Survey: As Medicaid enrollment remains flat, costs boom

Medicaid enrollment is slated to remain about the same in fiscal year 2026, according to a new survey of state Medicaid directors from KFF. But despite little to no increases in Medicaid enrollment, the states still predicted a 7.9% increase in Medicaid spending growth for the year.

Bumps in Medicaid spending will likely be driven by increases in provider rates, greater health needs from enrollees and increasing costs for certain services such as long-term care, pharmacy benefits and behavioral health services.

The findings were based on a 2025 survey of state Medicaid programs issued by KFF and Health Management Associates in partnership with the National Association of Medicaid Directors.

These predictions come as the Medicaid program has seen significant enrollment change in recent years. States are now wrapping up the Medicaid unwinding, or the rollback of pandemic-era continuous coverage mandates. As a result, Medicaid enrollment went down 7.6% in FY 2025, the KFF researchers said.

Because much of that unwinding work is now complete -- and certain provisions likely to limit Medicaid enrollment as part of the Trump tax bill won't go into effect until FY 2027 -- the researchers wrote that enrollment growth would be flat this year. Still, enrollment remains at pre-pandemic levels in many states, they added.

But although states told KFF that lower Medicaid enrollment in 2025 and again in 2026 are downward cost pressures, they still predict higher total Medicaid spending. Specifically, they estimate 7.9% higher total Medicaid spending for FY 2026, driven in large part by growing healthcare utilization for enrollees and higher healthcare costs overall.

To that end, Medicaid programs are anticipating dire financial states in the near-term. Around two-thirds of states said there's at least a "50-50" chance there will be a Medicaid budget shortfall for FY 2026. This is due in part to the Trump tax bill restricting states' ability to increase existing provider taxes or instate new ones.

To partially combat the threat of rising costs, state Medicaid programs have set their sights on prescription drug costs. In particular, KFF said they've dialed back their interest in expanding Medicaid coverage of GLP-1 medications for obesity treatment. In fact, some states said they plan to restrict existing coverage in the future.

Sara Heath has reported news related to patient engagement and health equity since 2015.