To meet House budget resolution requirements, Congress will need to make major cuts to federal spending on Medicaid. An option under consideration is to limit the use of state taxes on providers, which could save hundreds of billions of dollars according to the Congressional Budget Office (CBO). Medicaid is jointly financed by the federal government and the states, with the federal government paying close to 70% of total costs in fiscal year (FY) 2023. States are permitted to finance the non-federal share of Medicaid spending through multiple sources, including state general funds, health-care related taxes (referred to as “provider taxes” throughout this brief), and local government funds. All states except for Alaska finance some of the state costs with taxes on health care providers, which may be imposed as a percentage of provider revenues or using an alternative formula such as a flat tax on the number of facility beds or inpatient days. The most common provider taxes are levied on nursing facilities (46 states) and hospitals (45 states).

Proponents of restricting provider tax authority say that providers and states receive federal matching funds without expending their own money, which can “inflate a state’s Medicaid match.” As the debate about broader Medicaid spending reductions continues, Republicans may try to recast restrictions on provider taxes as addressing fraud, waste, and abuse. Opponents of such restrictions note that provider taxes are permissible under current law and help fund Medicaid; and restricting provider taxes will create financing gaps for states that could result in higher state taxes, reductions in Medicaid eligibility, lower provider payment rates, and fewer covered benefits. Both proponents and opponents of new restrictions agree that the limited data about provider taxes makes it difficult to assess states’ reliance on them as a funding source and to understand how they affect net payments to providers. The Medicaid and CHIP Payment and Access Commission has submitted recommendations to Congress that states start reporting new data on Medicaid taxes and that those data be publicly available for analysis.

In light of the current debate, this issue brief uses data from KFF’s 2024-2025 survey of Medicaid directors, to describe states’ current provider taxes and the federal rules governing them.

1. All states except for Alaska use provider taxes to help finance the state share of Medicaid spending.

The federal government and states share responsibility for financing Medicaid, with the federal government guaranteeing states federal matching payments with no pre-set limit. States have considerable flexibility in determining how to finance the non-federal share of state Medicaid payments. In state FY 2024, states reported that about 68% of state Medicaid spending came from general funds, most of which come from income and sales taxes. The remaining 32% was funded by other sources including local government funds and provider taxes.

Medicaid provider taxes are defined as those for which at least 85% of the tax burden falls on health care items or services or entities that provide or pay for health care items or services (see Social Security Act, Section 1903(w)(3)(A)). States use provider tax revenues to fund Medicaid “base” rates and supplemental payments, to avoid Medicaid benefit cuts, and to expand Medicaid benefits. Some states have used revenue from provider taxes to finance the ACA Medicaid expansion. Beyond helping finance the state share of Medicaid, permissible tax arrangements may have potential financial benefits for providers who are subject to the tax and serve a high volume of Medicaid patients.

All states but Alaska finance part of the state share of Medicaid funding through at least one provider tax and 39 states have three or more provider taxes in place (Figure 1). While data are limited, the Government Accountability Office (GAO) estimated that provider taxes as a percent of the non-federal share of Medicaid spending in SFY 2018 ranged from less than 0.5% in New Mexico, South Dakota, Texas, and Virginia to more than 30% in Michigan, New Hampshire, and Ohio. Over time, states have increased their reliance on provider taxes, with expansions often driven by economic downturns. GAO reported that reliance on provider taxes had grown significantly over the preceding decade, increasing from 7% in 2008 to 17% in 2018. There are no more current estimates that are publicly available of provider taxes as a share of Medicaid spending.

2. Federal rules set limits on how states can use provider taxes.

States first began using provider taxes to finance the state share of Medicaid in the 1980s, when Medicaid providers would donate funds or agree to be taxed and the revenues from those donations and taxes would be used to finance a portion of the state’s share of Medicaid. According to the Congressional Research Service, states were essentially “borrowing funds from Medicaid providers in order to draw down federal funds and increase Medicaid payment rates to the providers that had paid taxes or donated funds.” The particularly aggressive use of those taxes by some states spurred statutory and regulatory limitations on provider taxes starting in the 1990s. Federal rules now specify that provider taxes must be:

• Broad-based, which means the tax is imposed on all providers within a specified class of providers (e.g., the tax cannot be imposed only on providers that see primarily Medicaid patients);
• Uniform, which means the tax must apply equally to all providers within the specified class (e.g., the tax rate cannot be higher on Medicaid revenue than non-Medicaid revenue); and
• Not hold taxpayers (providers) “harmless,” which means states are prohibited from directly or indirectly guaranteeing that providers will receive their tax revenues back (i.e., be “held harmless”).

There are 19 classes of providers that the Centers for Medicare and Medicaid Services (CMS) uses to ensure that the tax programs are broad-based and uniform (see 42 CFR Section 433.56). In assessing whether provider taxes comply with federal laws, current regulations specify that the hold harmless requirement does not apply when the tax revenues comprise 6% or less of net patient revenues from treating patients (see 42 CFR Section 433.68), a level sometimes referred to as a “safe harbor” limit. States may also receive waivers of the requirement that taxes be broad-based and uniform if the state can prove the net effect of the tax is “generally redistributive,” and that the amount of tax is not directly related to Medicaid payments.

Policy proposals that would reduce the “safe harbor” limit below 6% could affect most significantly the 38 states that have one or more provider taxes that exceed 5.5% of provider net patient revenues (Figure 2). However, if the limit were reduced significantly enough, all states with provider taxes could be affected. There are 10 states with at least one provider tax that is between 3.5% and 5.5% of net patient revenues. One state (Georgia) reports that all provider taxes are below 3.5% of net patient revenues.

3. Provider taxes are most common for institutional providers.

Provider taxes fall on a wide range of provider types but are most common for institutional providers including nursing facilities (46 states), hospitals (45 states), and intermediate care facilities for people with intellectual or developmental disabilities (32 states, Figure 3). States often use provider tax revenues to support payment rates for providers, often by financing supplemental payments like disproportionate share hospital (DSH) payments, upper payment limit (UPL) payments, and managed care state directed payments (uniform payment increases through managed care that are similar to supplemental payments). Hospitals’ base fee-for-service rates vary considerably across states and, on average, are below hospitals’ costs of providing services to Medicaid enrollees and below Medicare payment rates for comparable services, causing some states to rely more heavily on supplemental payments than others to help cover hospitals’ costs. It is unknown from available data how much states are paying hospitals after accounting for base payments, supplemental payments, and the costs of provider taxes (e.g., the net payment rate), which is one reason why the Medicaid and CHIP Payment and Access Commission has called for greater transparency around provider taxes.

Although data on the use of revenues from provider taxes are limited, GAO found that in 2018, states financed a higher percentage of the state share of supplemental payments (e.g., DSH and non-DSH supplemental payments) using provider taxes than they did for other types of Medicaid payments (i.e., base payments). The use of provider taxes to fund supplemental payments to providers has raised some questions regarding compliance with hold harmless requirements for provider taxes. In April 2024, CMS released guidance to states about this issue, noting they will work with states to identify impermissible hold-harmless arrangements but will not take enforcement action until January 2028, allowing states time to come into compliance.

Beyond institutional providers, 20 states have provider taxes on managed care organizations (MCOs), 17 on ambulance providers, and 11 on “other” provider types such as ambulatory care facilities and home care providers (Appendix Table 1). The Deficit Reduction Act of 2005 required states that tax Medicaid MCOs to tax all MCOs uniformly, thus limiting the ability of states to only tax Medicaid MCOs. However, CMS has the authority to waive the uniformity requirement, and other federal requirements if the tax is determined to be “generally redistributive.” The formula for determining whether a waiver request is “redistributive” has allowed states to impose Medicaid taxes primarily on Medicaid enrollees, raising CMS concerns. For example, in California the tax is set at a much higher rate for Medicaid enrollees relative to privately-insured enrollees, which means that 99% of the tax burden falls on Medicaid member months. As a result, there may be issues with the hold harmless requirements because the MCOs paying for nearly all the tax payments also receive premium payments from the state to provide Medicaid coverage, and those premium payments reflect the tax expense. In its approval letter of California’s recent provider tax waiver in January 2025, CMS included a companion letter informing the state that CMS was contemplating proposed regulatory changes that could affect the legality of California’s MCO tax in future years.

4. Provider tax revenues are most likely to be near the safe harbor limit for long-term care providers.

Tax revenues are nearest to the safe harbor limit most often for nursing facilities and intermediate care facilities for people with intellectual or developmental disabilities (Figure 4). If provider tax revenues are 6% or less of patient net revenues, they are not subject to hold harmless requirements, meaning the revenues may fund payments back to the providers being taxed. Proposals to reduce the 6% “safe harbor” limit would likely most significantly affect states with taxes already near the upper limit. Provider taxes that exceed 5.5% of net patient revenue are most common for nursing facilities (22 states) and intermediate care facilities (17 states), both of which provide long-term care for people who need help with the activities of daily living. There are also 13 states that have provider taxes exceeding 5.5% of net patient revenues for hospitals.

5. Further limits on provider taxes are likely to reduce Medicaid spending, coverage, and payment rates.

The recently passed House budget resolution targets cuts to federal Medicaid spending of up to $880 billion or more over a decade. To put the size of the spending cuts in perspective, $880 billion represents 6% of state taxes per resident and 19% of states’ spending on education per pupil, so offsetting the loss of federal revenues would be challenging for states, particularly considering that states generally must balance their budgets. Assuming states will be unable to replace cuts of that magnitude, they will face difficult choices about whether to reduce Medicaid spending by covering fewer people, eliminating optional benefits, or reducing provider payment rates.

There are not yet detailed proposals under consideration by Congress to achieve federal Medicaid spending reductions, but the Congressional Budget Office (CBO) estimated that reducing the safe harbor limit for provider taxes could save tens or hundreds of billions of dollars depending on the size of the reduction (Figure 5). If the hold-harmless threshold were reduced to 5%, CBO estimates the federal government would save $48 billion over 10 years. If the hold-harmless threshold were eliminated, savings would be $612 billion.

CBO’s estimates of federal spending reductions are based on the agency’s assessment that states will reduce Medicaid spending, resulting in people losing Medicaid coverage. While CBO provides national estimates, the effects would vary significantly across the states. States with provider taxes near the safe harbor limit would be affected by even modest changes whereas states with lower provider taxes would only be affected by more significant reductions. Effects on total Medicaid spending and enrollment would also vary based on how much states offset lost provider tax revenues with other sources of funding. Because provider taxes often support Medicaid payment rates, there will almost undoubtedly be downward pressure on payment rates if provider taxes are restricted, particularly for institutional providers including nursing facilities, intermediate care facilities, and hospitals.

