Balancing Medicaid Changes and State Budget and Health Priorities

Balancing Medicaid Changes and State Budget and Health Priorities

Forecast '26: Lawmakers will grapple with evolving Medicaid policy, private insurance coverage, and public health and vaccine policy.

After a change in federal vaccine policies, some states eased or eliminated COVID-19 vaccine requirements. Other states broadened the authority of entities such as the American Academy of Pediatrics for vaccine recommendations. (Jeff Greenberg/Getty Images)

With federal health policy evolving, 2025 proved to be a landmark year for legislative action in the states. Lawmakers enacted hundreds of bills addressing Medicaid, private insurance coverage, public health and more.

Looking ahead to the coming legislative session, lawmakers will be racing against mounting budget pressures to adapt health systems and coverage to meet their constituents' needs-and the top policy priorities look much like what they worked on this year: Medicaid, private insurance coverage, and public health and vaccine policy.

Forecast '26 is a special report from State Legislatures News covering the topics NCSL's policy experts anticipate will occupy state lawmakers' time in 2026 legislative sessions. Read the full report.

Hot Topic: Medicaid

Uncertainty dominated much of this year's Medicaid policy in the states as Congress contemplated, revised and enacted President Donald Trump's sweeping tax cut and domestic policy law.

It's hard to overstate Medicaid's importance. The program accounts for almost 30% of state budgets and over half of all federal funding flowing to the states, according to the National Association of State Budget Officers. More than 40 states enacted at least 250 Medicaid bills in 2025. State financing and budgets were top priorities because of Medicaid financing changes in the president's domestic policy law. Several states created Medicaid-specific budget funds (Louisiana and New Mexico), authorized new provider taxes (Nebraska), increased existing provider taxes (Illinois and Wisconsin) or sought to oversee service use and costs in the program (Arizona and Kentucky).

Even as state legislatures grappled with this year's federal policy changes, they continued work on other health priorities, including maternal health. Lawmakers covered doulas (Montana), eased eligibility for expecting moms (Alabama and Mississippi), and enacted "momnibus" bills that leverage Medicaid to promote maternal health across multiple policies (Arkansas, New Hampshire and Virginia). States also addressed access to dental care for certain populations, including pregnant women (Virginia) and individuals with disabilities (Arkansas and North Dakota).

Looking ahead, state legislatures will be balancing Medicaid against other state budget and health priorities as they plan for and implement the changes in the president's policy legislation. Information system investments, implementation of eligibility limits and significant financing and payment changes are likely to add pressure to already complex state Medicaid systems and impact state health coverage in 2026 and beyond.

Trending: Commercial Health Care Coverage

Ongoing policy shifts to the Affordable Care Act marketplaces-including changes to automatic reenrollment and eligibility requirements, combined with the scheduled expiration of enhanced premium tax credits, or EPTCs-are likely to affect health insurance coverage for about 24 million people who purchase plans on the individual or small-group exchanges. The Congressional Budget Office estimates that the combined effects of these policy changes could lead to some 7 million people losing health coverage nationwide, in addition to the estimated 7.8 people losing coverage due to Medicaid changes. On the other side, these subsidies carry a significant cost. According to the Congressional Research Service, permanently extending the EPTCs could increase the federal budget deficit by $355 billion between fiscal years 2025 and 2034.

A handful of states have considered responses to the EPTC expiration, with at least two states enacting legislation. Alaska recently adopted a resolution urging Congress to extend the tax credits. During a special legislative session, Colorado enacted legislation directing about $100 million to help limit premium increases in the individual ACA marketplace in the event the EPTCs expire. Funds will be generated in part by selling insurance premium and corporate tax credits. 

States have passed more than 300 bills broadly addressing commercial health insurance coverage this year. For example, several states enacted legislation mandating coverage of certain benefits, including cancer screenings or treatment, or mandating coverage of specific providers, such as doulas or behavioral health therapists. This year, Nebraska required commercial and Medicaid plans to cover biomarker testing, and Oregon required health plans, including the state employee health program, to cover treatment for perimenopause and menopause.

Several states-Connecticut, Louisiana, Minnesota, North Dakota, Texas and Virginia-enacted legislation in 2025 requiring cost studies on new or existing state health insurance mandates.

Hot Topic: Public Health and Vaccine Policy

In a revamp of several vaccine policies and programs, the federal government changed COVID-19 vaccination guidance and replaced all 17 members of the Centers for Disease Control and Prevention's vaccine advisory panel.

In response to those actions, along with funding uncertainties and infrastructure challenges, some states eased vaccine requirements, modified or eliminated COVID-19 vaccine requirements or limited local health department authority. Idaho's Medical Freedom Act, for example, prohibits medical intervention mandates, including vaccines. Other states, including Colorado, broadened the authority of entities such as the American Academy of Pediatrics for vaccine recommendations.

Finally, legislatures also are addressing broader public health infrastructure changes, such as modernizing data systems. Oregon appropriated $50 million for local data system modernization, including $20 million for public health modernization. Montana lawmakers extended through 2027 an appropriation for public health IT modernization that was set to expire on June 30, 2025.