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This article first appeared on KFF Health News.

As Congress debates whether to extend the temporary federal subsidies that have helped millions of Americans buy health coverage, a crucial underlying reality is sometimes overlooked: Those subsidies are merely a band-aid covering the often unaffordable cost of health care.

California, Massachusetts, Connecticut and five other states have set caps on health care spending in a bid to rein in the intense financial pressure felt by many families, individuals and employers who every year face increases in premiums, deductibles and other health-related expenses.

Hospitals and other health care providers are citing Republicans’ One Big Beautiful Bill Act, signed by President Donald Trump in July, as one more reason to challenge those limits.

The law is expected to reduce federal Medicaid spending by more than $900 billion over a decade, which mathematically should help the overall health care system meet the caps. But the law is also expected to increase the number of uninsured Americans, mostly Medicaid beneficiaries, by an estimated 10 million people. Health care analysts predict hospitals and other providers will raise prices to cover the double whammy of lost Medicaid revenue and the cost of caring for an influx of newly uninsured patients.

Whether regulators in some states will allow providers to justify higher prices and exceed the spending caps is unclear. Only California and Oregon can penalize providers financially if they fail to meet targets.

“Are we going to say, ‘That’s OK’? Or are we going to say, ‘Well, you exceeded the target. We’re still going to penalize you for that’?” said Richard Pan, a former state lawmaker and a member of the California Office of Health Care Affordability’s board. “That has not yet been decided.”

The California Hospital Association, the industry’s main state lobbying group, filed a lawsuit in October asking a state court to strike down the spending caps, which it argued fail to account for all the cost pressures hospitals face. Those pressures, it said, include an aging, sicker population; the rising cost of labor; expensive advances in medical technology; large capital outlays on required seismic retrofitting; and changes in federal policy, including the One Big Beautiful Bill Act. The hospital group’s lawsuit also asserted that the state affordability office, by hastily imposing ill-considered cost-cutting targets, was undermining its other key mission of improving health care access, quality and equity.

California’s affordability office last year set a five-year target to cap statewide spending growth, starting at 3.5% in 2025 and declining to 3% by 2029. The annual caps apply to a wide range of health care entities, including hospitals, medical groups, insurers and other payers.

Earlier this year, it imposed much lower spending growth caps — starting at 1.8% in 2026 and declining to 1.6% by 2029 — for seven “high-cost” hospitals.

“The spending caps set by politically appointed bureaucrats could force cuts that result in many Californians traveling farther for care, facing longer emergency room wait times, experiencing more overcrowding and losing access to critical services,” Carmela Coyle, the hospital association’s president and CEO, said in an October press release.

The California attorney general’s office, which will represent the affordability agency, has not yet filed a response to the hospital group’s complaint and did not respond to a request for comment.

Hospitals’ pushback

California is not the only state taking a close look at hospital prices, which are widely considered a primary driver of health care costs.

“States, armed with information that points to payments to hospitals as a driver of what is way beyond affordable commercial premiums, have begun to take increasingly targeted actions focused on commercial hospital prices,” said Michael Bailit, founder of the Needham, Massachusetts-based consultancy Bailit Health, which has advised multiple states, including California, on ways to tame health care spending. “It is not surprising that the hospital industry is going to oppose such state actions.”

In its lawsuit, the California Hospital Association said the affordability office’s own report showed that pharmaceutical and insurance companies are largely responsible for high costs.

Hospitals in some states with cost growth limits, including Connecticut and Massachusetts, have expressed objections similar to the ones raised in the California lawsuit. They could follow their counterparts in California if their lawsuit succeeds, said Peter Lee, who led California’s Affordable Care Act marketplace, Covered California, for over a decade and is now a senior scholar at Stanford Medicine’s Clinical Excellence Research Center.

Lee said the work of California’s affordability office and similar agencies in other states is just about the only systemwide effort being made to cut health care costs. They are basically saying, “‘Look, health care is taking money away from education, it is taking money away from the environment, it is taking money away from everything in the public sector, and in the private sector it is taking money away from wages,’” he said. “‘We don’t know how you, the health system, are going to do it, but it is your job not just to provide quality but to lower costs. Here’s the target.’”