The U.S. has been involved in efforts to improve the health of those living in low- and middle-income countries for decades and has been the largest donor to global health in the world. Starting on January 20, 2025, as part of a larger foreign aid review, the Trump administration began to take several steps to defund and dismantle most of the U.S. global health response, rendering its future uncertain. To better understand the U.S. global health response, as it was before this date, here are key facts to know (also see 10 Things to Know About U.S. Funding for Global Health):

1. What have been the goals of U.S. global health efforts?

U.S. global health efforts aim to help improve the health of people in developing countries while also contributing to broader U.S. global development goals (e.g., advancing a free, peaceful, and prosperous world), foreign policy priorities (e.g., promoting democratic institutions, upholding universal values, and promoting human dignity), and national security concerns (e.g., protecting Americans from external threats, sustaining a stable and open international system).¹ 

2. How long has the U.S. been involved in global health?

The U.S. government (U.S.) has been engaged in international health activities for more than a century beginning with efforts in the late 1800s to join with other nations to form the first international health organizations, standards, and treaties designed to promote growing international trade and travel while protecting borders from external disease threats. Since then, U.S. engagement in global health has grown considerably, particularly after the launch of USAID in 1961, the U.S. international development agency, but most markedly in the last two decades with the creation of PEPFAR and other signature U.S. global health efforts. Heightened engagement has been driven by factors such as globalization, the growing recognition that infectious disease threats – including the emergence of new infectious diseases such as HIV, SARS, avian influenza, and COVID-19 – are threats to national security in the U.S. as well as abroad, as well as demonstrated success in addressing global health challenges, such as polio.

3. How much global health funding does the U.S. provide?

In FY 2024, the U.S. provided $12.4 billion to global health. Most funding (81%) was provided bilaterally (provided to or on behalf of other countries or regions), reaching almost 80 low- and middle-income countries, primarily in sub-Saharan Africa. The remaining share was provided to multilateral institutions (where it is pooled with funding from other donors and, in turn, disbursed to countries and programs by the multilateral institution). U.S. funding for global health, however, represents a very small share of the federal budget (<1%). See Figure 1.

4. How does the U.S. rank as a global health donor?

The U.S. government has been the largest donor to health in low- and middle-income countries. The U.S. provided 42% of all international health assistance from major donor governments in 2023 (see Figure 2), the largest of any donor. In addition, the U.S. has historically devoted a larger share of its foreign assistance to health than other donor governments; global health accounted for almost 30% of U.S. foreign assistance in 2023 (all other donor governments devoted less than 20% of their foreign aid budget to global health).

5. What are the main U.S. bilateral global health programs and priorities?

The U.S. has focused its global health work on several main areas and programs, including establishing major initiatives such as PEPFAR, its signature global HIV/AIDS program. These programs include (see Figure 3 for funding amounts):

• President’s Emergency Plan for AIDS Relief (PEPFAR)
• President’s Malaria Initiative (PMI)
• Tuberculosis
• Maternal and Child Health
• Nutrition and Feed the Future
• Family Planning/Reproductive Health
• Neglected Tropical Diseases
• Global Health Security

6. What are the main multilateral health organizations supported by the U.S.?

The U.S. government has been a major donor to several multilateral organizations, including those that are United Nations (U.N.) entities as well as independent, public/private partnerships:

U.N. entities:

• U.N. Children’s Fund (UNICEF)
• World Health Organization (WHO)
• Pan American Health Organization (PAHO)
• Joint United Nations Programme on HIV/AIDS (UNAIDS)
• U.N. Population Fund (UNFPA)

Independent entities:

• Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund)
• Gavi, the Vaccine Alliance
• TB Global Drug Facility of the Stop TB Partnership
• Global Polio Eradication Initiative (GPEI)
• Pandemic Fund

7. How does the U.S. carry out its global health efforts?

The U.S. government’s engagement in global health is carried out and overseen by multiple executive branch departments and agencies and the legislative branch. The main federal agencies include:

• the National Security Council (NSC), within the White House, which is responsible for coordinating and reviewing the U.S. strategy and activities, particularly for GHS;
• the Department of State, including the Bureau of Global Health Security and Diplomacy (GHSD);
• USAID (although its future is uncertain);
• the Millennium Challenge Corporation (MCC);
• the Department of Health and Human Services (HHS), including the Office of Global Affairs (OGA), the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), and the Food & Drug Administration (FDA); and
• the Department of Defense (DoD).

To implement health programs, the U.S. government partners with many organizations, ranging from non-profit and private sector organizations to foreign governments and international and multilateral organizations. In FY 2022, of the $10.6 billion in U.S. global health funding obligated to non-U.S. government recipients, the largest share (45%) went to U.S. NGOs, followed by multilateral organizations (34%), foreign NGOs (17%), and foreign governments (3%).

8. What do we know about the effectiveness of U.S. global health efforts?

U.S. global health programs have been shown to have significant impact. For example, PEPFAR is estimated to have saved 26 million lives (in addition to positive effects on health outcomes beyond HIV mortality, as well as impacts in the area of maternal and child health, along with significant, positive economic and educational spillover effects). Likewise, MCH efforts have supported a 55% decline in under-five mortality and a 42% drop in maternal deaths since 2000, while malaria efforts under PMI since 2006 have supported a 28.7% decline in malaria case rates and a 48.2% decline in malaria death rates.

9. What does the American public think about the U.S. involvement in global health?

Overall, there is broad support for the U.S. playing a role in improving the health for people in developing countries, although support is split along party lines, with the share of Republicans saying the U.S. should play a major role in this area declining since 2016. Half of the public says the U.S. should take a leading or major role in improving health for people in developing countries, while about one-third (36%) say the U.S. should take a “minor role.” Just over half the public says that before Trump took office this year, the U.S. was spending too little (19%) or about the right amount (37%) on these efforts. The public continues to recognize a benefit of spending money on global health. A large majority say that spending money on improving health in developing countries helps protect the health of Americans by preventing the spread of infectious diseases, although support is split along party lines, with most Democrats (86%) and many independents (67%) but fewer Republicans (49%) saying this spending helps Americans in this way.

10. What has the Trump administration done to affect the U.S. global health response?

Starting on January 20, 2025, the first day of his second term, President Trump began to announce numerous executive actions, several of which directly address or affect U.S. global health efforts. These have included a foreign aid freeze and “stop-work order”, cancelling the vast majority of foreign aid grants and contracts, and moving to dismantle USAID (the main implementing agency of U.S. global health efforts). As a result, many U.S. global health programs have been effectively shuttered. This situation presents considerable risks to the health of millions of people in low- and middle-income countries. Multiple lawsuits have been filed challenging these actions and litigation is ongoing.

KFF Resources

• Health Policy 101: The U.S. Government and Global Health
• KFF Global Health Fact Sheets on U.S. Global Health Policy and Programs
• KFF Global Health Budget Tracker
• KFF Breaking Down the Budget by Program Area
• KFF Overview of President Trump’s Executive Actions on Global Health Tracker

1. U.S. Code, Foreign Assistance Act of 1961, Title 22, Chapter 32; U.S. Code, U.S. Leadership Against HIV/AIDS Tuberculosis, and Malaria, Title 22, Chapter 83; U.S. Department of State and USAID, Joint Strategic Plan FY2022-FY2026, March 2022. White House, National Security Strategy, updated November 2022; USAID website, “Mission, Vision and Values,” webpage, https://www.usaid.gov/about-us/mission-vision-values [no longer accessible; accessed Oct. 2024]. ↩︎

Update: This rule was finalized on June 25, 2025 and was virtually the same as proposed rule, allowing the change to go into effect for the 2026 plan year. Differing from the proposed rule, which offered no definition, HHS defines “sex-trait modification” services to inlcude “any pharmaceutical or surgical intervention that is provided for the purpose of attempting to align an individual’s physical appearance or body with an asserted identity that differs from the individual’s sex.”

On March 10^th, CMS issued a proposed rule that seeks to change how plans sold on and off the Affordable Care Act’s (ACA) Marketplaces (plans for individuals and small businesses), would cover gender affirming care services, which the rule calls “coverage for sex-trait modification¹ .” The rule proposes, beginning plan year 2026, to prohibit insurers from covering gender affirming care as an essential health benefit (EHB), which could lead insurers to drop coverage or shift costs to individuals and states.

While the policy aim of the proposed rule aligns with the administration’s Executive Orders on gender and limiting access to gender affirming care, certain provisions of these orders are currently subject to preliminary injunctions and the agency states that the proposal “does not rely on the enjoined sections of the executive orders in making this proposal.” Instead, CMS writes that they are proposing the prohibition “because coverage of sex-trait modification is not typically included in employer-sponsored plans, and EHB must be equal in scope to a typical employer plan…” CMS does not provide support for this assertion, instead stating that they find that “0.11 percent of enrollees in non-grandfathered individual and small group coverage market plans utilized sex-trait modification during PYs 2022 and 2023.” Utilization of gender affirming care services is expectedly low in the population overall because only a small share of the population is transgender and not all transgender people seek gender affirming medical care. Further, utilization of a service may be a poor proxy for how commonly it is covered. There are other cases where a small share of the population uses a service that is generally covered by insurance. For example, there were fewer than 5,000 heart transplants in the US in 2023 (equaling one ten thousandth of a percent of the population) but public and commercial insurance typically covers this service.

Coverage of gender affirming care services in employer plans is fairly common. KFF’s 2024 Employer Health Benefit Survey²  found that about one-quarter (24%) of large employers (200 or more workers) stated they covered gender-affirming hormone therapy, a plurality of respondents did not know if they covered these services (45%), and less than one-third (31%) did not offer coverage.  The largest firms in the country (5,000 or more workers) employ 43% of people with job-based coverage and were significantly more likely to report covering hormone therapy in their largest plan (50% offered coverage, 18% did not know). In 2023, KFF’s Employer Health Benefit Survey found a similar trend relating to gender-affirming surgery. Among large employers (200 or more workers) offering health benefits, 23% provide coverage for gender-affirming surgery in their largest health plan, with 40% indicating they did not know.  More than 60% of the largest firms provide coverage for gender-affirming surgery (and 12% did not know). While for both services, there was uncertainty among employers over the details of coverage, many large employers provided coverage. 2022 data from Mercer and 2025 data on fortune 500 company coverage from HRC found, as KFF did, that coverage rates are particularly high among the largest employers (where most US workers are covered).

