to extend the tax credits for people who purchase their own coverage on the ACA marketplaces or allow them to expire.
• Democrats largely support what congressional Democrats have been doing throughout this debate, while independents are split. A large majority of Democrats (81%) say Democrats in Congress should “refuse to approve a budget unless it includes extending these tax credits, even if it means the government remains shut down.” Independents are divided, while about eight in ten (84%) Republicans say Congressional Democrats should approve a budget to quickly end the shutdown.
• If the enhanced tax credits are not extended, both political parties could face backlash from their bases. Among those who want to see Congress extend the tax credits, nearly four in ten say President Trump (28% of all adults) deserves most of the blame, and a similar share says they would blame Republicans in Congress (28% of all adults). Fewer, about one in four (17% of all adults), say Democrats in Congress deserve the most blame. Majorities of Democrats and independents say President Trump or Republicans in Congress would deserve the most blame, while a majority of MAGA Republicans say Democrats in Congress would deserve the most blame.
• The Democratic Party maintains an edge over the Republican Party when it comes to voter trust of handling the future of the ACA, and a narrower edge when it comes to high cost of health insurance. At least one in five voters say they do not trust either party to address these issues. While majorities of Democratic and Republican voters say they trust their own party on these issues, independents are more likely to trust the Democratic Party over the Republican Party on the ACA (38% vs. 18%), though many say they don’t trust either party. Democratic and independent voters are also much more likely than Republican voters to say rising health costs would impact their willingness to vote and their candidate choice. Nearly six in ten Democratic voters and half of independent voters say an annual health cost increase of $1,000 – the average expected increase for marketplace enrollees if the ACA enhanced premium tax credits expire – would have a “major impact” on both their decision to turnout to vote and which candidate they would support, compared to about three in ten Republican voters.  

Majorities of the Public Continue to Support Extending ACA Tax Credits; Most Democrats Want Budget Deal to Include Extension

As part of the ongoing budget negotiations, Democratic leaders are pushing to extend the enhanced premium tax credits, which help some people afford their health insurance through marketplaces created by the Affordable Care Act (ACA). These tax credits are currently set to expire at the end of the year. Republican lawmakers, on the other hand, say they will take up the ACA tax credits after the government is reopened.

Conducted as people began reviewing ACA plan options for this year’s open enrollment, this poll shows that extending these tax credits beyond 2025 continues to be popular among the public. About three quarters (74%) of U.S. adults overall say Congress should extend the enhanced tax credits for people who purchase their own insurance through ACA marketplaces, about three times the share who say Congress should let these credits expire. Three quarters (76%) of adults who purchase their own health insurance, most of whom do so through ACA marketplaces, support the extension of these tax credits, while one in four (23%) say they should expire.

At least half of adults across partisans continue to support the extension of these tax credits. This includes more than nine in ten (94%) Democrats, three quarters (76%) of independents, and half of Republicans. However, Republican support for Congress extending the tax credits has dropped nine percentage points in the past month as the enhanced premium tax credits have become a talking point around the budget negotiations and a major sticking point for Democratic lawmakers. In addition, supporters of the “Make America Great Again” (MAGA) movement are now 13 percentage points less likely to say these tax credits should be extended, from about six in ten (57%) last month, to fewer than half (44%) now.  

Now in its sixth week, the government shutdown has resulted in missed paychecks for some federal employees and delays in full SNAP benefits, adding pressure on Congress to reach an agreement. Overall, the public is split over what they think Congressional Democrats should do, with half (50%) saying they should “approve a budget that does not include extending these tax credits in order to quickly end the shutdown, even if it means the cost of health insurance will increase for some people,” while a similar share (48%) say Congressional Democrats should “refuse to approve a budget unless it includes extending these tax credits, even if it means the government remains shut down.”

