With the Trump administration instituting a foreign aid freeze, including a stop-work order, cancelling the vast majority of foreign aid grants and contracts, and moving to dismantle USAID, U.S. global health programs have been effectively shuttered. Even the limited waivers that have been granted for some services have not resulted in any significant funds flowing or services offered, according to multiple lawsuits and other reports.

This situation presents considerable risks to the health of millions of people in low- and middle-income countries, given the role the U.S. has played in this area. Indeed, the U.S. government has been the largest donor to global health for decades, carving out health one of its main sectors of international development, across multiple administrations and Congresses, through the provision of significant financial assistance, technical expertise, and personnel. However, this has also meant that the U.S. has disproportionately shouldered the burden for health programs, making health especially vulnerable to U.S. policy fluctuations and changes, and especially to the recent, abrupt halt in funding.

A recent analysis from the Center for Global Development identified countries most vulnerable to these cuts. This analysis examines the relative role of the U.S., compared to other donors (governments as well as multilateral institutions), in global health. We used disbursement data from the Organisation of Economic Development (OECD) Creditor Reporting System (CRS), averaged over a three-year period (2021-2023), to smooth out spending fluctuations (all totals and percent share present the per year average over the period). We focused on bilateral donor spending (e.g., the funding a donor gives directly to or on behalf of specific countries) vs. multilateral spending (e.g., the funding a donor gives to a multilateral institution that is then pooled with other donor contributions and provided to countries) because such funding is attributed to the multilateral institution as the donor in the CRS database. In addition, at this time, no U.S. government funding to the main multilateral funders of global health services has been halted. We looked at overall health spending as well as spending for HIV, tuberculosis (TB), and malaria. We removed COVID-19 funding given that it was emergency in nature and not enduring. Due to lack of available data, this analysis does not include domestic funding from recipient countries that are also used for health and in some case may be significant, although in general, GDP growth in low and middle income countries continues to lag due to the effects of COVID-19 and many face significant debt burdens that limit their ability to increase resources for health.

As this analysis shows, given that the U.S. has been the largest donor to global health, the gap left, should cuts and disruption continue, would be quite significant. This is especially true in the case of HIV for which the U.S. provides almost two-thirds of bilateral assistance. In addition, there are several countries that could be disproportionately affected by U.S. cuts, given that they are both very low-income and rely heavily on the U.S. for health assistance. Whether other donors, or countries themselves, would be able to make up such losses is unknown but seems unlikely given broader global economic trends.

Findings

The U.S. government was the single largest donor to health in low- and middle-income countries over the 2021-2023 period. The U.S. provided 30% of all health assistance, or $8.3 billion per year in bilateral support. The next largest donor was the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund), providing 19% or $5.2 billion each year over the period. The third largest donor was the World Bank’s International Development Association (IDA) (10% or $2.8 billion per year), followed by Gavi, the Global Alliance for Vaccines and Immunization (Gavi) at 6% ($1.7 billion per year) Germany (5% or $1.3 billion per year). All other donors each represented less than 5%. See Figure 1. It is important to note that government donors also fund multilateral entities focused on health and other areas, so these data underestimate the relative contributions of governments to health. The U.S., for example, is the Global Fund’s largest donor, providing approximately a third of its funding while the UK is Gavi’s largest donor providing about a quarter of its funding. Still, at this point, the Trump administration has not issued stop-work orders for the main multilateral entities that support health.

For HIV, the U.S. provided almost two-thirds of all donor support (63% or $5.2 billion per year) over the 2021-2023, making this area of health especially vulnerable to U.S. cuts. The next largest donor was the Global Fund (32% or $2.6 billion). The EU and UNAIDS provided 1%; while all other donors each provided less than 1%. Because the U.S. is the largest donor to the Global Fund, any reductions in its support would have an even greater and disproportionate impact on the HIV response. See Figure 2.

For malaria, the Global Fund was the single largest donor (65% or $1.6 billion) over the period. The U.S. was second largest at 28% or $673 million. The EU and IDA each provided 2% and all other donors were at 1% or less. As with HIV, reductions to Global Fund support by the U.S. would affect the global malaria response. See Figure 2.

Similarly, the Global Fund was the largest donor to TB efforts, providing 64% or $707 million per year over the period. The U.S. was the next largest, at 24% or $266 million, followed by the EU (4%) and Australia (2%). All other donors provided 1% or less. See Figure 2.

Some countries would be disproportionately affected by U.S. cuts in health aid, compared to others. Whereas the U.S. provided 30% of direct health assistance per year during the 2021-2023 period, it provided 50% or more of health assistance in 11 countries, including several low or lower-middle-income countries (Eswatini, Haiti, Kenya, Lesotho, and Zambia), one of which is currently conflict-affected (Haiti). Others are upper-middle-income (Botswana, Dominican Republic, Namibia, Jamaica, and South Africa) or high-income (Panama) and could likely more easily absorb U.S. cuts. See Figure 3.

Country reliance on U.S. support is even more concentrated for HIV. Eight countries receive 80% or more of their donor support for HIV from the U.S., compared to 63% across all recipients. For malaria, seven countries receive 50% or more of their funding from the U.S., and for TB the U.S. accounts for more than 50% of funding in nine countries. See Figure 4.

There are several options under consideration in Congress to significantly reduce 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. Large reductions in Medicaid spending are likely to have direct implications for the 83 million people covered by Medicaid, state budgets, and health care providers, including hospitals. Medicaid accounted for about one fifth (19%) of all spending on hospital care in 2023. Changes in hospital finances could affect patient care and may have broader economic implications, given that, for example, hospitals employ 6.7 million people and are the sixth largest employer in the country when comparing industry subsectors.

A number of policies to achieve large Medicaid savings have been discussed. These include imposing a per capita cap on federal Medicaid spending, reducing the federal government’s share of costs for the ACA Medicaid expansion group, imposing Medicaid work requirements, limiting states’ use of provider taxes to finance the state share of Medicaid spending, and placing restrictions on supplemental payments to providers and/or state-directed payments (which are payments managed care plans make to providers, including hospitals). Such policies could force states to make tough choices about raising state revenues to replace the lost federal dollars or making cuts to Medicaid by reducing the number of people covered; covering fewer benefits; or reducing payment rates for hospitals, physicians, nursing homes, and other health care providers.

Absorbing reductions in Medicaid spending could be challenging for hospitals, particularly for those that are financially vulnerable, such as hospitals that care for a relatively large share of Medicaid patients. Reducing reimbursement rates or cutting supplemental payments to hospitals would have a direct impact on hospital finances. Rolling back coverage would increase the number of uninsured patients, which could result in higher uncompensated care costs (and have implications for the health of Medicaid enrollees who lose coverage or have access to fewer benefits). Hospitals may respond to those financial pressures by operating more efficiently or by making various cuts—such as offering fewer services, laying off staff, or investing less in quality improvements—and lower payment rates could reduce the willingness of hospitals to see Medicaid patients. Cuts to Medicaid spending could also potentially accelerate the pace of hospital closures, including in rural areas. Given differences in state responses to potential federal Medicaid cuts, the impact would likely vary across states and hospitals.

1. Medicaid covered about one fifth of all hospital spending in 2023.

Medicaid accounted for 19% of all spending on hospital care in 2023, or $283 billion out of the $1.5 trillion spent on hospital care (Figure 1). The other major payers for hospital care are Medicare (25%) and private health insurance (37%). Medicaid also covered about one fifth of hospital discharges in 2023.

2. Hospital care accounted for about one third of total Medicaid spending in 2023.

Hospital care accounted for about one third (32%) of Medicaid spending in 2023, or $283 billion out of $872 billion in total Medicaid expenditures. For purposes of comparison, hospital care represented a larger share of Medicaid spending (32%) than physician and clinical services (14%) or retail prescription drugs (6%). Because hospital care accounts for a large share of Medicaid expenditures, it is likely that any substantial reduction in Medicaid spending would impact hospitals, and some proposed policy changes directly target supplemental or state directed payments to hospitals.

