Arkansas finance secretary urges lawmakers to keep Medicaid fully funded after $400M spending hike

Arkansas spent $400 million more on Medicaid between July 1, 2025 and June 30, 2026 than the previous year, Finance and Administration Secretary Jim Hudson told lawmakers Friday.

This increase was just above the amount in the Department of Human Services’ operating plan for fiscal year 2026, agency spokesperson Gavin Lesnick said in an email, but Hudson said state officials did not anticipate the spike in insurance claims that contributed to the spending increase.

“We had an unfavorable year, in terms of experience,” Hudson told the Arkansas Legislative Council.

The council approved a request from Hudson and Human Services Secretary Janet Mann for $200 million in restricted reserve funds to cover the state’s required match for Medicaid, the federally funded, low-cost insurance program for low-income people and people with disabilities.

Medicaid covered nearly 840,000 Arkansans at the end of fiscal year 2026, costing more than $9.8 billion. Mann wrote in her funding request to Hudson that she expects similar cost and enrollment for fiscal year 2027.

The $200 million allocated Friday will not last the rest of the current fiscal year, which ends June 30, 2027, Hudson said. He urged lawmakers to keep Medicaid fully funded, find ways to increase recurring revenue from the program and ensure the state’s Medicaid trust fund is “adequately capitalized to deal with any surprises that occur in the future.”

As of Aug. 31, the Medicaid trust fund had more than $120 million, Lesnick said.

Republican Sen. Scott Flippo of Bull Shoals asked Hudson “how healthy” he considers the Medicaid trust fund.

“I won’t put a healthy or sick label on it,” Hudson said. “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 also said Arkansas needs to have enough reserve funds to contribute to Medicaid if need be. The state finished fiscal year 2026 with a $655 million surplus and about $4 billion in reserves.

State lawmakers will meet several times throughout October to discuss the fiscal year 2028 state budget, and Gov. Sarah Huckabee Sanders will reveal her formal budget proposal in November.

Hudson and lawmakers agreed that Medicaid funding discussions will continue in the budget hearings leading up to the 2027 legislative session beginning in January.

The future of Arkansas Medicaid is expected to be one of the session’s highest priorities. The federal Centers for Medicare and Medicaid Services verbally denied a five-year extension of Arkansas’ Medicaid expansion model in July, and in August the state requested a two-year grace reprieve to keep Medicaid recipients covered while officials come up with a new model.

The Department of Human Services has not yet received a formal notification of the denial, nor has it received a response to the agency’s request for the two-year grace period, Lesnick said Friday.

Mann told lawmakers last month that she expects the federal government to approve the two-year grace period and that the Department of Human Services does not plan to stop administering Medicaid.