A large majority of Democrats (81%) support Congressional Democrats holding out for a deal that includes extending the ACA’s enhanced premium tax credits, even if it prolongs a government shutdown. Independents are split, with about half (51%) saying Democratic leaders should refuse to approve a budget without the tax credit extensions and half (47%) saying they should approve a budget to quickly end the shutdown. More than eight in ten (84%) Republicans say Democratic lawmakers should approve a budget to end the shutdown.

More than half (55%) of those who purchase their own health insurance say Democrats should refuse to approve a budget that does not include an extension for ACA subsidies, while 45% say Democrats should approve the budget without the subsidies to quickly end the shutdown. Notably, past KFF polls have shown that nearly half of adults enrolled in ACA marketplace plans identify as Republican or lean Republican.

If Congress does not pass an extension for the enhanced tax credits, those who want to see the credits extended are most likely to blame Republican leaders, including President Trump. Nearly four in ten of those who support extending the tax credits say that if they are not extended Republicans in Congress deserve the most blame (38%, or 28% of all adults) and a similar share (37%, or 28% of all adults) say President Trump deserves most of the blame. About one in four (23% or 17% of total adults) say Democrats in Congress deserve the most blame. Notably, the group that supports extending the tax credits is made up of larger shares of Democrats and Democratic-leaning independents.

Among the half of Republicans who want to see the tax credits extended, seven in ten say they would blame Democrats in Congress if the tax credits are allowed to expire, rising to eight in ten MAGA-supporters.

Despite the ongoing legislative debate over the government shutdown, awareness of the lapsing enhanced premium tax credits remains limited, even among the group most directly impacted by the loss of tax credits. Overall, more than half of adults say they have heard or read “a little” (28%) or “nothing at all” (29%) about the issue, while 44% have heard or read “a lot” (13%) or “some” (30%). Among those who buy their own insurance, half say they have heard at least “some,” compared to four in ten last month.

Some Republican lawmakers have claimed that Democratic efforts to extend the ACA’s enhanced premium tax credits would allow undocumented immigrants to receive federally subsidized health insurance. This KFF poll gauged the public’s understanding of this claim over who is eligible for ACA coverage. About half (47%) of U.S. adults correctly say that undocumented immigrants are not eligible to buy health coverage on ACA marketplaces. There is some confusion, however, as about one in seven (14%) incorrectly say undocumented immigrants are eligible and nearly four in ten (39%) say they are not sure.

Although this claim has been made by some Republican lawmakers and conservative media outlets, there are no partisan differences in awareness of this aspect of ACA eligibility. At least half of Republicans (57%) and Democrats (52%) say undocumented immigrants are not eligible for this, while at least three in ten across partisans say they are not sure. A larger share of independents (44%) say they are not sure whether undocumented immigrants are eligible to buy coverage on the ACA marketplaces.

Health Costs Could Influence Voters in 2026, and Democratic Party Holds Edge on Trust to Address ACA

There is some indication that these budget negotiations could influence how voters think about health care and their decisions at the ballot box in coming years. Consistent with previous polling, the Democratic Party continues to hold an advantage over the Republican Party among voters on which party they trust to do a better job addressing the future of the 2010 Affordable Care Act, or ACA. About four in ten voters (43%) say they trust the Democratic Party to do a better job addressing the future of the ACA compared to one-third (32%) of voters who say they trust the Republican Party. Democrats also have a small advantage on which party voters trust to address the high cost of health insurance (39% v. 33%), though a quarter of voters say they trust neither party on this issue.

On both health care issues, Democratic and Republican voters largely trust their own party. While the Democratic Party has a strong advantage over the Republican Party among independent voters on who they trust to do a better job handling the future of the ACA (38% v. 18%, respectively), independents are more split on which party they trust to address the high cost of health insurance.  More than one-third of independent voters say they do not trust either party to do a better job handling the ACA’s future (36%) or addressing the high cost of health coverage (41%).

As leaders in both political parties blame each other for the extended government shutdown, Democratic and Republican campaign groups have started running ads in competitive congressional districts, in hopes that the situation will boost their party’s standing with voters.

