Following the expiration of the enhanced premium tax credits for people with Affordable Care Act (ACA) Marketplace plans, a new KFF follow-up survey of the same Marketplace enrollees KFF surveyed in 2025 finds half (51%) of returning enrollees say their health care costs are “a lot higher” this year compared to last year, including four in 10 who specifically say their premiums are “a lot higher.” In all, a large majority (80%) of these enrollees say their health care costs, which can include premiums, deductibles, co-pays, or coinsurance, are higher.

This new survey, which was fielded about a month after open enrollment ended in most states and before the grace period to make payments ends for many enrollees, re-interviewed Marketplace enrollees who shared their expectations for their coverage decisions late last year. It also finds that nearly one in six (17%) returning ACA Marketplace enrollees say they are not confident they will be able to afford their premiums this year. For those who kept the same Marketplace plans, the expiration of the ACA’s enhanced premium tax credits in 2025 is estimated to have increased annual premium payments by more than two-fold on average this year.

Responding to Rising Health Costs
Among those who re-enrolled in an ACA Marketplace plan, a majority (55%) say they have cut or plan to cut spending on food or other basic household expenses to afford their health care costs. The impact is even greater for those with chronic health conditions, more than six in 10 (62%) of whom say they are, or will be, cutting back on food and other basics.

Marketplace enrollees are also concerned about their ability to pay for both routine and unexpected medical expenses. About three in four (73%) returning Marketplace enrollees say they are “very worried” or “somewhat worried” about being able to afford costs for emergency care or hospitalizations while about half are worried about affording costs for routine medical visits (49%) or prescription drugs (45%).

“The impacts on Marketplace enrollees we see in this follow-up survey will likely get worse as people struggle to make payments and the grace period many have expires,” KFF President and CEO Drew Altman said.

For some, rising costs have already forced them to make tough choices. About one in 10 (9%) Marketplace enrollees dropped their ACA coverage and are now uninsured and another nearly three in 10 (28%) changed Marketplace plans. When asked why they decided to drop or change their coverage, most cited costs.

In all, seven in 10 (69%) of those who had ACA Marketplace coverage in 2025 have re-enrolled in a plan through the Marketplace, while others became eligible for different types of health insurance coverage either through an employer (5%) or through Medicare (4%) or Medicaid (7%). A small share (5%) purchased health plans outside of the ACA Marketplace, which typically provide less comprehensive coverage and have fewer consumer protections than Marketplace plans. Even in years with few policy changes, shifts across Marketplace plans or to other types of coverage are normal and often follow changes in employment, income, age, and other life circumstances.

Looking Ahead to the Midterms
Among returning Marketplace enrollees who saw higher health costs, seven in 10 (70%) blame health insurance companies “a lot” for their increased costs and at least half place “a lot” of blame on congressional Republicans (54%), President Trump (53%), or pharmaceutical companies (52%). While majorities of partisans place “a lot” of blame on lawmakers from the opposite party, independents with Marketplace coverage are more likely to say Congressional Republicans (56%) and President Trump (58%) deserve “a lot” of blame than Congressional Democrats (28%).

Three-quarters of those who had Marketplace coverage in 2025 and are registered to vote say health care costs will affect their decision to vote (73%) and which party’s candidate they will support (74%). Democrats are more than twice as likely as Republicans to say it will have a major impact on their decision to vote (67% vs. 27%) and which candidate they may support (70% vs. 30%). Among independent voters, nearly half say the issue will have a major impact on their decision to vote (47%) and which candidate they will support (44%).

Designed and analyzed by public opinion researchers at KFF, this survey, which builds on a 2025 survey of ACA Marketplace enrollees, re-interviewed more than 80% of the original sample to learn how they are navigating changes to the ACA Marketplace. The survey was conducted February 12-March 2, 2026, online and by telephone, in English and in Spanish, among a nationally representative sample of 1,117 U.S. adults who had ACA Marketplace coverage in 2025 and completed the initial KFF survey. The margin of sampling error is plus or minus four percentage points for the full sample. For results based on other subgroups, the margin of sampling error may be higher.

This tracker is updated periodically and currently reflects major positions known to be filled or likely to be retained thus far in the second Trump administration (other key roles will be added as filled). Some of the officials noted in this tracker may be on administrative leave and not performing the duties of their roles under direction from the Trump administration.

Health care affordability is top of mind for many Americans, rising well above other necessities based on recent KFF polling.

A new Peterson-KFF policy explainer lays out the health care trends shaping the 2026 policy debates, including rising premiums, spending on prescription drugs, health care price transparency and consolidation, artificial intelligence in health care, and Medicaid funding cuts and other key program changes.

This brief is available through the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system.

Since the Supreme Court’s 2022 Dobbs ruling, state ballot initiatives have become a powerful tool used by advocates on both sides hoping to either protect or limit abortion access in their state. Successful ballot initiatives that enact state constitutional amendments provide stronger legal authority to either protect or restrict abortion than laws enacted by the legislature or state Supreme Court rulings. Since 2022, twelve states have passed ballot initiatives, usually, but not exclusively, to protect abortion rights in their state. Once again, this November, five states (Table 1) may have abortion-related measures for their voters to consider. Abortion rights advocates in Nevada and Virginia have placed a constitutional amendment protecting the right to abortion on the November ballot. The Missouri legislature has placed an initiative on the ballot to repeal a state constitutional amendment protecting the right to abortion approved by voters in 2024. In addition, voters in Idaho and Nebraska may vote on abortion initiatives if the measures qualify for the ballot. This issue brief reviews the abortion-related initiatives currently slated to be on the ballot in November 2026 and examines how these measures may impact abortion access in the state. 

Ballot Initiatives Seeking to Protect Abortion Rights

Virginia

Virginia is currently the only state in the South without a total abortion ban or early gestational limit, allowing abortion until the third trimester. Unless the litigation challenging the placement of the ballot measure succeeds, voters in Virginia will decide whether to enshrine these abortion protections into the state constitution in November. On February 6, 2026, Governor Spanberger signed a bill, placing the Right to Reproductive Freedom Amendment on the ballot, after the legislature passed it in two successive sessions as is required by state law. However, on March 3, 2026, Charla Bansely, the District 3 Supervisor for the Bedford County Board of Supervisors filed a lawsuit seeking to block the placement of the measure on the November ballot. Ms. Bansely alleges state election officials failed to distribute the constitutional amendment to circuit clerks in all counties, as required by state law, before certifying the abortion measure for the ballot.

The Right to Reproductive Freedom Amendment would amend the state constitution to guarantee a fundamental right to abortion until the third trimester, as well as contraception and fertility care. The Amendment would allow the Commonwealth of Virginia to regulate abortion in the third trimester; however, abortion cannot be prohibited if the pregnant person’s life or physical, or mental health is at risk, or if the fetus is not viable. If passed, the Amendment will provide durable protection for abortion rights in the state’s constitution by ensuring that changes in the composition of the legislature or the courts in the Commonwealth do not impede access to abortion care.

Nevada

Nevada law requires citizen-initiated ballot initiatives amending the state’s constitution to pass in two successive general elections. Therefore, Nevadans will vote for the second time on the Reproductive Rights Amendment initially approved by voters in 2024. If passed, the Reproductive Rights Amendment will, “guarantee a right to all individuals to abortion performed or administered by a qualified health care practitioner until fetal viability or when needed to protect the life or health of the pregnant patient, without interference from the state or its political subdivisions.” 