3. Medicaid covered about four in ten births nationally in 2023 and almost half of births in rural areas.

Medicaid covered 1.5 million births in 2023—representing 41% of all U.S. births—and financed nearly half (47%) of births in rural areas (Figure 3). Births are the most common reason for a hospital inpatient stay. Medicaid covered more than two in ten births in nearly every state, at least four in ten births in 25 states and DC, and more than half of births in four states: Louisiana, Mississippi, New Mexico, and Oklahoma. The share was the largest in Louisiana, where Medicaid covered nearly two in three (64% of) births. (See prior KFF work for more about women and Medicaid).

State Medicaid programs are required to cover pregnancy-related services without cost sharing for people with incomes up to 138% of the federal poverty level (FPL), including in states that have not adopted the ACA Medicaid expansion. For births covered by Medicaid, states must also provide pregnancy-related coverage for at least 60 days postpartum and cover infants for twelve months. Nearly all states have taken up the option to extend postpartum coverage through one year postpartum.

4. The ACA Medicaid expansion has helped improve hospital finances and is associated with lower charity care costs.

Expanding Medicaid under the ACA has had financial benefits for hospitals, according to several studies. These benefits include:

• Improvements in payer mix (fewer uninsured patients, more Medicaid patients, or both),
• Reductions in uncompensated care,
• Increases in hospital revenues and operating margins, and
• Fewer hospital closures.

The financial impact of Medicaid expansion for at least certain measures may be most evident among rural hospitals, small hospitals, and hospitals that see a higher proportion of low-income patients, based on some of the research.

Hospital charity care costs (one component of uncompensated care) were generally higher in 2023 in states that had not expanded Medicaid (Figure 4). Hospital charity care programs, also known as “financial assistance programs,” provide free or discounted services to eligible patients who are unable to afford their care and are one component of uncompensated care. Among the ten states with the highest charity care costs as a percentage of operating expenses in 2023, eight had not expanded Medicaid as of November of that year (one did so in December).

Texas, a non-expansion state, had both the highest uninsured rate (16%) and the highest average charity care costs as a percent of operating expenses (6.6%) in the country. Conversely, all thirteen states where average charity care costs as a percentage of operating expenses were less than 1.0% had expanded Medicaid. Wisconsin, which had the lowest uninsured rate and average charity care as a percentage of operating costs in 2023 among non-expansion states, has expanded Medicaid eligibility up to 100% of the federal poverty level under a Medicaid waiver and therefore does not have a coverage gap.

Although Medicaid expansion has helped improve hospitals’ finances, operating margins were lower than average in 2023 among hospitals with relatively high Medicaid shares, according to KFF analysis. This is true overall and in both rural and urban areas.

5. Medicaid financing for hospitals is complex.

States deliver and pay for services in Medicaid through fee-for-service (FFS) or managed care (Box 1). Hospital FFS rates consist of base rates and supplemental payments. Base rates vary considerably across states and, on average, are below hospitals’ costs of providing services to Medicaid enrollees. States may rely on supplemental payments – such as payments to hospitals that serve a disproportionate share of low-income patients – to help cover hospitals’ costs. FFS supplemental hospital payments as a share of total FFS hospital payments vary widely across states. In eight states, FFS hospital supplemental payments make up more than 75% of total FFS hospital payments (Figure 5). States with capitated managed care arrangements are generally prohibited from contractually directing how managed care plans pay providers. Subject to CMS approval, however, states may implement certain “state directed payments” (SDPs). Many states that contract with managed care plans use SDPs to make uniform hospital rate increases that are like FFS supplemental payments (Box 1).

According to MACPAC, in FY 2022, 61% of Medicaid payments to hospitals were made through managed care delivery systems and 39% were made on a FFS basis. About half of FFS payments to hospitals were made through supplemental payments, while one third of managed care payments to hospitals were made through state directed payments. States are permitted to finance the non-federal share of Medicaid spending through multiple sources, including state general funds, health-care related taxes, and local government funds (Box 1). Most FFS hospital supplemental payments and state directed uniform rate increases are financed by provider taxes and funds from local governments. Efforts to restrict provider taxes or intergovernmental transfers could have bigger implications for states that rely more heavily on these financing mechanisms as well as states with larger shares of hospital funding for supplemental payments.

In an effort to increase access for Medicaid enrollees, Medicaid managed care rules finalized in 2024 permit states to pay hospitals and nursing facilities at the average commercial payment rate (ACR) when using directed payments, which is substantially higher than the Medicare payment ceiling used for Medicaid FFS supplemental payments. CBO Medicaid spending projections for 2025-2034 included a 4% (or $267 billion) increase from the February 2024 baseline to the June 2024 baseline, with half of the increase attributed to expected growth in directed payments in Medicaid managed care (driven in part by the rule change allowing states to pay at the ACR). Federal policy options under consideration include proposals to repeal the 2024 managed care rules (including the provision that formalized/codified states’ ability to pay certain providers up to the ACR) and proposals to limit the use of provider taxes.

Introduction

There have been several high-profile cases regarding exceptions to save the health or the life of pregnant patients in state abortion bans. Major cases that have reached the US Supreme Court (Moyle v. Idaho) and Texas Supreme Court (Zurawski v. Texas) have highlighted the significant challenges for physicians providing pregnancy-related care in states with abortion bans. According to a 2023 KFF survey, 61% of OBGYNs practicing in states where abortion is banned report being concerned about their legal risk when making decisions about patient care and the necessity of abortion care for their patients. Some of the concern about legal risks stems from the “reasonable medical judgment” legal standard used in most states for when an abortion qualifies for an exception. This legal standard does not defer to the treating physician’s judgment but rather allows a court to review circumstances after the abortion has been completed and rely on the testimony of other medical experts to determine whether the treating physician met the standard. Some anti-abortion advocates, legislators, and state attorneys general maintain, however, that it is physicians, not the abortion bans, that are responsible for denial and delays of care, and have implied that providers should face medical malpractice lawsuits for not properly following the exceptions. This brief examines the legal considerations for physicians providing abortion care, including criminal and professional penalties, as well as the potential for medical malpractice lawsuits for delayed care to patients due to bans and prosecution for violation of abortion bans across state lines.

What Criminal Penalties Do Physicians Face for Providing Abortions?

Eleven of the 12 states with abortion bans impose criminal penalties on clinicians who violate their respective bans. These penalties range in severity from a few months in prison to the possibility of a life sentence. All but two of these 11 states — Arkansas and South Dakota — impose minimum sentences for violation of their abortion bans. In Alabama, for example, violation of the total ban constitutes a Class A felony and carries a minimum prison sentence of ten years and a maximum sentence of 99 years. Class A felony is the most serious offense in Alabama, which places abortion in the same criminal category as murder and first-degree domestic violence. Other states place the violation of their abortion bans in the same category as crimes such as aggravated assault (Tennessee), involuntary manslaughter (Indiana), and stalking in violation of a protective order (Kentucky). West Virginia’s law does not include jail time for licensed physicians who violate the abortion ban, but it does include a 3–10-year sentence for other people who violate the law. However, other pre-Dobbs abortion restrictions in the state, such as minor consent requirements, carry criminal penalties for physicians.

In addition, penalties include fines, and in many states, violation of the abortion ban or conviction of a felony are grounds for medical license revocation. If a physician’s license is revoked, even after they have served their sentence, they may not return to practicing medicine. License revocation penalties jeopardize physicians’ livelihoods. In many states, license revocation in a different state is grounds for denying a new medical license or revoking an existing license. This means that if a physician loses their license as a result of providing an abortion in a state where abortion is banned, they may not be able to practice medicine in other parts of the country.

Many states where abortion rights are supported have passed laws to protect clinicians from losing their license, amending their licensing provisions such that if a physician’s license has been revoked in a different state solely due to the provision of abortion care that would have been lawful in the state, the physician may not be denied a license. However, in these circumstances, there is no certainty that a physician would be able to receive a license in another state. And even if physicians had the certainty, continuing to practice medicine would require moving to another state.