If implemented, the proposal would likely have an impact on access and costs for individuals and states. Some plans might drop coverage and while plans could cover gender-affirming services outside of their EHB package, consumers would not be assured the same cost-sharing and benefit design protections as for services included in the EHB package. Costs accrued for gender affirming care would not be required to count towards deductibles or out-of-pocket maximums, and would not be protected from lifetime limits, increasing out-of-pocket liability. Given that transgender people are more likely to be living on lower-incomes than cisgender people, higher costs could pose a particular challenge. Increases in out-of-pocket costs would likely deter enrollees from accessing gender-affirming care services, which are medically necessary and recommended by practically every major US medical association.

States, including about half that prohibit transgender care related exclusions, could also be faced with defraying the cost of covering these services under certain scenarios. The proposal states “if any State separately mandates coverage for sex-trait modification outside of its EHB-benchmark plan, the State would be required to defray the cost of that State mandated benefit as it would be considered in addition to EHB….However, if any such State does not separately mandate coverage of sex-trait modification outside of its EHB-benchmark plan, there would be no defrayal obligation..”

The proposal also raises questions about whether the policy would violate the ACA’s major sex nondiscrimination protections (under Section 1557).  Sec. 1557 protects against sex (and other) discrimination in health care and while the Trump Administration has suggested that it will view these protections based on biological sex assigned at birth only, courts can and have said that those protections extend to sexual orientation and gender identity. This interpretation also differs from the opinion issued by the Supreme Court in the Bostock case which found employment sex-based nondiscrimination protections extend to sexual orientation and gender identity.

1. The proposed rule does not define “sex-trait modification” but references the definition of “chemical and surgical mutilation” used in the Trump administration’s Executive Order, “Protecting Children From Chemical And Surgical Mutilation”, which includes the use of puberty blockers, sex hormones, and surgical procedures to affirm an individual’s gender identity that differs from their sex assigned at birth. ↩︎
2. Since 1999, KFF’s Employer Health Benefit Survey has collected nationally representative information on the cost and coverage of employer sponsored plans. ↩︎

More than 67 million people—20% of the U.S. population—receive their health insurance coverage through the federal Medicare program. Among the most commonly used services that Medicare covers are physician services and other outpatient services covered under Medicare Part B. In 2021, 9 out of 10 beneficiaries in traditional Medicare used physician and other Part B medical services. Nearly half of the $1 trillion in gross Medicare benefit spending in 2023 (49% or $493 billion) was spent on Part B services. Medicare Part B spending accounts for 25% of all national spending for physician and clinical services.

Each year, the Centers for Medicare & Medicaid Services (CMS) updates Medicare payments for physician services and other Part B services through rulemaking, based on parameters established under law. In November 2024, CMS finalized a 2.83% decrease in the physician fee schedule conversion factor, a key aspect of physician payment rates under the Medicare program. This resulted in an average payment cut of 2.93% to physicians and other clinicians, which took effect on January 1, 2025 and remains in effect today. Congress considered but did not enact legislation to reverse the cut in Medicare physician payments in the year-end spending bill and in the 2025 continuing resolution that funds the government through the end of the fiscal year (Figure 1). Some policymakers continue to push for a fix, which is reportedly under consideration for inclusion in an upcoming budget reconciliation bill.

Efforts by lawmakers to address the Medicare physician payment cut for 2025 are the latest in a series of legislative actions to provide short-term increases to physician payment rates under Medicare to avoid similar reductions in fees. The payment cut finalized for 2025 follows the expiration of temporary funds under the Consolidated Appropriations Act of 2024, which provided a 2.93% increase to physician payments for a portion of 2024 to stave off scheduled cuts.

Over the years, physician groups and some policymakers have called for broader reforms to stabilize Medicare payments to physicians and other clinicians, and have expressed concerns that instability and loss of revenue could push physicians to opt out of the Medicare program, creating potential access problems for Medicare beneficiaries. Physicians are not required to take Medicare patients, but most do; virtually all (98%) of non-pediatric physicians accept Medicare’s standard payment rate for all Medicare covered services, and just 1% opted out of the program in 2024.

MedPAC and others have raised additional concerns about issues such as the long-standing gap in compensation between primary care and specialty care clinicians, the efficacy of quality-based payment incentives through the Quality Payment Program (QPP), and the influence of medical specialty groups and interests through the American Medical Association/Specialty Society Relative Value Scale (RVS) Update Committee, otherwise known as the RUC. The RUC issues annual recommendations to CMS on physician payment rates, and CMS has historically adopted most of these recommendations each year. These issues have drawn the attention of policymakers in recent years, including Robert Kennedy Jr., the Trump administration’s new Secretary of the Department of Health and Human Services (HHS), who has voiced interest in aspects of Medicare physician payment reform, such as increasing incentives for primary and preventive care, as well as bringing greater transparency to the operations of the RUC and potentially reducing the AMA’s influence over payment rates.

This issue brief answers key questions about how Medicare pays physicians and other clinicians, and reviews policy options under discussion to reform this payment system. The brief is focused primarily on the physician payment system used in traditional Medicare. Medicare Advantage plans have flexibility to pay providers differently and currently there is no systematic publicly-available information on how much Medicare Advantage plans pay providers. (See Appendix for a glossary of relevant programs, legislation, and terms.)

• What is the Medicare physician fee schedule?
• How does Medicare update physician payment rates?
• What is the role of the RUC in determining physician payment rates?
• How have physician payment rates changed in 2025?
• How did the 2025 payment rule address issues related to primary care, telehealth, and other health care priorities?
• How have Medicare payments to physicians changed since the implementation of MACRA?
• How does the Quality Payment Program (QPP) factor into physician payments?
• What concerns have been raised about the physician fee schedule?
• What policy proposals have been put forward to address concerns with Medicare’s current physician payment system?

1. What is the Medicare physician fee schedule?

Medicare reimburses physicians and other clinicians based on the physician fee schedule, which assigns payment rates for more than 10,000 health care services, such as office visits, diagnostic procedures, or surgical procedures. For services provided to traditional Medicare beneficiaries, Medicare typically pays the provider 80% of the fee schedule amount, while the beneficiary is responsible for a coinsurance of 20%. Physicians who participate in Medicare agree to accept this arrangement as payment in full (known as accepting “assignment”) for all Medicare covered services. Non-participating physicians receive 5% lower Medicare payments, but may accept “assignment” on a claim-by-claim basis and may choose to bill beneficiaries for larger amounts by charging additional coinsurance, up to 15% more than the Medicare-approved amount for the cost of a covered service. A third group of physicians opt out of the Medicare program altogether, and instead enter into private contracts with their Medicare patients, are not limited to charging fee schedule amounts, and do not receive any reimbursement from Medicare. Just one percent of all non-pediatric physicians opted out of the Medicare program in 2024.

Physician fee schedule rates for a given service are based on a weighted sum of three components: (1) clinician work, (2) practice expenses, and (3) professional liability insurance (also known as medical malpractice insurance). These three components are measured in terms of “relative value units” (RVUs). Together these three components represent the overall cost and effort associated with a given service, with more costly or time-intensive services receiving a higher weighted sum. Each component is adjusted to account for geographic differences in input costs, and the result is multiplied by the fee schedule conversion factor (an annually adjusted scaling factor that converts numerical RVUs into payment amounts in dollars). Fee schedule services are each associated with a unique service code, which allows clinicians to seek reimbursement for the care they provide on a service-by-service basis.

Payment rates specified under the physician fee schedule establish a baseline amount that Medicare will pay for a given service, but payments may be adjusted based on other factors, such as the site of service, the type of clinician providing the service, and whether the service was provided in a designated health professional shortage area. Physicians can also receive quality-based payment adjustments under the Quality Payment Program (QPP) (see question 7).

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2. How does Medicare update physician payment rates?

Annual updates to the physician fee schedule include statutorily-required updates to the conversion factor under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (see question 6), as well as other adjustments to reflect the addition of new services, changes in input costs for existing services, and other factors. Included in these adjustments are periodic changes to the RVUs assigned to fee schedule service codes, based in part on the recommendations of a multispecialty committee of physicians and other professionals, known as the AMA/Specialty Society RVS Update Committee (RUC) (see question 3).

Under current law, the projected cost of all changes to the physician fee schedule must be budget neutral. That is, the changes may not raise total Medicare spending by more than $20 million in a given year. This requirement was established by the Omnibus Budget Reconciliation Act of 1989 to address concerns that constraints on physician fees for specific services would lead to increases in service volume and growth in Medicare spending for physician services over time. The law requires CMS to adjust fee schedule spending when projected costs exceed the $20 million threshold, typically by decreasing the conversion factor relative to the statutory update called for by MACRA.

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3. What is the role of the RUC in determining physician payment rates?

The AMA/Specialty Society RVS Update Committee (RUC) is a volunteer committee of physicians and other professionals, formed by the American Medical Association (AMA) in 1991 to advise CMS on the relative weighting of service codes under the physician fee schedule, the primary mechanism used by CMS to set relative payments for physician and clinical services. The RUC is an independent body and its operations are not directly overseen by Congress or CMS. Further, because the RUC is not an official federal advisory committee, it is not bound by federal standards around transparency, membership balance, and other operating requirements applied to many similar committees. The RUC includes representatives from the AMA and other professional organizations, as well as members appointed by a range of national medical specialty societies.

Each year, CMS identifies potentially misvalued services for RUC review based on statutory criteria and public nomination. Potentially misvalued services may also be identified by the RUC itself, while new or recently revised service codes are identified by a separate AMA panel, known as the Current Procedural Terminology (CPT) Editorial Panel. The RUC then consults with various medical specialty societies, who decide which services they wish to review and develop recommendations on the clinician work, practice expenses, and other factors associated with payment for each service. A final list of recommendations for reviewed services is compiled by the RUC based on a committee vote and referred to CMS.

CMS is not required to adopt recommendations issued by the RUC, but it does so in a majority of cases. The AMA reports an average annual acceptance rate of 90% from 1993 to 2025. Over the years, MedPAC and others have raised concerns about the influence of the RUC, which is largely composed of specialty physicians with a financial stake in the recommendations they are producing, and noted several methodological issues with the data used to develop RUC recommendations (see question 8). MedPAC has called for CMS to develop internal processes to validate RUC recommendations by independent means. More recently, HHS Secretary Kennedy has raised concerns about the lack of transparency and relative lack of oversight of RUC operations by CMS, as well as the influence of the AMA in setting payment rates for physicians, which has brought renewed attention to the issue (see question 9).

