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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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  • KFF Health Tracking Poll February 2025: The Public’s Views on Potential Changes to Medicaid

    Feature

    Amid discussion of changes to the Medicaid program, most of the public say that Medicaid is important to their local communities. About two in ten favor cuts to Medicaid spending. Support for Medicaid cuts remain low even among typically conservative groups such as Republicans, Trump voters, and those living in rural communities. The poll also gauges the impact of arguments for and against Medicaid work requirements and reductions to federal spending on ACA expansion.

  • Poll: With More Than Half the Public Saying They or a Family Member Have Been Covered by Medicaid, Large Majorities Don’t Want Cuts, Including Most Trump Voters and Rural Residents

    News Release

    As Congress considers changes to the Medicaid program as part of the budget debate, relatively few (17%) in the public say they want to see a reduction in Medicaid spending, with larger shares saying they want spending to stay about the same (40%) or increase (42%), a new KFF Health Tracking Poll finds. Support for Medicaid spending cuts is relatively low even among traditionally conservative groups, including Republicans (33% favor cuts), people who voted for…

  • A quote in green text against a white background reads, "The math is conclusive: Major cuts to Medicaid are the only way to meet the House’s budget resolution requirements. There are a myriad of options available for cutting Medicaid, but all of them would leave the states facing  difficult choices to raise revenues or cut spending."

    The Math is Conclusive: Major Medicaid Cuts Are the Only Way to Meet House Budget Resolution Requirements

    Quick Insights

    The CBO letter confirms early expectations, finding that over the next 10 years, 93% of non-Medicare spending in the E&C [House Energy & Commerce Committee] jurisdiction is from the federal share of Medicaid spending…Even if E&C eliminated all non-Medicaid and CHIP spending, the committee would need to cut federal spending on Medicaid and CHIP by well over $700 billion, nearly 10% of projected spending.

  • 5 Key Facts About Medicaid and Hospitals

    Issue Brief

    We explain the role of Medicaid for hospitals, including how much spending on hospital care comes from Medicaid, the share of births covered by the program, and how Medicaid expansion has impacted hospital finances.

  • Trump Voters On Medicaid, On Medicaid Cuts

    From Drew Altman

    In a new column, KFF President and CEO Drew Altman discusses how recent KFF focus groups with Trump voters on Medicaid show that voters were not expecting big Medicaid cuts from the Trump administration and worry about what the impact of potential cuts in federal Medicaid spending will be. As Drew writes: “Trump built a populist base of working people formerly in the Democratic party.” When details of specific Medicaid cuts emerge, tension could develop…

  • Capping Per Enrollee Spending Could Reduce Federal Medicaid Expenditures by $532 billion to Nearly $1 Trillion Over 10 Years Depending on How States Respond and Result in as Many as 15 Million People Losing Medicaid Coverage by 2034

    News Release

    As Congress considers ways to cut Medicaid spending to help finance the extension of federal tax cuts, a new KFF analysis finds that imposing a cap on federal spending per Medicaid enrollee—known as a “per capita cap”—could trigger a decrease in federal Medicaid spending over a 10-year period of $532 billion to almost $1 trillion, depending on how states respond to the cuts. An estimated 15 million people could lose Medicaid coverage by 2034, if…

  • A Medicaid Per Capita Cap: State by State Estimates

    Issue Brief

    This analysis examines the potential impacts on states, Medicaid enrollees, and providers of implementing a per capita cap on federal Medicaid spending, which is one proposal that has been discussed in Congress. Such a plan could decrease federal Medicaid spending by $532 billion to almost $1 trillion over a 10-year period, depending on how states respond. An estimated 15 million people could lose Medicaid coverage by 2034.

  • The Debate Over Federal Medicaid Cuts: Perspectives of Medicaid Enrollees Who Voted for President Trump and Vice President Harris

    Report

    The Republican-led Congress is considering plans to cut Medicaid to help pay for tax cuts, with the House budget resolution targeting $880 billion or more in potential reductions to federal Medicaid spending. To better understand the experiences of Medicaid enrollees and their perceptions of potential changes to the program, KFF conducted five virtual focus groups in January, including three groups with participants who had voted for President Trump in the 2024 election and two groups…

  • What Does the Federal Government Spend on Health Care?

    Issue Brief

    As Congressional Republicans and President Trump search for trillions of dollars in cuts to mandatory federal spending that could help offset the cost of extending expiring tax cuts, this brief analyzes current support from the federal government for health programs and services, including both spending and tax subsidies as context for those federal budget discussions.