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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 Medicaid Resource Book

    Report

    This reference book describes four pivotal aspects of how the Medicaid program operates — who it covers, what it covers, how it is financed, and how it is administered. It was written to assist the public and policymakers in understanding the structure and operation of the Medicaid program.

  • Medicaid Long-Term Services and Supports: Key Considerations for Successful Transitions from Fee-For-Service to Capitated Managed Care Programs

    Issue Brief

    Although relatively few Medicaid beneficiaries are in capitated managed long-term services and supports (LTSS) programs, significant expansion is anticipated as more than half of states are implementing or proposing new programs that would include a transition from fee-for-service (FFS) to capitated managed care in the LTSS delivery system. By definition, these Medicaid beneficiaries need assistance with activities of daily living. Thus poor transitions, particularly those that lead to gaps in services, can have dire consequences.…

  • Implementing Medicaid Work Requirements: Lessons from Unwinding

    Issue Brief

    This brief highlights lessons from “Medicaid unwinding" that could help inform work requirement implementation. State experience with Medicaid unwinding illustrated the complexity of Medicaid eligibility processes and that outcomes reflect federal and state policy decisions, implementation and systems.

  • Restructuring Medicaid: Key Elements and Issues in Section 1115 Demonstration Waivers

    Issue Brief

    This policy brief provides background on Section 1115 Medicaid waiver activity, discusses the common provisions of the approved and proposed Section 1115 waivers since 1993, and briefly summarizes the current application of Section 1115 AFDC waivers. It also examines implications of the Section 1115 waivers on the Medicaid program and its beneficiaries. Policy Brief: Restructuring Medicaid: Key Elements And Issues In Section 1115 Demonstration Waivers

  • Medicaid Eligibility for Individuals with Disabilities

    Issue Brief

    This issue paper updates the July 1999 report and provides a general overview of federal Medicaid eligibility policy for the low-income disabled population. This paper focuses on four broad groups of individuals with disabilities: children under 18; adults under 65 who are not living in institutions; adults under 65 who are living in institutions; and adults under 65 who are also eligible for Medicare. In addition, this paper includes the new eligibility options offered under…

  • Individuals With Disabilities and their Experiences with Medicaid Managed Care

    Report

    Today, one out of every four disabled Medicaid beneficiaries receives health care through managed care. This Background Paper provides insights into how Medicaid managed care is working for individuals with disabilities, based on the findings from seven focus groups held in Florida and New Mexico. The key findings show that adults and children with disabilities feel alone in managing their health care and that important components of managed care - coordination and gatekeeping role that…

  • Brief Examines the Olmstead Decision’s Role In Community Integration for People With Disabilities Under Medicaid

    News Release

    As the 15th anniversary of the Supreme Court’s Olmstead decision approaches this month, a new brief from the Kaiser Family Foundation examines the legacy of the landmark civil rights ruling that the institutionalization of people with disabilities is illegal discrimination under the Americans with Disabilities Act. The brief, Olmstead’s Role In Community Integration for People with Disabilities Under Medicaid: 15 Years After the Supreme Court’s Olmstead Decision, revisits the historic case and examines legal developments…

  • How Will Medicare-for-all Proposals Affect Medicaid?

    Issue Brief

    As the debate over the future direction of our health care system heats up leading into the 2020 Presidential election, several Democratic proposals to create a single, federal, universal health insurance program known as Medicare-for-all have garnered significant attention. These proposals would replace most current public and private health insurance with a new federal program that would guarantee health coverage for all or nearly all U.S. residents. However, many details about how a new public…

  • Medicaid Financing: The Basics

    Issue Brief

    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 services and supports for low-income residents. This brief examines key questions about Medicaid financing and how it works.

  • Medicaid’s Home Care Support for Family Caregivers in 2025

    Issue Brief

    Medicaid home care programs offer various supports to family caregivers such as paid caregiving, self-directed services, respite care, and caregiver training. This issue brief describes the availability of self-directed services and supports for family caregivers in Medicaid home care in 2025, before most provisions in the reconciliation law take effect.