Abortion is currently legal in Nevada until 24 weeks gestation. In 1990, voters passed as a “statute affirmation” which upheld the existing law, NRS 442.250, which legalized abortion until 24 weeks, and prohibited the state legislature from amending or repealing the law unless it was placed on the ballot. In 2019, Nevada enacted the Trust Nevada Women Act, which decriminalized medication abortion and removed informed consent laws. The Reproductive Rights Amendment would protect the individuals’ right to abortion beyond the existing law by limiting state interference. While passage of the Reproductive Rights Amendment would provide the strongest protection against efforts to limit reproductive rights by the legislature or courts, any effort to change the gestational limit for abortion in Nevada would have to be approved by a direct vote of state residents, not by the legislature. 

If the Reproductive Rights Amendment passes, abortion rights advocates are likely to bring a new challenge to Nevada’s parental notification for minors law, contending it is not permissible under the new constitutional amendment. If successful, this challenge would allow minors to consent for their own abortions. Last year, a court lifted a 1985 injunction blocking the notification law and reinstated the parental notification requirement. Planned Parenthood Mar Monte, the affiliate that operates the Nevada Planned Parenthood clinics, has challenged this law in a case currently pending at the Nevada Supreme Court. 

Idaho

Idaho has among the most restrictive abortion laws in the nation. Abortion rights advocates are seeking to reverse these bans by trying to get a new law approved, the Reproductive Freedom and Privacy Act, which will change the legality of abortion in the state. However, the initiative faces considerable barriers to getting on the ballot. In Idaho, a citizen-initiated ballot initiative can only be placed on the ballot if the petitioner gathers signatures from 6% of the registered voters in the last election in 18 of the state’s 35 legislative districts and submits these signatures by May 1 of the election year. The signatures must then be verified by the county clerks and submitted to the secretary of state for certification. 

Idahoans United for Women and Families, a nonprofit group that advocates for comprehensive reproductive health care in the state, is organizing the 2026 ballot initiative. In January 2025, the group sued the attorney general’s office arguing that the financial impact statement and the short title of the ballot initiative contained biased language. On June 16, 2025, the Idaho Supreme Court agreed and ordered the attorney general to draft a new financial statement and short title. 

The Reproductive Freedom and Privacy Act would create a state law giving people the right to make decisions about their own reproductive health care including abortion up to fetal viability and in medical emergencies, miscarriage care, prenatal, pregnancy and postpartum care, contraception, and fertility treatment. The statute defines a medical emergency as  a physical medical condition, based on the physician’s good faith medical judgment, that complicates the physical medical condition of a pregnant patient as to warrant an abortion to protect a pregnant person’s life, or for which a delay will create a serious impairment of a major bodily function or organ of the pregnant person. In January 2026, Idahoans United for Women and Families announced that they collected over 63,000 signatures towards the signature requirement for the ballot initiative. Idaho is currently enforcing a total abortion ban with exceptions only to prevent the death of the pregnant person or in the first trimester for reported cases of rape or incest. 

If passed, the Reproductive Freedom and Privacy Act could expand access to abortion in Idaho. However, the Act would still face challenges after the election because Idaho allows its legislature to amend or repeal a citizen-initiated statute without restrictions.

There are numerous examples where the legislature has reversed or amended the will of the electorate. In 2002, the Idaho legislature repealed citizen-initiated statutes that sought to place term-limits on elected officials. In 2019, the Idaho legislature amended a citizen-initiated statute that expanded Medicaid eligibility. In addition, the Idaho legislature is currently considering a bill that would give the governor veto power over ballot initiatives that pass with less than two-thirds support from voters. Therefore, even if the Reproductive Freedom and Privacy Act is on the ballot and voters approve it, the Republican-majority legislature is likely to amend or repeal the law. Additionally, if legislation granting the governor power to veto voter-approved initiatives is enacted, the Governor would likely exercise that authority to veto the measure.

Ballot Initiatives Seeking to Curtail Abortion Rights 

Missouri 

In 2026, voters in Missouri will again be asked to decide the legal status of abortion in their state, but this time to reverse a recently approved constitutional amendment. In 2024, Missouri voters approved Amendment 3, the Right to Reproductive Freedom Amendment, which amended the state’s constitution to guarantee a right to abortion until fetal viability. Before Amendment 3 was passed, Missouri banned abortion with exceptions only to avert the death of the pregnant person or to avert a serious risk of substantial and irreversible physical impairment of a major bodily function of the pregnant person. After Amendment 3 passed, Planned Parenthood, one of the abortion providers in the state, filed a lawsuit challenging not only the state’s total abortion ban, but also a series of regulations on facilities and clinicians providing abortions. These restrictions included a 72-hour waiting period between an initial appointment and when an abortion could be performed, as well as abortion specific informed consent requirements. The court struck down the abortion ban, allowing abortion to be legal in the state, but did not block regulations on facilities and clinicians providing abortions while the litigation continues. 

State legislators that oppose abortion rights have drafted a new ballot initiative that seeks to repeal Amendment 3. The 2026 ballot initiative, also known as Amendment 3, would ban abortion except in cases of medical emergencies, fatal fetal anomalies, or pregnancies 12 weeks or less gestation that are a result of rape or incest. The initiative includes a parental or guardian consent requirement for minors except in medical emergencies and prohibits state funding of abortions in most circumstances. The Amendment defines a medical emergency as  “a condition that, based on reasonable medical judgment, so complicates the medical condition of a pregnant woman as to necessitate the immediate termination of her pregnancy to avert the death of the pregnant woman or for which a delay will create a serious risk of substantial and irreversible physical impairment of a major bodily function of the pregnant woman. A medical emergency shall include, but not be limited to, an ectopic pregnancy at any point following the diagnosis of such and treatment for a miscarriage.” The ballot initiative explicitly allows the legislature to regulate abortion provision, facilities, and providers including, “requiring physicians providing abortion care to have admitting privileges at a nearby hospital; laws requiring facilities where abortions are performed or induced to be licensed and inspected for clean and safe conditions and adequate instruments to treat any emergencies arising from an abortion procedure; laws requiring physicians to perform a sufficient examination of the woman to determine the unborn child’s gestational age and any preexisting medical conditions that may influence the procedure; and laws requiring ultrasounds to be performed only by physicians or licensed medical technicians.” In addition, the initiative includes a ban on gender affirming care for minors. 

The 2026 ballot initiative has faced legal scrutiny. On July 2, 2025, the ACLU of Missouri filed a lawsuit against the secretary of state alleging that the language for the 2026 ballot initiative was intentionally misleading, contained an inaccurate summary, and is unconstitutional because it included more than one subject. The ACLU argued that the language of the ballot initiative failed to properly inform voters that a “yes” vote would lead to a repeal of reproductive rights protections that passed in 2024. The ACLU also contended that the subject of the ballot initiative is related to “reproductive health care,” but includes topics unrelated to reproductive health, including a ban on gender-affirming care for minors. On July 4, 2025, the Missouri Western District Court of Appeals ruled that the language of the 2026 ballot initiative failed to inform voters that the initiative would repeal and replace the 2024 Right to Reproductive Freedom Amendment, and certified new ballot language for the 2026 ballot initiative. The language certified by the court will appear on the November 3, 2026, ballot. This is the first time voters could decide to repeal a state constitutional amendment protecting abortion. Passage of the 2026 ballot initiative would ban abortion in Missouri and prevent minors from accessing gender affirming care. 

