Insights

At the National Association of Medicaid Directors (NAMD) 2025 Fall Conference, planned federal health policy changes dominated conversations among attendees, including state Medicaid directors, health plans, and providers. With major changes on the horizon for Medicaid and Affordable Care Act (ACA) Marketplace programs, stakeholders are preparing for transition and transformation in 2026. 

A team from Health Management Associates (HMA) attended the conference and returned with valuable insights on the emerging opportunities, state-specific priorities for 2026 and beyond, and early strategies to address and mitigate the challenges ahead. Among the topics discussed were the Rural Health Transformation Program (RHTP), Medicaid eligibility and community engagement policy changes, drug costs and financing, upstream drivers of health, and data infrastructure. 

Five major takeaways about the work state Medicaid agencies, health plans, providers, and industry partners will focus on in the year ahead were as follows. 

1. Medicaid leaders are preparing for new eligibility and community engagement policies under tight timelines. 

The 2025 budget reconciliation act (P.L. 119-21, OBBBA) requires certain adults ages 19–64 enrolled in Medicaid to complete at least 80 hours per month of community engagement (CE) to maintain coverage. Exemptions to the CE requirement apply to people with disabilities, pregnant individuals, and caregivers. States must now develop processes and information systems that track and verify compliance with CE requirements, manage exemptions, and support members through this policy change. 

Medicaid CE and other new eligibility requirements, including more frequent eligibility checks, were a frequent topic of discussion throughout the event. Implementation of these requirements is a major operational lift with significant program integrity implications. State leaders discussed the tight timelines, resource constraints, and the need to coordinate across agencies, health plans, and providers. They are already planning to mitigate the risk of coverage losses for at-risk populations and to minimize administrative burden for all stakeholders. The urgency and complexity of these changes underscore the need for strategic planning and cross-sector collaboration. 

2. Coordinated communication and stakeholder engagement remain critical. 

States are increasingly relying on multiple forms of communication and feedback channels to engage stakeholders, including Medicaid members. Clear, timely communication is essential to ensure people understand their options and know what they need to do and when to do it. Medicaid leaders described the value of embedding vital eligibility information into workflows at all levels and applying lessons from the COVID-19 public health emergency unwind to new outreach and education initiatives. 

Several states emphasized the effectiveness of convening all stakeholders to ensure unified messaging. Other common themes included the importance of plain-language materials, hands-on support through case managers and navigators, and engaging providers to integrate new eligibility and work-related requirements into their workflows, as policies evolve. 

3. States are eager to begin implementing initiatives in their rural health transformation plans. 

Medicaid leaders are actively discussing their RHTP applications with CMS, preparing to move quickly once awards are announced. Many states are focused on enhancing existing efforts, while others are preparing to invest in systems, technology, and organizations that will better integrate rural providers into the broader healthcare system, including Medicaid. 

Federal and state leaders and their partners discussed the opportunity for RHTP funding to strengthen rural health infrastructure, workforce development, education, and outreach—especially in underserved areas. States are positioning themselves to leverage these funds to address persistent disparities and improve access to care for rural populations. 

4. States are seeking to balance cost and access to GLP-1s and other prescription drugs. 

Federal and state leaders extolled the benefits of new and innovative prescription drug products and therapies, including GLP-1s. Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz highlighted the administration’s announcements about drug pricing, including the new GENEROUS (GENErating cost Reductions fOr US Medicaid) model, which is focused on drug costs in the Medicaid program. These discussions reinforced CMS’s focus on new drug pricing models and the importance of involving Medicaid experts in these nuanced development and implementation conversations. 

Attendees gained a deeper appreciation for the administration’s intent to have GLP-1s and other therapies play a significant role in addressing chronic disease, including obesity. State Medicaid agencies—and their Medicaid managed care plans and partners—should plan to inform discussions about coverage and financing of these novel products as well as for cell and gene therapies. The intersection of innovation, affordability, and access will remain a central challenge. 

