Arkansas spent $400 million more on Medicaid during fiscal year 2026 than it did the previous year, according to state Finance and Administration Secretary Jim Hudson. Speaking to the Arkansas Legislative Council on Friday, Hudson said the spike exceeded projections and was partly driven by higher-than-anticipated insurance claims.
“We had an unfavorable year, in terms of experience," Hudson said.
The Legislative Council approved a request from Hudson and Human Services Secretary Janet Mann for $200 million in restricted reserve funds to fulfill the state’s Medicaid match obligations. Medicaid, the federal program providing low-cost insurance for low-income individuals and people with disabilities, covered nearly 840,000 Arkansans at the end of fiscal year 2026, with total program costs exceeding $9.8 billion.
Mann stated in her funding request to Hudson that enrollment and costs are expected to remain similar in fiscal year 2027.
However, Hudson cautioned that the $200 million allocated will not suffice for the remainder of the current fiscal year, which ends on June 30, 2027. He called on lawmakers to ensure consistent Medicaid funding, seek ways to enhance recurring revenue, and guarantee the state’s Medicaid trust fund remains adequately resourced to address future contingencies. As of August 31, the trust fund held more than $120 million, according to Department of Human Services spokesperson Gavin Lesnick.
Republican State Senator Scott Flippo of Bull Shoals questioned the health of the Medicaid trust fund. Hudson refrained from categorizing the fund’s status.
“This is math, right? I think what we have to look at is the total resources that we have available as a state to meet our obligations, and we have more than adequate resources to be able to do that,” Hudson said. He emphasized the need for robust reserve funds to support the program if necessary.
Arkansas concluded fiscal year 2026 with a $655 million budget surplus and approximately $4 billion in total reserves. Lawmakers are expected to continue Medicaid funding discussions during October budget hearings, with Governor Sarah Huckabee Sanders scheduled to unveil her formal budget proposal in November. Medicaid’s future remains one of the key priorities for the upcoming 2027 legislative session, which begins in January.
Further complicating the outlook is a decision by the federal Centers for Medicare and Medicaid Services (CMS). In July, CMS verbally denied a five-year extension for Arkansas’ Medicaid expansion model. In response, the state has requested a two-year grace period to maintain coverage while developing a new model. Mann assured lawmakers last month that CMS will likely approve the extension, but no formal response has been received regarding the state’s request.
Despite uncertainties, Mann said the Department of Human Services does not plan to cease Medicaid administration.
Lawmakers and state officials are expected to closely monitor federal responses and funding strategies to navigate the program’s challenges.