Nebraska

In 2024, Nebraskans voted on two citizen-initiated ballot initiatives related to abortion, and in 2026 voters could once again be asked to decide on the legality of abortion in their state. In 2024, Nebraska voters weighed in on two separate constitutional amendments related to abortion rights. Voters approved the Prohibit Abortions After the First Trimester Amendment, which bans abortion after the first trimester unless the pregnant person experiences a medical emergency or the pregnancy is a result of rape or incest. Voters opposed the competing ballot measure, the Right to Abortion Initiative, which would have amended the state constitution to recognize a fundamental right to abortion until fetal viability. As a result, abortion is banned after 12 weeks gestation in the state.

The 2026 ballot initiative would impose a total abortion ban in the state. Choose Life Now, the same campaign that initiated the 2024 Prohibit Abortion After the First Trimester Amendment, is collecting signatures to have the Establish Personhood of Preborn Children Amendment added to the 2026 ballot. This new initiative would establish personhood at fertilization. Nebraska law requires citizen-initiated ballot initiatives to collect signatures from 10% of registered voters before it can appear on the ballot. Choose Life Now is still gathering signatures. 

Some Abortion Restrictions Remain in Place After Voters Pass Constitutional Amendments

Voters in Arizona, Ohio and Missouri passed state constitutional amendments establishing the right to abortion in recent elections. After abortion advocates challenged existing state abortion bans under the new constitutional amendments, courts have blocked the pre-existing state abortion bans. However, legal challenges to existing abortion restrictions such as waiting periods, and telemedicine bans, have taken longer as courts have not uniformly blocked these provisions. 

On November 5, 2024, Arizona voters passed Proposition 139, a ballot initiative that amended the state constitution to guarantee a right to abortion until fetal viability. The amendment also allows abortions after fetal viability if the physician providing the abortion determines that the abortion is necessary to protect the life, or physical or mental health of the pregnant person. After this constitutional amendment became effective in December 2024, advocates filed legal challenges to block Arizona’s 15-week ban and other abortion restrictions. In March 2025, a court ruled Arizona’s 15-week ban was unconstitutional under the new amendment. In February 2026, an Arizona state court ruling blocked several abortion restrictions including: (1) a ban on abortion based on fetal diagnoses; (2) a 24-hour waiting period and (3) a prohibition on telemedicine for abortion care due to new protections granted in the state’s constitutional amendment. However, Republican state legislators who have intervened in the lawsuit may appeal this decision. The Democratic Arizona Attorney General declined to defend the laws on behalf of the state, and therefore it is unlikely the state will appeal. 

There are, however, still abortion restrictions in effect in Arizona including a ban on state funds for abortion (which affects Medicaid), a parental consent requirement for minors seeking abortions, and a law that bars medical professionals other than doctors from providing abortions. In February 2026, the ACLU of Arizona filed a lawsuit on behalf of advanced practice clinicians contending the physician only law violates the constitutional amendment protecting abortion. 

On November 7, 2023, Ohio voters passed Issue 1, a ballot initiative that amended the state constitution to guarantee every individual has the right to make their own reproductive decisions including contraception, fertility treatment, continuing a pregnancy, miscarriage care, and abortion care. The amendment also allows the state to prohibit abortion after fetal viability; however, an abortion cannot be prohibited after viability if it is necessary to protect the life or health of the pregnant person. After the passage of Issue 1, advocates cited the new amendment in legal challenges to the state’s 6-week ban as well as the many other abortion restrictions. In October 2024, the Hamilton County Court of Common Pleas issued a permanent injunction blocking Ohio’s 6-week abortion ban from taking effect, marking the first permanent injunction based on Ohio’s Reproductive Freedom Amendment. Courts have blocked many of the other abortion restrictions as well. One provision that was challenged, but is still in effect, is a requirement for providers to document the reason for an abortion, but this provision does not impact patients’ access to abortion care. Ohio law still requires parental consent for minors seeking abortions and blocks public funding for abortions. 

As was discussed earlier, Missouri voters approved Amendment 3, the Right to Reproductive Freedom Amendment in 2024, which guarantees a right to make and carry out decisions about all matters relating to reproductive health care including: prenatal care, childbirth, postpartum care, birth control, abortion care, miscarriage care, and respectful birthing conditions. The amendment also allows the government to regulate abortion after fetal viability; however, it prevents the government from restricting abortion after fetal viability if the abortion is necessary to protect the life, physical or mental health of the pregnant person. After the passage of Amendment 3, a court blocked the state’s abortion ban but many restrictions on abortion (72-hour waiting period and abortion specific informed consent requirements) remain in place and are the subject of ongoing litigation.

Options for Future Citizen Referred Ballot Measures Are Limited

Citizens are allowed to propose a constitutional amendment for the ballot in 17 states. There are only two states, Arkansas and Oklahoma, with current bans on abortion which allow for citizen-initiated constitutional amendments and have yet to vote on an abortion measure (Figure 1). There were efforts in Arkansas (where there is a near total abortion ban) to get an initiative on the ballot, but the Arkansas Secretary of State rejected the petition for the initiative on the grounds that the signatures were not properly gathered, and thus the initiative did not make it to the ballot. The Arkansas Supreme Court upheld this decision. 

Oklahoma has a total abortion ban, with an exception only to save the life of the pregnant person and classifies performing an abortion as a felony. A citizen-led effort to put a state constitutional amendment that would have added an “individual right to reproductive freedom” on the ballot was withdrawn in December 2022, before signature gathering began.

In 2024, in Florida, Nebraska, and South Dakota, abortion rights amendments failed to garner sufficient votes for passage. In Nebraska, voters approved a competing measure to ban abortion after the first trimester. In South Dakota, the measure failed to pass, only garnering 41% of the votes. In Florida, the initiative received 57% approval. However, state law requires 60% approval for a constitutional amendment. As the popular vote fell just 3 percentage points short of approval, abortion rights supporters in Florida may try again in a future election to reverse the 6-week abortion ban. 

Conversely, in states with current abortion protections without a constitutional amendment protecting abortion, only three states (Illinois, Massachusetts, Oregon) have a process for citizen initiated constitutional amendments. However, in today’s political climate it is unlikely that new citizen initiatives will be brought to the electorate to weaken existing abortion protections.

The current administration is placing a new emphasis on potential fraud in Medicaid with its Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative. The Centers for Medicare and Medicaid Services (CMS’) started the new initiative in Medicaid focusing on Minnesota and three other states with Democratic governors (California, Maine, and New York) while the House Committee on Energy and Commerce sent requests for information to 11 states. CMS has historically partnered with states to identify and resolve issues of fraud, waste, and abuse, and denied the federal share of Medicaid spending when fraud has been identified by an audit, investigation, or reported by the state. However, CMS has recently announced a new approach to fraud that will rely more heavily on options to prevent spending federal funds in cases of potential fraud, which could have broad implications for states and enrollees. This issue brief explains the new approach. Key findings include:

• CMS’ historic practice has relied on disallowing federal Medicaid payments when fraud is identified (typically through an audit), a process that may take several years to implement.
• CMS’ new approach to potential fraud involves potentially pausing or withholding federal Medicaid payments when fraud is suspected (Figure 1). This approach differs from prior approaches because, if implemented, it could have more immediate consequences, place a much larger share of federal spending at risk (including spending that pays for services uninvolved in fraud), and proactively shift the burden of proof to states to obtain federal funds.
• While all approaches aim to limit future fraudulent payments using tools such as corrective action plans, the new approach to federal Medicaid spending when fraud is suspected creates uncertainty for state budgets and could have implications for Medicaid enrollees and providers who are not involved in fraud.

What is a disallowance?

