Medicaid Enrollment & Spending Growth: FY 2025 & 2026

New survey results from state Medicaid directors show the program entering a “new normal” after the end of pandemic-era continuous coverage.

• Enrollment: Medicaid enrollment declined 7.6% in FY 2025 as states completed unwinding of the continuous enrollment provision. For FY 2026, enrollment is expected to be essentially flat (+0.2%), but still above pre-pandemic levels in many states.
• Total Spending: Despite fewer members, total Medicaid spending grew 8.6% in FY 2025 and is projected to increase another 7.9% in FY 2026.
• State Spending Pressure: State Medicaid spending (the non-federal share) grew even faster—12.2% in FY 2025, with 8.5% growth projected for FY 2026—reflecting the full phase-out of enhanced federal matching funds and rising care costs.
• Cost Drivers: States cite upward pressure from managed care and provider rate increases, higher-acuity enrollees who retained coverage during unwinding, growth in long-term services and supports, behavioral health, and high-cost specialty drugs, along with general health care inflation.
• Budget Outlook: Nearly two-thirds of states report that the odds of a Medicaid budget shortfall in FY 2026 are “50–50,” “likely,” or “almost certain,” even before major Medicaid cuts under H.R. 1 fully phase in.

What this means for providers:

With flat enrollment, rising per-member costs, and tightening state budgets, Medicaid programs are likely to lean harder on cost controls, including:

• Stricter medical necessity and prior authorization requirements
• More aggressive use of editing, denials, and post-payment review
• Increased scrutiny of high-cost drugs, behavioral health, and long-term care services

For hospitals, labs, and physician groups, this environment raises the stakes for accurate eligibility, precise coding, strong documentation, proactive denial management, and robust Medicaid-focused analytics.

Source: https://www.kff.org/medicaid/medicaid-enrollment-spending-growth-fy-2025-2026/