5. Medicaid agencies are working on multiple technology interoperability and quality initiatives.  

Although Medicaid eligibility policy changes and CE requirements drew significant attention, many discussions also focused on other upcoming deadlines, including: 

• New federal interoperability and prior authorization rules that go into effect in 2027 
• State implementation of Medicaid and CHIP Quality Rating System requirements before the end of 2028 
• The transition to digital quality measurement (dQM) by 2030 

Medicaid agencies are collaborating with managed care and provider organizations to understand the operational, clinical, and technical dimensions of these initiatives. 

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HMA’s expert consultants provide advanced policy, technical, and operational support, and can help your organization navigate and succeed in the evolving regulatory landscape. Our team brings deep experience and practical solutions to help clients anticipate challenges, leverage opportunities, and achieve their program goals. For more information or technical assistance on these and other emerging Medicaid priorities, contact the HMA’s featured experts below.

The Massachusetts Executive Office of Health and Human Services has begun early stakeholder engagement for the next Section 1115 demonstration waiver from 2028 to 2032, which will reflect the priorities of MassHealth, the Commonwealth’s Medicaid and CHIP (Children’s Health Insurance Program) system. The program covers roughly two million residents and operates with a budget of more than $20 billion in annual state and federal spending.

In two public meetings November 10 and 17, 2025, senior officials from MassHealth—Ryan Schwarz and Caitlin Towey—outlined MassHealth’s early thinking for the next 1115 demonstration in the “Roadmap for MassHealth’s 2028–2032 1115 Demonstration Extension,” released in October 2025. They emphasized the Commonwealth’s commitment to preserving core programs while acknowledging a more challenging federal landscape than in prior waiver cycles.

The roadmap highlights the 28-year trajectory of progress enabled by Massachusetts’ 1115 authority—from establishing the Accountable Care Organization (ACO) model and expanding substance use disorder (SUD) treatment, to strengthening safety net providers and driving the uninsured rate to 3 percent, the lowest in the nation. More recent demonstration cycles have deepened primary care investments, expanded the behavioral health continuum, advanced health equity incentives, and integrated housing and nutrition supports into ACO benefits.

Nonetheless, the roadmap also underscores the significant headwinds that are shaping the next waiver. The federal budget reconciliation act (P.L. 119-21, OBBBA) signed in July 2025 is projected to result in coverage losses for up to 300,000 Massachusettsresidents and as much as $3.5 billion in lost annual federal healthcare funding. Meanwhile, new federal policy stances, such as rescinding health-related social needs (HRSN) guidance and discontinuing approval of continuous eligibility authorities, will require Massachusetts to rethink elements of its current demonstration. State budget pressures are also a factor. MassHealth now accounts for nearly one-third of total state spending.

A major source of uncertainty is the lack of federal guidance on several core elements of the existing waiver. During November’s stakeholder sessions, state leaders said they are still awaiting direction from the Centers for Medicare & Medicaid Services (CMS) on several issues, including budget neutrality, hospital transformation funding, and HRSN services.

• HRSN: Current HRSN initiatives were enabled by guidance issued under the Biden Administration, which has since been rescinded. MassHealth officials said they intend to request approval for HRSN-like services in the upcoming waiver, even if the program must be redesigned or authorized through different mechanisms.
• Workforce Initiatives: Workforce funding, currently about $40 million over five years, will not be allowed under 1115 authority moving forward. State officials said they must identify alternative pathways to sustain or reconfigure workforce efforts if they are to continue.
• ACO & MCO Programs: Stakeholders asked for updates to the ACO and managed care organization (MCO) programs. MassHealth confirmed that the current ACO contracts run through December 31, 2027; however, they did note that Tufts Health Plan will exit the MCO program at the end of 2025, though this will have no effect on MassHealth’s two ACOs. Future ACO and MCO re-procurements could lead to changes, but those decisions remain several years out.
• Behavioral Health: Behavioral health policy also drew substantial interest. The state is assessing its behavioral health diversion system to determine which components require continued 1115 authority and where changes may be needed. Officials also confirmed that they intend to request continued 1115 authority for the Program for Assertive Community Treatment (PACT)—a multidisciplinary service for individuals with serious mental illness.
• Primary Care: Officials described a “crisis in primary care access”, driven by provider shortages and prolonged underinvestment. Although Massachusetts has historically led the nation in primary care spending, state leaders noted that the 1115 waiver alone cannot resolve these challenges. Gov. Maura Healey’s administration has convened a new task force to assess primary care access and financing, and MassHealth indicated it intends to align with that panel’s work.
• Cost Containment: Cost containment remains a priority. Officials said managing rising program costs is a theme that will be embedded throughout the renewal process.

