NEBRASKA - New federal rules likely will force three dozen states to reduce their annual Medicaid payments to doctors and hospitals by a total of more than $50 billion — potentially shrinking the number of providers willing to see Medicaid patients, according to a new analysis.

The analysis in the peer-reviewed Health Affairs estimates that the 17 states with the highest provider reimbursement rates will have to cut their spending by between 10% and 25% of their overall Medicaid budgets. Medicaid is the joint state-federal health insurance program for people with low incomes.

“It means that more of these hospitals, and a few nursing homes that are wrapped up in our academic medical centers, are going to start limiting the numbers of Medicaid patients that they see,” said Debra Lipson, the independent health policy researcher who authored the report. “It’s going to make it more difficult for people who are on Medicaid to get essential care.”

Medicaid generally pays doctors and hospitals less money than private insurers and Medicare do for the same services. As a result, many providers refuse to care for Medicaid patients.

To address this problem, the federal government in 2016 began allowing the 40 states that contract with Medicaid managed care organizations to require those organizations to pay doctors and hospitals more for certain types of care. But in the years since, federal and state spending on these so-called state-directed payments has exploded, growing from about $27 billion in 2020 (4% of total Medicaid spending) to an estimated $97.8 billion in 2024 (12% of total spending). The federal Centers for Medicare and Medicaid Services estimates that 2025 spending topped $143 billion (14% of total Medicaid spending).

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