No clinician has yet been convicted and jailed for performing an abortion since the Dobbs ruling, but a physician in New York, where abortion is protected, has been charged with a felony crime for mailing medication abortion pills that were given to a minor in Louisiana (discussed below). However, there have been cases indicating that the threat of criminal prosecution has led physicians to delay health- or life-preserving care and prevented them from practicing medicine based on accepted standards of care. A UCSF study identified multiple cases of patients with pregnancy complications being denied abortion care that met clinical standards in states where abortion is banned. Cases included second trimester obstetric complications such as preterm labor, preterm pre-labor rupture of membranes (PPROM), hemorrhage, cervical dilation, and hypertension, as well as ectopic pregnancy, Abortion care was also denied in case of patients with underlying medical conditions that made continuing a pregnancy dangerous, who were experiencing miscarriages, or were carrying a pregnancy with a severe fetal anomaly.

Medical Malpractice

While physicians are faced with criminal and professional penalties if they provide abortion care for health reasons that are later second-guessed in court, if they do not provide this care or delay it, they could potentially be sued for medical malpractice for failing to provide timely and necessary care.

Post-Dobbs, there are no documented cases of medical malpractice lawsuits being filed by pregnant patients who were denied care or did not receive it in a timely manner. However, there have been growing calls from anti-abortion advocates to hold treating physicians liable for delays or denials of miscarriage management care or other care to pregnant people.

In response to calls for exceptions to abortion bans to be widened in scope or be further clarified, anti-abortion lawmakers and attorneys general have argued that it is not policies, but rather the physicians who are at fault in situations where care has been delayed or denied. For instance, in the case Zurawski v. Texas, where women facing dangerous pregnancy complications who had been denied emergency abortion care and two OB-GYNs asked Texas courts to clarify the scope of the medical emergency exceptions in the state’s abortion bans, attorneys for the state of Texas argued that it was not the state’s abortion bans that prevented plaintiffs from receiving timely care. Instead, he argued that physicians committed malpractice and are at fault and suggested that people should sue their physicians, not the state, when they are unable to receive timely abortion care in life-threatening medical emergencies.

Prosecution of Providers Across State Lines

In 2023, some states started passing “shield” laws. These laws aim to protect physicians from prosecution brought by states where abortion is banned as long as the physician is located within the state with the shield law and the care they provided is legal in that same state, regardless of patient location. From July 2023 through June 2024, the Society of Family Planning estimates that 1 in 10 abortions in the U.S. have been medication abortions for which the pills were mailed by providers practicing in states with shield laws.

In December 2024, in the first action testing a shield law, the Texas Attorney General filed a lawsuit against a New York doctor for mailing medication abortion pills into the state. The lawsuit alleges the physician violated Texas law by practicing medicine in the state of Texas without a Texas license and for violating the state’s abortion ban and prohibitions on telehealth for abortion care. On February 13, 2025, after the physician did not respond to the lawsuit or appear at court proceedings, a trial court issued a default judgment for the state, enjoining the physician from prescribing medication abortions to Texas residents and ordering her to pay $100,000 in civil fines. Additionally, in January 2025, a Louisiana grand jury indicted the same New York physician for violating Louisiana’s abortion ban and restrictions. The mother of the minor who received the medication abortion was also indicted. Shield laws in the state of New York seek to protect providers from this kind of litigation, so these cases will likely serve as a test case for shield laws and their ability to protect clinicians providing abortion care via telehealth to patients located in states that ban or restrict abortion. In the Louisiana case, however, the minor’s mother does not have a similar protection from the ban.

Challenges to Exceptions to Abortion Bans

In response to the abortion bans, physicians practicing in Idaho, South Carolina, Tennessee, and Texas have filed lawsuits challenging the vagueness, narrowness, and lack of deference to physician judgment of the medical exceptions in state abortion bans. Among other claims, these challenges contend the vagueness of the exceptions unduly places physicians’ livelihoods and liberty at stake. Additionally, a complaint filed by South Carolina providers argues the state ban’s exceptions violate their First Amendment rights to practice their faith, which includes beliefs that they should use their medical training to honor patients’ requests to end pregnancies that threaten to profoundly harm them or when a fetus is diagnosed with a fatal anomaly, beyond what the exceptions allow.

The Texas Supreme Court has issued rulings in both the challenges in the state – Zurawski v. Texas and Cox v. Texas – ruling in favor of the state and leaving the narrow exceptions untouched. A Tennessee court partly granted a preliminary injunction blocking the state from taking disciplinary action against physicians who provide abortion care to safeguard the health of the pregnant person (unlike Texas, Tennessee has a health exception to their abortion ban). However, because the court lacked authority over criminal laws, it did not block criminal enforcement of the law against physicians. Whether or not these lawsuits will ultimately expand the scope of the exceptions or the deference granted to physician judgment will depend on the rulings of each state’s respective supreme court.

As the Trump administration works to dissolve the U.S. Agency for International Development (USAID), a new KFF poll finds that two-thirds (67%) of the public believe these actions will increase illness and death in low-income countries, and a similar majority (62%) believe it will result in more humanitarian crises around the world.At the same time, nearly half of the public believe the dissolution of USAID will significantly reduce the U.S. budget deficit (47%) and allow funds to be redirected to domestic programs (47%).  Views on the impact of downsizing USAID divide sharply along partisan lines, with most Democrats and independents expecting more illness and death in low-income countries (91% and 69%, respectively), and most Republicans expecting positive impacts on domestic programs (72%) and the budget deficit (67%).The poll also finds that most of the public grossly overestimates how much the federal government spends on foreign aid. When informed that it is actually about 1% of the federal budget, far fewer people say the U.S. spends “too much” on foreign aid. 

About one in ten (11%) adults correctly estimate that 1% or less of the federal budget goes to foreign aid, with others guessing higher amounts, including more than half (54%) who guess more than 10%. On average, U.S. adults guess that foreign aid accounts for 26% of the federal budget.When initially asked about the level of U.S. foreign aid prior to President Trump taking office, most say the country was spending “too much” (58%). After being informed that foreign aid accounts for about 1% of the federal budget, the share of the public who says that the U.S. spends too much on foreign aid drops more than 20 percentage points to one-third (34%). This shift is similar across partisans. After hearing that only about 1% percent of the federal budget is spent on foreign aid, the share saying the U.S. spends too much drops to 50% among Republicans, 39% among independents, and 15% among Democrats. 

The Public is More Supportive of Global Health Spending than Foreign Aid Overall

The poll also finds that half (50%) of the public believe the U.S. should play “the leading role” or “a major role” in efforts to improve health for people in developing countries. About a third (36%) say the U.S. should play a minor role in global health, while fewer (14%) say it should not play any role.Republicans’ views on the role that the U.S. should play in global health have shifted since President Trump’s first term. In the most recent poll, one-third (32%) of Republicans say the U.S. should play at least a major role in improving the health of people in developing countries, down from about half in KFF polls in 2016 and 2018. At the same time, the share of Republicans who say the U.S. should take “no role” in global health has risen from 9% in 2016 to one in four (24%) now. 

When asked about U.S. spending on global health, the public is more supportive than they are of spending on foreign aid generally. Nearly six in ten say that prior to President Trump taking office, the U.S. was spending either too little (19%) or about the right amount (37%) to improve health for people in developing countries, while about four in ten (43%) say the U.S. was spending “too much.”Seven in ten adults say spending money on improving health in developing countries helps protect the health of Americans by preventing the spread of infectious diseases, including about nine in ten Democrats (86%) and two-thirds of independents (67%). Republicans are split, with half saying this spending helps Americans in this way (49%) and half saying it does not have much of an impact (51%). 

