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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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  • Unintended Consequences: The Potential Impact of Medicare Part D on Dual Eligibles with Disabilities in Medicaid Work Incentive Programs

    Report

    Individuals with disabilities who are eligible for both Medicare and Medicaid must also shift to a Medicare prescription drug benefit in 2006. This report analyzes how younger dual eligibles in Kansas enrolled in work incentive programs differ than other Medicare enrollees in the types of drugs they use and how much drug spending they have to better assess the impact of the Medicare drug benefit on this population. Report (.pdf)

  • Medicaid: Addressing the Future

    Event

    Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, testified before the U.S. Senate Special Committee on Aging on the future of Medicaid and its role for low-income Americans, particularly the elderly. Testimony (.pdf)

  • Medicaid Enrollment and Spending by “Mandatory” and “Optional” Eligibility and Benefit Categories

    Report

    Medicaid Enrollment and Spending by "Mandatory" and "Optional" Eligibility and Benefit Categories This report presents new estimates of the proportion of Medicaid beneficiaries and spending that is mandatory and optional to promote an increased understanding of how Medicaid restructuring proposals might affect the various groups and services covered by the program. Report (.pdf)

  • Medicare Prescription Drug Improvement and Modernization Act Implementation Timeline: June 2004 – December 2006 Key Dates

    Report

    Key Implementation Dates for the Medicare Prescription Drug Benefit This timeline presents important dates and deadlines of key implementation activities related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). It runs from the beginning of 2005 through the end of 2006, the first year of the new Medicare drug benefit. Some of these dates are defined in the MMA statute, while others are from the final rule issued by the Centers…

  • The Latest Data on Mandatory and Optional Populations and Benefits in Medicaid

    Report

    With discussions on restructuring Medicaid occurring in state capitols and Washington, two new reports provide the latest data on how much of Medicaid's spending is for covering mandatory versus optional populations and services. The analysis shows that although optional populations account for 29 percent of Medicaid enrollment, 60 percent of all Medicaid spending (whether for mandatory or optional populations) is optional and 86 percent of optional spending is for the elderly or individuals with disabilities.…

  • Medicaid:  An Overview of Spending on “Mandatory” vs. “Optional” Populations and Services

    Issue Brief

    Medicaid: An Overview of Spending on "Mandatory" vs. "Optional" Populations and Services This issue brief provides an overview of Medicaid’s optional beneficiaries and services. The brief demonstrates that although “optional” populations account for only 29 percent of Medicaid enrollment, 60 percent of all Medicaid expenditures for both “mandatory” and “optional” populations are “optional,” and the majority of these (86 percent) pay for services provided to the elderly and disabled. Issue Paper (.pdf)

  • Stresses to the Safety Net:  The Public Hospital Perspective

    Report

    The nation’s safety net financing is fragmented; consequently, providers must knit together resources from many different funding sources to create a stream of revenue to cover the costs of providing a very broad range of services. This report describes those sources of revenue, documenting that nearly 40% of all safety net revenues are from Medicaid. The report also describes challenges that safety net hospitals and health systems are experiencing as they attempt to rebound from…

  • Increasing Premiums and Cost Sharing in Medicaid and SCHIP: Recent State Experiences

    Issue Brief

    Over the past few years, a number of states have implemented new or increased existing out-of-pocket costs for beneficiaries in their Medicaid, SCHIP, or other public coverage programs. This brief reviews the key findings from this recent activity, including the impact on enrollment in public coverage programs, access to care, and providers. Issue Paper (.pdf)

  • Medicaid’s Role in Long-Term Care

    Other Post

    Medicaid and Long-Term Care While Medicaid is the nation’s major source of financing for long-term care services, paying for over 40% of total long-term care, its role is not well understood. Misperceptions on who qualifies and what is covered are common. A fact sheet and a Q & A sheet about Medicaid’s role in long-term care assistance provide basic information on the topic. Medicaid’s Role in Long-Term Care: Q & A Medicaid and Long-Term Care…