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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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  • Deficit Reduction Act of 2005: Implications for Medicaid

    Issue Brief

    This issue brief summarizes the Medicaid provisions of the budget reconciliation law signed in February 2006 and discusses the implications of the proposed changes. The changes would net reductions of $4.8 billion over the next five years and $26.1 billion over the next ten years from current Medicaid spending. Issue Brief (.pdf)

  • Tracking Prescription Drug Coverage Under Medicare:  Five Ways to Look at the New Enrollment Numbers

    Issue Brief

    Tracking Prescription Drug Coverage Under Medicare: Five Ways to Look at the New Enrollment Numbers This new analysis, which assesses Medicare drug benefit enrollment statistics released Feb. 22 by the U.S. Department of Health and Human Services, examines five different approaches to understanding the Medicare drug coverage numbers: What share of the total Medicare population has creditable prescription drug coverage? What share of the total Medicare population is enrolled in a Medicare drug plan? How…

  • The Transition of Dual Eligibles to Medicare Part D Prescription Drug Coverage: State Actions During Implementation

    Report

    This 50-state survey of Medicaid officials assesses states’ early experience relating to the transition of low-income seniors and people with disabilities enrolled in both Medicaid and Medicare (dual eligibles) to the Medicare Part D drug benefit. Conducted by Health Management Associates, the survey covers the types of problems observed by states during the transition of dual eligibles to the Medicare drug benefit, state actions to correct problems and ensure temporary coverage, and specific data on…

  • Frontline Perspectives on Long-Term Care Financing Decisions and Medicaid Assets Transfer Practices

    Report

    Frontline Perspectives on Long-Term Care Financing Decisions and Medicaid AssetsTransfer Practices In the Deficit Reduction Act of 2005, Congress tightened Medicaid asset transfer rules for individuals qualifying for Medicaid assistance with nursing home bills. Research on asset transfer shows a low incidence of asset transfers and limited cost savings from tightening such rules. But, because of demographic trends that will increase pressure on Medicaid and concerns that the Medicaid program may be financing care for…

  • Private Long-Term Care Insurance: A Viable Option for Low and Middle-Income Seniors?

    Issue Brief

    In the Deficit Reduction Act of 2005, the federal government made it harder for individuals to qualify for Medicaid nursing home benefits by increasing penalties on individuals who have transferred assets for less than fair market value during the past five years and by making individuals with home equity above $500,000 ineligible for nursing home benefits. The legislation also lifts the moratorium on the number of states that may operate Long-Term Care (LTC) Partnership Programs,…

  • Resources on Medicaid Policy Changes in the Federal Budget Reconciliation Bill

    Issue Brief

    The Foundation's Kaiser Commission on Medicaid and the Uninsured has collected resources related to the Medicaid policy changes in the budget reconciliation law, Deficit Reduction Act of 2005. Deficit Reduction Act of 2005: Implications for Medicaid West Virginia Medicaid State Plan Amendment: Key Program Changes and Questions KYHealth Choices Medicaid Reform: Key Program Changes and Questions Reports Explore Long-Term Care Issues Included in the Deficit Reduction Act The Nuts and Bolts of Making Medicaid Policy…

  • The Implications of a Loss in Public Health Coverage

    Event Date:
    Event

    A new Health Affairs article and a policy brief examine the implications of cuts to public coverage programs like Medicaid and SCHIP. The Health Affairs article finds that Medicaid and SCHIP cuts would increase emergency department visits by the uninsured, suggesting that cost containment actions on public coverage programs would shift costs to hospital uncompensated care. The policy brief examines the share of current enrollees in public programs who would have other coverage options if…

  • Medicaid and Budget Reconciliation:  Implications of the Conference Report

    Issue Brief

    Medicaid and Budget Reconciliation: Implications of the Conference Report This issue brief provides an overview of the federal budget context and then highlights key Medicaid savings proposals in the budget reconciliation conference bill and discusses the implications of the proposed changes. Issue Brief (.pdf)