The federal and state governments share responsibility for financing Medicaid, and states draw on federal funds to pay health care providers and health plans for providing health care to enrollees. The federal government makes quarterly grant awards to states to cover the federal share of Medicaid spending. Awards reflect states’ estimated expenditures for the upcoming quarter and adjustments from prior quarters’ expenses. Adjustments reflect various considerations such as:

• Instances where states’ estimated expenditures are higher or lower than actual expenditures
• Changes to accounting practices or federal matching rates
• Reductions in payment resulting from claims where fraud has been identified

Publicly-available data on Medicaid expenditures show the total amount of adjustments each year, reflecting the net impact of all various factors, and do not specifically identify adjustments due to disallowances and deferrals.

Historically, CMS has used disallowances to deny federal matching funds for state Medicaid expenditures that have already occurred and are later determined to be not allowable. There is limited information available about the frequency and scope of Medicaid disallowances, but an older report by the Government Accountability Office (GAO) suggests that they were not infrequent between 2014 and 2017. Upon receiving a disallowance notice, states may request that CMS reconsider the decision and provide additional information to CMS to demonstrate that the expenditures were allowable or accept the disallowance and resolve it directly with CMS. In all cases, once CMS has issued a disallowance, “the state has the burden of documenting the allowability” of the expenditures to overturn the disallowance. When states request a reconsideration, CMS has 60 days to decide, although this timeline may take longer if CMS requests additional information from the state.

States may appeal the disallowance decisions to a Departmental Appeals Board, but the state still has the burden of proof for documenting the allowability of expenditures and the process may take years to resolve. States are not required to request a reconsideration before appealing the disallowance. More information is publicly available for cases where states do appeal the decisions than for cases where they settle or request a reconsideration. In such cases, data about the decisions of the Department Appeals Board are available online through the Department’s website. Between 2020 and 2025, the Departmental Appeals Board has issued 12 Medicaid disallowance rulings (with 6 rulings being an appeal of a prior case). In all 6 new rulings, there were on average 15 years between the oldest year of disputed expenditures and the final ruling, highlighting how long it takes to resolve these cases (see Figure 2 for an example from Texas). All cases were decided in favor of CMS, but that may reflect the fact that CMS has historically used disallowances only in cases where fraud is well-established.

The amount of disputed disallowances where the Departmental Appeals Board issued a ruling between 2020 and 2025 ranged from less than $500,000 to almost $200 million, but these amounts reflect differences in the number of years and scope of services within the disallowed claims. Some of the largest disallowances to be upheld involve disproportionate share hospital (DSH) payments.

• The largest disallowance ruling between 2020 and 2025 was $195.7 million in a case involving Michigan’s DSH payments between 2001-2009. In that instance, CMS in 2018 determined that the state had made DSH payments to a small number of hospitals that were ineligible to receive them. The Departmental Appeals Board ruling was in 2024.
• The second largest disallowance ruling between 2020 and 2025 was for more than $97 million in a case where Florida made DSH payments between 2006-2013 in excess of the limits established for specific hospitals (CMS first issued this disallowance in 2016 and the Departmental Appeals Board ruling was in 2021).

What is a deferral?

With deferrals, CMS pauses payment for state Medicaid expenditures that have already ocurred and requires the state to provide additional information demonstrating that expenditures are “allowable.” Deferrals are usually initiated by the federal government and may be used to pause federal funding while the state and federal governments work out the details of a disallowance, and in cases where fraud, waste, or abuse has been identified and the state and federal governments are gauging the extent of the issue. In the past, deferrals were used as temporary measures that pause funding until CMS either reimburses the expenditures or issues a disallowance. Deferral notices must specify the reason for the deferral and include a request for all documents and materials that CMS believes are necessary to determine whether the expenses are allowable. After the notice is sent, the loss of federal funds occurs immediately.

After receiving a deferral notice from CMS, states have 60 days to provide all requested documents and materials unless they request an additional 60-day extension. CMS usually begins document review within 30 days but may request different formats or additional materials from the state. States have 15 days to submit additional materials and if they do not meet that deadline, CMS disallows the expenses. Once all documents are available, CMS has 90 days to review and determine whether expenditures are allowable. If CMS determines expenditures are not allowable, the disallowance process begins, offering the state the opportunity to request a reconsideration and appeal to the Departmental Appeals Board.

Deferrals are receiving new attention after the administration announced that it would temporarily defer $259 million in federal Medicaid payments to Minnesota for expenditures incurred in quarter 4 of in fiscal year (FY) 2025, an unprecedentedly large amount. In the announcement, CMS noted that it may continue to defer federal payments for either additional quarters in 2025 or future quarters in 2026, and that similar announcements for other states would likely be coming soon. As of March 25, 2026, 4 additional states have received formal letters from CMS requesting information about program integrity, and 11 states have received formal letters from the House Committee on Energy and Commerce (Figure 3).

What is a withhold?

In January 2026, CMS notified Minnesota that pending the outcome of a hearing, it would begin withholding $515 million in quarterly federal Medicaid payments moving forward, a process that has seldom been used in prior years. Withholding funds has been referred to as the “compliance process” because it is only permissible in cases where the state is failing to comply with Medicaid law. Prior use of withholding has been limited. When CMS has considered withholding as a compliance tool in the past, it announced withholdings that were at most between 1 and 10 percent of the federal share of Medicaid spending for specific services (in most cases, the administrative costs states incurred to implement their Medicaid programs). Prior CMS communication notifying states of possible withholdings appear to have been used when states incorrectly restricted eligibility or benefits, thus failing to comply with minimum requirements regarding access to coverage or eligibility. Minnesota’s case is different because of the scope of the proposed withholding and because the proposed withholding would be to address potential future fraud, rather than state policies that restrict Medicaid eligibility or benefits. The announced level of withholding would have represented nearly 20% of the federal share of Minnesota’s spending on an annual basis.

To withhold federal Medicaid funds, CMS must first provide states with the opportunity for an administrative hearing, and withholding generally ends when CMS is satisfied with states’ resolution of the issue. Withholdings may reflect issues with states’ Medicaid approved plans or with states’ implementation of the plans. Because CMS has authority to approve states’ plans, most issues arise regarding implementation of the plan and are resolved using a corrective action plan. Corrective action plans may also be used to address other types of issues in Medicaid (such as payment error rates or eligibility re-determinations). In general, the plans include a narrative of steps states are planning to take to address issues related to proper implementation of the Medicaid program. On January 13, 2026, Minnesota requested a hearing about the withholding and on January 30, 2026, Minnesota submitted a revised corrective action plan to CMS. On March 20, 2026, CMS accepted Minnesota’s revised corrective action plan. Successful completion of the corrective actions outlined in the plan will resolve the threat of withholding.

What are the implications of new reliance on deferrals and withholds?

The new approach to federal Medicaid spending when fraud is suspected creates uncertainty for state budgets, particularly given the magnitude of federal funding at stake and the time it takes to resolve administrative disputes. Unlike the federal government, states must generally operate balanced budgets, which is one reason states are able to draw down matching funds to finance ongoing expenditures. If withholding is implemented, the loss of federal funds could make it difficult for states to maintain current programs while details of the cases are being sorted out. More extensive use of deferrals could have similar, but more immediate, destabilizing effects on states’ budgets because they reduce the amount of federal funds available to states for several months, and the state has no option to request reconsideration or appeal until a disallowance is issued. Increasing the use of deferrals so that it applies to entire categories of services where fraud is suspected but not established would also place a new administrative burden on states to demonstrate the allowability of expenditures. Other approaches to addressing suspected fraud, waste, and abuse remain available to CMS. The National Association of Medicaid Directors (NAMD) has suggested the following actions to help states to address fraud waste, and abuse in Medicaid:

• Help states identify federal materials about best practices such as recommendations and provider enrollment self-assessments;
• Create rapid methods to share information about provider disqualifications between Medicare, the Veterans’ Health Administration, and Medicaid;
• Respond more quickly to fraud reports from state attorneys general and the Medicaid Fraud Control Units;
• Strengthen procedural pathways for states and CMS to work collaboratively on Corrective Action Plans to enhance adherence to provider requirements while maintaining access to Medicaid benefits;
• Conducting additional analysis of Medicaid data through the Center for Program Integrity;
• Strengthening federal data sources and their interoperability; and
• Providing technical assistance to state officials and staff.

