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Spending on Medicaid State Directed Payments Before New Limits Take Effect

Forty states and DC currently receive $93 billion in annual federal Medicaid spending through state directed payments (SDPs) and may be at risk due to forthcoming limits on these payments, according to new KFF estimates. Annual federal spending on SDPs is highest in California (an estimated $10.6 billion)—followed by Texas ($6.3 billion), North Carolina ($5.2 billion), and Illinois ($5.1 billion).

Forthcoming Policy Changes to Medicaid State Directed Payments

Changes to Medicaid State Directed Payments

The 2025 reconciliation law cut federal Medicaid spending by an estimated $911 billion from 2025 through 2034, some of which stems from new restrictions on Medicaid state directed payments (SDPs) for hospital and other health care services. This issue brief describes SDPs and forthcoming policy changes stemming from the 2025 law and the proposed regulation to implement those requirements and make other changes.

Medicaid Work RequiremEnts

Tracking the 2025 Reconciliation Law’s Medicaid Work Requirements: Data and Policies

To implement Medicaid work requirements, states will need to make important policy and operational decisions, implement needed system upgrades or changes, develop new outreach and education strategies, and hire and train staff, all within a relatively short timeframe. The information tracked here can serve as a resource to understand Medicaid work requirements and state options, gauge readiness, and track implementation of the requirements.

understanding medicaid

Medicaid Financing

Medicaid represents $1 out of every $5 spent on health care in the U.S. and is the major source of financing for states to provide health coverage and long-term care. This brief examines key questions about Medicaid financing and how it works.

Medicaid Program Integrity

This brief explains what is known about improper payments and fraud and abuse in Medicaid and describes ongoing state and federal actions to address program integrity.

Medicaid and Provider Taxes

All states except Alaska cover some state Medicaid costs with taxes on health care providers. This brief uses data from KFF’s 2024-2025 survey of Medicaid directors to describe current practices and the federal rules governing them.

Medicaid and Hospitals

Absorbing reductions in Medicaid spending could be challenging for hospitals, particularly for those that are financially vulnerable. This brief provides data on the reach of Medicaid across hospitals, patients, and charity care.

Medicaid Home Care

This issue brief provides an overview of what Medicaid home care (also known as “home- and community-based services”) is, who is covered, and what services were available in 2025.

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  • Proposed Changes to Medicaid Expansion in Kentucky

    Fact Sheet

    On June 22, 2016, Governor Bevin released his proposed Section 1115 demonstration waiver application called Kentucky HEALTH (Helping to Engage and Achieve Long Term Health) as an alternative to the current Medicaid expansion which is being implemented through a state plan amendment according to the terms in the ACA. On July 3, 2017, Kentucky submitted an amendment, proposing several changes, to its pending waiver application to the new Administration. This fact sheet summarizes the proposed…

  • Medicaid Enrollment & Spending Growth: FY 2019 & 2020

    Issue Brief

    This brief analyzes Medicaid enrollment and spending trends for FY 2019 and FY 2020 based on interviews and data provided by state Medicaid directors as part of the 19th annual survey of Medicaid directors in all 50 states and the District of Columbia. States reported declines in Medicaid enrollment and modest growth in total Medicaid spending for state fiscal year (FY) 2019 and budgeted for nearly flat enrollment growth but a return to more typical…

  • State Budgets for Fiscal Year 2020 Include Total Medicaid Spending Growth of 6.2 Percent on Average, Even As Enrollment Remains Essentially Flat  

    News Release

    States budgeted for total Medicaid spending to increase at a faster pace than enrollment in fiscal year 2020, driven in part by rising costs for prescription drugs, provider rate increases and higher costs associated with caring for the elderly and disabled, according to KFF’s new 50-state Medicaid budget survey. The 19th annual survey of state Medicaid directors finds that officials expect total Medicaid spending to climb 6.2 percent while enrollment remains virtually flat, up 0.8…

  • State Options for Medicaid Coverage of Inpatient Behavioral Health Services

    Report

    This report provides data to understand current patterns of Medicaid enrollees’ use of inpatient and outpatient substance use disorder and mental health treatment services; explains the options for states to access federal Medicaid funds for enrollees receiving IMD services; analyzes current Section 1115 waiver activity; and draws on interviews with policymakers using IMD waivers in Vermont, Virginia, and San Diego County to examine successes and challenges

  • Analysis of Recent Declines in Medicaid and CHIP Enrollment

    Fact Sheet

    This fact sheet provides analysis of this recent enrollment decrease and discusses potential implications for coverage rates. It is based on Kaiser Family Foundation analysis of the Centers for Medicare and Medicaid Services (CMS) Performance Indicator Project Data.

  • Medicaid Financing Cliff: Implications for the Health Care Systems in Puerto Rico and USVI

    Issue Brief

    This brief provides an overview of the status of the health care systems and Medicaid programs in Puerto Rico and the U.S. Virgin Islands (USVI) about one and a half years after Hurricanes Irma and Maria struck the islands in September 2017. The hurricanes exacerbated the territories’ existing economic and health care challenges by accelerating outmigration of residents and health care providers and destroying homes, schools, health care facilities, and other infrastructure. After the storms,…

  • Community Health Centers Prepare for Funding Uncertainty

    Issue Brief

    With the Community Health Center Fund, a key source of federal funding, set to expire in September, community health centers across the country are considering steps to reduce staffing, close some locations and eliminate or reduce services as they cope with uncertainty about their future financing.

  • Evolving Picture of Nine Safety-Net Hospitals: Implications of the ACA and Other Strategies

    Issue Brief

    Safety-net hospitals are an integral part of the U.S. health care landscape, providing care to some of the nation’s most medically vulnerable populations, including Medicaid enrollees and the uninsured. With the implementation of the Affordable Care Act (ACA), the U.S. health care system is rapidly changing, and safety-net hospitals need to make major adjustments to survive in the post-reform environment. This brief draws on interviews with executives at nine safety-net hospital systems and examines how…

  • Medicaid Expansion, Health Coverage, and Spending: An Update for the 21 States That Have Not Expanded Eligibility

    Issue Brief

    Ever since the Supreme Court ruled in June 2012 that states could effectively choose whether or not to accept the Affordable Care Act’s expansion of Medicaid eligibility, that choice has been one of the most prominent and often one of the most contentious issues for states. In this report, we provide new projections of the impact of Medicaid expansion on health coverage, Medicaid enrollment, and costs in states that have not expanded Medicaid.