Designed and analyzed by public opinion researchers at KFF. The survey was conducted Feb. 18-25, 2025, online and by telephone among a nationally representative sample of 1,322 U.S. adults in English and in Spanish. The margin of sampling error is plus or minus 3 percentage points for the full sample. For results based on other subgroups, the margin of sampling error may be higher.

Enhanced subsidies for Affordable Care Act (ACA) Marketplace plans are set to expire at the end of 2025, unless they are renewed by Congress. Since 2021, these enhanced subsidies have lowered monthly premium payments for the vast majority of Marketplace enrollees, across incomes. For example, instead of a lower-income person paying 2% of their income on their premium, they pay nothing. Higher income people currently pay no more than 8.5% of their income on their premium, whereas they were originally ineligible for financial assistance.

While virtually all subsidized ACA enrollees can expect to see their premium payments rise substantially without extension of these subsidies, most will still be eligible for some financial assistance (with the original ACA subsidies). However, those who earn more than four times the federal poverty level ($62,600 for an individual or $128,600 for a family of four with 2026 coverage) would lose eligibility for subsidies altogether and would therefore have to pay full price for their health plans. Based on 2025 premiums, for example, a 60-year-old couple earning $85,000 annually (416% of the federal poverty level in the contiguous 48 states), would see their monthly premium payment increase by $1,507 per month (an increase in payments of over $18,000 for the year), on average.

Relative to other Americans, subsidy-eligible individual market enrollees with incomes over four times poverty (who would lose subsidy eligibility if enhanced tax credits expire) are disproportionately:

• Early and pre-retirees: About half (51%) of enrollees with incomes over four times poverty who would lose subsidy eligibility are between the ages of 50 and 64, compared to 23% of the non-elderly U.S. population.
• Self-employed: Among non-elderly adults (ages 19 to 64) with incomes over four times poverty who would lose ACA subsidy eligibility, 38% are self-employed, compared to 7% of non-elderly adults (19-64) nationally. Small business owners often rely on the ACA Marketplaces because they do not have employer-sponsored insurance.
• Living in rural areas: 15% of people with individual market insurance who would lose subsidy eligibility live outside metropolitan areas, compared to 9% of Americans with incomes over four times poverty. (12% of all Americans live in rural area; this is not statistically different from the share of people who would lose subsidy eligibility living in rural areas.)

Relatively few Marketplace enrollees have incomes above four times poverty. According to administrative data, in 2024, 7% of Marketplace enrollees reported an income over four times poverty, with 3% having an income between four and five times poverty and another 4% with incomes over five times poverty (another 4% did not have a known income and may have also exceeded four times the poverty level, but most likely are not receiving an advanced premium tax credit). However, before the enhanced subsidies were introduced – and particularly in 2017 when there were large premium increases and debates about repealing the ACA – this group of people with incomes over four times poverty were the focus of a great deal of media attention because they were fully exposed to the underlying premiums. For those who were priced out of coverage before the enhanced subsidies, they often faced a choice of being uninsured, or – if they were healthy enough to qualify – buying a short-term (non-ACA-compliant) plan off of the Marketplace.

Note: The data above is based on KFF analysis of the 2024 Current Population Survey Annual Social and Economic Supplement. The analysis includes people under age 65 who buy individual market insurance, are subsidy eligible, and would receive a subsidy based on household income. Household offer units were imputed as described previously; enrollees were considered not subsidy eligible if a member of the unit reported being offered employer-sponsored insurance.

The U.S. health insurance system has become a “complex labyrinth” for consumers to understand and navigate. Whether public or private coverage, the information needed and the hoops the average health care consumer must go through to use their health coverage effectively is itself a public policy concern, exacerbating continued access and affordability challenges. The KFF 2023 Survey of Consumer Experiences with Health Insurance found that half of insured adults have some difficulty understanding at least some aspects of their insurance. This is the first of two Issue Briefs exploring specific survey findings about gaps in understanding health coverage, highlighting problems and federal consumer protections in place today designed to bridge the gap.

This brief discusses how consumers understand what their insurance covers, what to do when coverage for care is denied, and what protections exist to ensure that information is available and coverage determinations are fair, accurate, and timely. The second brief will discuss survey findings of consumer understanding of the cost of their coverage, existing consumer protections designed to assist with understanding how much they will have to pay for a covered service, and balanced billing and other federal consumer health insurance protections.

The Labyrinth

What does a consumer need to know in order to use their health coverage effectively? The U.S. insurance system of managed care networks, utilization review, and changing coverage options can result in a complicated maze for a patient to navigate on their own. Federal and state policymakers have developed a series of incremental reforms to address understanding and transparency for consumers, but these can differ considerably based on the type of coverage, the plan the consumer chooses (if they have a choice), and sometimes, the state where they live. For private coverage in particular, the current regulatory framework is a complicated system of overlapping state and federal standards, sometimes leaving consumers to sort through a barrage of questions in order to get the care they thought was covered by their insurance.

KFF Consumer Survey Findings

The KFF 2023 Survey of Consumer Experiences with Health Insurance (“Consumer Survey”) included a nationally representative sample of 3,605 U.S. adults ages 18 and older with health insurance. The survey asked consumers about their experiences with their health insurance, including questions regarding how well enrollees understood what was covered, insurance problems that arose when enrollees tried to use their insurance, and where they sought help when they experienced insurance problems.

Understanding What is Covered

According to the 2023 KFF Consumer Survey, more than one-third (36%) of all insured adults said it was somewhat or very difficult for them to understand what their insurance will and will not cover. These shares vary by insurance type, with larger shares of those with Affordable Care Act (ACA) Marketplace plans (46%) and employer-sponsored plans (40%) reporting greater difficulty than those with Medicaid (28%) or Medicare (24%) (Figure 1). There were also differences in understanding certain aspects of insurance by demographic characteristics. Hispanic (36%) and White (36%) insured adults were more likely than insured Black adults (26%) to say it is somewhat or very difficult to understand what their insurance will and will not cover. Among insured adults, Hispanic adults (37%) were more likely than their Black (24%) and White (29%) counterparts to say it is at least somewhat difficult to understand their Explanation of Benefits (EOB). (An EOB is a written statement from a health insurance plan explaining what costs it will cover for medical care an enrollee has received and what the enrollee must pay, though it is not a bill). While the precise explanation for these demographic differences is not clear from the survey data, these trends are similar to those found in other research that noted health insurance literacy challenges across consumers generally, but found racial and ethnic disparities. Additionally, about three in ten insured adults ages 18-29 (30%) and 30-49 (28%) found it somewhat or very difficult to understand how to find information about which doctors, hospitals, and other providers are covered in their plan’s network, compared to 13% of insured adults ages 65 and older. (For the full list of consumer items asked about in this question, see the survey toplines.)

Educational attainment does not necessarily explain lack of understanding. The KFF Consumer Survey found that a slightly higher share of college graduates (58%) had difficulty understanding some aspect of their health insurance coverage than those without a college degree (46%). College graduates (43%) were more likely to report that it was somewhat or very difficult to understand what their health insurance will or will not cover compared to those without a college degree (31%). It is not entirely clear why education does not seem to increase understanding of insurance, though one possible explanation is that those with higher educational attainment are more likely to have private insurance (employer-sponsored insurance or Marketplace), with variable and changing insurance designs that may be more difficult to understand generally.

Areas where consumers note trouble with understanding insurance are often consistent with the top problems that consumers face with insurance. About six in ten (58%) insured adults reported experiencing a problem with their health insurance in the past year. This share is even higher (78%) among high utilizers of health care – those who had more than ten visits with a health care provider in the past year. While having a problem with health insurance does not necessarily indicate that a consumer had trouble understanding their insurance, determining what services are covered and what providers are in-network are items that cut across both topics. Several survey respondents reported problems related to using insurance that involved services or providers not covered by their plan. For example, 18% of insured adults indicated that their health insurance did not pay for a service that they thought was covered. Those with employer-sponsored (21%) and Marketplace (20%) coverage were more likely to report having this problem than those with Medicaid (12%) or Medicare (10%) (Figure 2). A somewhat larger share of insured Black (17%) and Hispanic (16%) adults reported that a doctor or hospital they needed was not covered by their insurance in the past 12 months compared to White adults (12%). Marketplace (20%) and Medicaid (19%) enrollees were more likely to encounter this problem than those with Medicare (9%) or employer-sponsored insurance (ESI) (13%). One in five (20%) insured adults ages 30-64 reported their health insurance denied or delayed a prior approval request in the past 12 months, relative to 11% of those ages 18-29 (11%) and 9% of those age 65 and older. (For the full list of consumer problems asked about in this question, see the survey toplines.)