Yet, the possibility of increasing health care costs resonates as a stronger motivator for Democratic voters and independent voters, rather than Republican voters. When asked how a $1,000 increase in their health care costs – the average expected increase for marketplace enrollees if the ACA’s enhanced premium tax credits expire – would affect their 2026 vote, nearly six in ten Democratic voters and more than half of independent voters say it would have a “major impact” on both their decision to vote (59% and 54%) and which candidate they support (56% and 52%). About three in ten Republican voters say such an increase would have a “major impact” on either their decision to turn out or who they support. Although the expiring enhanced premium tax credits directly affect only those who purchase their own coverage on the ACA marketplaces, this suggests that rising health care costs resonate more as a voting issue among Democrats and independents than Republicans.

This KFF Health Tracking Poll was designed and analyzed by public opinion researchers at KFF. The survey was conducted October 27-November 2, 2025, online and by telephone among a nationally representative sample of 1,350 U.S. adults in English (n=1,274) and in Spanish (n=76). The sample includes 1,031 adults (n=63 in Spanish) reached through the SSRS Opinion Panel either online (n=1,007) or over the phone (n=24). The SSRS Opinion Panel is a nationally representative probability-based panel where panel members are recruited randomly in one of two ways: (a) Through invitations mailed to respondents randomly sampled from an Address-Based Sample (ABS) provided by Marketing Systems Groups (MSG) through the U.S. Postal Service’s Computerized Delivery Sequence (CDS); (b) from a dual-frame random digit dial (RDD) sample provided by MSG. For the online panel component, invitations were sent to panel members by email followed by up to three reminder emails. 

Another 319 (n=13 in Spanish) adults were reached through random digit dial telephone sample of prepaid cell phone numbers obtained through MSG. Phone numbers used for the prepaid cell phone component were randomly generated from a cell phone sampling frame with disproportionate stratification aimed at reaching Hispanic and non-Hispanic Black respondents. Stratification was based on incidence of the race/ethnicity groups within each frame. Among this prepaid cell phone component, 143 were interviewed by phone and 176 were invited to the web survey via short message service (SMS). 

Respondents in the prepaid cell phone sample who were interviewed by phone received a $15 incentive via a check received by mail. Respondents in the prepaid cell phone sample reached via SMS received a $10 electronic gift card incentive. SSRS Opinion Panel respondents received a $5 electronic gift card incentive (some harder-to-reach groups received a $10 electronic gift card). In order to ensure data quality, cases were removed if they failed two or more quality checks: (1) attention check questions in the online version of the questionnaire, (2) had over 30% item non-response, or (3) had a length less than one quarter of the mean length by mode. Based on this criterion, one case was removed.

The combined cell phone and panel samples were weighted to match the sample’s demographics to the national U.S. adult population using data from the Census Bureau’s 2024 Current Population Survey (CPS), September 2023 Volunteering and Civic Life Supplement data from the CPS, and the 2025 KFF Benchmarking Survey with ABS and prepaid cell phone samples. The demographic variables included in weighting for the general population sample are gender, age, education, race/ethnicity, region, civic engagement, frequency of internet use and political party identification. The weights account for differences in the probability of selection for each sample type (prepaid cell phone and panel). This includes adjustment for the sample design and geographic stratification of the cell phone sample, within household probability of selection, and the design of the panel-recruitment procedure.

The margin of sampling error including the design effect for the full sample is plus or minus 3 percentage points. Numbers of respondents and margins of sampling error for key subgroups are shown in the table below. For results based on other subgroups, the margin of sampling error may be higher. Sample sizes and margins of sampling error for other subgroups are available on request. Sampling error is only one of many potential sources of error and there may be other unmeasured error in this or any other public opinion poll. KFF public opinion and survey research is a charter member of the Transparency Initiative of the American Association for Public Opinion Research.