As Pandemic-Era Policies End, Medicaid Programs Focus on Enrollee Access and Reducing Health Disparities Amid Future Uncertainties: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2024 and 2025

Future Outlook: Key Priorities and Challenges in FY 2025 and Beyond

At the start of FY 2025 states were wrapping up the unwinding of the pandemic-related continuous enrollment provision and focusing on an array of other priorities. With a return to more routine operations, Medicaid directors reported a focus on behavioral health, long-term services and supports, and key initiatives related to social determinants of health or reentry services for justice-involved populations in FY 2025 and beyond. However, directors also noted challenges related to state workforce shortages, systems issues, and emerging state budget pressures.

Two-thirds of responding states reported administrative challenges including workforce, system modernization and maintenance, and compliance with federal rules. Headed into FY 2025 after the intensity of managing the unwinding of the continuous enrollment provision, states were worried about ongoing workforce shortages, hiring freezes, recruitment and retention issues, as well as managing bandwidth and staff burnout. States also reported managed care procurements, new contract implementations, and increasing MCO accountability and oversight as both a challenge and priority. A handful of states mentioned prioritizing system and operational efficiencies, with a focus on maintaining and enhancing eligibility and enrollment improvements post-pandemic. In addition, many states raised the need for systems modernization or essential maintenance as an ongoing administrative challenge. States also noted that adequate staffing and systems are necessary to ensure compliance with recently promulgated federal rules, particularly the Access and Managed Care rules which present new reporting, oversight, and beneficiary protection responsibilities for states. States further noted that the upcoming election adds uncertainty to their current program administration responsibilities.

Nearly half of responding states reported Medicaid budget challenges, including increasing budget pressures or fiscal uncertainty. For the three-year period following the onset of the COVID-19 pandemic, states provided continuous enrollment in Medicaid in exchange for enhanced federal matching funds, resulting in a sharp increase in Medicaid enrollment and spending. When the enhanced federal matching funds expired at the end of 2023, as anticipated, the state share of Medicaid spending grew significantly. At the same time, states also reported facing new spending pressures from inflation, efforts to further expand access and address provider workforce shortages, and the introduction of high cost but promising treatments such as cell and gene therapies and obesity medications. Some states also mentioned sustaining and continuing provider rate enhancements and benefit expansions implemented during the pandemic as priorities. Although the total Medicaid caseload dropped in FY 2024, many states reported a notable increase in per enrollee costs due to the greater health care needs of enrollees that retained coverage. Beyond Medicaid, states expressed concerns that overall state fiscal conditions and state revenue decreases or slowdowns could put pressure on Medicaid agencies to focus on limited cost growth or potentially implement cuts.

Amid these administrative and budget challenges, nearly half of responding states mentioned addressing mental health and substance use disorders as a top priority or opportunity. For example, states are working to strengthen the delivery system by building out the behavioral health continuum of care, expanding access points and the availability of community-based services and supports, assuring access to crisis services, integrating physical health and behavioral health services, designing new payment models or incentives for improved mental health and SUD outcomes, increasing provider rates, implementing Certified Community Behavioral Health Clinics (CCBHCs), and adding coverage of evidence-based behavioral health service models. Many states commented on efforts to improve care and quality for children, youth, and young adults, including youth in foster care. Consistent with state-identified behavioral health priorities, a number of states reported behavioral health challenges including increased demand for services, workforce shortages, lack of access to services, gaps in the service continuum (especially for children and youth), challenges related to integrating physical health and behavioral health, and complexity of aligning available behavioral health funding sources.

Nearly half of responding states reported key initiatives related to social determinants of health or reentry services for justice-involved populations. Many states reported designing or preparing for implementation of reentry services for incarcerated populations, housing services and supports, and food and nutrition services. In highlighting these initiatives, states emphasized related efforts to engage enrollees and community stakeholders, build capacity, coordinate across systems and agencies, and develop networks of service providers. These initiatives frequently rely on the use of Section 1115 demonstration waivers and are often tied to broader goals involving reducing health disparities. Several states noted new requirements for Medicaid and CHIP programs to provide certain services to eligible youth who are incarcerated (beginning January 1, 2025) as a priority and challenge.

More than one-third of responding states mentioned a focus on long-term services and supports (LTSS), including LTSS workforce issues. For example, states reported priorities such as stabilization and sustainability of LTSS, implementation of managed LTSS programs, home and community-based services (HCBS) waiver redesign, and transitioning Medicare-Medicaid models to integrated D-SNP programs as LTSS priorities. At the same time, states cited workforce challenges and increased demand for services, highlighting the direct care workforce in particular. Some states are transforming nursing facility reimbursement, increasing rates, or implementing minimum fee schedules to support HCBS providers.

Many states also mentioned access, payment, and delivery system reforms as key priorities. This includes efforts to improve maternal and child health, rural initiatives and targeted rate increases, expansion of school-based services, implementation of continuous coverage for children or other targeted populations, value-based payment and quality initiatives, and network monitoring and oversight. A handful of states noted improving the enrollee and provider experience and enhancing stakeholder engagement as additional opportunities or focus areas.

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