Knowing Where To Go For Help

What actions, if any, consumers take when they encounter a problem with their health insurance might be instructive in addressing barriers to understanding coverage or best practices to assist consumers in navigating coverage questions.

Among the nearly six in ten insured adults who reported experiencing problems with their health insurance in the past 12 months, more than half (53%) said they contacted their health insurance company to resolve the problem(s) (Figure 3). A similar share (49%) said that they referred to their health insurance website or documents. Fewer said they asked a Navigator or broker for help (11%) or contacted their state Consumer Assistance Program or Ombudsman (3%).

Nearly three in five (57%) of all insured adults reported contacting their insurance at least once in the past 12 months, either by phone, online, in-person, or in writing (Figure 4). Forty-two percent of insured adults did not contact their insurance company at all. Among those who did reach out to their insurance at least once, half (50%) inquired whether a health care expense (such as a prescription, procedure, treatment, or visit with a health care provider) was covered by their health insurance, making it the most common reason for contacting their insurance. Receiving a medical bill (42%) was another reason insured adults contacted their insurance, followed closely by finding out what steps needed to be taken for their insurance to cover a prescription, procedure, or medical visit (39%). Fewer (31%) contacted their insurance at least once in the past year to find out how much a medical procedure would cost out-of-pocket.

Most insured adults are unaware that they have the legal right to appeal to a government agency or independent medical expert if their health insurance refuses to cover needed medical services (Figure 5). Those with public insurance are more likely than those with private insurance to be aware of this right. Just one-third (34%) of those with ESI or Marketplace coverage know they have this right, compared to 58% of Medicare beneficiaries and 45% of those with Medicaid. Further, just one in ten (10%) insured adults who experienced a problem with their health insurance in the past year filed a complaint with their health insurance company (data not shown). This share is similar across all four coverage types.

Three-quarters (76%) of adults with insurance reported not knowing what government agency they would call for help if they wanted to. Adults with ESI (83%) or Marketplace (81%) coverage were more likely to report that they did not know which government agency to contact compared to Medicare (61%) and Medicaid (70%) enrollees. Among insured adults with ESI or Marketplace coverage who reported that they did know which government agency they would contact, 15% of those with ESI and 6% of those with Marketplace coverage reported that they would reach out to their state insurance department/commission(er), the lead agency that is responsible for regulating non-group health coverage and insured group coverage. No one reported that they would contact the Department of Labor (DOL), the government agency that regulates health plans sponsored by private employers, including self-insured employer health plans.

Federal Consumer Protections Seek to Address Barriers to Understanding Coverage

Many federal reforms have focused on providing consumers with better information about their plan, standardizing and simplifying information, and making sure notice is provided of key design features and reforms. While public programs such as Medicare and Medicaid also provide consumer protections, this section focuses primarily on federal protections for those with private health insurance coverage (individual and employer-sponsored).

Understanding What is Covered

The ability to access accurate and easy-to-understand written information has long been a core consumer protection. Below is the landscape of written materials a consumer can access to get information to understand their coverage. Figure 6 is a snapshot of some key consumer protections for those with private insurance.

Coverage documents and summaries: All forms of coverage, whether Medicare, Medicaid, or private insurance available through an employer or a health insurance Marketplace, are required as a form of consumer protection to provide information about benefits and coverage, with varying content requirements, formats, and frequency of updates. Although there are fewer required standardized information formats across private coverage than in public programs such as Medicare, the ACA ushered in a standardized template across most private insurance through the Summary of Benefits and Coverage (SBC), with information on key coverage items and exclusions, cost-sharing, and rules for accessing care. All ACA-compliant plans in the individual and group insurance market and all employer-sponsored plans must provide consumers with an SBC.

More detailed coverage documents can extend to one hundred written pages or more; however, electronic formats and machine-readable files may make it easier to access information for those with the technology and ability to research this information. Examples in the private insurance market include state-regulated insurance documents (including Marketplace plans) sometimes called Certificates of Coverage, or plan documents and Summary Plan Descriptions that set out benefits for those in employer group health plans covered by ERISA.

Provider directories and formularies: Provider directories and formularies allow consumers to see what providers and medications are covered by their insurance. While these items might be easy to access online, several research studies have found that provider directories are often inaccurate. Federal consumer protections across public and private coverage include various features designed to ensure that plans maintain more accurate and up-to-date information. In some cases, these protections also require plans to meet minimum network adequacy standards and test that accuracy through “secret shopper” compliance programs.

Private coverage protections include the No Surprises Act (NSA) requirements, which apply to all private insurance (including employer coverage) and set standards for both plans and in-network providers to ensure accurate provider directory information. Consumers must be reimbursed for cost sharing in excess of in-network amounts when they rely on inaccurate directory information indicating that a provider was in-network. Plans must also continue to cover care from certain providers for a limited period of time after they leave an insurance network.

There is little research on prescription drug formulary accuracy and how consumers determine what medications are covered, but some public programs have model formulary templates to make it easier for consumers to review. There are no federal standards for private employer plans for formulary format, accuracy, and usability.

Consumer notice of rights, disclaimers, and marketing restrictions: Nearly every new consumer protection includes a requirement on an employer or insurance plan and/or provider to notify patients that the protection exists. For example, the NSA requires providers and facilities, as well as plans, to provide patients with information about the NSA’s balanced billing protections. Other federal reforms are meant to alert consumers about aspects of their coverage that might easily be misunderstood with a clear warning or disclaimer. For instance, federal rules for short-term limited duration coverage require a prominent statement that this coverage is “NOT COMPREHENSIVE COVERAGE.” This federally required warning on plan materials, as well as one for fixed indemnity plans, has been the subject of recent litigation questioning the need for and validity of these disclaimers. Another federal agency, the Federal Trade Commission, enforces protections against unfair or deceptive marketing or advertising to consumers that, for example, misrepresents certain limited coverage arrangements as comprehensive health insurance. Several recent investigations have been in collaboration with the federal health insurance agency Centers for Medicare and Medicaid Services (CMS).

Information about coverage determinations and appeals: Even if a consumer has located written information that an item, service, or provider visit is covered by their insurance, they could still face a denial of coverage (e.g., because the plan does not deem the care “medically necessary”), which can create frustrating hurdles for consumers. Medicare and Medicaid have longstanding processes for claims review and appeals. Private coverage also includes certain protections including:

• Processes for reviewing claims: All private insurers and employer plans must ensure a “full and fair” review of enrollee claims. In addition, the ACA includes a “transparency in coverage” provision that requires all non-grandfathered private health plans to provide information and statistics about plan practices to the public and to federal and state agencies, including data on claims payment policies and procedures and the number of claims denied.
• Prior authorization: The longstanding practice of health plans requiring patients to obtain approval for a health care service or medication before the care is provided has received renewed scrutiny in recent years. New federal protections issued in 2024 and effective in 2027 streamline the process and require aggregate reporting of the number of claims denials for federal Marketplace plans as well as Medicare Advantage and Medicaid managed care organizations.
• Information about why a claim was denied: Health insurers and employer plans must clearly disclose to consumers the reason(s) their claim was denied, provide information on their right to appeal the decision, and include the name of any Consumer Assistance Program (CAP) in their state. Consumers can also request more specific information from their plan about the decision (e.g., policy provisions related to the denied claim, names of experts consulted for decision).
• Internal appeal to the plan: If a consumer disagrees with a denied claim from their health plan, they can file an internal appeal with their plan. Plans are required to inform consumers of their appeal decision within 30 days for a service not yet received, within 60 days for a service that was already administered, and within 72 hours in urgent medical cases (sometimes less depending on the situation).
• External independent review: Consumers whose claims denial is upheld at internal appeal may have the right to an external review by an entity independent of the plan for certain types of claims.

