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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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  • The New Medicare Rx Benefit:  Challenges for Maintaining Access to Prescription Drugs

    Other Post

    The New Medicare Rx Benefit: Challenges for Maintaining Access to Prescription Drugs With the launch of the new Medicare Part D prescription drug benefit less than 18 months away, and growing interest in beneficiaries’ access to medications in the future, the Kaiser Family Foundation is pleased to release two new publications that examine issues concerning access to medications raised by the implementation of the new Part D Medicare prescription drug benefit. The New Medicare Drug…

  • Economic Stress and the Safety Net: A Health Center Update

    Issue Brief

    The issue paper provides data on the demographic profile of health center patients and the revenue sources available for financing their care, including recent increases in federal discretionary funding. It examines the impact of the recent economic downturn on health centers in selected communities, exploring the effect of elevated unemployment levels among lower wage workers, declining private health insurance coverage, and widespread cutbacks in Medicaid--the single most important source of health center financing. Issue Paper…

  • The New Medicare Prescription Drug Law:  Issues for Dual Eligibles with Disabilities and Serious Conditions

    Issue Brief

    The New Medicare Prescription Drug Law: Issues for Dual Eligibles with Disabilities and Serious Conditions The new issue paper discusses the challenges the new Medicare drug program faces in meeting the needs of dual eligible individuals with disabilities, who tend to have extensive, complex and varying needs. The brief examines four key questions about how the new benefit will serve dual eligibles with disabilities and profiles some individuals from this population for whom prescription drugs…

  • Issues Surrounding the “Clawback” or State Contributions Towards Medicare Drug Coverage:  A Conference Call Discussion

    Other Post

    Issues Surrounding the “Clawback” or State Contributions Towards Medicare Drug Coverage: A Conference Call Discussion As part of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 signed into law last year, Congress included a financing provision that requires a monthly payment from each state to the Medicare program beginning in January 2006. MMA’s clawback provision will recapture most of the savings that states would realize when Medicare assumes prescription drug costs for…

  • Medicaid Prescription Drug Spending and Use

    Issue Brief

    This issue paper provides the latest data and trend analysis on Medicaid prescription drug spending and utilization. In 2002, Medicaid programs spent $30 billion for prescribed drugs. Issue Paper (.pdf)

  • Olmstead at Five:  Assessing the Impact

    Report

    This report examines the impact of Olmstead v. L.C. five years after the United States Supreme Court’s 1999 landmark decision. The analysis brings together new research with a synthesis of research undertaken over the past five years, to help policymakers and program administrators understand the meaning of the Americans with Disabilities Act for health programs in Olmstead’s aftermath. Report (.pdf) Related Olmstead Materials

  • The U.S. Supreme Court’s Olmstead Decision:  Five Years Later

    Event Date:
    Event

    The U.S. Supreme Court's Olmstead Decision: Five Years Later Five years after the Supreme Court’s landmark Olmstead decision applying the Americans with Disabilities Act to the right of individuals with disabilities to receive health care in a community-based setting, the Kaiser Commission on Medicaid and the Uninsured releases two new reports and a video examining what progress has been made and the impact on the Medicaid program. Policy Brief - Olmstead v. L.C.: The Interaction…

  • The “Clawback:” State Financing of Medicare Drug Coverage

    Issue Brief

    This issue paper describes the origins of the clawback, the formula by which each state’s clawback amount is calculated, and the clawback’s implications for states and for low-income Medicare beneficiaries. Issue Paper (.pdf)

  • Additional Help with Rx Drug Costs For Low-Income People on Medicare

    Other Post

    Additional Help with Prescription Drug Costs For Low-Income People on Medicare (For 2007 Benefits and Cost-Sharing) As of 2007, Medicare helps pay for outpatient prescription drugs. Medicare provides additional help with drug costs to beneficiaries who qualify based on low incomes and limited resources. The information below describes the different levels of assistance available to people who meet the eligibility requirements. People on Medicare Who Also Have Full Medicaid Benefits (Dual Eligibles) pay: No premium…