States predict steady Medicaid enrollment, rising spending as cuts loom: KFF

Diving brief:

• Medicaid enrollment declined this year as states ended pandemic-era continuous enrollment policies, but spending has increased — and looming cuts to the safety net insurance program mean more cost pressures are on the horizon, according to a report released Thursday by KFF.
• Enrollment fell 7.6% in fiscal year 2025 and is expected to remain largely flat in fiscal year 2026, according to the survey of state Medicaid directors. At the same time, total spending increased by 8.6% in 2025 and costs are expected to increase by 7.9% in 2026.
• Increases in provider rates and increased health care needs for beneficiaries, as well as rising costs for long-term care, pharmacy benefits and behavioral health care, are the main drivers of increased spending, states said.

Dive overview:

State Medicaid programs are navigating a “new normal” as policies enacted during the COVID-19 pandemic expire and the industry expects a significant decrease in federal health spending, the survey found.

For example, states received more generous federal funds to keep Medicaid beneficiaries permanently enrolled in the safety net insurance program during the public health emergency, pushing enrollment to new heights.

But those policies ended in 2023. States then began redetermining the eligibility of beneficiaries on their Medicaid rolls, removing millions of people from insurance across the country.

Medicaid programs had completed the process by mid-fiscal year 2025, with enrollment down 18% from March 2023, according to KFF. However, this total registrations is 9% higher than that of February 2020.

Two-thirds of states said the unwinding of continued enrollment policies was the most important driver of declining enrollment in fiscal year 2025, according to the health policy researcher’s survey.

But there were other factors leading to increased enrollment. Nearly half of respondents reported that other policies expanding eligibility – such as continued child enrollment and expanded postpartum coverage – put upward pressure on Medicaid enrollment. However, the Trump administration has since decided to stop approving or expanding waivers from continued enrollment policies.

Additionally, about a quarter of states reported that increased use of long-term care is leading to increased enrollment as some states see their populations age.

Meanwhile, states have highlighted several trends driving increased Medicaid spending. For example, nearly half said enrollees who remained in the program after the redeterminations had greater health needs and used more services than those who were disenrolled.

Additionally, more than half said rising rates for managed care providers put pressure on spending in 2025, 2026 or both. And a third of states said increased long-term care enrollment and utilization, along with rising pharmacy costs, were leading to increased spending.

Today, the state’s Medicaid programs face more policy changes as a result of the One Big Beautiful Bill Act passed this summer.

This massive tax and policy law will reduce federal Medicaid spending by $911 billion, through policies such as work requirements, provider tax freezes, and limits on state-directed payments. Millions of people will likely become uninsured because of this law.

The scale of the Medicaid cuts and the otherwise difficult financial environment will make it difficult for states to absorb or offset funding reductions, KFF said.

Nearly two-thirds of states said they saw at least a 50/50 chance of seeing a Medicaid budget shortfall in fiscal year 2026, according to the survey.