Study: SDP Limits to Cut Medicaid Spending Significantly in 17 States

The state-directed payment (SDP) provisions in the Working Families Tax Cut legislation (WFTCL) will cut Medicaid payments in 39 states, according to a recent study published in Health Affairs. In 17 states, the SDP reductions are projected to be 10-25% of total Medicaid spending.

The study includes estimates of the pending reduction amount and how it compares to total Medicaid spending in each state. It reviewed SDP preprints from the 2024 to 2025 rating periods targeting the four provider classes listed in the WFTCL and paid above the Medicare rate. Included preprints were posted online as of May 31, 2026.

Notably, this study did not include the potential fiscal effects of the new provisions in the SDP proposed rule or the provider tax provisions in the WFTCL, which likely will compound Medicaid cuts.

Contact Director of Policy Rob Nelb, MPH, at [email protected] or 202.585.0127 with questions.