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4. How have physician payment rates changed in 2025?

CMS recently finalized payment changes for 2025, which include a 2.83% decrease to the physician fee schedule conversion factor relative to 2024. This decrease reflects the following adjustments: (1) the expiration of temporary funds approved by Congress under the Consolidated Appropriations Act of 2024, which increased payments by 2.93% for all fee schedule services furnished between March 9, 2024 and December 31, 2024, (2) a 0% statutory increase for 2025 under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), and (3) a modest 0.02% budget neutrality adjustment. The combined impact of these adjustments is a 2.93% decrease in average payments to physicians and other clinicians, which went into effect on January 1, 2025.

As of March 2025, Congress has not passed legislation to address this payment cut. A provision to reduce (though not fully eliminate) the cut was included in an early version of the year-end Continuing Resolution (CR) filed in December 2024, similar to the temporary payment adjustments instituted by Congress in prior years, but was removed from the version signed into law. Congress also considered, but did not include, legislation in the subsequent CR enacted in March 2025, but some policymakers continue to push for a fix, which is reportedly under consideration for inclusion in an upcoming budget reconciliation bill.

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5. How did the 2025 payment rule address issues related to primary care, telehealth, and other health care priorities?

Recent changes to the physician fee schedule also include several measures designed to improve health care access and increase support for preventive services, behavioral health, and management of chronic disease. These measures are part of an ongoing effort by CMS and the Department of Health and Human Services (HHS) to strengthen primary and preventive care and address long-standing concerns about the gap in compensation between primary and specialty care physicians (see question 8). The final payment rule for 2025 introduces the following key changes:

• CMS has added new billing codes to the physician fee schedule intended to streamline payment for advanced primary care management. This change bundles several existing services related to care management, interprofessional consultation, and other care components into single codes, stratified by patient medical and social complexity, which may be billed on a monthly basis.
• CMS has added new billing codes related to caregiver training for direct care services and supports, allowing clinicians to bill for time spent training caregivers on specific clinical skills such as techniques to prevent ulcer formation, wound dressing changes, and infection control, and has expanded existing billing options for trainings dedicated to caregiver behavior management and modification.
• CMS has finalized several provisions aimed at improving beneficiary access to telehealth, such as broader coverage of audio-only services and increased flexibility in the use of telehealth for treatment of opioid use disorder (OUD). Safety planning interventions and PrEP counseling have been added to the Medicare Telehealth Services list on a permanent basis, and caregiver training services have been added on a provisional basis.
• Absent further action from Congress, many of the other telehealth restrictions that were in place prior to the COVID-19 pandemic will come back into effect on April 1, 2025. These include restrictions limiting telehealth coverage to beneficiaries in rural areas, and requiring beneficiaries to travel to an approved site, such a clinic or doctor’s office, when receiving telehealth services. However, CMS has extended certain limited flexibilities under its authority through December 2025, such as provisions that allow Rural Health Centers (RHCs) and Federally Qualified Health Centers (FQHCs) to serve as distant site providers for all covered telehealth services, and allow providers to use their currently enrolled practice location in place of their home address when providing telehealth services from home.
• CMS has also added new billing codes for a range of other primary and behavioral health services, such as cardiovascular risk assessment and care management, use of digital mental health treatment devices, and safety planning interventions for patients at risk of suicide or overdose, among others.
• CMS has finalized several updates to the Quality Payment Program (QPP) to improve the accuracy of quality reporting and reduce administrative burden for providers participating in the Merit-based Incentive Payment System (MIPS). (For a more detailed description of the QPP and MIPS, see question 7).

The new rules also include updates to the Medicare Shared Savings Program (MSSP), a permanent accountable care organization (ACO) program in traditional Medicare that offers financial incentives to providers for meeting savings targets and quality goals, as well as other changes related to payment for preventive vaccine administration, opioid treatment programs, evaluation and management of infectious diseases in hospital inpatient or observation settings, and a variety of other health services.

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6. How have Medicare payments to physicians changed since the implementation of MACRA?

Medicare has revised its system of payment for physician services numerous times over the years (Figure 1). The current payment system was established under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and includes two primary components: (1) a schedule for annual, statutorily-defined updates to the conversion factor, a key determinant of payment rates under the physician fee schedule, and (2) a new system of bonus payments and quality-based payment adjustments under Quality Payment Program (QPP) (see question 7).

The physician payment system established by MACRA was intended to stabilize fluctuations in payment caused by the prior system under the Medicare Sustainable Growth Rate (SGR) formula, which set annual targets for Medicare physician spending based on growth in the gross domestic product (GDP). Under the SGR, if physician spending exceeded its target in a given year, payment rates would be cut the following year, while spending that was below the target led to increased rates. As with the current system, rates were subject to further adjustment for budget neutrality if the projected cost of all fee schedule spending was projected to increase by more than $20 million for the year.

The SGR was established by the Balanced Budget Act of 1997 to slow the growth in Medicare spending for physician services, but the formula garnered criticism, as growth in service volume and rising costs led to several years of spending on physician services that exceeded the growth target, necessitating payment cuts from 2002 onward. Between 2002 and 2015, Congress enacted 17 short-term interventions (so-called “doc-fixes”) to delay the cuts and provide temporary increases to physician payments, but did so without repealing the SGR, which resulted in accumulated deficits over time.

MACRA permanently eliminated the SGR formula, preventing a 21.2% cut in physician fees slated for 2015 and replacing it with 0% statutory increases to the conversion factor through 2025 (later raised to 0.5% from 2016-2019), followed by modest annual increases from 2026 onward. These updates are set by MACRA and do not vary based on underlying economic conditions. However, subsequent adjustments to preserve budget neutrality and supplemental payments provided by Congress may result in conversion factor updates that are higher or lower than the statutorily-required update in a given year.

Although MACRA has stabilized payments under the physician fee schedule to some degree relative to the years leading up to its enactment, rates have continued to fluctuate over the last decade. Due to strict budget neutrality requirements, CMS has limited flexibility to adjust payment rates for new or undervalued services without offsetting the costs elsewhere in the fee schedule. This often takes the form of budget neutrality adjustments to the conversion factor, such as a -10.20% adjustment in 2021 and a -2.18% adjustment in 2024. Since 2021, Congress has provided several short-term increases to fee schedule rates to boost payment during the COVID-19 pandemic and to offset budget-neutrality cuts, raising concerns that the cycle of “doc-fixes” under the SGR formula has not been wholly avoided under MACRA.

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7. How does the Quality Payment Program (QPP) factor into physician payments?

The Quality Payment Program (QPP), which launched in 2017, was established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) to create financial incentives for health care providers to control costs and improve care quality. The QPP includes two distinct pathways for participation: (1) incentive payments for participants in qualified advanced alternative payment models (A-APMs) and (2) performance based payment adjustments under the Merit-based Incentive Payment System (MIPS).

A-APM Incentive Payments: Physicians and other clinicians who participate in qualified A-APMs, such as select accountable care organizations (ACOs) and others, are eligible for bonus payments if they meet certain participation thresholds. A-APMs are a type of value-based care model in which the provider bears some financial risk for the costs of care in a defined setting, such as treatment of a specific condition or primary care services for a group of beneficiaries, typically by sharing in a portion of financial savings and losses relative to a benchmark. Incentive payments to increase participation in A-APMs are part of a broader goal by CMS to have all traditional Medicare beneficiaries in some type of accountable care relationship by 2030.

Each year, A-APM clinicians qualify for bonus payments based on their participation during the Qualifying APM Participant Performance Period (January 1 – August 31) two years prior. Under MACRA, qualifying A-APM clinicians received a 5% bonus in payment years 2019 through 2024 (performance periods 2017 – 2022). Congress subsequently extended these bonus payments to include a 3.5% bonus in 2025 and a 1.88% bonus in 2026. A-APM bonus payments are scheduled to be phased out in favor of annual 0.75% increases to the conversion factor for qualifying A-APM clinicians (relative to smaller 0.25% increases for all other clinicians). These conversion factor updates will begin in 2026, and A-APM bonus payments will be fully retired in 2027.

Roughly 386,000 clinicians qualified for A-APM bonuses in 2024, based on the 2022 performance period, a nearly fourfold increase from 99,000 in 2019, the first year A-APM bonuses were available. At the same time, A-APMs are not evenly distributed throughout the country, and participation among non-physician providers and certain physician specialties remains relatively low, suggesting that additional strategies may be needed to encourage wider adoption of these models. Further, MedPAC and others have noted that the scheduled conversion factor updates for qualifying A-APM clinicians will be relatively small in the first few years after A-APM bonuses are retired, though their effects will compound over time, and have cautioned that additional incentives may be needed to prevent attrition in A-APM participation during this transition.

Merit-based Incentive Payment System (MIPS): Clinicians who do not participate in A-APMs, or do not meet the participation criteria for A-APM bonus payments, are subject to additional reporting requirements under MIPS, which adjusts payments up or down depending on a clinician’s performance on certain quality metrics. As with A-APM bonuses, payment adjustments under MIPS are based on performance two years prior. Clinicians are required to participate in MIPS if they are eligible, but many are exempt, such as those in certain specialties (e.g., podiatrists), those in their first year of Medicare participation, and those who serve a low volume of Medicare patients.

Payment adjustments under MIPS are required to be budget neutral. Adjustments are capped each year (between +9% and -9% in 2025), and savings generated from clinicians who incur negative adjustments are used to fund positive adjustments for those who qualify. Because a relatively small share of clinicians have incurred negative adjustments each year since MIPS was implemented, positive adjustments have generally been much lower than the annual cap. In 2023 for instance, roughly 600,000 clinicians received positive adjustments up to +2.34%, based on the 2021 performance year, while just 23,000 clinicians received negative adjustments down to -9%. MedPAC estimates that another 460,000 clinicians were ineligible for either an A-APM bonus or MIPS adjustment due to low Medicare patient volume or other exemption criteria.

Clinicians who participate in MIPS have traditionally selected from a large set of quality measures and other clinical metrics to report on each year. While this structure was intended to give clinicians flexibility to choose the metrics best suited to their practice, it has also been criticized by physician groups and experts for increasing the reporting burden on participants, and for making comparisons between participants less clinically meaningful and more difficult to assess. In an effort to address these concerns, CMS has introduced several more streamlined reporting options. The newest of these allows clinicians to choose from smaller, bundled subsets of reporting metrics tailored to particular specialties or medical conditions, known as MIPS Value Pathways (MVPs).

