How will Medicaid changes affect long-term care?

Changes to Medicaid passed in the Trump Administration's Big, Beautiful Bill are poised to reduce federal Medicaid spending by $911 billion over the next 10 years and lead millions of people to lose their health insurance coverage, according to estimates from the nonpartisan Congressional Budget Office (CBO). How exactly the reductions will impact local nursing homes and assisted living centers is unknown, but given Medicaid is a large payer for those services, residents and experts are concerned for the future.

Funded by the federal government and states, Medicaid provides health coverage to low-income Americans, people with disabilities, and older adults. Minnesota expanded access to Medicaid for more people earning up to 138% of the poverty level through the Affordable Care Act (ACA). The Big, Beautiful Bill made a number of changes to Medicaid eligibility and states' options for funding Medicaid.

Those changes are leading many residents in long-term care to wonder if they will be eligible in the future. "What we see," Sugar Loaf Senior Living Marketing Director Maggie Modjeski said, "is the fear of people when they're starting this process, that they know they need assisted living, but they don't know how their health needs are going to progress and how fast their money might go. So their concern is, 'What if I don't qualify, then what's going to happen to me?' And I think that's a lot of the concerns for caregivers." Modjeski added that the impact of reductions to Medicaid will be less pronounced for assisted living facilities compared to nursing homes, because assisted living facilities generally have fewer people on Medicaid. She said that roughly 30% of the tenants at Sugar Loaf Senior Living are on Medicaid or a related program. While it is unclear how exactly the Medicaid changes may impact Sugar Loaf Senior Living, Modjeski said the fear of that unknown is causing some to put off seeking long-term care or ask, "If I run out of money, what if I don't qualify? Or … how is this new bill going to affect me?"

Winona Health CEO Rachelle Schultz said that roughly 70% of residents at Winona Health's nursing home, Lake Winona Manor, and 65% at its assisted living facility, Senior Living at Watkins, are on Medicaid. Schultz said that the Big, Beautiful Bill will add a huge administrative burden on enrollees and Winona Health to keep up with applications. It could lead to people having gaps in their coverage or losing their coverage, Schultz said, as well as a loss of revenue for Winona Health. As people potentially fall off Medicaid, Schultz said those people could be required to pay out-of-pocket, and some may then go into debt for care, which Winona Health typically cannot fully collect. She estimated Winona Health could lose out on $500,000 because of the cuts to Medicaid. The changes to Medicaid are still very recent and at a federal level, Schultz said, noting that how the changes will actually impact Winona Health will depend on how the state reacts to the changes and loss of federal Medicaid funding. Winona Health is not planning to scale anything back, Schultz said, adding, "Our goal is really to stay kind of on top of this as all the pieces get put in place and really help people be able to continue to access the care that they need."

LeadingAge Minnesota Vice President of Advocacy Erin Huppert echoed Schultz and said changes to Medicaid in the Big, Beautiful Bill will make it harder to enroll in Medicaid. "I think if you're trying to enroll in Medicaid, if you're a low income senior, it's going to get more complicated, and it's probably going to take longer," Huppert said. She added that cuts to federal Medicaid funding could lead to further state cuts.

One of the changes to Medicaid passed in the Big, Beautiful Bill requires that adults covered by Medicaid expansion verify their eligibility every six months instead of every 12, which Schultz said will be a major paperwork burden for enrollees and Winona Health. She added that the applications are extremely detailed and require lots of documentation. Enrollees might not realize when their six-month eligibility expires, and Schultz said, "They might come in for services and then not have coverage."

Additionally, changes to Medicaid limit retroactive coverage — in which Medicaid will cover medical bills incurred just before signing up — from three months to one month for expansion enrollees and two months for traditional enrollees. Schultz noted that most applications for Medicaid take more than a month to complete, meaning people may have a gap in their coverage, and care providers may not get paid for their services. "I think it's designed to actually have less people on Medicaid in general," Schultz said.

Another change to Medicaid in the new bill delays changes that would streamline dual-enrollment for older adults who also qualify for Medicare. The AARP reported in July that most of the country's 1.2 million nursing home residents have both Medicaid to pay for long-term care, and Medicare to pay for other medical care such as doctor visits. According to the AARP, following the pandemic, many people enrolled in both programs lost Medicaid coverage, not because they were ineligible, but because of procedural reasons. Under the Biden administration, the Centers for Medicare & Medicaid Services attempted to make dual-enrollment easier with a pair of rules. The new bill passed last month prohibits implementation of the new rules until 2034. The CBO estimates the delay will reduce the number of dual-enrollees by 1.3 million through 2034.

Other changes to Medicaid include restrictions and reductions to provider taxes. Taxes on health care providers are a significant revenue source for states to fund the non-federal share of Medicaid. According to the health policy research organization KFF, changes to Medicaid passed in July prohibit states from establishing new provider taxes or increasing rates of existing taxes and reduce how much states can tax under "hold harmless" agreements, which guarantee health care providers will receive enough Medicaid revenue to make up for the taxes. The CBO estimates these changes will reduce federal Medicaid spending by $191 billion over 10 years.

The Big, Beautiful Bill also delayed federal rules that would increase nursing home staffing minimums until 2034. While the delay may benefit providers financially, senior organizations opposed the delay, saying better staffing levels are needed for safety.

Finally, for a person to qualify for Medicaid-covered long-term care, there are home equity limits that the bill increased. The previous limits were, adjusted for inflation and depending on the state, $730,000 and $1,097,000, according to KFF. The new home equity cap will be $1 million for most properties starting in 2028, with no adjustments for inflation.

Proponents of the bill have argued that it helps to prevent Medicaid fraud and ensure people receiving the benefit really need help. In an op-ed earlier this month, Congressman Brad Finstad and other Minnesota Republican congressional representatives called Democrats' concerns about the bill and how it will "tear health care away from a quarter million Minnesotans" and how in it, "rural hospitals are roadkill", all lies. "To put it succinctly: Minnesota has a Medicaid problem, and taxpayers are being forced to foot the bill," Finstad and his colleagues wrote in the op-ed. They added, "The Medicaid provisions included in the One Big Beautiful Bill ensure our most vulnerable continue receiving the support they need, while restoring the integrity of the program and saving taxpayer dollars."

Schultz said that while some fraud may occur, Medicaid's application process is very rigorous.

"If anything, [this bill] has added to the waste, this administrative burden …" She added, "I really doubt that there's the level of fraud and abuse … that has been contemplated about this."

How the federal cuts impact Minnesota will depend on how the state reacts, LeadingAge Minnesota Vice President of Advocacy Erin Huppert said, adding that many of the Medicaid changes would need to be effectuated by the state legislature. According to the Minnesota Department of Human Services, Medicaid changes in the Big, Beautiful Bill could result in Minnesota losing out on up to $500 million worth of annual federal revenue for Medicaid. The state legislature will have to find a way to make up for the lost revenue or reduce spending, Huppert said, noting that there are not many ways to find savings in Medicaid without changing which services are covered, or the cost-share Minnesotans pay to receive care, or by reducing reimbursement rates. Huppert said she is worried about what the state will do, given its track record. "The legislature that adjourned in 2025 balanced a $5 billion deficit largely on the backs of people with disabilities and seniors. They passed a two-year budget that promulgated $1 billion in cuts to human services over four years, and then included some pretty significant cuts to nursing homes," Huppert said. She added, "So I'm pretty worried that they are going to try to do that again to shore up whatever budget shortfall they may have from this federal budget."

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