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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’s Role in Behavioral Health

    Other Post

    This infographic highlights Medicaid's role in facilitating access to behavioral health treatment and the impact of potential reductions in federal Medicaid financing on behavioral health coverage and access to services.

  • Medicaid Waiver Requests in Wisconsin and Maine Seek to Impose Work Requirements and Time Limits for Beneficiaries

    News Release

    A new issue brief from the Kaiser Family Foundation highlights proposed changes to Medicaid programs in Wisconsin and Maine that include work requirements and time limits in both states, as well as drug screenings for some beneficiaries in Wisconsin. The waiver authority sought by both states would impose welfare-like restrictions and include a number of provisions that have never been approved for traditional, non-Medicaid expansion populations, such as locking beneficiaries out of coverage for failure…

  • Data Note: Medicaid’s Role in Providing Access to Preventive Care for Adults

    Issue Brief

    Chronic illness is prevalent in the adult Medicaid population. Preventive care, including immunizations and regular screenings that permit early detection and treatment of chronic conditions, improves the prospects for better health outcomes. This Data Note focuses on Medicaid’s role in providing access to preventive care for low-income adults.

  • Medicaid: What We Learned From the Recent Debate and What to Watch for in September 2017

    Issue Brief

    The inclusion of major Medicaid changes in both the American Health Care Act (AHCA) that passed in the House and the Better Care Reconciliation Act (BCRA) considered in the Senate revealed that is hard to gain consensus on significant cuts and reforms to Medicaid. Medicaid has broad general support and intense support from special populations served by the program. In addition, proposed changes would have different implications across states due to significant program variation across…

  • Health Affairs Blog: Can States Substantially Reduce Medicaid Spending Through Delivery System And Financing Reform?

    Perspective

    In a Health Affairs blog post,  Joshua M. Wiener and Melissa Romaire of RTI International and MaryBeth Musumeci of the Kaiser Family Foundation examine whether states could successfully cope with substantial reductions in federal Medicaid funding under a per capita cap or block grant system by improving efficiency in the way both acute and long-term care are delivered and paid for under the program. A review of the evidence in literature suggests that large Medicaid…

  • California’s Uninsured on the Eve of ACA Open Enrollment

    Report

    This report presents the findings of a baseline survey of California’s uninsured adult population just before the start of the first open enrollment period under the Affordable Care Act (ACA). It will be followed by three other surveys over the course of the next two years that will capture the changing experiences and attitudes of this same group of 2,000 people over time, whether they obtain coverage or remain uninsured. The report analyzes the uninsured…

  • Managing Care Transitions in Medicaid: Spotlight on Community Care of North Carolina

    Issue Brief

    Community Care of North Carolina’s Transitional Care Program (TCP) provides robust transition planning for high-risk Medicaid inpatients to support sound transitions from the hospital back to the community and reduce emergency department use and readmissions. Integral elements of the TCP are hospital-based care managers who coordinate with care managers in medical home practices; centralized health information technology, and standard care management training and tools.