MVPs were introduced in 2023 as an optional alternative to reporting under traditional MIPS, and included a preliminary set of reporting pathways aimed at specific clinical contexts, such as primary care, treatment of heart disease, and supportive care for neurodegenerative conditions. CMS has added new MVPs each year since the option was introduced, including 6 in 2025, with the eventual goal of replacing all reporting under traditional MIPS with MVPs in future years. The purpose of this shift is to reduce administrative burden by offering providers smaller, more targeted sets of reporting metrics to choose from, as well as to allow for more clinically meaningful assessments by comparing outcomes among similar clinicians who choose to report under the same MVP.

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8. What concerns have been raised about the physician fee schedule?

Criticism of the physician fee schedule has focused on four primary concerns about the way in which Medicare pays physicians and other clinicians. These include: (1) the overall adequacy of Medicare payments to cover medical practice costs and incentivize participation in the Medicare program, (2) the gap in compensation between primary and specialty care clinicians, (3) the influence of the AMA/RVS Update Committee (RUC) and medical specialty groups in determining relative payment rates for fee schedule services, and (4) the success of the Quality Payment Program (QPP) in achieving its goal of incentivizing quality improvements and cost-efficient spending.

Payment Adequacy: Over the years, physician groups and some policymakers have expressed concern that payment rates under the physician fee schedule have not kept pace with inflation in medical practice costs. Practice expenses are one component of the relative-value calculation used to determine payment rates for fee schedule services, but the requirement to preserve budget neutrality makes it difficult for CMS to increase payment for some services without also decreasing payment in other areas, such as by lowering the fee schedule conversion factor (see question 6). Statutory increases to the conversion factor under MACRA are not scheduled to begin until 2026, and do not vary based on underlying economic conditions, which may make it more challenging for some physicians to adapt to changing financial demands.

Core to these concerns is the possibility that loss of revenues could lead some physicians to opt out of the Medicare program, which could create access issues for Medicare beneficiaries. National surveys and other analyses have generally found that beneficiaries report access to physician services that is equal to, or better than, that of privately-insured individuals, with similar or smaller shares reporting delays in needed care or difficulty finding a physician who takes their insurance. A recent KFF analysis found that just 1% of all non-pediatric physicians had opted out of Medicare in 2024, suggesting that the current fee structure has not substantially discouraged participation. Moreover, MedPAC estimates that virtually all Medicare claims (99.7% in 2023) are accepted on “assignment” and paid at the standard rate (see question 1), with beneficiaries in traditional Medicare facing no more than the standard 20% coinsurance rate. At the same time, analyses by KFF and others have found that physicians in some specialties, such as psychiatry, opt out of Medicare at higher rates, which may impact access to these services over time.

Loss of revenue may also lead some physician practices to merge with (or be acquired by) larger health systems or hospitals, a process known as “vertical consolidation.” Vertical consolidation may offer certain benefits to physicians, such as greater economy of scale for practice expenses, lower administrative burden, and access to costly resources such as medical imaging equipment, and may be attractive to physicians who are otherwise struggling to meet their practice costs. While consolidation may be associated with some benefits to patients as well, such as improvements in care integration and coordination between providers, it may also lead to higher out-of-pocket costs and lower care quality by reducing market competition. Further, Medicare generally pays more for a given service provided in a hospital outpatient department than it does for the same service provided in a freestanding physician office, which can lead to increased costs for beneficiaries and higher program spending over time. Policymakers are currently exploring options to align Medicare reimbursement rates between these settings, known as “site-neutral payment reforms.”

Primary Care Compensation: A second concern with the current payment system is that Medicare does not adequately pay for primary care services, as reflected by the gap in Medicare payments between primary and specialty care clinicians. Payments under the physician fee schedule are generally higher for clinical procedures, such as surgeries and diagnostic tests, than for non-procedural services, such as preventive care provided during an office visit. While many clinicians provide a mixture of procedural and non-procedural services, primary care clinicians often dedicate a larger share of their time to non-procedural care. Further, MedPAC has expressed concern that this imbalance encourages clinicians of all specialties to increase their use of more costly and profitable services, such as unnecessary imaging, screenings, and diagnostic tests, at the expense of high-value, but less profitable, services, such as patient education, preventive care, and coordination across care teams, which can impact the quality of patient care and lead to higher physician spending over time.

MedPAC notes that clinical procedures often see gains in efficiency due to technological improvements and other factors, which reduce the time and effort needed to provide them. If fee schedule rates are not adjusted to reflect these improvements, these services may become overvalued over time. By contrast, non-procedural services often involve more fixed time constraints, such as time spent communicating with patients or coordinating with other providers, and are unlikely to see similar gains, contributing to the gap in compensation between these service types.

Due to budget neutrality requirements, efforts to directly increase payment for non-procedural services under the physician fee schedule in order to boost payments for primary care have often necessitated across-the-board payment cuts in the form of decreases to the fee schedule conversion factor (see question 6). Further, physicians may offset any expected reductions in revenue by increasing service volume over time, or by increasing their use of higher intensity, and more highly compensated, service codes, leaving the gap in payment rates relatively constant. These constraints make it difficult for CMS to meaningfully address differences in payment between primary and specialty care, and have led some policymakers to voice concerns that the current budget neutrality requirements are too rigid.

Role of the RUC: The American Medical Association (AMA) and the RUC play a substantial role in annual decision-making around the relative weighting of service codes under the physician fee schedule, the primary mechanism used by CMS to set relative payment rates for physician and clinical services (see question 3). While CMS is not required to adopt recommendations issued by the RUC, it does so in a majority of cases. MedPAC has raised several methodological concerns with the data used by the RUC to develop its annual reports, which are largely based on recommendations from medical specialty societies. These include a lack of transparency, as well as low response rates and total responses on the various member surveys that inform medical specialty society recommendations, which make it difficult for CMS to validate RUC recommendations by other means.

Other concerns raised about the RUC include the overrepresentation of specialty physicians on the committee, and the potential for conflicts of interest when RUC members recommend changes to relative payments for primary and specialty care services. In contrast to federal advisory committees, which are typically formed by Congress, the office of the President, or executive branch agencies, the RUC is an independent committee overseen by the AMA. For this reason, it is not held to the same operating requirements as many other similar committees, which adhere to certain criteria around transparency and membership balance.

To ensure that fee schedule services are not overvalued, MedPAC has recommended that CMS develop internal processes for validating RUC recommendations, such as by collecting data from clinical practices on the number of clinician hours dedicated to commonly-billed services. Pilot studies commissioned by CMS and the Department of Health and Human Services (HHS) have attempted to validate the clinician time component of small subsets of fee schedule services using methods such as analysis of electronic health records, direct observation of clinical procedures, and independently-collected physician surveys. These projects may serve as a blueprint for future work, though implementing these and similar methods on a large scale would likely require significant time and staff investment.

Role of the QPP: QPP programs such as the Merit-based Incentive Payment System (MIPS) and bonus payments for Advanced Alternative Payment Model (A-APM) clinicians are designed to create incentives for quality improvement, care coordination, and the provision of high-value services (see question 7). While the share of clinicians who qualify for A-APM bonuses has more than tripled since the QPP began (from roughly 99,000 to 386,000 in the 2017 and 2022 performance periods, respectively), some policymakers have argued that greater incentives are needed to encourage providers to take on the financial risks and high startup costs associated with these models, particularly as A-APM bonus payments are phased out in favor of relatively smaller conversion factor adjustments in the coming years.

Additionally, MedPAC has voiced concern that MIPS, the quality-based payment program for clinicians who do not participate in A-APMs, imposes too large of a reporting burden on those who participate, while at the same time offering relatively weak incentives to improve quality and control costs. As noted earlier, a large share of clinicians are exempt from the program, and because few participants receive negative adjustments, positive adjustments are relatively modest. The administrative burdens associated with MIPS may be partially addressed by the shift towards MIPS Value Pathways (MVPs) in place of traditional quality reporting, and further assessment of this option will likely take shape as the program is phased in.

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9. What policy proposals have been put forward to address concerns with Medicare’s current physician payment system?

In addition to bipartisan legislation that directly addresses the 2025 payment cuts that took effect January 1, 2025, policymakers and others have put forward a number of strategies to revise the current Medicare physician payment system. These include measures to stabilize physician fee schedule payments from year to year, provide additional support to primary care and safety-net providers, and create stronger incentives for efficient spending, care coordination, and participation in Advanced Alternative Payment Models (A-APMs).

In 2025, MedPAC recommended a one-time inflation-based increase to physician payment rates in 2026 (equal to the projected increase in the Medicare Economic Index minus one percentage point), similar to recommendations from past years. While MedPAC has weighed the possibility of recommending annual updates for inflation, it has not done so to date, focusing instead on targeted strategies to bolster payments to primary care clinicians and safety-net providers. For instance, in light of findings that clinicians often receive lower revenue for treating low-income Medicare beneficiaries, MedPAC has recommended raising payment in these instances by 15% for claims billed by primary care clinicians and 5% for claims billed by non-primary care clinicians, to encourage clinicians to treat these populations.

MedPAC has voiced support for the goals behind the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Quality Payment Program (QPP), including the financial incentives offered to A-APM participants under current law (see question 7), while also recommending changes to the design of the QPP, including the elimination of the Merit-based Incentive Payment System (MIPS). MedPAC has noted that the ongoing shift from traditional MIPS to MIPS Value Pathways (MVPs) addresses some concerns related to administrative complexity and participant comparisons, but a large share of clinicians remain exempt from MIPS reporting and incentive payments have generally remained relatively small (see question 8). In place of MIPS, MedPAC has recommended establishing a voluntary program designed to mimic the structure of A-APMs and other alternative payment models, allowing clinicians to transition into these models more gradually.

Several bills introduced in the last Congress indicate interest in strategies such raising or modifying the budget neutrality threshold, or offering separate conversion factor updates for primary and specialty care services, which would allow CMS greater flexibility to adjust payment rates to reflect evolving policy priorities without necessitating a mandatory payment cut. The Senate Finance Committee has held several hearings on physician fee schedule reform, and released a whitepaper in 2024 outlining a range of options to stabilize conversion factor updates from year to year, extend access to telehealth, and incentivize continued participation in A-APMs, among other reforms.