To be sure, achieving the cost savings that California and those other states are seeking is no easy lift. It will ultimately require persuading large, financially powerful players that compete fiercely for health care dollars to adopt a different mindset and begin cooperating to reduce costs instead. And that, in many cases, will mean lower revenue.

But the status quo, as many people know all too well, means continued financial pain for millions.

In early 2020, Estevan Rodriguez, a bartender at California’s Monterey Beach Hotel, had surgery for a staph infection in his leg. The bill came to nearly $168,000. His insurance paid most of it, but he still owed $5,665, which took him two years to pay, more than $200 every month. “It may not be a lot to some people, but it was a lot to me,” Rodriguez said.

He said he dropped his Hulu subscription, switched to a lower-cost cellphone, and got cheaper car insurance. He started going to food banks rather than the grocery store, he said, and had a lot less time with his kids, because he was constantly working to pay off the hospital bill.

Community Hospital of the Monterey Peninsula, where Rodriguez had his surgery, is one of the seven hospitals identified by California’s affordability office as high-cost. A study by the office attributed high hospital prices in Monterey County to a lack of market competition “rather than higher operating costs or superior quality of care.”

The Monterey hospital referred a request for comment about its “high-cost” designation to the California Hospital Association. CHA spokesperson Jan Emerson-Shea declined to comment beyond the language of the lawsuit and Coyle’s press release statement.

Reduced competition

Health care analysts worry the One Big Beautiful Bill Act will reduce market competition even further by stressing already weak hospitals, leading some to shut services, merge with larger health systems, or close. One study estimates 338 rural hospitals are at risk of closing nationwide.

Less competition, in addition to fewer Medicaid dollars and an increase in uninsured patients, will only strengthen the incentive of health systems with the requisite market clout to raise their commercial prices, increasing premiums for employers and individuals.

“We think commercial prices will continue to increase as health care providers, and hospitals in particular, will seek to preserve or increase their revenue,” said Rachel Block, a program officer at the Milbank Memorial Fund, a foundation that focuses on health equity.

That in turn could pose a challenge to state affordability regulators tasked with overseeing compliance with growth targets for health care spending.

California’s affordability office is required to consider mitigating factors, including changes in federal and state laws. But some of its board members have expressed skepticism about letting hospitals offset Medicaid losses with higher commercial prices.

“There’s a lot of talk about using HR 1 and other federal policies as an excuse to raise prices on commercial payers,” Ian Lewis, an affordability office board member and policy director for UNITE HERE Local 2, a hospitality workers union in the Bay Area, said at the agency’s July board meeting, referring to the One Big Beautiful Bill. “There’s no more blood to be squeezed from this stone.”

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — an independent source of health policy research, polling and journalism. Learn more about KFF.

A vacant hallway at Vaughan Regional Medical Center in Selma, Alabama, on Tuesday, Sep. 3, 2024 in Selma, Alabama. (Will McLelland for Alabama Reflector)

WASHINGTON — President Donald Trump’s administration unveiled Monday hundreds of millions of dollars each state will receive this fiscal year as part of a massive $50 billion rural health fund baked into Republicans’ “big, beautiful” law. 

The five-year Rural Health Transformation Program — authorized under GOP lawmakers’ mega tax and spending cut package Trump signed into law in July — is designed to offset the budget impacts on rural areas due to sweeping Medicaid cuts.  

Half of the $50 billion will be distributed equally among each state between fiscal years 2026 and 2030, according to the Centers for Medicare and Medicaid Services.

The agency under the U.S. Department of Health and Human Services said the remaining $25 billion, doled out over the same time period, is being allocated to states based on several factors, such as steps states are taking to improve access to care in rural communities. 

Texas will get the highest first-year award at $281.3 million, followed by Alaska at $272.2 million, California at $233.6 million, Montana at $233.5 million and Oklahoma, at $223.5 million. 