As that effort unfolds in 2026, the State appears to be focused on maintaining core programs, adapting to uncertain federal guidance, and preserving flexibility. Officials said they are evaluating whether some current initiatives may need to shift from waiver authority to the State Plan, depending on forthcoming CMS policies. They are also closely monitoring other states’ expiring waivers to understand what CMS may approve under the current administration.

HMA experts have extensive expertise in helping to draft, implement, and evaluate 1115 demonstrations across the country. Our team in Massachusetts will be following the Commonwealth’s efforts closely and are available to answer your organization’s questions on how to navigate these new developments. 

KFF and Health Management Associates (HMA), on November 13, 2025, released the annual Medicaid Budget Survey, A View of Medicaid Today and a Look Ahead: Balancing Access, Budgets and Upcoming Changes Results from an Annual Medicaid Budget Survey for State Fiscal Years 2025 and 2026. Now in its 25th year, this report offers a window into the evolving landscape of state Medicaid policy, financing, and operations across the United States. The survey was conducted in collaboration with the National Association of Medicaid Directors (NAMD), with 48 states providing survey responses by October 2025.

Released before the NAMD 2025 Fall Conference, Medicaid directors’ insights and the challenges, priorities, and innovations shaping Medicaid programs in fiscal years (FYs) 2025 and 2026 will figure prominently at this event. A team of HMA experts will be in attendance and available to address new developments and opportunities in state Medicaid policy and financing.

Key Trends and Challenges

Fiscal Pressures and Budget Uncertainty

States are entering FY 2026 with slower revenue growth and rising healthcare costs. In FY 2025, Medicaid enrollment dropped by 7.6 percent as pandemic-era continuous coverage policies ended, but spending continued to climb. In fact, total Medicaid spending grew 8.6 percent in FY 2025 and is projected to rise another 7.9 percent in FY 2026. State Medicaid spending growth is expected to slow from 12.2 percent in FY 2025 to 8.5 percent in FY 2026. Nearly two-thirds of Medicaid directors, however, thought the odds of a Medicaid budget shortfall in FY 2026 was “50-50,” “likely,” or “almost certain.” Cost drivers include increases in provider rates, higher acuity enrollees, greater long-term care and behavioral health utilization, and rising pharmacy costs, especially for specialty drugs.

Figure 1. Medicaid Spending and Enrollment Trends Since the COVID-19 Pandemic Began

Federal Policy Changes and Provider Taxes

States are preparing for major federal policy changes under the 2025 budget reconciliation law (OBBBA), which will reduce federal Medicaid funding and impose new eligibility requirements. On November 14, 2025, the Centers for Medicare & Medicaid Services issued guidance regarding the OBBBA’s restrictions on states’ ability to use healthcare-related provider taxes to finance Medicaid programs (see CMS Provider Tax Guidance Places New Pressures on Medicaid Budgets). States are now generally prohibited from enacting new provider taxes or increasing existing ones after July 4, 2025, and must comply with new rules by the end of FY 2026 or FY 2028, depending on the tax type. In particular, beginning in federal FY 2028, the OBBBA gradually reduces the safe harbor provider tax limit for states that have adopted the ACA Medicaid expansion by 0.5 percent annually until the safe harbor limit reaches 3.5 percent of net patient revenues in federal FY 2032. These changes will reduce states’ flexibility to use provider taxes as a source of non-federal Medicaid funding, potentially leading to budget gaps and reductions in provider payments if lost revenue cannot be replaced.

Policy Changes and Priorities

Managing Risk in Managed Care Programs

A total of 46 states operate some form of managed care, and capitated managed care remains the predominant delivery system for Medicaid in most states. Most states that contract with capitated managed care organizations (MCOs) reported imposing a minimum medical loss ratio (MLR) requirement, requiring remittance payments when an MCO falls short of the minimum MLR requirement, and using risk corridors to manage financial risk and ensure value. States are also grappling with the growing use of artificial intelligence, particularly in the context of managed care prior authorization. Early policies focus on transparency, oversight, and ensuring human review to address concerns about bias, inappropriate denials, and privacy risks.

