Medicaid Cuts Threaten Nursing Home Funding Nationwide

WASHINGTON, D.C. — Congressional proposals to reduce Medicaid spending by up to $940 billion over the next decade threaten to destabilize nursing home funding across the country, potentially displacing hundreds of thousands of residents who depend on the program for their care, according to health policy experts and industry leaders.

Medicaid currently covers approximately two-thirds of all nursing home residents nationwide, yet facilities consistently report losing money on patients covered by the program. A 2019 federal study documented that Medicaid reimbursed nursing homes an average of $198 per day while the actual cost of care averaged $253 daily—meaning the program paid just 82 cents on the dollar, as reported by PBS NewsHour.

The financial strain has already triggered widespread facility closures even before proposed cuts take effect. Between February 2020 and July 2024, 774 nursing facilities closed nationwide while only 243 new facilities opened, according to industry data cited by PBS. Operators warn that additional reductions to an already inadequate payment system could accelerate the trend and force difficult decisions about staffing levels and services.

"If these cuts happen in the way they may appear to happen at this moment, people are going to get sick and die," said Jason Sullivan-Halpern, director of the California Long Term Care Ombudsman Association, in an interview with PBS NewsHour.

The House of Representatives passed reconciliation legislation in May 2025 by a vote of 215-214 that included approximately $700 billion in Medicaid reductions and $500 billion in Medicare cuts over ten years, as reported by Skilled Nursing News. The Congressional Budget Office projected that 7.6 million Americans would lose health coverage under the House proposal. The Senate subsequently passed a version containing even larger cuts of approximately $940 billion to Medicaid, according to analysis from the University of Pennsylvania's Leonard Davis Institute.

Impact on Facility Operations and Quality

Research indicates a direct correlation between Medicaid payment rates and the quality of nursing home care. A study published in the Journal of the American Medical Directors Association by researchers at the University of Massachusetts Boston found that higher Medicaid reimbursement rates directly corresponded with facilities receiving four- or five-star quality ratings on the federal Care Compare website, as reported by WESA.

Operators describe current payment rates as insufficient to cover basic costs. Joe Weeks, regional director of operations at HCF Management Inc., which operates 24 nursing homes in Ohio and Pennsylvania, told WESA that Hempfield Manor near Greensburg, Pennsylvania loses $60 per day for each Medicaid resident. Pennsylvania's Medicaid program covers only approximately 80 percent of actual care costs due to a budget-adjustment factor that reduces payments by roughly 20 percent, according to Weeks.

"Funding drives staffing and staffing drives quality," Weeks explained to WESA, noting that proposed cuts scheduled to begin in fall 2026 would further squeeze already tight margins.

Brown University professor Vincent Mor warned PBS NewsHour that inadequate funding leads to "failure to thrive" among nursing home residents due to insufficient staffing levels and increased social isolation. Health economists project that reduced funding could trigger increases in hospitalizations, emergency room visits, and premature deaths among vulnerable populations.

Home Care Services Face Elimination

While nursing home coverage is mandatory under federal Medicaid law, home and community-based services are optional state benefits. Experts predict that states facing budget shortfalls will cut optional programs first, potentially forcing individuals currently receiving care at home into institutional settings.

By 2022, home and community-based services accounted for 65 percent of Medicaid long-term care spending, according to Penn's Leonard Davis Institute. Proposed cuts could eliminate coverage for 4.5 million people currently receiving home-based services, as reported by NPR.

"Unnecessary institutionalization" would likely result from eliminating home care options, according to Nicole Jorwic of Caring Across Generations, speaking to NPR. Approximately 700,000 people are already on waiting lists for Medicaid-funded home care services nationwide.

The home care workforce faces additional pressure from stagnant wages and immigration enforcement. Home care workers earn an average of $11 to $12 per hour, and nearly 15 percent of home care agency workers are estimated to be undocumented immigrants, according to Penn research.

Sharon Duchessi, a Sacramento caregiver earning $18.65 per hour through SEIU 2015, is currently capped at 189 hours per month by Medicaid despite her partner Michael Kowalczyk requiring 250 hours of care monthly, as reported by NPR. Proposed cuts would likely tighten such restrictions further.

Timeline and Implementation

The House reconciliation bill included Medicaid work requirements beginning in December 2026 for expansion enrollees, according to Fred Bentley of ATI Advisory speaking to Skilled Nursing News. The legislation would add $3.3 trillion to the federal deficit while raising the debt ceiling by $4 trillion, according to analysis by Macquarie analyst Tao Qiu.

LeadingAge president Katie Smith Sloan called the legislation "cold-hearted" with "devastating impact on millions of older adults" in a statement to Skilled Nursing News.

Harvard health economist David Grabowski told NPR that Medicaid funds over $415 billion in annual long-term care spending nationwide. Reducing that funding while demand for services continues to grow as the population ages creates what advocates describe as an unsustainable situation for both facilities and the families they serve.

Resources for Families

Families concerned about nursing home care quality or who need assistance navigating long-term care options can contact the National Long-Term Care Ombudsman Resource Center at 1-800-677-1116. Additional information and resources are available at https://ltcombudsman.org.

Residents and families experiencing issues with care quality, billing, or coverage should document concerns in writing and contact their state's long-term care ombudsman program, which provides free advocacy services for nursing home and assisted living residents.