More recently, House Republicans included adjustments to the physician fee schedule in a menu of potential policy actions circulated in January 2025. The Secretary of the Department of Health and Human Services (HHS), Robert F. Kennedy Jr., has expressed a particular interest in Medicare physician payment reform, and has called for bringing greater transparency to the operations of the AMA/RVS Update Committee (RUC) (see question 3), as well as exploring options for reducing the role the RUC plays in annual decision-making around physician payments.

A decade after the passage of MACRA, Congress’s last major overhaul of how Medicare pays physicians, interest in broader reforms to Medicare’s physician payment system, beyond addressing the physician fee cuts finalized for 2025, is gaining steam. Designing payment approaches that address concerns raised by interested parties to compensate physicians adequately while restraining spending growth represents a challenge for policymakers.

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Appendix

Medicaid is jointly financed by states and the federal government but administered by states within broad federal rules. Medicaid accounts for a large share of state budgets and can be central to state fiscal decisions. Following years of robust revenue growth, states are now contending with weakening tax revenues, budget shortfalls, and uncertainty in their long-term fiscal outlook, leaving some states with difficult budget decisions. At the same time, there are several options under consideration in Congress to significantly reduce federal Medicaid spending to help pay for tax cuts, with the recently passed House budget resolution targeting cuts to Medicaid of up to $880 billion or more over a decade. There are not yet detailed proposals under consideration by Congress to achieve federal Medicaid spending reductions. However, any reduction in federal Medicaid spending would leave states with tough choices about how to offset reductions through tax increases or cuts to other programs, like education. If states are not able to offset the loss of federal funds with new taxes or reductions in other state spending, states would have to make cuts to their Medicaid programs. This brief explores the magnitude of federal funding cuts under the House budget resolution and puts the $880 billion in context by comparing the size of the cuts to states’ tax revenues, spending on education, and the number of Medicaid enrollees covered for that cost. The analysis assumes $880 billion in federal Medicaid cuts over a decade, though the amount could end up being more or less depending on what Congress passes.

Key Take-Aways

• Federal cuts of $880 billion over 10 years (or $88 billion per year) would represent 29% of state-financed Medicaid spending per resident.
• States could opt to raise tax revenues to offset federal Medicaid reductions. Proposed federal cuts represent 6% of state taxes per resident.
• States could instead make cuts to other states programs such as education, the largest source of expenditures from state funds, to offset federal Medicaid reductions. Proposed federal cuts represent 19% of state education spending per pupil.
• To further put the proposed federal cuts in perspective, they are equivalent to all Medicaid spending on 3 million seniors and people with disabilities (18% of enrollees in that group), 14 million other adults (38% in that group), or 22 million children enrolled in Medicaid (76% of that group). These figures are meant to put the magnitude of the cuts in perspective, not to suggest that states would achieve savings by eliminating coverage by these amounts. The effects of federal cuts on Medicaid spending and coverage would depend on the specific policies enacted.

What is the size of federal Medicaid reductions under consideration?

Congress is currently targeting up to $880 billion or more in federal Medicaid spending reductions. The House passed a budget resolution instructing the House Energy & Commerce Committee (E&C) to reduce the federal deficit by at least $880 billion over 10 years. Although the budget resolution does not mention Medicaid, Medicaid comprises $8.2 trillion out of the $8.6 trillion in mandatory spending that E&C must use to come up with spending reductions (assuming Medicare cuts are off the table). As a result, major cuts to Medicaid are the only way to meet the House’s budget resolution required $880 billion (or more) in spending reductions.

This is an illustrative analysis designed to portray the potential impact of $880 billion in Medicaid cuts in the absence of specific policies that would yield federal savings. This analysis assumes that the $880 billion in cuts over a decade are spread uniformly across 10 years, or $88 billion a year, which represents 16% of federal Medicaid funding in federal fiscal year (FY) 2024. While this analysis applies cuts evenly across the 10-year period to get a one-year estimate, in practice, the cuts could grow over time. Policies are often implemented after a period of preparation and some may require multiple years before the effects are fully observed.

The analysis applies the federal cuts proportionally across states for illustrative purposes, though the distributional effects would vary depending on the specific policy changes proposed. This analysis applies the federal cuts proportionally to states based on their share of federal spending, resulting in a 16% cut to federal Medicaid funding across all states, though the total amount of the cuts varies by state, ranging from $78 million to $13 billion (Appendix Table 1). In practice, cuts would almost certainly not be allocated proportionately, and some states would be disproportionately impacted depending on the specific policy proposals pursued. Without specific policies yet under consideration by Congress, this illustrative analysis is a way of understanding the magnitude of the potential Medicaid cuts.

How does $880 billion in federal Medicaid reductions relate to states’ taxes and education spending?

Federal Medicaid cuts of $88 billion per year would represent 29% of state-financed Medicaid spending per resident (Figure 1). For states to maintain Medicaid spending and eligibility at current levels, they would have to increase state spending by $88 billion each year, shifting costs from the federal government to the states. This would result in a 29% increase in state-financed Medicaid spending per resident in FY 2024. Across states, the federal cuts per resident range from $100 to $700, representing anywhere from 17% to 59% in state Medicaid spending per resident (Appendix Table 1). These findings are based on the assumptions above; in practice, the increase in state Medicaid spending per resident would vary based on the specific policy proposals.

States could opt to raise taxes to offset the federal Medicaid cuts, with $88 billion per year in federal Medicaid cuts representing 6% of state taxes per resident nationwide. Total state taxes per resident ranged from $2,530 to $15,225 across states (Appendix Table 1). The federal cuts per resident range from $100 to $700 across states, representing anywhere from 2% to 11% in state tax dollars per resident.

Another option for states is to make cuts to another budget item like K-12 education, with proposed federal Medicaid cuts representing 19% of state spending on education per pupil. States could make cuts to any areas of state spending, but education is the largest source of expenditures from state funds, so it is used as an illustrative example in this analysis. Total education spending is primarily from state and local governments, with a small share financed by the federal government. Reductions in state government spending for K-12 education would have a direct impact on total spending per-pupil. State education spending per pupil ranges from $4,500 to $28,600 across states (Appendix Table 1). The federal cuts per pupil range from $700 to $3,400 across states, representing anywhere from 7% to 38% in state education spending per pupil.

How does $880 billion in federal Medicaid reductions relate to Medicaid coverage by eligibility group?

If states do not offset federal Medicaid cuts by picking up the new costs, they could reduce Medicaid spending by covering fewer people, offering fewer benefits, or paying providers less. To reduce eligibility, states would have to make tough choices about what enrollment groups to apply eligibility restrictions to given variation in enrollment and spending per enrollee across groups. It is unclear if more specific federal policy proposals will disproportionately affect certain eligibility groups (like the Affordable Care Act expansion group), or make changes to minimum eligibility standards or benefits set by the federal government. Also, depending on the specific policy proposals and assuming the matching structure of Medicaid financing is retained, states would have to reduce total Medicaid spending by more than one dollar to achieve a dollar in savings.

To provide context for the scope of proposed cuts to Medicaid, the following analysis shows how many people’s Medicaid benefits are covered with $88 billion. The numbers are presented across different enrollee groups to account for significant differences in Medicaid costs for different groups of enrollees (see Methods).

To put the proposed federal cuts into perspective, they are equivalent to all Medicaid spending on 3 million or 18% of Medicaid enrollees eligible because they are 65 and older or have a disability, 14 million or 38% of adult Medicaid enrollees, or 22 million or 76% of child enrollees (Figure 2). Spending per enrollee varies across eligibility groups and is over $18,000 per year for seniors and people with disabilities compared to $3,000 per year for children. As a result, a $88 billion a year cut would be equivalent to Medicaid spending on a smaller number of seniors and people with disabilities relative to other populations both nationally and across states (Appendix Table 2).

Appendix

As one of his first actions in office, President Trump signed executive orders revoking federal diversity, equity, inclusion, and accessibility (DEIA) related programs and actions in the federal government and among federal contractors and grantees. DEI initiatives are intended to create more diverse and inclusive work environments, to address discriminatory policies or practices, as well as to counter the impacts of historical actions that led to unequal opportunities for certain groups. In implementing President Trump’s executive orders, the administration has taken significantly broader actions beyond eliminating DEI programs to include eliminating priorities, actions, information, data, and funding related to concepts of diversity or disparities among federal agencies as well as federal contractors and grantees. Some of these actions have been paused due to ongoing litigation, and it remains to be seen what actions may proceed under final court rulings. Given the broad nature of these actions, they will not only likely lead to a less inclusive and diverse workforce, including in health care, but will also likely lead to widening disparities in health and health care, reversing prior efforts to address disparities and advance equity.

This brief explains the potential impacts of the elimination of diversity and disparities-related initiatives under the Trump administration on racial health disparities. While this brief focuses on racial and ethnic disparities, these actions have implications for health equity across other dimensions, including gender and sexual orientation. The terms DEI and DEIA are similar and often used interchangeably. The “A” in DEIA refers to accessibility for people with disabilities. The remainder of this brief uses DEI as it is more commonly known and used, but with the recognition that accessibility is also a key part of health equity

Federal Actions to Eliminate Disparities Initiatives

On the first day of his second term, President Trump signed Executive Order 14148 which revoked 78 executive orders and memoranda issued by the Biden administration, many related to DEI. This included President Biden’s Executive Order 13985, which required federal agencies to conduct equity assessments and collect data to track and address trends and barriers that underserved communities face in accessing federal positions and programs. The reversal also eliminated DEI frameworks that prioritized equity-driven decision-making and resource allocation in agencies such as the Department of Health and Human Services (HHS) and the Centers for Disease Control and Prevention (CDC).

President Trump also issued Executive Order 14151 and directives that mandate federal agencies to terminate all DEI related offices and positions; equity action plans, actions, initiatives or programs; equity-related grants or contracts; and DEI performance requirements for employees, contractors, or grantees. In addition, he issued Executive Order 14168 to “recognize two sexes, male and female;” specify that sex shall refer to a biological classification of male or female; direct federal agencies and employees to only use “sex” and not “gender;” remove all references to “gender ideology” or identity; and ensure that grant funds do not promote “gender ideology.” Further, he signed Executive Order 14173, which revoked the 1965 Equal Employment Opportunity rule that protected against discrimination in employment among federal contractors; the order also added new requirements for federal contractors and grantees to certify that they do not operate DEI programs that violate anti-discrimination laws and for federal agencies to identify entities, including publicly traded corporations, large nonprofit corporations or associations, and foundations, to target with civil investigations to deter DEI programs. Other actions include Executive Order 14224, which named English as the official language of the U.S. and rescinded an executive order and guidance that reaffirmed the federal government’s commitment to make services accessible to people with limited English proficiency, as well as guidance directing schools and other entities that receive federal funds from the Department of Education to stop using “racial preferences.” This guidance broadens the landmark 2023 U.S. Supreme Court ruling that effectively ended the use of race-conscious admissions policies in higher education, overturning decades of precedent supporting affirmative action.

