The budget includes an additional 500 slots for the Home and Community Based Services program over the biennium. The total additional funding for Home and Community Based Services slots is $20,349,900 each year, with $5,789,100 from the General Fund and $14,560,800 from federal funds. This will bring the total number of funded slots to 18,300.

The budget includes an additional $1,441,400 General Fund in fiscal year 2028 as a federal fund replacement to support the four currently operating pilot Certified Community Behavioral Health Clinics. Funds are needed due to an expiring enhanced federal match rate at the end of calendar year 2027.

Congress passed H.R. 1 in July 2025 which made significant changes to the Medicaid program. Among them are new work or community engagement requirements for the expansion population and changing the eligibility determination timeline for the expansion population from annually to every six months. These two changes are effective January 2027. The Medicaid eligibility forecast assumes that the work or community engagement change will reduce enrollment by 4,295 in fiscal year 2027 and by 9,660 in fiscal year 2028. The more frequent eligibility redetermination change is estimated to reduce enrollment by 18,879 in fiscal year 2028. When these two changes are combined, the estimated enrollment reduction is 28,539 in fiscal year 2028. H.R. 1 also impacts Medicaid program income from provider taxes. It imposes limits on provider tax, used as a match for federal funds. The legislation reduces the allowable Medicaid provider tax rate by phasing it down over five years from 6% to 3.5% by 2032, starting January 1, 2028 with 0.5% annual drops. The first year of impact to Kentucky is in 2029. Starting October 2028, the new law imposes a cost sharing requirement on the expansion population between 100-138 percent of the federal poverty level, capped at $35 dollars per service and 5 percent of total family income annually.

One of the most significant changes is the new law's limits on state directed payments to hospitals. In Kentucky, the most prominent example is the Hospital Rate Improvement Program (HRIP). State directed payments help fill the gap between base Medicaid rates and the average commercial rate. The change phases down these payments by 10 percentage points each year to no more than what Medicare pays. The phase down is scheduled to begin in 2028. The Kentucky Hospital Association has estimated this change will amount to a 90 percent loss of the current payments. One national study has estimated that Kentucky would be at risk of losing 35 rural hospitals because of H.R. 1.