An Uptick in Provider Rate Reductions and Provider Tax Restrictions on the Horizon

Most states implemented fee-for-service rate increases for at least one provider category in FY 2025 and FY 2026. The number of increases is slowing, however, and there was an increase in states reporting provider rate restrictions compared with previous years. States continue to target rate increases for nursing facilities and home and community-based services more than other provider types.

Provider taxes remain a key source of the non-federal share of Medicaid funding, with all states except Alaska having at least one tax. These taxes accounted for a median 18 percent of states’ FY 2026 non-federal Medicaid financing, but new federal restrictions enacted in the OBBBA will limit states’ ability to use or expand these taxes going forward. As of July 1, 2025, 31 Medicaid expansion states reported having a non-exempt provider tax greater than the 3.5 percent of net patient revenues and therefore subject to the OBBBA’s phase down requirement.

Strong Benefit Enhancements and Scrutiny of Prescription Drugs

New Medicaid benefits and benefit enhancements continued to outpace benefit cuts and limitations. In all, 37 states reported new or enhanced benefits in FY 2025, and 36 plan to add or enhance benefits in FY 2026. More specifically, states reported expanding services across the behavioral health care continuum and for prenatal, delivery, and postpartum services. Most states reported at least one new or expanded initiative to contain prescription drug costs, including participation in the Centers for Medicare & Medicaid Services (CMS) Cell and Gene Therapy Access Model. State responses also reflected a waning interest in expanding Medicaid coverage for costly obesity drugs (GLP-1s), with some states restricting coverage because of budget pressures.

Challenges and Priorities

Many states are confronting more difficult fiscal conditions while also preparing for future fiscal uncertainty driven, in part, by the OBBBA. Medicaid leaders also expressed concern about the complexity of implementing new federal requirements, including work requirements and more frequent eligibility determinations. At the same time, state Medicaid leaders reported that they continue to pursue a variety of program priorities to expand access, especially to behavioral health and long-term care services, implement initiatives targeting specific populations (e.g., people who are pregnant, justice-involved, and at risk of homelessness), reform and strengthen delivery systems, modernize IT systems and infrastructure, and expand program integrity efforts.

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States face a challenging fiscal environment as they balance cost containment, quality, and access in their Medicaid programs. The combination of rising healthcare costs, new federal restrictions on provider taxes, and anticipated funding reductions will require states to make decisions about coverage, benefits, and provider payments. Nonetheless, states remain committed to maintaining quality and access for Medicaid beneficiaries, using available resources, and pursuing innovative approaches to care delivery.

For more information about the key takeaways from the KFF report and HMA’s Medicaid solutions, contact our experts below.

The Centers for Medicare & Medicaid Services (CMS) issued a letter on November 14, 2025, which provides preliminary guidance on healthcare-related taxes affected by Sections 71115 and 71117 of the Budget Reconciliation Act of 2025 (OBBBA, P.L. 119-21)—the portion of the legislation that focuses on new limitations on provider assessments.

Although this letter does not change federal regulations, it signals an important policy shift that will affect how states fund their Medicaid programs. CMS is working to incorporate these interpretations into rulemaking through the federal notice and comment process.

Health Management Associates (HMA) reviewed the letter specific to these provisions and in the context of other policy and financing changes that are affecting the Medicaid program. This article highlights key clarifications in the letter, the impact of the preliminary guidance on states, and the potential for the guidance to shape Medicaid budgets, financing strategies, and future policy reforms.

Guidance Clarifies the Meaning of “Enacted” and “Imposes”

OBBBA prohibits states from establishing new provider taxes after July 4, 2025. Existing provider taxes may be grandfathered if they meet specific criteria, but most taxes in expansion states—except those on nursing and intermediate care facilities—will be phased down starting October 1, 2027. To qualify for grandfathering, a tax must be both “enacted” and “imposed” by July 4, 2025, as defined by CMS.

CMS interprets enacted and imposed in the following way.

