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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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  • Leveraging Medicaid for School-Based Behavioral Health Services: Findings from a Survey of State Medicaid Programs

    Issue Brief

    Concerns about youth mental health and access to care continues to increase. Schools can be an easy access point for behavioral health services and Medicaid provides significant financing for the delivery of these services in schools. In this analysis, we explore the strategies state Medicaid programs are taking to promote and improve access to school-based behavioral health services, and how recent policies call on Medicaid to expand access to care for youth, particularly in schools.

  • A Look at Substance Use Disorders (SUD) Among Medicaid Enrollees

    Issue Brief

    In its role as a public program and the single largest payer of behavioral health services in the country, Medicaid is particularly well positioned to implement policy to improve the delivery, quality, and effectiveness of behavioral health services. Our analysis finds that 7.3 percent of Medicaid enrollees ages 12 to 64 had at least one clinically-identified substance use disorder in 2019, but this is likely an undercount, as other research suggests that prevalence is at…

  • Prescriptions to Treat Opioid Overdoses and Opioid Use Disorder Among Medicaid Enrollees Rose Sharply in the Years Leading Up to the Pandemic

    News Release

    State Medicaid programs saw a doubling of prescriptions for medications used to treat Opioid Use Disorder (OUD) or rapidly reverse opioid overdoses from 2016 to 2019, finds a new KFF analysis. KFF analysts studied the latest available Medicaid claims data -- detailed and comprehensive administrative data that can help answer questions and inform policy -- and found that the share of enrollees who received at least one medication used to treat OUD or reverse opioid…

  • Rural Hospitals Have Fared Worse Financially in States that Haven’t Expanded Medicaid Coverage

    News Release

    Rural hospitals fared worse financially in states that have not expanded their Medicaid programs under the Affordable Care Act than in states that expanded Medicaid, a new KFF analysis finds. Nearly one third of all rural hospitals nationally are in the 11 states that have not approved the expansion of their Medicaid programs to cover low-income childless adults, and concerns about their ongoing viability has been an issue in legislative debates about whether to do…

  • FAQs on Health Spending, the Federal Budget, and Budget Enforcement Tools

    Issue Brief

    As some policymakers in Washington are pushing to reduce the federal deficit and debt, this brief provides a concise explanation of federal spending for domestic and global health programs and services, which could be part of any conversation about curbing federal spending. These FAQs answer basic questions about health spending and the federal budget and budget enforcement tools, including the debt limit and sequestration.

  • Medicare Advantage Insurers Report Much Higher Gross Margins Per Enrollee Than Insurers in Other Markets

    News Release

    A new analysis of health insurers’ 2021 financial data shows that insurers continue to report much higher gross margins per enrollee in the Medicare Advantage market than in other health insurance markets. The analysis examines insurers’ financial data in the Medicare Advantage, Medicaid managed care, individual (non-group), and fully insured group (employer) markets. In 2021, Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, at least double the margins reported by insurers in the…

  • How are State Medicaid Programs Approaching the Unwinding of the Federal Continuous Enrollment Provision?

    Event Date:
    Event

    KFF estimates that enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) will have grown by 23.3 million enrollees, to nearly 95 million, by the end of March, when the federal continuous enrollment provision expires. On Thursday, March 16, 2023, KFF hosted an hour-long web briefing focused on how state Medicaid programs are approaching this unwinding of the continuous enrollment provision. States’ existing enrollment and renewal procedures and their differing approaches to the unwinding…

  • As State Medicaid Programs Prepare to Resume Disenrollments, Many States Are Using a Range of Strategies to Make it Easier for People Who Remain Eligible to Retain Coverage, But in Others it Will be More Difficult

    News Release

    With pandemic-era protections for Medicaid enrollees set to expire this month, state Medicaid programs are gearing up to resume eligibility checks and disenrollments. But how the unwinding of the federal continuous enrollment provision affects enrollees and state budgets will vary according to states’ differing approaches and administrative capabilities, a new KFF survey finds. The 21st annual KFF survey of state Medicaid and Children’s Health Insurance (CHIP) Program officials finds that many states are using an…

  • Unwinding of Medicaid Continuous Enrollment: Key Themes from the Field

    Issue Brief

    Data are important to help monitor how unwinding is going across states, but trackers and dashboards only tell part of the unwinding story. This brief examines the perspectives of state officials and others involved in the unwinding process. The brief provides information on outreach and engagement, renewal processes and coverage transitions, providing lessons for the ongoing unwinding process, as well as for how to conduct more effective Medicaid renewals generally in the future.

  • Year in Review: 10 Health Policy Issues for 2023

    Fact Sheet

    This fact sheet offers a look back at 10 issues that KFF tracked closely during 2023 in its polling, policy analysis and journalism, including summaries of major findings and news stories.