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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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  • 5 Key Facts About Medicaid Coverage for People with Disabilities

    Issue Brief

    This brief considers options under consideration to cut Medicaid spending by $2.3 trillion over ten years and their potential impact on people with disabilities. Policy changes such as per capita caps, reduced federal funding for the ACA expansion, and Medicaid work requirements could require states to limit coverage, reduce benefits, or cut provider payments. Given their higher health care costs and reliance on Medicaid for essential services, people with disabilities could be especially affected.

  • 5 Key Facts About Medicaid Eligibility for Seniors and People with Disabilities

    Issue Brief

    Nearly 1 in 4 Medicaid enrollees are eligible for the program because they are ages 65 and older or have a disability, and they have higher per-enrollee costs than other enrollees. Proposals to limit federal spending on Medicaid may create incentives for states to drop or reduce their eligibility or coverage for seniors and people with disabilities in response to fewer federal revenues. Considering the proposed reductions in Medicaid spending, this issue brief describes Medicaid…

  • Eliminating the ACA Medicaid Expansion Match Could Reduce Total Medicaid Spending by Up To $1.9 Trillion Over 10 Years and End Coverage for 20 Million People 

    News Release

    A new KFF analysis finds that a congressional proposal to significantly cut federal spending on the Affordable Care Act’s Medicaid expansion could reduce total Medicaid spending by up to nearly one-fifth, or $1.9 trillion, over a 10-year period, and end Medicaid coverage for as many as 20 million people.The impacts would be felt in both blue and red states and could effectively reverse and end the Medicaid expansion in most or all states that have…

  • What is Medicaid Home Care (HCBS)?

    Issue Brief

    This issue brief provides an overview of what Medicaid home care (also known as “home- and community-based services” or HCBS) is, who is covered, and what services were available in 2024.

  • 10 Things to Know About Medicaid

    Issue Brief

    At the start of 2025, many issues are at play that will affect Medicaid coverage, financing, and access to care. While Medicaid was not discussed much on the campaign trail, Congress may consider big changes as part of tax and spending debates and the Trump administration may make changes to Medicaid through executive actions. Amid the potential changes, this brief highlights ten key things to know about Medicaid.

  • 5 Key Facts About Medicaid Coverage for Adults with Mental Illness

    Issue Brief

    Nationwide, an estimated 52 million nonelderly adults live with mental illness, and Medicaid covers nearly one in three (29%) of them, or about 15 million adults. More than 1 in 3 Medicaid enrollees has a mental illness. Mental health treatment rates for Medicaid adults are higher than or similar to those with insurance.

  • A Medicaid Per Capita Cap: State by State Estimates

    Issue Brief

    This analysis examines the potential impacts on states, Medicaid enrollees, and providers of implementing a per capita cap on federal Medicaid spending, which is one proposal that has been discussed in Congress. Such a plan could decrease federal Medicaid spending by $532 billion to almost $1 trillion over a 10-year period, depending on how states respond. An estimated 15 million people could lose Medicaid coverage by 2034.

  • Trump Voters On Medicaid, On Medicaid Cuts

    From Drew Altman

    In a new column, KFF President and CEO Drew Altman discusses how recent KFF focus groups with Trump voters on Medicaid show that voters were not expecting big Medicaid cuts from the Trump administration and worry about what the impact of potential cuts in federal Medicaid spending will be. As Drew writes: “Trump built a populist base of working people formerly in the Democratic party.” When details of specific Medicaid cuts emerge, tension could develop…

  • KFF Health Tracking Poll February 2025: The Public’s Views on Potential Changes to Medicaid

    Feature

    Amid discussion of changes to the Medicaid program, most of the public say that Medicaid is important to their local communities. About two in ten favor cuts to Medicaid spending. Support for Medicaid cuts remain low even among typically conservative groups such as Republicans, Trump voters, and those living in rural communities. The poll also gauges the impact of arguments for and against Medicaid work requirements and reductions to federal spending on ACA expansion.