• Enacted: CMS defines enacted based on two components. First, the state or local government must have completed the legislative process to authorize the tax by July 4, 2025. Second, any necessary tax waiver of the broad-based and uniformity requirements must be approved no later than July 4, 2025. This interpretation will present challenges for some states as any pending tax waiver requests and approvals issued after July 4, 2025, will not qualify for grandfathering.
• Imposed: In addition to the enacted requirements, a state must have been actively collecting revenue for the new tax as of July 4, 2025. CMS does appear to allow for instances in which a state’s routine collection and billing practices require the tax be paid on a delayed schedule—a common practice across states.

CMS may continue to approve pending state proposals for new and revised tax structures; however, with the approvals, CMS is also notifying states that any tax structure that is ineligible for grandfathering must be revised by October 1, 2026, to comply with Section 71115 of the OBBBA.

Guidance Sets Preliminary Timeline for Compliance with New Broad-based and Uniformity Requirements in Section 71117

The OBBBA and a separately proposed rule published in May 2025 provide CMS with additional flexibility to tighten requirements for waivers that allow states to impose provider taxes that are not broad-based and uniform (i.e., the tax is levied on providers in a class at a common rate). CMS believes states have used a strategy to pass the prescribed statistical test for these waivers while shifting a disproportionate share of tax burden to high Medicaid providers.

The November 14 letter also includes a preliminary timeline for states to restructure their taxes to comply with the new requirements related to waivers of the broad-based and uniformity tests.

• MCO taxes: States that levy a higher tax rate on Medicaid managed care organizations (MCOs) than on other MCOs must submit a revised tax structure applicable to the state fiscal year (SFY) starting in calendar year (CY) 2026.
• Taxes on all other provider types: States with a similar tax structure on another provider class would need comply by the conclusion of the SFY, ending in CY 2028.

CMS notes that the preliminary timeline for the MCO taxes is the minimum transition period, and the final rule may allow for a transition period of up to three fiscal years.

What It Means for States

All states except Alaska rely on one or more provider tax(es) to fund their Medicaid programs. These additional limitations on the uses of provider taxes—including those now in place—will put a significant strain on state budgets, beginning as early as October 1, 2026. States may need to reduce provider reimbursement and/or enrollee benefits to address these losses.

States and providers should start planning for the changes in revenue now. Strategic planning for provider tax sustainability and close monitoring of upcoming CMS rulemaking are essential.

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The potential impact will vary by state, and each tax structure should be individually assessed to fully understand the implications of this new guidance. HMA has designed, developed, and helped implement provider taxes across the country and is uniquely positioned to support states, MCOs, and providers as they navigate the evolving landscape.

For details about the federal guidance and considerations for your organization, contact our experts below.

The 25^th annual Medicaid Budget Survey conducted by KFF and Health Management Associates (HMA), in collaboration with the National Association of Medicaid Directors (NAMD), was released on November 13, 2025 in the report A View of Medicaid Today and a Look Ahead: Balancing Access, Budgets and Upcoming Changes: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2025 and 2026. 

Following years of significant changes in Medicaid spending, enrollment, and policy during the COVID-19 public health emergency and the subsequent Medicaid unwinding period, state Medicaid programs returned to more routine operations in state fiscal year (SFY) 2025 and were focused on an array of other priorities, including improving access to care or addressing social determinants of health.  

Heading into SFY 2026, however, states were facing a more tenuous fiscal climate and beginning to prepare for another major set of policy changes to the Medicaid program. The 2025 federal budget reconciliation law (OBBBA) includes substantial Medicaid policy changes and reductions in federal funding, though the impacts vary by state. While many of the provisions do not take effect until FY 2027 or later, states are anticipating the upcoming changes, assessing budgetary and programmatic impacts, and preparing for the implementation of multiple and complex policy changes.  

In addition to navigating state budget challenges and implementing new federal policies, the report also addresses other Medicaid program priorities including expanding access, implementing initiatives that target specific populations (e.g., pregnant individuals, justice-involved), continuing delivery system efforts, and improving administrative systems and functions. 

Serving over one in five people living in the United States and accounting for nearly one-fifth of health care spending (and over half of long-term care spending), Medicaid represents a large share of state budgets and is a key part of the overall health care system. 

