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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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  • Medicaid at 50: A Look Back – And Ahead

    Event Date:
    Event

    Medicaid, the main health insurance program for low-income people and the single largest source of public coverage in the U.S., turns 50 this year. In that time, it has grown to cover nearly 70 million Americans and become a key source of financing for safety net hospitals and health centers, as well as the main source of coverage and financing of long-term care. The program continues to be a focus of policy debate and partisan…

  • Medicaid at 50

    Report

    The Medicaid program, signed into law by President Lyndon B. Johnson on July 30, 1965, will reach its 50th anniversary this year, a historic milestone. This report reflects on Medicaid’s accomplishments and challenges and considers the issues on the horizon that will influence the course of this major health coverage and financing program moving forward.

  • How Are Hospitals Faring Under the Affordable Care Act? Early Experiences from Ascension Health

    Issue Brief

    Expanded health insurance coverage through the Affordable Care Act (ACA) is having a major impact on many of the nation’s hospitals through increases in the demand for care, increased patient revenues, and lower uncompensated care costs for the uninsured. This report examines the early experiences with the ACA by Ascension Health, the delivery subsidiary of the nation’s largest not-for-profit health system, Ascension. It finds that, overall, Ascension hospitals in Medicaid expansion states saw increased Medicaid…

  • 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.

  • Demonstrations to Improve the Coordination of Medicare and Medicaid for Dually Eligible Beneficiaries: What Prior Experience Did Health Plans and States Have with Capitated Arrangements?

    Report

    This report examines the Center for Medicare and Medicaid Services (CMS) financial alignment demonstration for beneficiaries dually eligible for Medicare and Medicaid, with a focus on the extent to which participating states and health plans have prior experience with capitated managed care arrangements under Medicare or Medicaid, and specifically for this population. Under these capitated financial alignment demonstrations, health plans contract with the state and CMS (a three-way contract) to provide both Medicare and Medicaid…

  • Public vs. Private Health Insurance on Controlling Spending

    News Release

    In his latest column for The Wall Street Journal's Think Tank, Drew Altman analyzes whether public or private health insurance does a better job of controlling costs. All previous columns by Drew Altman are available online. 

  • Key Themes From Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States

    Issue Brief

    Building on an earlier brief that provided an overview of the components of DSRIP waivers, this analysis relied upon interviews with stakeholders to identify emerging trends and themes from DSRIP waivers in four states – California, Massachusetts, New York and Texas. It highlights that DSRIP waivers are spurring major change in relationships among providers; allowing providers to launch new initiatives aimed at improving care and reducing costs; and fostering a stronger focus on the social…

  • Medicare and Medicaid at 50

    Video

    With Medicare and Medicaid turning 50 this year, this updated video provides a brief history of both programs, including: an examination of the health care, social and political landscape that gave rise to them, the significant ways each program has evolved over five decades, and the important roles they play in the U.S. health care system. The video includes archival footage, as well as commentary and perspective from policymakers, government officials and experts.