New Jersey is receiving the lowest first-year award, at $147.2 million. 

“Thanks to Congress establishing this investment and President Trump for his leadership, states are stepping forward with bold, creative plans to expand rural access, strengthen their workforces, modernize care, and support the communities that keep our nation running,” CMS Administrator Dr. Mehmet Oz said in a statement alongside the announcement. 

Oz added that “CMS is proud to partner with every state to turn their ideas into lasting improvements for rural families.” 

Meanwhile, the nonpartisan health research organization KFF found that the program would only offset a little more than one-third of the package’s estimated $137 billion cut to federal Medicaid spending in rural areas over the next decade.

Ashley Murray contributed to this report. 

Boxes of the diabetes drug Ozempic rest on a pharmacy counter in Los Angeles. Drugs like Ozempic have grown in popularity to treat obesity, prompting more than a dozen states to pay for them. But with major budget pressures, several state Medicaid agencies are either stopping coverage altogether or restricting who can get access to the therapy. (Photo illustration by Mario Tama/Getty Images)

Some states are rethinking their coverage of GLP-1 drugs for weight loss as budgets tighten and Medicaid programs brace for the cuts included in President Donald Trump’s broad tax and spending law.

As of Oct. 1, 16 state Medicaid programs covered GLP-1s for obesity treatment, up from 13 last year, according to a survey of Medicaid directors by KFF, a health policy research group. But some states have announced they will discontinue coverage or restrict who can qualify for it.

Many doctors and patient advocates say the drugs will save money in the long run by reducing obesity-related diseases such as heart disease and diabetes. Many states, however, have concluded they just can’t afford them.

North Carolina Medicaid ended coverage of GLP-1s for obesity last month, citing shortfalls in state funding. California, New Hampshire and South Carolina have said they will end coverage on Jan. 1. Starting next year, Michigan Medicaid will limit coverage to people who are “morbidly obese.” Pennsylvania, Rhode Island and Wisconsin also are considering new restrictions.

In last year’s KFF survey, about half the states said they were interested in covering GLP-1s for weight loss, according to Elizabeth Williams, a senior policy manager at KFF who focuses on Medicaid. This year, most states are moving in the opposite direction.

“This likely reflects recent state budget challenges and the significant, significant costs associated with coverage,” Williams said. “After a number of years of robust revenue growth right after the pandemic, states are starting to see slowing revenues, increasing spending demands and a lot of fiscal uncertainty due in part to recent federal actions.”

In April, the Trump administration scrapped a Biden-era proposal that would have required state Medicaid programs to pay for some GLP-1s for obesity treatment. Earlier this month, Trump announced that his administration had reached agreements with the manufacturers of Wegovy and Zepbound to reduce the prices of the drugs for Medicaid, Medicare and consumers buying the drugs directly, But it’s unclear whether the deals will reduce costs for states.

Health plans for state workers also are reassessing their coverage of the drugs for obesity. North Carolina, for example, ended GLP-1 obesity coverage for state workers last year, and West Virginia canceled a 1,000-person pilot program.

GLP-1 medications, which balance blood sugar levels, have long been prescribed to patients with Type 2 diabetes and cardiovascular conditions. All state Medicaid programs, which are funded jointly by the states and the federal government, cover GLP-1s for those uses.

But the drugs also curb hunger signals and can help people lose significant amounts of weight. Medications such as Ozempic, Wegovy and Zepbound have become wildly popular for that purpose.

Between 2019 and 2023, the number of outpatient Medicaid prescriptions for select GLP-1s to treat diabetes and obesity grew from 755,300 to 3.8 million, according to KFF. During the same period, Medicaid spending on those drugs increased from $597.3 million to $3.9 billion.

A study published last year in The BMJ, the journal of the British Medical Association, found that the number of patients without diabetes who started GLP-1 treatment in the United States increased from roughly 21,000 in 2019 to 174,000 in 2023, or more than 700%.

