5 things to know about Medicaid trends for 2025
By Bridget Early / October 23, 2024
State Medicaid spending is expected to rise and enrollment to fall next year as states weigh greater financial support for providers and health insurance companies, officials said in a report published Wednesday.
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, according to research from the National Association of Medicaid Directors, the health policy research institution KFF and the consulting firm Health Management Associates.
Here are five highlights from the survey of Medicaid directors:
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 and 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.