New uncertainty about the availability of federal funding could have implications for Medicaid enrollees and providers who are not involved in fraud. If states have inadequate funding to maintain existing Medicaid services, they may face difficult decisions regarding how to limit Medicaid spending. In general, states can reduce Medicaid spending by decreasing payment rates for providers, covering fewer services, or enrolling fewer people. Such actions could affect enrollees and providers who are not using or providing services in which fraud is suspected. There will also be additional disruptions for providers who lawfully provide Medicaid services where fraud is suspected because of new administrative burdens associated with increased audits, delayed payments, and other administrative practices.

CMS’ new approach to addressing cases of suspected fraud may exacerbate administrative and financial challenges states face as they implement the 2025 reconciliation law. The 2025 reconciliation law made historic reductions in federal funding for Medicaid and created new administrative requirements for states, particularly those that must implement work requirements for enrollees eligible for Medicaid through the Affordable Care Act Medicaid expansion. As states work to implement those changes and adjust to changes in federal financing, the new approach to fraud creates additional administrative requirements and potential new reductions in federal funding. Combined, these changes may have more significant implications for states’ ability to maintain existing levels of Medicaid payment rates, coverage, and eligibility.

After years of rapid increases, Medicare Advantage enrollment growth slowed in 2025, a trend that continued in 2026. The number of Medicare Advantage prescription drug (MA-PD) plans available to the average Medicare beneficiary has declined from a peak of 36 in 2024 to 32 in 2026. Additionally, the trend of rapidly expanding extra benefits, spurred by sharp increases in rebate payments from the federal government, has stalled, with a smaller share of plans offering over-the-counter allowances and meals after hospital stays. Medicare Advantage insurers have warned that recent changes to the Medicare Advantage payment system have already hurt enrollees, leading to plan terminations, reduced benefits, and higher costs, and that these harmful effects will be exacerbated if the Trump Administration’s proposed payment rates for the 2027 plan year are finalized.

Despite concerns raised by the industry, the Medicare Advantage market remains robust in terms of enrollment, plan choice, and extra benefits. Enrollment in Medicare Advantage surpassed 35 million people in February of 2026, as more than half of eligible beneficiaries receive their Medicare coverage from a private plan. The number of plan options has ticked down in recent years, but remains higher in 2026 than in 2022 and every year before. Virtually all Medicare beneficiaries have at least one zero-premium plan with prescription drug coverage to choose from (excluding the Part B premium that all beneficiaries pay). Almost all plans (at least 98%) offer vision, dental, and hearing – benefits that are not covered by traditional Medicare. At the same time, rebate payments to plans from the Medicare program, which must be used to lower cost sharing, pay for extra benefits, and reduce premiums, are expected to reach their highest level ever, averaging more than $2,600 per enrollee in 2026.

Nevertheless, 2.6 million people who were covered by a MA-PD plan in 2025 had that coverage terminated at the end of the year as insurers decided to discontinue or reduce the service areas where certain plans were offered. Plan terminations affected 13% of all enrollees in individual MA-PDs in 2025, a substantially larger share than in previous years (6% of enrollees in individual MA-PDs in 2024 were affected by plan terminations). There are several reasons why plan terminations may have increased going into the 2026 plan year. Increases in the utilization of health care services, consistent with higher spending growth, and slower increases in the federal payments per enrollee to Medicare Advantage plans (stemming from changes to how payments are adjusted for the health status of enrollees) have somewhat reduced the relatively high gross margins private insurers realize on their Medicare Advantage business. This has led insurers to take a more careful look at the plans they offer and reduce the number of plans or withdraw from some markets in efforts to stabilize their margins. In some cases, insurers are also investing more in special needs plans (SNPs), which restrict enrollment to people with specialized health needs or who are covered by both Medicare and Medicaid (dual-eligible individuals). The number of SNPs offered has continued to increase, more than doubling since 2020.

This analysis examines the Medicare Advantage options in 2026 for Medicare beneficiaries who were covered by a MA-PD plan that was terminated at the end of 2025. It also examines the characteristics of plans that were terminated and the areas where the terminated plans were offered in 2025. The analysis excludes special needs plans, employer-and union-sponsored group plans, and individual plans that do not include prescription drug coverage (see Methods).

Key Findings

• Virtually all (98.9%) Medicare beneficiaries enrolled in a Medicare Advantage plan that terminated coverage at the end of 2025 (2.6 million beneficiaries) have at least one MA-PD plan available in 2026, with an average of 25 MA-PD options offered in their area in 2026. Most Medicare beneficiaries affected by a plan termination that had a zero-premium MA-PD option in 2025 also had a zero-premium MA-PD option in 2026. 
• More than two-thirds (68.7%) of Medicare beneficiaries enrolled in a plan that terminated coverage have at least one Medicare Advantage plan offered by the same insurer in 2026 in addition to MA-PDs from other insurers, while 29.8% have at least one option from another insurer in 2026 but none from the same insurer. Another 0.4% can choose an MA-PD from the same insurer in 2026 but have no MA-PD options from other insurers.
• Just 1.1% of people who were in terminated plans nationwide have no MA-PD options in 2026 (less than 30,000 people).
• About half (49%) of all enrollees in terminated plans were covered by small insurers; however, UnitedHealth Group, Inc. had the largest share (20%) of enrollees in plans that terminated coverage in 2025.
• Medicare Advantage enrollees living in rural areas were disproportionately affected by plan terminations. While 14% of 2025 MA-PD enrollees lived in a rural county, nearly one in four (23%) enrollees in a plan that terminated coverage at the end of 2025 live in a rural area. Plan terminations in rural areas were also more likely to lead to no MA-PD options in 2026.
• The impact of Medicare Advantage plan terminations at the end of 2025 varied across states, ranging from less than 5% of enrollees in 12 states to 60% or more in 6 states, including Vermont where more than 90% of 2025 Medicare Advantage enrollees were in a plan that was terminated (the other states with 60% or more of enrollees affected are WY, SD, ID, NH, ND). The states where the largest shares of Medicare Advantage enrollees were impacted are mostly rural states that comprise a small share of Medicare Advantage enrollment (and a small share of enrollees affected by plan terminations).

More than two-thirds of enrollees in plans that terminated coverage at the end of 2025 have MA-PD options from the same insurer in 2026

Virtually all (98.9%) Medicare beneficiaries enrolled in a plan that was terminated at the end of 2025 have MA-PD plan options in 2026. On average, these Medicare beneficiaries can choose from 25 MA-PD plans offered by 7 firms, and for more than two-thirds of people (68.7%), those options include an MA-PD plan from the same insurer as their 2025 coverage, as well as a plan from another insurer (Figure 1). Just under a third (29.8%) of beneficiaries in a plan that was terminated at the end of 2025 have a MA-PD option from another insurer in 2026, but not the same insurer that sponsored their 2025 coverage. The vast majority (83%) of Medicare beneficiaries affected by plan terminations have at least one zero-premium MA-PD to choose from in 2026, similar to the share (86%) in 2025.

