FROM: Lisa D. Lee, Commissioner
DATE: June 8, 2026
RE: Medicaid Budget Impact on Provider Reimbursement Dear Provider Partner,
As you may be aware, House Bill 500, passed in the 2026 Kentucky General Assembly Session, did not provide sufficient funding for the Department to continue operating the Medicaid program at current service and reimbursement levels. The Governor and his administration repeatedly warned the General Assembly about the painful impacts that would be felt by the unnecessary and harmful budget cuts, yet no action was taken by the legislature. As a result, the Department for Medicaid Services (DMS) must take the necessary action to align Medicaid program expenditures with the funding appropriated by the Kentucky General Assembly.
Accordingly, we regretfully write to inform you that DMS will implement a 4% reduction in Medicaid provider reimbursement rates for the provider types identified in the DMS Provider Letter attached document, effective August 1, 2026, or the earliest administratively feasible date thereafter.
This action is necessary to ensure the Department can continue providing medically necessary services to Kentucky Medicaid members, particularly the Commonwealth’s most vulnerable populations, within available appropriations. DMS is committed to preserving access to medically necessary services for Kentucky Medicaid members while ensuring the long-term fiscal sustainability of the Medicaid program.
DMS recognizes the impact reimbursement reductions may have on providers and appreciates the important role you play in delivering care to Kentucky Medicaid members. The Department will continue to monitor program expenditures, utilization trends, and budget conditions and will communicate additional implementation and operational details as necessary.
We appreciate the difficulty this may present and regret the actions taken by the General Assembly, which make this a necessary step.
Thank you for your continued partnership and service to Kentucky Medicaid members. Please direct any questions regarding this letter to CHFS.listens@ky.gov.
Sincerely,
Lisa D. Lee, Commissioner