To carry out the executive orders, the Office of Personnel Management (OPM) directed agencies and departments to take down all outward facing media that “inculcate or promote” “gender ideology,” as well as to remove all public facing DEI related websites and content. This resulted in the temporary shutdown of websites and removal of key health datasets. While some web pages and datasets began returning in several days, they included a warning message that they were being modified to comply with President Trump’s executive orders and some materials, such as codebooks and questionnaires, did not immediately return. The administration also directed departments and agencies to pause grants provided to federal contractors to identify and review programs and activities for consistency with the President’s policies. Reports also indicate that the administration has flagged over 100 words that federal agencies should limit or avoid to comply with the President’s policies, including disparities, diversity, equity, and race. The CDC reportedly ordered the withdrawal of papers pending publication to ensure language compliance. Similarly, reports suggest that the National Science Foundation froze payments to grantees and began screening grant proposals for terms related to gender, equity, and inclusion and that the National Institutes of Health began terminating research grants to comply with the new restrictions.

Multiple lawsuits have been filed challenging the executive orders and actions, which have halted some of these actions, but it remains to be seen what actions will be allowed under final court rulings. For example, a preliminary nationwide injunction blocked enforcement of significant provisions of the executive orders, including the termination of federal contracts and funding. Other litigation has ordered the return of public health web pages and datasets. Some of this information has been restored, such as the FDA’s draft guidance on diversity in clinical trials, but with an explanatory note that any information on the page promoting “gender ideology” is “extremely inaccurate” and that “Administration and this Department reject” the content:

Implications for Health and Health Equity

In the wake of the COVID-19 pandemic and racial reckoning following the murders of George Floyd and others, the federal government as well as many states and private entities increased efforts focused on addressing health disparities, including recognizing the role of historical and ongoing racism in driving disparities. This increased focus led to the development of programs and initiatives focused on mitigating disparities, including efforts to address disparities in maternal and infant health, cancer, and chronic disease, as well as other efforts, such as increasing diversity in clinical trials for development of new drugs and devices. Research efforts also increased to understand disparities, the factors driving them, and effective interventions to mitigate them. Implementation of President Trump’s executive orders eliminates much of this work, which will likely lead to widening disparities in health.

Elimination of focused efforts to address health disparities will potentially further exacerbate disparities, contributing to worsening overall health and unnecessary health care costs. To comply with the President’s executive orders, federal agencies have eliminated health equity plans, strategies, and guidance focused on mitigating disparities. For example, the administration ordered the Centers for Medicare and Medicaid Services to disband its Health Equity Advisory Committee, which was charged with addressing systemic barriers to access that included structural racism, and Federal Drug Administration draft guidance on diversity in clinical trials (although it was restored pursuant to a court order). Focused plans and initiatives to mitigate health disparities seek to address the underlying inequities that drive disparities and meet the needs and preferences of diverse populations. These efforts are important for equity and for improving the nation’s overall health and economic prosperity. Racial and ethnic health disparities result in higher rates of illness and death across a wide range of health conditions. Research also shows that disparities are costly, resulting in excess medical care costs and lost productivity, as well as economic losses due to premature deaths. In the absence of focused efforts, disparities will likely widen because the underlying inequities that contribute to them persist, leading to worse overall health and unnecessary health care costs.

Loss of information, data, and research will inhibit the ability to identify disparities and understand the factors driving them. In implementing the executive orders, agencies removed health information, such as HIV-related content, and reports on current disease threats, like bird flu, as well as federal data, including data from the Centers for Disease Control and Prevention and the U.S. Census. While some of the datasets were returned, they were marked with a warning message suggesting there could be future changes, leaving uncertainty about what data will be available over the long-term. Additionally, as noted, federal agencies are now screening and halting research related to disparities, equity, and inclusion, which will likely lead to reductions in funding to support research on disparities. Data are a cornerstone for efforts to address health disparities and advance health equity. Data are essential for identifying where disparities exist, directing efforts and resources to address disparities as they are identified, measuring progress toward achieving greater equity, and establishing accountability for achieving progress. Without adequate data and research disparities may remain unseen and unaddressed.

Elimination of DEI efforts among the federal workforce and contractors as well as in education will likely lead to a less diverse health care workforce, which would contribute to widening disparities in health care experiences and outcomes. People of color have historically been underrepresented in the health care workforce relative to their share of the population. Research shows that increasing the racial and ethnic diversity and cultural competency of health professionals is associated with improved access to care, greater patient choice and satisfaction, and other benefits. KFF 2023 survey data show Black, Hispanic, and Asian adults who have more health care visits with providers who share their racial and ethnic background report more frequent positive and respectful interactions. Other research suggests that patient and provider racial concordance contributes lower emergency department use, increased visits for preventative care, and greater treatment adherence. One study found that greater representation of Black primary care physicians led to increased life expectancy and lower mortality among Black people. The recent actions to eliminate diversity efforts among federal agencies and contractors as well as in education will likely reverse progress diversifying the health care workforce. For example, research suggests that the 2023 Supreme Court ruling banning affirmative action resulted in a decline in Black, Hispanic and American Indian and Alaska Native medical school students. Moreover, it remains unclear whether hospitals and providers are considered federal contractors subject to the executive orders to eliminate DEI-related activities, but there are concerns about the potential impact to hospital hiring, training, and programming.

Elimination of diversity efforts will lead to a less diverse and inclusive workforce among federal agencies and contractors with fewer protections against discrimination. The new executive orders undo longstanding policies that grew out of antidiscrimination laws focused on increasing employment opportunities for historically underrepresented groups in the federal government and among federal contractors. It reverses efforts by President Biden to strengthen the federal government’s ability to “recruit, hire, develop, promote our nation’s talent and remove barriers to equal opportunity.” Reports suggest that DEI initiatives can support talent acquisition and performance. Prior analysis from the Office of Personnel Management, which has since been removed from the web, found that the federal government achieved significant declines in the gender pay gap for women over time and has a much smaller gap compared to the national gap. Without diversity efforts, certain groups may face increased barriers to employment and advancement, which has impacts for health care access and health.

Federal actions to eliminate diversity and disparities-related efforts are having ripple effects in the private sector, schools, and states. As part of federal actions to eliminate DEI efforts, the federal government issued a statement that they will “investigate, eliminate, and penalize illegal DEI and DEIA preferences” at private companies and universities that receive federal funds. Reports show a wide range of private companies ending or reframing DEI related initiatives in the last several months as well as reversal of DEI efforts in universities and schools. Some states also are reversing or prohibiting DEI-related work, including efforts that began prior to President Trump taking office. In 2024, state legislatures introduced over 30 bills aimed at restricting DEI initiatives in public colleges and universities. Some states also have imposed limits on teaching concepts related to systemic racism, historical inequities, and unconscious bias.

The recently passed House budget resolution targets cuts to Medicaid of up to $880 billion or more over a decade to help pay for tax cuts. Major cuts to Medicaid may impact coverage for the almost 1 in 5 Medicare beneficiaries (12.2 million) who are also enrolled in Medicaid. For people covered under both programs (“dual-eligible individuals”), Medicare is the primary payer and covers medical acute and post-acute care, including skilled nursing facility services and home health care. Medicaid wraps around Medicare coverage by paying Medicare premiums and in most cases, cost sharing. Most dual-eligible individuals (8.9 million people in 2024) are “full-benefit” enrollees, which means they are eligible for Medicaid benefits that are not otherwise covered by Medicare, including long-term care, vision, and dental. The remaining 3.3 million dual-eligible individuals, “partial-benefit” enrollees, are eligible for Medicare premiums and often, cost sharing assistance, but not for full Medicaid benefits.

It is unclear what policies might be designed to achieve $880 billion in savings, but there are possible implications for Medicare beneficiaries, who account for nearly 30% of Medicaid spending. Effects would vary across states as coverage and benefits do.

1. Medicaid helps make Medicare more affordable for more than 12 million people with Medicare by covering the cost of premiums.

Nearly 1 in 5 (18%), or 12.2 million Medicare beneficiaries also have Medicaid coverage (Figure 1). Most Medicare beneficiaries with Medicaid have low incomes and modest savings, and Medicaid coverage makes the Medicare program more affordable by paying premiums, and in most cases, cost sharing. Medicare Part B premiums are $185 per month in 2025 and without Medicaid, these premiums alone would consume close to 15% of income for people in poverty. Most Medicare beneficiaries with Medicaid also get help from Medicaid to pay their Part A and B deductibles, coinsurance, and copayments through the Medicare Savings Programs, which provide coverage of Medicare premiums and often, cost sharing, to Medicare beneficiaries with limited financial resources. Many dual-eligible individuals receive additional Medicaid-covered wraparound services, such as long-term care, vision, and dental services. Just over half (55%) of Medicare beneficiaries who are under age 65 (who are eligible for Medicare on the basis of a permanent disability) are also covered by Medicaid. Most people with both Medicare and Medicaid receive benefits from separate Medicare and Medicaid coverage arrangements. In 2021, just 5% of people with Medicare and Medicaid were in a program that covered Medicare and Medicaid benefits under a single plan or program with integrated financing.

2. The share of Medicare beneficiaries who are also covered by Medicaid varies across states, ranging from 9% to 34%.

Across the 50 states and the District of Columbia, the share of Medicare beneficiaries who are also covered by Medicaid ranges from 9% in New Hampshire to 34% in D.C (Figure 2). The variation stems from differences in eligibility criteria for Medicaid, as well as the income and asset levels of Medicare beneficiaries living in different states. The primary Medicaid eligibility pathways for people with Medicare are through Supplemental Security Income and Medicare Savings Programs, both of which are mandatory. In addition, there are several optional pathways that states can choose to use to expand coverage, making eligibility complex and different across states. In general, in states where more people meet Medicaid eligibility criteria—which may reflect either lower incomes among Medicare beneficiaries or higher income eligibility criteria, a higher share of Medicare beneficiaries are also covered by Medicaid.

