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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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  • American Recovery and Reinvestment Act (ARRA): Medicaid and Health Care Provisions

    Fact Sheet

    This fact sheet examines the assistance for Medicaid programs and key health provisions in the American Recovery and Reinvestment Act (ARRA) that President Obama signed into law on February 17, 2009. Subjects covered include the temporary increase in federal matching money for state Medicaid programs, subsidies for COBRA health coverage for laid off workers and funding for health information technology. It includes a breakdown of additional federal allocations to states for Medicaid costs under the…

  • The Diversity of Dual Eligible Beneficiaries: An Examination of Services and Spending for People Eligible for Both Medicaid and Medicare

    Issue Brief

    This issue brief analyzes linked Medicare and Medicaid data to examine dual eligibles' utilization and spending in both programs in 2007. As a group, dual eligibles are costly—with per capita Medicare and Medicaid spending over four times Medicare spending for other beneficiaries. However, a small share of dual eligibles account for most of the group's spending, and dual eligibles who are high cost to the Medicare program are generally not the same individuals who are…

  • A Primer on Dually Eligible Beneficiaries

    Event Date:
    Event

    The nine million dually eligible beneficiaries are generally poorer and sicker than other Medicare beneficiaries, tend to use more health care services, and thus account for a disproportionate share of Medicare and Medicaid spending. Because they often have complex medical and long-term care needs, and must navigate both Medicaid and Medicare benefits and financing, they present a special challenge for those seeking a more efficient and coordinated care delivery system. The panel will address such…

  • Five Key Questions And Answers About Section 1115 Medicaid Waivers

    Issue Brief

    This issue brief provides an overview of what Section 1115 Medicaid waivers are, how they are approved and financed, how states have used them, and how they are impacted by health reform. For many years, Section 1115 waivers have been used by states to test new coverage approaches not otherwise allowed under Medicaid program rules. Some waivers have also raised important policy issues. Since the passage of the health reform law, several states, including California,…

  • Provider Payment And Access To Medicaid Services: A Summary of CMS’ May 6 Proposed Rule

    Issue Brief

    This brief summarizes the major provisions of a rule proposed by the Centers for Medicare and Medicaid Services that would set forth state requirements for ensuring access to care in state Medicaid programs. It would apply to fee-for-service Medicaid, but not to Medicaid managed care programs. The public comment period for the regulation closed on July 5, 2011. Under the proposed rule, state Medicaid agencies would have to review access to a subset of Medicaid-covered…

  • Medicaid Innovations: Can Managed Care Cut Costs and Improve Value?

    Event Date:
    Event

    A number of states have expressed interest in expanding managed care approaches within their Medicaid programs. While managed care may present an opportunity for better delivery of care, it presents challenges within certain populations and geographic areas. How many states are planning Medicaid managed care expansions? What impact would these changes have on beneficiaries, providers and health plans? What have we learned from past efforts to expand managed care? This briefing, cosponsored by the Alliance…

  • An Overview of Recent Section 1115 Medicaid Demonstration Waiver Activity

    Issue Brief

    This brief summarizes and examines the implications of recent Section 1115 Medicaid waiver activity. Section 1115 waivers provide states flexibility to test new approaches in Medicaid that differ from federal program rules and can have significant impacts for beneficiaries, providers, and states. While recent waivers and waiver proposals vary in their specific goals and approaches, some key themes are emerging, including using Section 1115 waiver authority to get a jump start on the 2014 Medicaid…

  • How Five Leading Safety-Net Hospitals Are Preparing For The Challenges and Opportunities of Health Care Reform

    Report

    This study, published in the journal Health Affairs, examines how five leading safety-net hospitals are preparing for major changes expected to result from the Affordable Care Act (ACA), including less government support for uncompensated care and the need to compete for newly insured people. The hospitals studied are Bellevue Hospital Center in New York City; Denver Health Medical Center in Colorado; Parkland Health and Hospital System in Dallas; San Francisco General Hospital in California; and…

  • Medicaid and Its Role in State/Federal Budgets and Health Reform: A Fact Sheet

    Fact Sheet

    This fact sheet highlights key issues about Medicaid, including the structure, financing and purpose of the program, its role for low-income beneficiaries, its share of the federal budget and state budgets and the significant implications of the coverage expansion under the Affordable Care Act. Fact Sheet (.pdf) Related chartpack: Medicaid and Its Role in State/Federal Budgets and Health Reform

  • The Texas Health Care Landscape

    Fact Sheet

    This fact sheet summarizes the Texas health care landscape, including data on demographics, population health, the uninsured and the state Medicaid program. Fact Sheet (.pdf)