A new analysis from KFF indicates that nearly two-thirds of states expect a Medicaid budget shortfall in 2026.
The analysis shows total Medicaid spending increased 8.6% in 2025 despite a 7.6% drop in enrollment. Costs are projected to rise 7.9% in 2026, even as enrollment is expected to remain steady.
KFF cites provider rate increases and higher costs for long-term care as key drivers. Some states also cover GLP-1 drugs for weight loss. These medications generally have a list price of more than $1,000 for a one-month dose, making them expensive to cover. State Medicaid programs are not required to cover these drugs for weight loss, though coverage is mandatory for conditions such as diabetes or heart disease.
The federal government is also cutting $911 billion from Medicaid spending starting in 2026, the report says. This reduction will make it difficult for states to absorb costs, according to the report.
Medicaid is typically administered at the state level. The federal government pays for about two-thirds of Medicaid costs, while states generally pay about one-third. The share varies by state, with some paying more than 40% of costs and others paying less than 20%.
Provisions intended to cut Medicaid enrollment are not scheduled to take effect until 2027. Those measures include requiring states to verify certain recipients’ job status and to redetermine recipients’ eligibility every six months.