Language assistance and information in alternative formats: Requirements to provide some form of language assistance and auxiliary aids to help with understanding coverage exist across most forms of coverage. Private employer plans have long been required to offer assistance in a non-English language where the plan covers a specific percentage of participants in the plan who are “only literate” in the same non-English language. The ACA requires that the SBC and certain claims and appeal notices be provided in a “culturally and linguistically appropriate manner” by individual and group insurers and self-insured employer plans. This could include items such as oral language services and a notice in a certain non-English language provided to enrollees upon request if they live in a county where 10% or more of the population is literate only in the same non-English language.

Separate language access standards apply to recipients of federal financial assistance, programs that HHS administers, and entities established under the ACA, such as health insurance Marketplaces. As a result, most private insurers participating in public and private insurance programs (including some who also provide insurance or administrative services to employer-sponsored coverage) must comply.

Effective communication for individuals with disabilities is also required under the ACA. Current regulations likely extend to information about health insurance coverage through the use of “auxiliary aids” for individuals with disabilities, such as sign language interpreters onsite or by video. Electronic information technology used to provide information about health coverage to enrollees must also be accessible for individuals with disabilities unless doing so creates an undue burden or fundamentally alters the program. Similar access standards for persons with disabilities might also apply to those who sponsor coverage and are also subject to the Americans with Disabilities Act or the Rehabilitation Act.

Direct Assistance

Some consumers may seek one-on-one communication to understand technical details in an insurance coverage document, to get more information about plan or provider policies and procedures, or to navigate the claims appeal process. The 2023 KFF Consumer Survey indicates that more insured adults reach out to their insurance company when encountering a problem than look to written plan material for resolution. Ensuring that consumers have access to effective and impartial one-on-one help has been the subject of federal consumer protection requirements. Figure 7 is a snapshot of key channels for direct consumer assistance.

Customer service options: Private insurers generally make certain customer services available to enrollees. Customer service provided by health plans is commonly offered via call centers, electronic messaging platforms, and increasingly, virtual chatbots. States may have specific customer service requirements for insurers selling state-regulated plans, such as call center wait time standards or staffing a minimum number of customer service representatives.

Health insurance marketplaces are required to provide consumer tools. Healthcare.gov operates a toll-free call center 24 hours a day, 7 days a week, for consumers with questions related to the federal health insurance Marketplace. The ACA also requires all state-based marketplaces to provide a live call center during their hours of operation. Call center representatives must assist consumers with inquiries related to qualified health plans, enrollment, cost-sharing reductions, and advanced premium tax credits (APTCs). Beyond relying just on insurers to provide this information, Congress also created the Navigator grant program to give enrollees access to an additional source of information from organizations other than health insurers to help navigate Marketplace coverage.

For those with private employer-sponsored coverage, there is no specific requirement under federal law to provide direct assistance to help covered employees and their families. Human resources staff sometimes perform this role if a consumer is unable to get answers from customer service personnel available from their insurer or third-party administrator. Some firms contract with third-party vendors to provide patient navigation or “concierge” services that help enrollees navigate plan services and advocate for enrollees as patients, among other services. According to the KFF Employer Health Benefits Survey, in 2024, 29% of firms with 200 or more employees that offered health benefits contracted with a vendor to provide “concierge” services to their enrollees. Separately, the DOL’s Employee Benefits Security Administration (EBSA) operates a toll-free phone number and an online message platform for consumers with questions or concerns related to federal legal requirements, obtaining health plan documents, and assistance getting claims paid.

Funding to state and other entities providing direct assistance: Before the ACA, some states had already established their own Consumer Assistance Programs (CAPs) or health insurance ombudsman programs to help all consumers explore coverage options or assist in resolving problems with their health insurance. Federal CAP grants as part of the ACA allowed for the improvement of existing programs and the creation of new CAPs in other states. In addition to assisting with consumer education and enrollment, the ACA listed one of the duties of CAPs as “assisting with the filing of complaints and appeals… of group health plans…and providing information about the external appeal process.” However, CAPs still operating today have not been supported by federal grant funding since 2012, effectively eliminating the only federally-funded assistance program available to consumers with employer coverage. Several have ceased operations due to lack of funding.

As referenced above, in addition to CAPs, Navigators were established under the ACA as a program to provide direct assistance to consumers in both HealthCare.gov states and in states that operate their own marketplace. Navigators offer support by conducting public education and outreach, helping consumers apply for financial assistance, assisting with enrollment and post-enrollment issues, and providing fair and impartial information about health plan options. Navigators cannot be insurers, nor can they receive any direct or indirect payment from an insurer. These programs in HealthCare.gov states are funded by federal grants, the amounts of which have fluctuated over the years depending on which political party is in power. In February 2025, the Trump administration announced it would cut funding for the Navigator program from its current $100 million to $10 million for 2026.

Standards for health insurance agents and brokers: Agents and (web)brokers play a large role in selling coverage in the individual and group insurance markets and can assist consumers in understanding their health insurance options and costs. While most agents and brokers are certified and regulated at the state level, federal requirements for those agents and brokers involved with Marketplace plans are meant to protect consumers from fraudulent activity and misleading information from agents and brokers, and to make sure consumers are aware of how they are paid and the possibility of conflicts of interest in steering consumers to certain products that financially benefit the agent/broker/web broker. Federal law also requires agents, brokers, and other service providers that work with private employer plans to disclose to employers how they are paid.

Looking forward

KFF 2023 Consumer Survey findings about how consumers understand and navigate the health insurance system reveal frustrating hurdles to determine what items and services and what providers are covered by their insurance. It presents the question of whether we have a system that is impossible for a consumer to navigate alone, leaving consumers vulnerable to exploitation and confusion as they are caught in the middle of health plan and provider interests and arbitrary boundaries of authority between state and federal agencies. Coming out of an election widely viewed to have turned on concerns about the economy, including health care costs, and following public outrage against insurers following the killing of the United Healthcare CEO at the end of 2024, expect that health care consumer issues will not go away, but perhaps will shift focus to include:

Use of digital technology such as artificial intelligence (AI) to assist consumers: Though imperfect and with some pitfalls, digital technology, including AI, can help consumers navigate the complexities of health insurance. These tools are increasingly being promoted to both companies and individuals and in 2024, nearly two-thirds (64%) of adults say they have used or interacted with AI. AI tools can be appealing to consumers looking for answers to health insurance-related questions without the need to make a phone call, wait on hold, or read through plan documents, and are often available 24/7. From guiding consumers through the insurance claims process, including filing appeals, to helping determine whether a plan that applies coinsurance or copayments for their prescription drugs will meet their needs, and identifying in-network doctors near a patient’s home, these tools have the potential to transform the ways in which people seek health information.

However, AI has also been in the spotlight following investigations and litigation in recent years related to health plans’ use of these tools in making coverage determinations, such as for prior authorization requests and in the claims review process. Much of the existing research and criticisms related to the use of AI in health care more broadly, such as clinical decision-making and claims processing, feature overarching concerns related to their accuracy, reliability, confidentiality, and accessibility that could also apply to consumers using AI and other digital technology to navigate their health insurance.

Patient input in coverage practices: Broader and different mechanisms to gather information about consumer experiences in real time could assist in determining the most pressing concerns for patients and engage more consumers in policy discussions about what structural changes and protections are most needed and impactful for them. One of the largest health insurers recently announced changes aimed at improving the patient experience in using their coverage, expanding consumer support, and improving transparency. Employers are making changes to better oversee and understand their benefit programs and provide consumer input and navigation services as plan sponsors face real scrutiny for the first time under longstanding federal fiduciary requirements.