3. Medicare beneficiaries with coverage under Medicaid are in poorer health and have greater health needs than Medicare beneficiaries without Medicaid.

Four in ten (41%) people with both Medicare and Medicaid report their health as fair or poor, compared with 15% of Medicare beneficiaries without Medicaid coverage (Figure 3). More than a third (34%) of those with both Medicare and Medicaid have five or more chronic conditions, such as diabetes, hypertension, and heart disease, compared with 23% of Medicare beneficiaries without Medicaid coverage. Additionally, more than four in 10 (44%) have at least one mental health condition, such as depression and schizophrenia, compared with 24% of Medicare beneficiaries without Medicaid coverage.

A larger share of people with both Medicare and Medicaid experience functional or cognitive impairments than Medicare beneficiaries without Medicaid coverage. More than a third (34%) report difficulties performing two or more activities of daily living—such as eating, bathing, and toileting—compared to 11% of Medicare beneficiaries without Medicaid coverage. Additionally, a higher share of people with both Medicare and Medicaid coverage have cognitive impairments (36% versus 12%) and Alzheimer’s or other dementia (8% versus 3%) than beneficiaries without Medicaid coverage.

4. People with both Medicare and Medicaid account for a disproportionately high share of spending in both programs.

People with both Medicare and Medicaid comprise 16% of the traditional Medicare population and 31% of traditional Medicare spending in 2021 (Figure 4). Similarly, people with both Medicare and Medicaid comprise 14% of all Medicaid enrollment and 29% of federal and state Medicaid spending. The higher spending relative to enrollment is consistent with the greater health and functional needs of people with both Medicare and Medicaid. (People enrolled in private Medicare Advantage plans are not included in this analysis because Medicare comparable spending data are not available.)

5. Nearly 5 million Medicare beneficiaries receive Medicaid wraparound services, including long-term care.

Almost 5 million Medicare beneficiaries with Medicaid used at least one of four Medicaid wraparound services in 2021, including long-term care, vision services, dental services, and non-emergency medical transportation (Figure 5). Medicaid wraparound services are Medicaid benefits available to most Medicare beneficiaries with Medicaid that are not covered under Medicare Part A or Part B. (The services may be covered as a supplemental benefit for people enrolled in a Medicare Advantage plan.) All states are required to provide some wraparound benefits including nursing facility care (part of institutional long-term care), home health (part of home care), and non-emergency medical transportation. Other services are optional for states to provide including dental services, vision services, and all other home care, which includes personal care, support for family caregivers, and services for people in assisted living facilities.

Medicaid covered vision services for 1.9 million Medicare beneficiaries, dental services for 1.4 million beneficiaries, and non-emergency medical transportation for 1.0 million Medicare beneficiaries. In addition, Medicaid covered long-term care services for 2.8 million Medicare beneficiaries (some of whom used both home care and institutional long-term care). Most of the people using long term-care (2.2 million) receive services in home and community settings. The costs of long-term care often exceed the median income and would quickly exhaust the median savings of Medicare beneficiaries, making Medicaid the primary payer of long-term care in the U.S., covering 61% of total spending.

Since the Columbine school shooting in 1999, there have been over 420 school shootings across the United States. More than 160 of these shootings occurred after the onset of the COVID-19 pandemic, indicating a significant increase. While 2024 marked the beginning of a decline in the number of mass shootings per year since the onset of the pandemic, this trend did not apply to school shootings, the number of which remains consistently high to date. Although school shootings continue to account for a small portion of total firearm violence, they can have a widespread impact that goes beyond physical harm. According to the Washington Post, at least 390,000 students were exposed to a school shooting (exposure is defined as students attending a school at which a shooting occurred during the current school year) since the 1999 Columbine shooting.

This brief analyzes the rate of student exposure to school shootings over time. While these exposures often occur at the community level, this brief quantifies exposures at the state and national level in order to draw comparisons. Individual state policies may play a role in their exposure rates. A KFF analysis found that states with more restrictive firearm laws generally have lower youth firearm morality than states with fewer firearm laws. The rate of exposure to school shootings depends on factors including school enrollment size and state population size. Therefore, even a single school shooting incident in a state can impact many youths beyond those that are physically injured and may significantly increase exposure rates. Key findings include:

• The U.S. average yearly rate of student exposure to a school shooting has increased threefold over time (from 19 per 100,000 students in 1999-2004 to 51 in 2020-2024).
• From 2020 to 2024, the rate of school shooting exposure per 100,000 students was highest in Delaware (359), DC (356), Utah (166), Arkansas (130), and Nevada (127).
• Children exposed to gun violence may experience serious adverse effects, including anxiety, PTSD, suicide risk, and substance use issues. Some safety measures at schools, such as active shooter drills, may also negatively affect student mental health.

How has exposure to school shootings changed over time among U.S. students?

Since 1999, the rate of U.S. students exposed to a school shooting has nearly tripled, with most of the increase occurring during the pandemic years (2020-2024) (Figure 1). KFF analysis of the Washington Post’s school shooting database found that the average yearly rate of student exposure to school shootings grew from 19 per 100,000 in 1999-2004 to 51 in 2020-2024.

Delaware, the District of Columbia, Utah, Nevada, and Arkansas had the highest rates of students exposed to school shootings since the pandemic. These states have experienced student exposure rates that are at least double the U.S. average yearly rate of exposure (51 per 100,000 students) from 2020-2024. The rate per 100,000 students was highest in Delaware (359), DC (356), Utah (166), Arkansas (130), and Nevada (127) (Figure 2). Note that student exposure rates can vary greatly at the state level due to factors such as school student enrollment size and state population. For example, Delaware and DC had low student populations (under 200,000) from 2020 to 2024, making their exposure rates more volatile than in higher-population states, and a small number of shootings could produce a high rate. For more information, see Methods.

While student exposure to school shootings spiked during the pandemic, several states, including Washington state and Maryland, have had exposure rates higher than the U.S. average for the past several decades (Figure 3). Since 1999, Washington’s exposure rates have remained at or above national average exposure rates – including the state’s lowest average yearly rate in 2010-2014 (25 per 100,000 students) to the state’s highest average yearly rate in 2020-2024 (62). Similarly, Colorado, Maryland, North Carolina, and Nevada have often endured school shooting exposure rates that are higher than the national average rate. Some states have consistently experienced increases in exposure rates over time, including Florida (from a yearly average of 13 per 100,000 students in 1999-2004 to 52 in 2020-2024) and Georgia (from a yearly average rate of 12 in 1999-2004 to 76 in 2020-2024).

In contrast, Maine, Vermont, West Virginia, and Wyoming have had no student exposure to school shootings since 1999. However, there may have been incidences of gunfire on school grounds in these states that did not meet the Washington Post’s criteria for school shootings.

How do exposures to school shootings and efforts to mitigate them affect student mental health and well-being?

Although school shootings account for a small portion of gun violence, they are linked to negative mental health consequences for students and communities at large. Youth antidepressant use and suicide risk can increase in communities with exposures to school shootings. More broadly, exposure to gun violence is linked to post-traumatic stress disorder and anxiety, in addition to other mental health concerns among youth. Gun violence may also lead to challenges with school performance, including increased absenteeism and difficulty concentrating. Additionally, a survey prior to the pandemic found that the majority of teenagers and their parents felt at least somewhat worried that a school shooting may occur at their school. Although research is limited on how mass shootings affect individuals not directly exposed to them, current literature suggests that information and knowledge of mass shootings may be linked to increased levels of fear and anxiety.

Measures intended to combat school violence – such as the placement of school officers and the use of metal detectors – may also negatively affect the well-being of students and their sense of safety. Fifty-four percent of public schools reported having a sworn law enforcement officer (SLEO) such as a police officer or school resource officer on campus during the 2023-2024 school year. While many public schools report feeling that SLEOs have a positive impact on the school community, evidence that they reduce gun violence or school shootings is lacking. Further, among school shootings that involved a SLEO, several involved the officer shooting an unarmed student or staff member. Although nearly all (92%) public schools with SLEOs report that these officers carry a firearm, just over half of these schools have a written policy for firearm handling expectations among SLEOs. Further, the placement of these officers on school campuses may negatively impact students of color specifically, as they are more likely to face disciplinary action than their White counterparts. Separately, 8% of public schools report having metal detectors at school gates for all or most students and 14% of public schools perform random metal detector checks on students. While these detectors are used as a security measure, there are not enough data to demonstrate that they decrease the risk of violent behavior on school grounds. Additionally, the presence of metal detectors may damage students’ sense of safety at school.

Other safety measures include written action plans and drills in the event of an active shooter, with the latter being linked to psychological harm among participants. While 98% of public schools had a written procedure to handle an active shooter during the 2023-2024 school year, only 27% of these schools reported feeling “very prepared” for an active shooter situation. Additionally, many public schools drill students on emergency lockdown and evacuation procedures for school shootings with varying degrees of intensity, with some being psychologically harmful to participants. A longitudinal study on children exposed to school shootings in Texas demonstrated that even when school shootings do not result in deaths, the impacts of gun violence at schools – such as chronic absenteeism and economic consequences – can follow children into early adulthood. Similarly, when schools properly execute a plan prepared in advance, physical and mental harm is not completely preventable. For example, in the recent shooting at a Madison, Wisconsin school, officials praised the well-executed response by authorities, but injury and death occurred regardless.

Appendix

On March 15, 2025, the President signed a full-year “continuing resolution” (CR) that continues funding the federal government through the rest of the fiscal year. It maintains U.S. global health funding at the prior year (FY 2024) level ($10.8 billion).[i] The Full-Year Continuing Appropriations and Extensions Act, 2025, which was passed by the House on March 11, 2025 and the Senate on March 14, 2025, references relevant sections of the Further Consolidated Appropriations Act, 2024 – as well as the associated explanatory report, specifying funding levels for global health programs at the Department of State (State), U.S. Agency for International Development (USAID), Centers for Disease Control and Prevention (CDC), and National Institutes of Health (NIH). The CR also includes language (Section 1113) instructing departments and agencies to report back to Congress within 45 days on spending, expenditure, or operating plans at the program, project, or activity level for FY 2025, and specifically for foreign assistance programs funded under State and Foreign Operations (SFOPs), which includes State and USAID, at the country, regional, and central program level, and for any international organization. See other budget summaries for details on historical annual appropriations for global health programs.

[i] The $10.8 billion in global health funding is based on those amounts specified in appropriations bills. In past years, additional funding for global health has also been determined at the agency level.