More than 2 in 5 U.S. adults have obesity, according to the federal Centers for Disease Control and Prevention. The CDC defines obesity as having a body mass index — a calculated measure of body weight relative to height — of 30 or higher. Obesity costs the U.S. health care system almost $173 billion per year, according to the agency.

Recently, the manufacturers of some GLP-1s have lowered their prices, selling them directly to consumers for $500 or less per month. But many patients cannot afford to pay that much out of pocket.

States in a tough financial position

In North Carolina, Dr. Jennifer McCauley, a weight management physician at UNC Health, said Medicaid coverage of GLP-1s was “incredibly helpful for our patients.”

“Now they’ve stopped coverage, so those people are now going back, regaining some of the weight, because they’re unable to obtain these medications, and also are suffering the health consequences of obesity,” McCauley told Stateline.

Some critics of expansive GLP-1 coverage say it isn’t cost effective, because many patients gain back the weight they lost when they stop treatment. But McCauley said the “downstream effects of obesity are even higher.”

“There are definitely vulnerable populations that probably would not be able to obtain weight loss without these medications.”

James Werner, a spokesperson at the North Carolina Department of Health and Human Services, blamed the coverage change on the state legislature’s failure to budget enough money for Medicaid.

In an email to Stateline, Werner said coverage of GLP1s for weight loss “would be reconsidered if Medicaid is fully funded.”

Some states are trying to maintain at least some coverage of the expensive drugs by tightening the eligibility requirements for a prescription, according to Colleen Becker, a project manager at the National Conference of State Legislatures, a policy research group.

“States are really looking at how to balance access and provide that access to patients, but they’re stewards of their budgets, and they need to be good stewards of it,” Becker said.

Michigan and Pennsylvania are among the states considering such options. Meanwhile, Connecticut has decided to maintain coverage of weight-loss drugs for state employees, but to require beneficiaries to try online weight-loss counseling before they can get a prescription.

Some future possibilities

One state, North Dakota, has taken a different approach to GLP-1 coverage after legislation that would have required the state’s Medicaid program to cover the drug failed. Instead, North Dakota this year became the first state to mandate that insurers on the state’s Affordable Care Act marketplace cover the drugs for weight loss.

North Dakota Deputy Insurance Commissioner John Arnold said the insurance department calculated that the mandate wouldn’t cause insurance premiums to rise significantly.

“It’s not that anybody can walk into the doctor’s office and say, ‘Hey, I want to have this covered,’” Arnold said. “It is really for those who have a medical need for the drugs, then it would be covered.”

The insurance department had to ask the legislature for permission to make the change, according to North Dakota Republican House Speaker Robin Weisz. He said insurance carriers were concerned that it was going to be “open season for everybody who could lose 20 or 30 pounds.”

He said it will take time to see whether the policy raises insurance premiums.

“If the carriers can come in a couple years and say, ‘Wow, here’s what we’ve spent on these … we’ll take a hard look at it,” Weisz said. “But, it’s way too early to tell at this point.”

Arnold says other states may have the flexibility to consider mandating ACA insurers to cover the drugs.

“Our biggest concern was reducing those comorbidities and the long-term impact that that has on the cost of insurance in general, because more comorbidities means more claims,” Arnold said, referring to diseases and conditions associated with obesity.

Stateline reporter Shalina Chatlani can be reached at schatlani@stateline.org.

Children are pictured at an Autism Speaks Light it Up Blue Autism Awareness Celebration at Chicago Children's Museum in April 2017. State Medicaid agencies are struggling to pay for applied behavior analysis, an intensive therapy for children with autism. (Photo by Daniel Boczarski/Getty Images for Autism Speaks)

State Medicaid agencies are struggling to pay for an intensive therapy for children with autism — and looming federal Medicaid cuts are likely to make the problem worse.

Parents of children and young adults who receive applied behavior analysis, or ABA, worry states’ cost-saving measures will make it harder for them to get vital services. About 5% of children ages 3 to 17 on public insurance have autism spectrum disorder, compared with 2% who have private insurance, according to a CDC survey.