The report was prepared by Kathleen Gifford, Aimee Lashbrook, and Carrie Rosenzweig from HMA; and by Elizabeth Hinton, Elizabeth Williams, Jada Raphael, Anna Mudumala, Robin Rudowitz from KFF. The survey was conducted in collaboration with NAMD. 

Read the report: https://www.kff.org/medicaid/50-state-medicaid-budget-survey-fy-2025-2026/  

Other links: 
2025 Press Release  
Medicaid Enrollment & Spending Growth: FY 2025 & 2026 

HMA recently released a report analyzing the impacts of the CareSource JobConnect Program, which provides employment assistance to non-elderly adults enrolled in Medicaid. CareSource is a national, nonprofit managed care organization dedicated to transforming healthcare for those served by government-sponsored health care programs. The program helps individuals prepare for a job search, obtain employment, and succeed in the workplace. HMA was engaged due to our significant expertise in Medicaid to evaluate the program’s impacts in 3 of the 6 states where it is currently active: Indiana, Georgia, and Ohio. HMA conducted an economic impact analysis to assess outcomes for members participating, a cost–benefit analysis, and a return-on-investment (ROI) assessment, examining the direct and indirect financial benefits to participants, the broader economic impact on the state and healthcare spending, and the total program operation costs incurred by CareSource.

The recently enacted OBBBA law established new federal standards that require states to verify that certain Medicaid enrollees are meeting minimum work or community engagement hours as a condition of continued coverage. Past efforts by states to establish work requirements as a condition of enrollment in Medicaid have resulted in coverage losses because of bureaucratic hurdles that made it difficult for people to comply. A program like CareSource JobConnect can provide support and assistance to those enrolled.

The analysis aimed to help CareSource understand the advantages of this program on those participating, as well as the broader impact on the state’s economy, and demonstrates potential gains for the state, the job seekers, and CareSource’s program if more people took advantage of the program’s benefits.

The report shows significant economic and workforce outcomes, particularly in Ohio and Indiana.

• Ohio led with the highest number of participants and employed workers, generating a return-on-investment of 13:1.
• Indiana showed impressive efficiency, with a strong return-on-investment of 12:1.
• Georgia’s results were still positive with a 5:1 ROI, but there are opportunities for improvement in employment success and economic return that could improve the success for the Georgia program.

HMA examined direct benefits to those newly employed through the program, including annual earnings and earnings supplements such as tax credits; indirect benefits, such as key elements of social determinants of health like food security and safe and affordable housing; new spending: new worker spending due to employment enhanced by the multiplier (defined as the ripple effect that occurs as new jobholders spend a large portion of their earnings, which creates income for local businesses and nonprofit organizations); the Benefit-to-Cost Ratio: The sum of direct and indirect benefits and the multiplier effect, divided by the cost incurred by the organization making the investment. These things together help determine the full ROI for the program.

As more participants receive job placements over time and their incomes increase, earning supplements will decrease, and other indirect benefits will decrease as participants earn more than the maximum amounts for eligibility.  Each of the three states saw a net gain to their state budgets in the form of state sales and income taxes as members earn more and are able to spend their wages on goods and services.  

	Indiana	Georgia	Ohio
2024 Participants with Employment through the Program	87	28	198
2024 Participants in the Program	220	188	566
Aggregate New Worker Spending	$1,688,001	$537,923	$3,110,462
Multiplier Effect	5	5	5
Aggregate Benefit to Participants and the Local Economy (new worker spending times multiplier)	$8,440,004	$2,689,615	$15,552,308
Estimated Cost Per Participant	$2,938	$2,230	$1,988
Benefit—Cost Ratio	13:1	6:1	14:1
Return-on-Investment	12:1	5:1	13:1

To learn more about the program and to download the whitepaper, click here.

HMA has more than 40 years of experience in helping to shape and improve Medicaid programs, and supports organizations nationwide to develop, implement, and evaluate programs for state agencies, local governments, health plans, and other community-based partner organizations.  Learn more about how HMA supports Medicaid and our efforts in Housing and Health.

Related resources:

• Blog: Turning HR 1 Medicaid Work Requirements into Workforce Development Opportunities: Lessons from HMA’s Recent Webinar
• Blog: States need to move quickly on Rural Health Transformation Program