With the signing of the One Big Beautiful Bill Act (OBBBA) into law in July, 2025, health care providers should be concerned about the impact OBBBA will have on their Medicaid payments, and the problem is particularly acute for long-term care providers. Medicaid is a primary payor for approximately 63% of nursing home patients in the United States, and various state-level Medicaid waiver programs provide payment for various types of health care services and supplies outside of nursing homes. All of these are in jeopardy in the coming years as federal funds distributed to states for Medicaid start to dwindle.
The only protection provided in OBBBA for long-term care providers relates to Medicaid payments for the base nursing facility benefit. This means add-ons to the base rate and waivered Medicaid program funding are not protected. States will have to make tough decisions about which add-ons and programs to maintain and which to defund in whole or in part, which means the following current Medicaid coverages and payments are at risk:
- Home-and-Community-Based Services Waivers that fund in-home care, personal care, adult day care, and home modifications for people who would otherwise need a nursing home or hospital level of care.
- Elderly and Disabled Waivers that help older adults and people with physical disabilities stay independent through meal delivery, homemaker services, and respite care.
- Assisted Living Services Waivers that provide coverage for assisted living level of care services in assisted living facilities when individuals would otherwise be unable to pay privately for assisted living care.
- Quality Incentive Payments that incentivize certain quality metrics by offering high-quality operators an add-on payment to the base Medicaid rate.
- Private Room Incentive Payments that help promote home-like environments for residents by providing a supplemental daily Medicaid payment to providers for offering private rooms with private bathrooms.
- Specialty Care Add-On Payments that recognize the cost of providing higher acuity care to patients with certain needs, like ventilator and bariatric patients, requiring high-level clinical staffing and providers with specialized knowledge of certain conditions that cannot be addressed in a standard long-term care setting.
- Occupancy and Geographic Adjustments that are tied to factors like regional labor costs or maintaining high overall occupancy at the facility, including in rural and underserved areas.
These quality-driven and optional payment streams are not expressly protected under OBBBA, and are the first dollars exposed as states evaluate what programs to keep and which to cut in order to keep within their Medicaid budgets. Perhaps most at risk are Home and Community Based Waiver programs that account for approximately 32% of all Medicaid spending and about half of all optional spending, making those programs the most likely targets for Medicaid cuts on a state-by-state basis.
Other parts of the OBBBA restrict Medicaid funding for long-term care providers. Although changes to Medicaid eligibility work requirements are unlikely to materially impact the long-term care patient population, the shorter retroactive coverage window (dropping to 60 days from 90 days beginning January 1, 2027) increases the potential that long-term care providers will have residents who have a gap in payment coverage between private pay payments or Medicare coverage and Medicaid eligibility, particularly if states take longer than 60 days to issue a Medicaid determination.
The impact of all of these changes is somewhat foreseeable – for instance:
- Higher acuity individuals will likely be pushed into more institutional settings;
- HCBS waitlists will grow longer, delaying needed care and services for older Americans;
- Older Americans will find it harder to find a placement in their preferred long-term care setting;
- Without payment incentives, quality will likely decrease;
- Delays in level of care determinations will result in periods of nonpayment to providers;
- Medicaid payment will fail to cover all of the costs of caring for more and more residents in long-term care settings; and
- Providers will have to rebalance their budgets in light of funding shortfalls and decreased Medicaid dollars, and an accompanying decreased ability to pay competitive wages to essential direct care providers, which may result in more facilities having to sell or close. Solo operators and smaller-scale providers will struggle financially if they are unable to centralize certain operations.
Long-term care providers should be anticipating these changes now, even if the precise impact is not yet known or calculable, by proactively making changes to their operations to help protect their ability to continue providing care in light of both a decrease in Medicaid rates and a likely increase in individuals funneling into nursing homes when waivers for home and community-based services are restricted or eliminated.
