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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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  • An Overview of State Approaches to Adopting the Medicaid Expansion

    Issue Brief

    State approaches to adopting the Affordable Care Act’s Medicaid expansion have varied greatly by state based on state law, the political context, or other factors. While it does not cover how every state has enacted the Medicaid expansion, this issue brief highlights some of the different approaches states have taken to adopt the Medicaid expansion. Each state’s circumstances are unique, and the actions taken by one state may not apply to another state’s circumstances.

  • Medicaid in the Territories: Program Features, Challenges, and Changes

    Issue Brief

    This brief draws on a survey of and interviews with Medicaid officials in U.S. Territories, as well as other research, to examine key issues and trends in their Medicaid programs. Territories differ from the states on key demographic, economic, and health status indicators. Unlike in the states, where federal Medicaid funding is not capped, and the federal share varies based on states’ per capita income, Medicaid in the territories is subject to a statutory cap…

  • The Debate About Enhanced Premium Tax Credits Begins to Emerge (Finally)

    From Drew Altman

    In his latest column, president and CEO Drew Altman discusses why debate about extending the ACA enhanced tax credits set to expire this year has been slow to develop, and why it could matter to Republicans politically if the tax credits are not extended.

  • On Medicaid Expansion, History Matters

    From Drew Altman

    In his latest column, KFF President and CEO Drew Altman discusses the history of the battles over the ACA’s provisions that were designed to expand coverage for the uninsured, which helps explain the effort to cut federal funding for the Medicaid expansion today. The real underlying issues, he says, are the same divisions that have always plagued the debate about covering the uninsured.

  • The Spotlight Is on Medicaid Cuts, But the ACA Marketplaces Could See a One-Third Cut in Enrollment

    From Drew Altman

    In his latest column, President and CEO Drew Altman shows how proposals contained in the House reconciliation bill could result in a one-third reduction in ACA Marketplace enrollment. “While all eyes are on the big Medicaid cuts being proposed in the House,” he writes, “significant changes are also being proposed that together would dramatically reduce enrollment in the ACA Marketplaces.”

  • Why Most States Will Not Replace Federal Medicaid Cuts

    From Drew Altman

    In his latest Beyond the Data column, KFF’s President and CEO Drew Altman discusses how difficult it will be for states to replace lost federal Medicaid funding should Congress make significant cuts.

  • Medicaid Postpartum Coverage Extension Tracker

    Tracker

    This page tracks recent state actions to extend Medicaid postpartum coverage, including approved and pending 1115 waivers, legislation that will require the state to seek federal approval through a SPA or 1115 waiver, submitted and approved SPAs, and coverage financed solely with state funds.

  • A Look at New or Expanded Medicaid and Public Health Partnerships from 2025: Findings from A Survey of State Medicaid Programs

    Issue Brief

    State Medicaid and public health agencies both work to advance the health of their communities, often pursuing similar priorities and serving similar populations. This brief examines findings from KFF's 25th annual Medicaid budget survey, which asked state Medicaid directors about new or enhanced initiatives involving public health in FY 2025 or planned for FY 2026.