For the federal government, while deregulation across health care, as well as federal agency upheaval, is likely to be the focus in the coming years, the Trump administration will be tasked with implementing key provisions of the No Surprises Act, which he signed into law, that requires upfront information about what services cost and more accurate provider directories. The Trump administration has already issued an Executive Order for agencies to “rapidly implement” price transparency regulations.

Promoting other forms of coverage: A reaction to the health insurance labyrinth has some promoting mechanisms to move away from traditional insurance to direct payment alternatives such as direct primary care arrangements and account-based arrangements where consumers use dollars available in a health savings account or other type of account to purchase care. The pros and cons of these arrangements will be up for debate, as well as whether consumers—especially those with lower incomes and/or chronic illnesses—are well served by the financial and coverage limitations that may be part of these arrangements, including existing problems with the price transparency data available to them and the rising cost of care due to provider consolidation. Patients might be faced with a different set of understanding challenges under these arrangements.

Understanding how health coverage works, what services are covered and by whom, and what rights consumers have is one piece of the health insurance labyrinth. The second brief in this series on consumer understanding will focus on the cost-related aspects and challenges of health insurance and health care.

Managed care is the dominant delivery system for people enrolled in Medicaid. The latest national Medicaid managed care enrollment data (from 2022) show 75% of Medicaid beneficiaries were enrolled in comprehensive managed care organizations (MCOs). While managed care is the dominant Medicaid delivery system, states decide which populations and services to include in managed care arrangements, which leads to considerable variation across states. Additionally, while state requirements for Medicaid managed care plans can be tracked, plans have flexibility in certain areas, including in setting provider payment rates, and plans may choose to offer additional benefits beyond those required by the state.

Early in 2025, there are many factors at play that could have implications for Medicaid managed care plans and the people they serve. At the state level, states and plans have faced considerable rate setting uncertainty after millions of people were disenrolled during the unwinding of the pandemic-era Medicaid continuous enrollment provision. Some firms report that current capitation rates do not align with higher member risk and utilization patterns. Many states have sought federal approval to adjust rates to address these changes amid shifts and uncertainty in state fiscal conditions. At the federal level, talks in Congress about cutting federal Medicaid spending could have implications for coverage as well as plans and providers. Finally, major Medicaid regulations designed to promote quality of care and advance access to care for Medicaid enrollees finalized under the Biden administration could be repealed by Congress or delayed or rewritten by the Trump administration. In this context, this brief describes 10 themes related to the use of comprehensive, risk-based managed care in the Medicaid program.

1. Today, capitated managed care is the dominant way in which states deliver services to Medicaid enrollees.

States design and administer their own Medicaid programs within federal rules. States determine how they will deliver and pay for care for Medicaid beneficiaries. Nearly all states have some form of managed care in place – comprehensive risk-based managed care and/or primary care case management (PCCM) programs.^1 ,2  As of July 2024, 42 states (including DC) contract with comprehensive, risk-based managed care plans to provide care to at least some of their Medicaid beneficiaries (Figure 1). Oklahoma is the latest state to be included in this count, having implemented capitated, comprehensive Medicaid managed care (for most children and adults) on April 1, 2024. Medicaid MCOs provide comprehensive acute care (i.e., most physician and hospital services) and, in some cases, long-term care to Medicaid beneficiaries and are paid a set per member per month payment for these services. For more than three decades, states have increased their reliance on managed care delivery systems with the aim of improving access to certain services, enhancing care coordination and management, and making future costs more predictable. While the shift to MCOs has increased budget predictability for states, the evidence about the impact of managed care on access to care and costs is both limited and mixed.^3 ,4 ,5 

2. In FY 2023, payments to comprehensive risk-based MCOs accounted for over half of Medicaid spending.

In FY 2023, state and federal spending on Medicaid services totaled over $880 billion. Payments made to MCOs accounted for about 52% of total Medicaid spending (Figure 2), unchanged from the previous fiscal year. The share of Medicaid spending on MCOs varies by state, but over three-quarters of MCO states directed at least 40% of total Medicaid dollars to payments to MCOs (Figure 3). State-to-state variation reflects many factors, including the proportion of the state Medicaid population enrolled in MCOs, the health profile of the Medicaid population, whether high-risk/high-cost beneficiaries (e.g., people with disabilities, dual eligible beneficiaries) are included in or excluded from MCO enrollment, and whether long-term care services are included in MCO contracts. As states expand Medicaid managed care to include higher-need, higher-cost beneficiaries, expensive long-term care, and adults newly eligible for Medicaid under the ACA, the share of Medicaid dollars going to MCOs could continue to increase.

3. Three-quarters (75%) of all Medicaid beneficiaries received their care through comprehensive risk-based MCOs.

As of July 2022, nearly 72 million Medicaid enrollees received their care through risk-based MCOs. Thirty MCO states covered at least 75% of Medicaid beneficiaries in MCOs (Figure 4).

Although 2022 data are the most current national data available, enrollment in Medicaid overall grew substantially during the COVID public health emergency when states paused disenrollments, resulting in growth in MCO enrollment as well. At the start of the “unwinding” period, in April 2023, Medicaid enrollment (overall) peaked at 94.5 million, an increase of 23 million or 32% from before the pandemic. Despite millions of disenrollments during the unwinding, nationally, nearly 8 million more people were enrolled in Medicaid/CHIP in October 2024 than in February 2020 (pre-pandemic).

4. Children and adults are groups most likely to be enrolled in MCOs; however, states are increasingly including enrollees with complex needs in MCOs.

As of July 2022, 36 MCO states reported covering 75% or more of all children through MCOs (Figure 5). Of the 39 states that had implemented the ACA Medicaid expansion as of July 2022, 32 states were using MCOs to cover newly eligible adults and most covered more than 75% of beneficiaries in this group through MCOs. Thirty-five MCO states reported covering 75% or more of low-income adults in pre-ACA expansion groups (e.g., parents, pregnant women) through MCOs. Fewer MCO states reported covering 75% or more adults ages 65+ and people eligible through disability. Although this group is still less likely to be enrolled in MCOs than children and adults, over time, states have been moving to include adults ages 65+ and people eligible through disability in MCOs.

5. Five publicly traded firms account for half of MCO enrollment.

States contracted with a total of 282 Medicaid MCOs as of July 2022. MCOs represent a mix of private for-profit, private non-profit, and government plans. As of July 2022, a total of 16 firms operated Medicaid MCOs in two or more states (called “parent” firms), and these firms accounted for over 63% of enrollment in 2022 (Figure 6). Of the 16 parent firms, six are publicly traded, for-profit firms while the remaining ten are non-profit companies. Five firms – Centene, UnitedHealth Group, Elevance (formerly Anthem), Molina, and Aetna/CVS – account for 50% of all Medicaid MCO enrollment (Figure 6). All five are publicly traded companies ranked in the Fortune 500, and four are ranked in the top 100.

6. States make decisions about which services to carve in and out of MCO contracts.

Although MCOs provide comprehensive services to beneficiaries, states may carve specific services out of MCO contracts to fee-for-service systems or limited benefit plans. Services frequently carved out include behavioral health, pharmacy, dental, and long-term care services. However, there has been significant movement across states to carve these services into MCO contracts. While the vast majority of states that contract with MCOs report that the pharmacy benefit is carved into managed care (31 of 42), eight states report that pharmacy benefits are carved out of MCO contracts as of July 2024 (Figure 7). An additional three states (Kentucky, Louisiana, and Mississippi) now contract with a single PBM for the managed care population instead of implementing a traditional carve-out of pharmacy from managed care. (Under this “hybrid” model, MCOs remain at risk for the pharmacy benefit but must contract with the state’s pharmacy benefit manager to process pharmacy claims and pharmacy prior authorizations according to a single formulary and preferred drug list.)

7. Each year, states develop MCO capitation rates that must be actuarially sound and may include risk mitigation strategies.