A small share of people in plans terminated at the end of 2025 (0.4%) only have the option of enrolling in a MA-PD plan from the same insurer that sponsored their 2025 coverage (no other insurers are offering a plan in their area). Just 1.1% (28,472) of Medicare beneficiaries in a plan terminated at the end of 2025 have no MA-PD plan available in 2026.

All Medicare beneficiaries enrolled in a plan that terminated coverage at the end of 2025 have the option to receive their Medicare coverage from traditional Medicare. Traditional Medicare offers broader access to providers and less utilization management than Medicare Advantage, but does not offer extra benefits, such as dental, vision, and hearing. Additionally, beneficiaries who want prescription drug coverage must purchase a standalone drug plan, and many traditional Medicare beneficiaries also purchase a supplemental Medigap policy. Beneficiaries who have had their coverage terminated by their Medicare Advantage insurer have a special guaranteed issue period to purchase a Medigap policy to supplement their coverage under traditional Medicare, meaning they cannot be denied coverage or charged a higher premium for a Medigap policy due to pre-existing conditions (something Medigap insurers are permitted to do in most states in most other cases outside of a person’s initial eligibility period for Medigap). Medigap policies require an additional monthly premium, which averaged more than $200 in 2023, though premiums vary both across and within states as well as by type of Medigap policy.

That additional cost is one reason many of the beneficiaries affected by plan terminations may choose a different Medicare Advantage plan for 2026 rather than switch to traditional Medicare. Enrolling in a different Medicare Advantage plan could lead to changes in benefits and cost sharing, as well as other plan characteristics. For example, previous KFF work has shown that Medicare Advantage provider networks vary substantially, even across plans offered by the same insurer, so having to switch plans, even if to another plan from the same insurer, could require a change in providers to stay in-network, unless the individual chooses to switch to traditional Medicare.

About half (49%) of the 2.6 million Medicare Advantage enrollees in plans that terminated coverage in 2025 were covered by small insurers

Medicare Advantage enrollment is highly concentrated among a small number of relatively large firms. Two insurers, UnitedHealth Group, Inc. and Humana Inc., together comprised just under half of all enrollment in individual MA-PDs in 2025, another four insurers comprise between 4% and 11% of enrollment each, while more than 100 small insurers (that represent less than 3% of MA-PD enrollment each) together enrolled just less than one-third (31%) of Medicare beneficiaries in an individual MA-PD in 2025. Those smaller firms, however, accounted for about half (49%) of Medicare beneficiaries enrolled in plans that were terminated at the end of 2025 (Figure 2).

UnitedHealth Group had the largest number of enrollees (532,869) in terminated plans, which represents a slightly smaller share (20%) of people affected by plan terminations than the firm’s share of individual MA-PD enrollment (24%) in 2025. Fewer than 2% of UnitedHealth Group enrollees (8,500 people) affected by plan terminations have no MA-PD options in 2026. More than half of this group lives in Vermont, where UnitedHealth Group pulled out completely.

In contrast, the second largest insurer, Humana, had a relatively small number of people affected by terminations, comprising just 2% of all terminated enrollees compared with the firm’s share of individual MA-PD enrollment (19%).

Among the smaller insurers, four firms terminated plans that affected at least 100,000 enrollees. Two of the firms, UCare Minnesota and Blue Cross Blue Shield (BCBS) of Michigan Mutual Ins. Co., were among the largest insurers in a single state, Minnesota and Vermont, respectively. (Note, while an insurer’s name may include a specific state, those insurers may operate in multiple states). UCare Minnesota, the second largest insurer in the state of Minnesota in 2025 (which also offered plans in some Wisconsin counties), terminated all of its individual MA-PD plans, which enrolled nearly 150,000 Medicare beneficiaries, although it is still offering D-SNPs. Fewer than 1% of former UCare Minnesota enrollees have no MA-PD options in 2026.

BCBS of Michigan Mutual Ins. Co., which offered MA-PDs in five states in 2025 (IA, MI, ND, SD, and VT), terminated plans that affected just over one-third of their 2025 enrollees and was one of two insurers to pull out of Vermont completely (leaving Humana as the only insurer in the market in 2026). Of the almost 110,000 enrollees in a BCBS of Michigan Mutual Ins. Co. sponsored plan in 2025 that was terminated, 17,000 (all in VT) have no MA-PD option in 2026.

Two other insurers terminated plans affecting over 100,000 enrollees and all of the Medicare beneficiaries in these two plans have other MA-PD options in 2026. Those insurers are Highmark Health, which terminated plans affecting 148,000 enrollees (44% of 2025 the firm’s individual MA-PD enrollment) in four states (DE, NY, PA, WV), and Lifetime Healthcare, Inc., which terminated plans affecting 106,000 enrollees (45% of the firm’s individual MA-PD enrollment) in New York.

The disproportionate share of Medicare beneficiaries in plans sponsored by small insurers affected by plan terminations could raise questions about the impact on competition and market concentration. However, recently released 2026 Medicare Advantage enrollment data suggests the impact of plan terminations is more mixed, as some small insurers have increased enrollment substantially year-over-year. For example, Devoted Health, Inc., which had 0.8% of enrollment in 2025, added more than 160,000 enrollees to its individual MA-PD plans between February 2025 and February 2026, more than doubling enrollment and expanding its market share to 1.6%. Overall, enrollment in individual MA-PDs sponsored by small insurers grew by more than 300,000 enrollees between February 2025 and February 2026, reflecting increases in enrollment for over half of all small insurers.

Additionally, enrollment in Medicare Advantage plans fluctuates and an insurer can lose enrollees beyond the number that were in a terminated plan or gain enrollees that offset losses from discontinuing plans or shrinking service areas. It is possible that higher levels of disruption in plan offerings from one year to the next may lead enrollees to switch plans, even if not directly affected by a plan termination. For example, enrollment in UnitedHealth Group plans declined by more than the enrollment in terminated plans, while the net increase in Humana MA-PDs between February 2025 and February 2026 was 831,000 enrollees.

Just under one-quarter (23%) of Medicare Advantage enrollees in a plan that terminated coverage live in a rural area

Medicare beneficiaries living in a rural county were disproportionately affected by plan terminations. Medicare Advantage enrollees living in a rural county comprised 23% of those who lost their coverage at the end of 2025 but just 14% of all individual MA-PD enrollment in 2025 (Figure 3). On average, enrollment in terminated plans was lower in rural counties than in urban counties. Consistent with the larger impact in rural counties, terminated plans had relatively low enrollment, on average. The median county-level enrollment per terminated plan was just 22 people.

Additionally, plan terminations in rural counties were more likely lead to no MA-PD options in 2026 than plan terminations in urban areas, though only a small number of enrollees overall were left with no options. Nearly two-thirds (65%) of the approximately 30,000 enrollees in terminated plans with no MA-PD options in 2026 live in rural counties (these counties are in just 8 states: CA, CO, MN, MT, NE, OR, SD, and VT), while the remaining 35% live in urban counties (all in VT). Among all enrollees in rural areas affected by plan terminations, 3% have no MA-PD option in 2026 compared to less than 1% in urban areas.