Many families and autism therapists say ABA can help improve communication and social skills, sharpen memory and focus, and replace challenging behaviors with positive ones. ABA therapy can range from 10 to 40 hours per week in different settings, including home and school. That makes it expensive.

In 2014, the federal Centers for Medicare & Medicaid Services mandated that all state Medicaid programs cover comprehensive autism services for children. It did not explicitly require coverage of ABA, but by 2022, every state Medicaid program covered ABA.

In addition, more kids are getting diagnosed with autism as screenings increase. As a result, state spending on the service has skyrocketed. In Indiana, for example, Medicaid spending on ABA therapy grew from $21 million in 2017 to $611 million in 2023. The sharp increase has prompted Indiana, and other states, to take steps to control costs.

Meanwhile, federal auditors have begun examining states’ coverage of ABA services to ferret out fraud and abuse.

Mariel Fernandez, vice president of government affairs at the Council of Autism Service Providers, a nonprofit trade association, acknowledged that states are facing difficult choices.

“For such a costly and intensive service, the states need to explore how to best reimburse this benefit so that it’s sustainable and promotes quality,” said Fernandez, who is also a board-certified behavioral analyst. “Is [the rate] going to bankrupt Medicaid? Is it going to ensure that people are actually receiving the service?”

The Medicaid changes included in the One Big Beautiful Bill Act that President Donald Trump signed in July will increase the pressure: The law includes more than $900 billion in federal spending cuts over the next decade. Medicaid is funded jointly by the federal government and the states.

Meanwhile, Health and Human Services Secretary Robert F. Kennedy Jr. has described autism as a rapidly growing “epidemic” in the U.S. and has made it a major focus of his tenure. Kennedy has promoted the debunked theory that there’s a link between childhood vaccines and autism.

Curbing costs

Several states this year have considered curbing ABA costs by capping therapy hours, tightening provider enrollment rules, reducing reimbursement rates or changing patient eligibility rules. A bill in New York, for example, would establish a 680-hour annual cap on ABA services.

But nowhere has the issue been more prominent than in Indiana, where Medicaid has covered ABA therapy since 2016.

Governor’s group recommends ABA usage cap, rate changes as Medicaid costs rise

Historically, Indiana Medicaid has reimbursed ABA providers for most services at a rate of 40%, regardless of what they charged.

That “created some very strange incentives for a small portion of the provider network,” said Jason McManus, president of Indiana Providers of Effective Autism Treatment (InPEAT), which represents smaller ABA providers in Indiana and larger providers that operate in Indiana and elsewhere. “You had folks who were charging exorbitant amounts for the service.”

Beginning in 2024, Indiana lowered its reimbursement rate to about $68 per hour — and received plenty of pushback.

“That did have an impact on the provider community,” McManus said. “You had a lot of folks, smaller shops, who ended up closing their doors or consolidating with other organizations. So that was disruptive.”

And that year, the HHS inspector general issued a report which found that Indiana’s Medicaid program made at least $56 million in “improper” payments to ABA therapy providers in 2019 and 2020.

The state’s rapidly rising ABA costs and the federal audit prompted Republican Gov. Mike Braun to issue an executive order earlier this year creating a working group to examine ways to cut costs without compromising quality.

The group crafted recommendations to correct the problems identified in the federal audit and put ABA coverage on a financially sustainable path. Without changes in the state’s reimbursement policies, the group concluded, Indiana’s Medicaid spending on ABA therapy would reach a projected $825 million by 2029.

This month, Braun unveiled the group’s recommendations, which include the creation of a new ABA office to increase oversight and lower reimbursement rates, which the state has not yet detailed.

ABA allows people with autism “to obtain the highest level of independence that’s possible for them,” said McManus, who served on the working group.

“But from a state perspective, I can see how, if you’re purely just looking at the cost, you would say, ‘Wow, this is a cost that has grown over time, and if absent all other contexts, this is something we need to pay attention to, because it’s unsustainable.’”