States pay Medicaid managed care organizations a set per member per month payment for the Medicaid services specified in their contracts. While plans set rates in the commercial and Medicare Advantage markets, Medicaid managed care rates are developed by states and their actuaries and reviewed and approved by CMS. Under federal law, payments to Medicaid MCOs must be actuarially sound. Actuarial soundness means that “the capitation rates are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the managed care plan for the time period and the population covered under the terms of the contract.” Unlike fee-for-service (FFS), capitation provides upfront fixed payments to plans for expected utilization of covered services, administrative costs, and profit. Plan rates are usually set for a 12-month rating period. States may use a variety of mechanisms to adjust plan risk, incentivize plan performance, and ensure payments are not too high or too low, including risk sharing arrangements, risk and acuity adjustments, medical loss ratios (MLRs, which reflect the proportion of total capitation payments received by an MCO spent on clinical services and quality improvement), or incentive and withhold arrangements.

To limit the amount that plans can spend on administration and keep as profit, states are required to develop capitation rates for Medicaid to achieve an MLR of at least 85% in the rate year; ⁶  however, there is no federal requirement for Medicaid plans to pay remittances to the state if they fail to meet the MLR standard.⁷  As of July 2024, 34 MCO states reported they always require remittance payments when an MCO does not meet state minimum MLR requirements, while two states indicated they sometimes require MCOs to pay remittances (Figure 8).

8. In 2024, CMS finalized rules to strengthen access standards, but the future of the rules is uncertain.

The Biden administration finalized major Medicaid regulations designed to promote quality of care and advance access to care for Medicaid enrollees. The 2024 Managed Care rule addresses Medicaid managed care access, financing, and quality, including strengthening standards for timely access to care (e.g., through the establishment of national maximum wait time standards for certain “routine” appointments) and states’ monitoring and enforcement efforts. These rules are complex and are set to be implemented over several years. However, Congress may seek to overturn these rules, or the Trump administration could delay implementation or issue new regulations that would undo them. During the first Trump administration, CMS took action to change Medicaid managed care rules, including relaxing rules around network adequacy and beneficiary protections.

States are generally prohibited from contractually directing how a managed care plan pays its providers.⁸  Subject to CMS approval, however, states may implement certain “state directed payments” (SDPs) that require managed care plans to adopt minimum or maximum provider payment fee schedules, provide uniform dollar or percentage increases to providers (above base payment rates), or implement value-based provider (VBP) payment arrangements.⁹  In creating state directed payments (in 2016), CMS aimed to help states ensure access to adequate provider networks and to increase use of VBP arrangements. Many states that contract with MCOs use SDPs to make uniform rate increases that are like FFS supplemental payments. State directed payments must meet federal requirements (e.g., must be tied to utilization and delivery of services, be distributed equally to specified providers, and not be conditioned on participation in intergovernmental transfer (IGT) agreements).¹⁰  The managed care rules finalized in 2024 permit states to pay hospitals and nursing facilities at the average commercial payment rate (ACR) when using directed payments (higher than the Medicare payment ceiling used for other Medicaid FFS supplemental payments). The 2024 rules also tightened SDP requirements to improve oversight, evaluation, and transparency (e.g., states will be required to report provider level directed payment data) and to ensure state directed payments are tied to actual utilization. Recent reports indicate state directed payments have been a major driver of Medicaid expenditure growth in recent years, and CBO Medicaid projections for 2025-2034 attribute further increases in SDPs (partially tied to the changes in rule) as a factor increasing spending.

In 2024, CMS also finalized a rule focused on improving the prior authorization process including reducing approval wait times and improving transparency. A 2023 KFF survey of consumer experiences with health insurance found that about one in five Medicaid enrollees say they’ve had issues with prior authorization—higher than for most other types of insurance. A July 2023 OIG report found that Medicaid MCOs had an overall prior authorization denial rate of 12.5%–more than 2 times higher than the Medicare Advantage rate (Figure 9), raising concerns about prior authorization and access in Medicaid managed care. OIG recommendations (to CMS) include strengthening state monitoring of denials. Recent MACPAC analysis of denials and appeals in Medicaid managed care resulted in the inclusion of seven recommendations in the March 2024 Report to Congress focused on improving the appeals process and enhancing monitoring and oversight of MCOs.

9. States link financial incentives to quality measures and use contract requirements to advance priorities, including addressing social determinants of health.

States incorporate quality metrics into the ongoing monitoring of their programs, including linking financial incentives like performance bonuses or penalties, capitation withholds, or value-based state directed payments to quality measures. Over three quarters of MCO states reported using at least one financial incentive to promote quality of care as of July 2021 (Figure 10). Financial incentive performance areas most frequently targeted by MCO states include behavioral health, chronic disease management, and perinatal/birth outcomes. Despite activity in this area, detailed performance information at the plan-level frequently has not been made publicly available by state Medicaid agencies, limiting transparency and the ability of Medicaid beneficiaries (and other stakeholders) to assess how plans are performing on key indicators related to access, quality, etc.

In FY 2024, most MCO states reported leveraging Medicaid MCO contracts to promote at least one specified strategy to address social determinants of health (Figure 11). States can also leverage managed care contracts to help reduce health disparities.

10. CMS has taken steps to improve managed care program monitoring and transparency.

The 2016 Medicaid managed care final rule created new managed care reporting requirements for states. CMS, under the Biden administration, developed standard reporting templates (Table 1) and a variety of toolkits and released a series of informational bulletins (2021, 2022, 2023, 2024) to help states improve their monitoring and oversight of managed care programs. Transparency has the potential to promote accountability. To improve transparency, CMS began publicly posting the Managed Care Program Annual Report (MCPAR) and the MLR Summary Reports on Medicaid.gov in 2024. Managed care rules finalized in 2024 include provisions aimed at further strengthening managed care transparency and monitoring, though the fate of these rules remains uncertain.

Posting data relating to the performance of individual MCOs may allow for comparison within and across states. However, limitations and challenges may exist including posting lags and incomplete data (e.g., GAO found 6 states had not submitted required MCPARs for 2022, OIG found MLR reports prepared by plans were missing required data). (States are required to post the MCPAR and Network Adequacy and Access Assurances Report on their websites but some states may not yet be in compliance with these requirements.) It is unclear whether the Trump administration will continue efforts to strengthen managed care oversight and transparency.

1. PCCM is a managed fee-for-service (FFS) based system in which beneficiaries are enrolled with a primary care provider who is paid a small monthly fee to provide case management services in addition to primary care. ↩︎
2. While MCOs are the predominant form of Medicaid managed care, millions of other beneficiaries receive at least some Medicaid services, such as behavioral health or dental care, through limited-benefit risk-based plans, known as prepaid inpatient health plans (PIHPs) and prepaid ambulatory health plans (PAHPs). ↩︎
3. Sparer M. 2012. Medicaid managed care: costs, access, and quality of care. Res. Synth. Rep. 23, Robert Wood Johnson Found., Princeton, NJ ↩︎
4. Daniel Franco Montoya, Puneet Kaur Chehal, and E. Kathleen Adams, “Medicaid Managed Care’s Effects on Costs, Access, and Quality: An Update,” Annual Review of Public Health 41:1 (2020):537-549 ↩︎
5. Medicaid and CHIP Payment and Access Commission (MACPAC), “Managed care’s effect on outcomes,” (Washington, DC: MACPAC, 2018), https://www.macpac.gov/subtopic/managed-cares-effect-on-outcomes/ ↩︎
6. The 85% minimum MLR is the same standard that applies to Medicare Advantage and private large group plans. ↩︎
7. The 2024 Consolidated Appropriations Act included a financial incentive to encourage certain states to collect remittances from Medicaid MCOs that do not meet minimum MLR requirements. ↩︎
8. 42 CFR Sections 438.6 and 438.60. ↩︎
9. Permissible under 42 CFR Section 438.6(c). ↩︎
10. 42 CFR §438.6(c) ↩︎