This week, our In Focus highlights the 24th annual Medicaid Budget Survey conducted by the Kaiser Family Foundation (KFF) and Health Management Associates, Inc. (HMA), in collaboration with the National Association of Medicaid Directors (NAMD). Survey results were released on October 23, 2024, in two new reports: As Pandemic-Era Policies End, Medicaid Programs Focus on Enrollee Access and Reducing Health Disparities Amid Future Uncertainties: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2024 and 2025 and Medicaid Enrollment & Spending Growth: FY 2024 & 2025.
The sections below review results and share key takeaways. On November 12, during NAMD’s 2024 Fall Conference, KFF experts and state Medicaid directors will delve into survey findings on policies in place or planned for fiscal year (FY) 2024 and FY 2025, including state experiences with reduced state revenues and the unwinding of the pandemic-related continuous enrollment provision.
Several of HMA’s former Medicaid directors and Medicaid experts will be in attendance at the NAMD meeting to provide additional context and address questions about FY2025 Medicaid policies in the post-election landscape. Visit our Medicaid team at our exhibit hall booth, where we will have executive summaries on hand.
Medicaid Enrollment and Spending Growth
During the COVID-19 pandemic, Medicaid enrollment reached record highs as a result of the Families First Coronavirus Response Act, which authorized a 6.2 percentage point increase in the federal match rate, also known as the or Federal Medical Assistance Percentage until the public health emergency ended, provided that states did not disenroll people with Medicaid coverage. During this time, Medicaid and Children’s Health Insurance Program (CHIP) enrollment rose to 94 million in April 2023 from 71 million in February 2020. In FY 2024 and into FY 2025, states are concluding their Medicaid unwinding eligibility redeterminations.
Medicaid enrollment declined by 7.5 percent year over year in FY 2024 and is expected to further decline by 4.4 percent in FY 2025. However, net Medicaid enrollment remained above pre-pandemic levels. Total Medicaid spending growth slowed to 5.5 percent in FY 2024 and is expected to slow further to 3.9 percent in FY 2025. State shares of spending, however, rose by 19.2 percent in FY 2024 and is estimated to slow to 7 percent in FY 2025. According to FY 2025 enacted budgets, most states anticipate revenue growth will continue to flatten and expect state general fund spending growth to slow. More than half of responding states anticipated a state revenue shortfall to some degree (see Figure 1).
Figure 1. Percent Change in Medicaid Spending and Enrollment, FY 1998−2025
Source: FY 2024−2025 spending data and FY 2025 enrollment data are derived from the annual KFF survey of state Medicaid officials conducted by HMA, October 2024. All 50 states submitted survey responses by October 2024; state response rates varied across questions. FY 2025 projections based on enacted budgets. Historic data reflects growth across all 50 states and DC and comes from various sources.
Managed Care and Provider Rates
Capitated managed care remains the predominant delivery system for Medicaid in most states. Specifically:
- A total of 46 states operated some form of Medicaid managed care (managed care organizations [MCOs] and/or primary care case management [PCCM]).
- 42 states contracted with risk-based MCOs.
States use a variety of risk mitigation tools to ensure appropriate payment levels for MCOs, including risk-sharing arrangements, risk and acuity adjustments, medical loss ratios, or incentive and withhold arrangements (see Figure 2).
- Of the 41 responding MCO states, 25 reported seeking approval from the Centers for Medicare & Medicaid Services (CMS) for a capitation rate amendment to address shifts in the average risk profile of MCO members in FY 2024 and/or FY 2025 because of the unwinding.
- Separate from the KFF report, HMA tracks state Medicaid managed care rate certifications. In addition, Wakely, an HMA Company, published a paper summarizing approaches taken by actuaries in 27 states, and considerations for how they relate to the biggest enrollment shift in Medicaid since the implementation of the Affordable Care Act.
Figure 2. States Seeking Capitation Rate Amendments to Address Acuity Shifts Resulting from the Unwinding for the Rating Periods Beginning in FY 2024 and/or FY 2025
States also are implementing a range of fee-for-service (FFS) rate increases across provider types. More than half of states reported increasing both inpatient and outpatient hospital FFS base rates in FY 2024. States reported rate increases for nursing facilities and home and community-based service providers more often than for other provider categories, reflecting ongoing staffing challenges for long-term services and supports (LTSS). Most states also reported rate increases for outpatient behavioral health providers, primary care professionals, and dentists.
Social Determinants of Health and Reducing Health Disparities
States are increasingly addressing social determinants of health (SDOH) and associated health-related social needs (HRSN) using several types of Medicaid authorities. For example:
- A total of 39 states reported leveraging Medicaid MCO contracts to promote at least one strategy to address SDOH, including screening enrollees for behavioral health or social needs, providing referrals to social services, partnering with community-based organizations, and requiring providers to capture SDOH data and employ community health workers. See Figure 3 for details.
Figure 3. MCO Contract Requirements Related to SDOH, FY 2024−25
- Nearly all states also had least one specified MCO requirement related to reducing racial and ethnic health disparities in FY 2025. About one-third of states reported at least one MCO financial incentive tied to reducing racial/ethnic disparities in place in FY 2024, most commonly linking capitation withholds or pay for performance incentives to improving health disparities.
- Medicaid Section 1115 demonstrations are also being used to expand flexibilities by adding HRSN services and supports, including coverage of rent/temporary housing, utilities, and meal support. CMS has approved ten states under the new HRSN Section 1115 framework.
Benefits
In all, 41 states reported new or enhanced benefits in FY 2024, and 38 states reported plans to add or enhance benefits in FY 2025. Benefit enhancements continue to outpace benefit cuts.
- States especially continue to expand behavioral health benefits, particularly for mental health and substance use disorder services.
- A total of 11 states reported benefit actions related to the addition or expansion of crisis services, including mobile crisis responses and crisis services for youth.
Prescription Drugs
Rising prescription drug costs are an ongoing concern for states and nearly three-quarters of states reported at least one new or expanded initiative to contain prescription drug costs in FY 2024 or FY 2025.
- Efforts to implement or expand value-based arrangements with pharmaceutical manufacturers were the most frequently mentioned cost-containment initiative across states.
- Weight-loss prescription drugs also are a hot topic in the states; 13 states now cover GLP-1s (glucagon-like peptide-1s) prescribed to treat obesity. Most state Medicaid programs reported that cost was a key factor contributing to their decisions.
Key Opportunities, Challenges, and Priorities in FY 2025 and Beyond
Medicaid directors are focused on behavioral health, LTSS, and key initiatives related to SDOH or reentry services for justice-involved populations in FY 2025 and beyond. In addition, state-reported priorities included maternal and child health, rural initiatives, school-based services, continuous coverage for children, value-based payment and quality initiatives, and network monitoring and oversight.
Budget pressures and workforce shortages are among the main challenges for Medicaid. States noted adequate staffing and systems are obstacles for compliance with recently promulgated federal regulations, particularly the access and managed care rules, which present new reporting, oversight, and beneficiary protection responsibilities for states. Many states also reported a notable increase in per enrollee costs due to the greater healthcare needs of enrollees who retained coverage during the unwinding, adding pressure to budgets.
Connect with Us
The KFF Medicaid budget report provides important policy insights for federal and state government decisionmakers and Medicaid stakeholders. HMA’s Medicaid experts know the impact and planning needed to navigate these policies and to inform new decisions in 2025 and beyond. For more information about the key takeaways from the KFF report and HMA’s Medicaid solutions, contact our experts below.
