Anticipated State Medicaid Trends for 2025

Results from a new survey of State Medicaid Directors suggest that State Medicaid spending in 2025 is expected to rise and enrollment to fall next year as states weigh greater financial support for providers and health insurance companies. A full copy of the 2024-2025 Issue Brief can be found here.

KFF (formerly the Kaiser Family Foundation) commissioned a survey of Medicaid directors in all 50 states and the District of Columbia to track expected trends in Medicaid spending, enrollment, and policy-making for 2025. Medicaid directors are concerned about the economy declining and the consequences of the elections as they continue to cope with the expiration of enhanced federal funding enacted during the COVID-19 public health emergency. Five highlights from the survey include:

1. Reimbursements: Most states boosted fee-for-service Medicaid payments in fiscal 2024 and most are planning a second round during the fiscal year that started Oct. 1, especially for primary care, home- and community-based services, nursing homes, and behavioral health. More than half of states are increasing hospital reimbursements for fiscal 2025. These rate hikes are mostly meant to address workforce shortages and inflation.
2. Managed Care: About two-thirds of states that contract with health insurance companies to administer Medicaid have requested that the Centers for Medicare and Medicaid amend capitation rates for fiscal 2025 to manage worsening acuity among beneficiaries. Most of those states are extending state-directed payments to bolster what Medicaid managed care organizations pay hospitals.
3. Spending: State Medicaid spending is expected to rise by 7% in fiscal 2025, but state budgets are stable overall in the near term. Despite more than 25 million being removed from Medicaid during the eligibility redeterminations process in 2023 and 2024, there are still 8 million more enrollees than before the COVID-19 pandemic and spending is still higher than in early 2020. Medicaid officials believe the presidential election could significantly impact longer-term Medicaid finances and policies, particularly if former President Donald Trump, who has advocated Medicaid cuts, defeats Vice President Kamala Harris in November.
4. Benefits: Most states plan to continue expanding coverage of mental health and substance use disorder treatments, doula services, and glucagon-like peptide-1 agonists, or GLP-1s, which treat obesity, diabetes and other conditions.
5. Health Equity & Disparities: Numerous states have accepted CMS' offer to implement initiatives that address social determinants of health and health disparities, especially for maternal health and racial and ethnic health disparities. Some states face budgetary issues could impede that work, however.

The State Medicaid Director Survey was conducted in partnership with the National Association of Medicaid Directors, and the health policy research institution KFF and the consulting firm Health Management Associates. This report is the 24th annual State Medicaid Director survey. Archived copies of past reports are available on the following page.