In some, mostly rural states, at least 60% of Medicare Advantage enrollees were affected by plan terminations

Just under 13% of enrollees in individual MA-PD plans in 2025 nationwide were affected by plan terminations, but in a handful of mostly rural states the impacts were much larger. In Vermont, more than nine-in-ten (93%) Medicare beneficiaries enrolled in an individual MA-PD in 2025 were in a plan that terminated at the end of the year. In five other states, at least 60% of enrollees were affected: Wyoming (65%), South Dakota (64%), Idaho (63%), New Hampshire (61%), and North Dakota (60%) (Figure 4). Altogether, these six states comprised 9% of the 2.6 million MA-PD enrollees who were in terminated plans, and just 2% of individual MA-PD enrollment in 2025.

In contrast, in 12 states fewer than 5% of Medicare Advantage enrollees were affected by a plan termination in 2025. These states represent less than one-tenth (9%) of people enrolled in terminated plans but nearly one-third (30%) of individual MA-PD enrollment. 

In Vermont, plan terminations were significantly more likely to leave Medicare beneficiaries without any Medicare Advantage option than in other states. More than two-thirds (68%) of enrollees in terminated plans in Vermont have no MA-PD options in 2026. In contrast, less than 5% of enrollees in terminated plans in California, Colorado, Minnesota, Montana, Nebraska, and South Dakota have no MA-PD options in 2026. In all other states, every Medicare Advantage enrollee affected by plan terminations has MA-PD options in 2026.

Methods

This analysis examined the Medicare Advantage prescription drug (MA-PD) plans that were terminated at the end of 2025 and MA-PD plan availability in 2026, including by firm and rurality. KFF uses the term “plan terminations” to apply to all county-level plan offerings that are no longer available in 2026. Those include plans that did not have their contract renewed and other types of situations, such as service area reductions where a subset of the plan’s 2025 enrollees will no longer have the option of continuing to receive coverage through the same plan. Medicare Advantage plans without prescription drug coverage, Special Needs Plans, and employer- and union-sponsored plans are excluded from this analysis. Cost plans, PACE plans, HCPPS, and MMPs are also excluded from this analysis.

Data on Medicare Advantage plan terminations, enrollment, and availability were collected from a set of data files released by the Centers for Medicare & Medicaid Services (CMS): 2025 and 2026 Medicare Advantage plan landscape files, released each fall prior to the annual enrollment period and the Medicare Advantage contract/plan/state/county level enrollment file for February 2025, June 2025, and February 2026.

Enrollment data is only provided for plan-county combinations that have at least 11 beneficiaries; thus, this analysis excludes enrollees who reside in a county where county-wide plan enrollment does not meet this threshold.

This analysis determines urban and rural analysis based on the 2024 Urban Influence Codes (UIC) published by the U.S. Department of Agriculture (USDA) Economic Research Service. See Methods of KFF, “Key Facts About Medicare Beneficiaries in Rural Areas” (June 2025) for more details. Connecticut is excluded from the analysis by rurality because of differences in FIPS codes in the CMS Medicare Advantage data and the USDA 2024 UIC.

Medicaid is the primary program providing comprehensive health and long-term care to low-income people, including access to prescription drugs to treat acute problems and manage ongoing chronic conditions, covering about one in five people in the United States. In recent years, Medicaid spending on prescription drugs has grown substantially, in part due to the emergence of new, high-cost drugs, including GLP-1s and cell and gene therapies that treat, and sometimes cure, rare diseases. At the same time, a more tenuous fiscal climate coupled with federal funding cuts and policy changes in the 2025 reconciliation law have put pressure on state Medicaid programs. As a result, both states and the federal government continue to prioritize the management of rising pharmacy costs. There have been several recent Trump administration prescription drug initiatives, including new payment models, that could help combat rising costs for state Medicaid programs, though questions remain about their impact. While lower prices for state Medicaid programs through the new models could result in reduced Medicaid prescription drug spending and potentially expanded coverage of certain drugs, the extent of the savings and how states or manufacturers will respond remain unclear. To provide context for emerging debates about federal actions to address prescription drug costs, this issue brief highlights five key facts about Medicaid prescription drug coverage, payment, and administration.

1. Despite growth in net Medicaid spending on prescription drugs, drug spending continues to account for a relatively small share of Medicaid spending.

Drug spending accounts for a relatively small share of overall Medicaid spending. The percent of Medicaid spending on prescription drugs was 6% in 2024, substantially smaller than Medicaid’s spending on hospitals (38%), long-term care (37%), and providers (15%) (Figure 1). Following the enactment of the Medicare prescription drug benefit in 2006 — which shifted some drug spending for dually-eligible beneficiaries to the federal government — the percent of Medicaid spending on prescription drugs has remained relatively stable between 5% and 7%. Despite this, management of prescription drug expenditures continues to be a focus area at both the state and federal levels. Net spending on prescription drugs increased by 46% between federal fiscal year (FY) 2019 and FY 2024, which is a similar rate to growth in Medicaid spending overall (52%) over the period. The emergence of new, high-cost drugs can put pressure on state budgets, and states reported experiencing several substantial Medicaid budget pressures including increasing pharmacy costs in KFF’s latest annual Medicaid budget survey.

2. Low out-of-pocket costs help Medicaid enrollees access needed prescriptions.

Federal law limits out-of-pocket costs for Medicaid enrollees to nominal amounts. Since people on Medicaid must have low incomes to qualify for the program, Medicaid is designed to provide access to prescription drugs with little cost to enrollees. Federal rules limit beneficiary cost-sharing or copays to up to $4 for preferred drugs and $8 for non-preferred drugs for individuals with incomes at or below 150% of the federal poverty level (FPL) and slightly higher for those with higher incomes. Some Medicaid populations (e.g. most children under 18, pregnant women, etc.) are exempt from cost-sharing requirements. Within those limits, states have flexibility to establish their cost sharing levels, though fewer than half of states required prescription drug cost-sharing for non-exempt enrollees as of July 1, 2023.

Medicaid coverage helps adults avoid cost-related prescription medication rationing or delays. Over two-thirds of Medicaid-enrolled adults took prescription medication in the past year, which is similar to the share of adults with private insurance (68%) but much higher than the share of uninsured adults (37%) (Figure 2). Uninsured adults (17%) were also more likely than Medicaid-enrolled adults (10%) and privately insured adults (8%) to report delaying filling, taking less, or not getting a needed prescription at all due to cost. Medicaid adults report cost-related rationing or delays at slightly higher rates than privately insured adults (10% compared with 8%), likely because Medicaid covers a predominantly low-income population. While prescription out-of-pocket costs in Medicaid are limited to nominal amounts, even low amounts may still be prohibitive for some families. Recently proposed federal prescription drug initiatives may affect overall Medicaid spending for prescription drugs, but they are not expected to have an impact on Medicaid enrollee affordability.

3. States vary in how they administer the prescription drug benefit.

While not required by Medicaid statute, all state Medicaid programs cover prescription drugs, though states administer the benefit in different ways. Within federal rules regarding payment and medical necessity requirements, states have flexibility to administer and manage the pharmacy benefit within their Medicaid programs. Capitated managed care is now the dominant way in which states deliver services, including prescription drugs, to Medicaid enrollees. As of July 2025, only eight out of 42 states that contract with managed care organizations (MCOs) “carved out” prescription drug coverage from managed care and delivered the pharmacy benefit through fee-for-service (FFS) (Figure 3). For the other MCO states, the pharmacy benefit is included in the overall capitation rate paid to the plan, though as a MCO risk mitigation strategy or for other reasons, states may also carve out one or more specific drugs (or drug classes) from MCO capitation payments. While most Medicaid prescription drugs are covered through the pharmacy benefit, some drugs, including outpatient physician-administered drugs or drugs provided as part of a hospital stay, are covered through the medical benefit or both, depending on how the drug is dispensed, administered, and billed.