Nebraska rate cut

In Nebraska, state officials also have been looking for ways to control spiraling ABA costs: Last year, Nebraska Medicaid paid out more than $85 million for ABA therapy, a surge from $4.6 million in 2020.

In July, the state announced that it would cut its Medicaid reimbursement rates for ABA, including a 48% cut to reimbursement for direct therapy provided by a behavior technician. That brought the rate to $74.80 per hour, down from about $144 per hour. Rates for therapy by physicians or other board-certified professionals also were reduced by about 37%.

Many providers saw the cuts coming, as the state has had the highest hourly reimbursement rate in the nation.

“It would be fiscally irresponsible of the state to maintain that,” said Leila Allen, vice president of external affairs at Lighthouse Autism Center, which has ABA therapy centers in Nebraska as well as in Illinois, Indiana, Iowa, Michigan and North Carolina.

Sam Wallach, president of Attain, an ABA therapy provider that operates in Nebraska and a dozen other states and Washington, D.C., said the service is “life-changing for children and families.” He views the ABA reduction as a “correction” that will make it feasible for Nebraska Medicaid to continue to cover it.

“The previous rates were well above what most Medicaid programs pay nationally, and while that created short-term benefits, it wasn’t realistic or sustainable,” Wallach said.

But some providers are taking issue with the way Nebraska went about those cuts.

For example, the state provided only 30 days’ notice before making the change. “There were providers that within 30 days had to tell their staff, ‘We’re so sorry. We have to cut your salary by ‘x’ percent in 30 days,’” Allen said.

Nebraska also didn’t examine how much it costs to provide ABA in the state, she said. The new rate is closer to what neighboring states, such as Iowa, pay. But therapists are few and far between in sparsely populated Nebraska, and families there often have to travel long distances to reach ABA providers.

“There was no cost survey to determine what the cost should be,” said Allen. “They didn’t take into account that you do have to pay people a little bit more to be able to work as behavior analysts in Nebraska.”

Finding ABA therapists in Nebraska is particularly difficult for families with older kids. Angela Gleason, executive secretary on the board of autism advocacy organization Arc of Nebraska, has a 13-year-old son with autism. She said many companies only serve very young children, up to age 6.

“So for families like mine, it’s then hard to even find a company that will serve his age and will provide that kind of support,” she said. To be able to afford therapy, her son Teddy has Medicaid coverage as his secondary insurance. ABA therapy helps him with socializing and speaking with his speech delay.

“He needs a lot more help throughout his day than a normal 13-year-old without autism might need,” Gleason said.

North Carolina court case

In North Carolina, the cost of covering autism services, including ABA, will total an estimated $639 million in fiscal 2026, up 425% from 2022, according to the state’s Medicaid agency. About five autism providers made up roughly 41% of the state’s increase in spending in fiscal year 2023-2024, according to the state.

Effective on Oct. 1, North Carolina Medicaid cut reimbursement rates for all kinds of health care services, arguing that state legislators had not budgeted enough money to keep up with rising costs. The reductions, which ranged from 3% to 10%, included a 10% cut to the reimbursement rate for autism services, including ABA therapy.

But the families of 21 children immediately sued the state Department of Health and Human Services to halt the move, arguing that it was discriminatory because it targeted children with disabilities.

Earlier this month, the families won a preliminary injunction temporarily halting the rate cut.

But families across the state are on edge as children with autism often see multiple providers — psychologists and speech language pathologists, for example — whose rate cuts were not paused, according to Allen, of Lighthouse Autism Center.

David Laxton, director of communications for the Autism Society of North Carolina, which is also a provider, said many providers won’t be able to absorb the rate reductions and continue operating.

“At some point, the math is not going to math,” Laxton said.

“It’s very stressful for families, because right now, there’s not an end in sight,” Laxton said. “There’s agreement that this [service] is very important, but there’s not been action to bring an end to the cuts.”

Stateline reporter Nada Hassanein can be reached at nhassanein@stateline.org.