States and MCOs often contract with external vendors like pharmacy benefit managers (PBMs) to manage or administer the pharmacy benefit. PBMs may perform a variety of administrative and clinical services for Medicaid programs (e.g., negotiating supplemental rebates with drug manufacturers, adjudicating claims, monitoring utilization, overseeing and formulating preferred drug lists, etc.) and are used in both FFS and managed care settings. States have increased their reliance on PBMs over the years, with 33 states reporting contracting with a PBM to administer their FFS pharmacy benefit as of July 1, 2023. However, PBMs have faced increased scrutiny in recent years as more states adopt reforms to increase transparency and improve oversight. Congress also included Medicare and employer health plan PBM reforms in the Consolidated Appropriations Act, 2026, though Medicaid PBM provisions were not included.

4. Medicaid payments for prescription drugs are determined by a complex set of policies.

Total Medicaid spending for a given outpatient drug is based on the amount paid to the pharmacy less rebates received from the manufacturer. Pharmacies negotiate prices and purchase drugs from manufacturers or wholesalers and then fill prescriptions for Medicaid enrollees. In return, the pharmacy receives payment from the state Medicaid agency based on the ingredient cost of the drug and professional dispensing fees, plus any copays paid by the enrollee (Figure 4). States set policies on dispensing fees and, within federal guidelines, enrollee cost-sharing, while federal regulations guide FFS payment levels for outpatient drug ingredient costs (physician-administered drugs or those received in an inpatient setting follow a different set of payment guidelines). If the state delivers the pharmacy benefit through managed care, MCOs reimburse the pharmacy, usually through a PBM. MCOs have more flexibility to set payment rates, though they must set payment rates sufficient to guarantee enrollee access. The final cost to Medicaid is then offset by any rebates received under the federal Medicaid Drug Rebate Program (MDRP) and state-negotiated supplemental rebates (if any).

Under FFS, state Medicaid programs reimburse pharmacies for prescription drugs based on the ingredient costs for the drug and a dispensing fee for filling the prescription (Figure 4). The ingredient cost must reflect the actual acquisition cost (AAC) or the price to the pharmacy of acquiring the drug from a manufacturer or wholesaler (see Box 1 for a list of key Medicaid drug pricing terms and their definitions). States have some flexibility to determine AAC, which can include using the National Average Drug Acquisition Cost (NADAC) survey or average manufacturer price (AMP) as a benchmark. With the exception of some multiple-source drugs for which there are additional limits, federal regulations require Medicaid programs to reimburse pharmacies based on the lesser of:

• (1) AAC plus a professional dispensing fee or
• (2) the pharmacy’s “usual and customary charge” to the public.

For certain multiple-source drugs, AAC is capped at the federal upper limits (FUL) or state maximum allowable costs (MAC). Overall, depending on the drug and state, reimbursement is typically set at the lesser of:

• (1) the state’s AAC formula plus dispensing fee,
• (2) the FUL plus dispensing fee,
• (3) the state MAC plus dispensing fee, or
• (4) the pharmacy’s usual and customary charge to the public. 

These limits ensure Medicaid is paying a reasonable market price for prescription drugs. The dispensing fee is intended to cover reasonable pharmacy costs associated with filling a prescription. States establish dispensing fees, and they can vary by type of pharmacy or drug. The ingredient and dispensing fee cost are considered together when assessing the adequacy of a state’s drug payment, and the total payment must meet federal requirements.

Manufacturers who want their drugs covered by Medicaid are required to rebate a portion of drug payments under the MDRP, and in return, Medicaid must cover almost all FDA-approved drugs produced by those manufacturers. The rebate formula is set in statute, varies by type of drug (brand or generic), and is the same regardless if drugs are purchased through FFS or managed care. For most brand name drugs, the rebate is the greater of either 23.1% of average manufacturer price (AMP), which is the average price paid to drug manufacturers, or the difference between AMP and “best price”, which is the lowest available price to any wholesaler, retailer, or provider, excluding certain government programs. The best price provision ensures that Medicaid gets the lowest drug prices (with some exceptions), and a majority of brand drug rebates are based on best price. For generic drugs, the rebate amount is 13% of AMP, and there is no best price provision. The rebate calculation also includes an additional inflationary component, which requires additional rebates if a drug’s price rises faster than inflation, and as of January 1, 2024, there is no longer a cap on the total rebate amount if a drug’s price increases quickly over time. The rebates are paid to the states quarterly, and shared between the states and federal government based on the state’s federal medical assistance percentage or “FMAP” to offset the total cost of prescription drug payments. Drugs not dispensed by the pharmacy but received in other settings, including physician-administered drugs, can be eligible for rebates under the MDRP if they meet the definition of a “covered outpatient drug,” generally meaning a prescription drug that is FDA approved from a rebating manufacturer and identified separately on a claim for payment.

In addition to federal statutory rebates, most states negotiate with manufacturers for supplemental rebates. As of September 2025, 48 states and DC had supplemental rebate agreements in place. States often use placement on a preferred drug list (PDL) as leverage to negotiate supplemental rebates with manufacturers (see Box 2). Some states have also formed multi-state purchasing pools to increase negotiating power and/or negotiated value-based arrangements (VBAs), which increase supplemental rebates if a drug does not perform as expected. In addition, Medicaid managed care plans (or typically PBMs on behalf of the plan) may negotiate their own supplemental rebate agreements with manufacturers, which then, when passed on to the plan, may result in lower capitation rates. In Medicaid and in general, there are many opaque aspects to the pricing of prescription drugs, and much of the data is proprietary, which makes it difficult to understand which prescription drugs and parts of the supply chain are the spending drivers.

5. While states must cover nearly all drugs under the MDRP, states use an array of payment strategies and utilization controls to manage prescription drug expenditures.

While rebates through the MDRP are a key tool to manage prescription drug expenditures, states also use an array of payment strategies and utilization controls. Under the MDRP, state Medicaid programs must cover nearly all of a rebating manufacturer’s FDA-approved drugs, essentially creating an open formulary. There is a small group of drugs that can be excluded from coverage, including drugs used for weight loss, though some states have opted to cover GLP-1s for obesity treatment or weight loss. The open formulary facilitates greater access to prescription drugs for enrollees but can also limit states’ ability to control drug costs through restrictive formularies. Instead, states use several tools to manage pharmacy expenditures and ensure safe use of medications. This includes innovative payment strategies such as VBAs, subscription models, or participating in recent federal drug payment models as well as tools such as preferred drug lists (PDLs), prior authorization linked to clinical criteria, quantity limits, and more to manage utilization (see Box 2). MCOs may apply differing utilization controls and medical necessity criteria unless the state’s MCO contract specifies otherwise. Utilization controls can also differ for physician-administered drugs covered under the medical benefit, and states have identified a number of challenges managing utilization and spending of drugs under the medical benefit in particular.

States continually develop, update, and expand their payment strategies and utilization controls. KFF’s 2025 Medicaid budget survey found that most responding states reported at least one new or expanded initiative to contain prescription drug costs, including participating in CMS’s cell and gene therapy access model or other initiatives related to VBAs, or implementing other policy changes related to maximizing rebates, expanding utilization controls, or oversight. Many of the cost containment initiatives reported specifically targeted high-cost specialty drugs, which are contributing to increases in Medicaid drug spending. At the federal level, there have been several recent prescription drug initiatives, including new drug payment models, that could help combat rising costs for state Medicaid programs, though questions remain about the implementation and impact of the deals.