Signed by President Trump on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) spending and tax law that will cut more than $1 trillion in Medicaid funding introduces several changes that significantly impact healthcare providers who serve the long-term care population. Although the provisions do not go into effect until 2026 or later, nursing homes, skilled nursing facilities (SNFs) and home‑and‑community‑based service (HCBS) providers should begin preparing now to minimize patient care and reimbursement problems down the road.
Key Changes Under OBBBA
As the name suggests, the bill makes wide-ranging changes to federal spending in areas affecting taxation, immigration and healthcare. The biggest impacts for long-term care providers are:
Staffing mandate delay – postposed to 2034 One sigh of relief is that the minimum staffing requirements that were originally released in April 2024 will not be enforced until September 30, 2034. This buys providers significantly more time to hire and train staff and align operations to eventually meet the proposed requirements.
Stricter Medicaid eligibility criteria – effective December 31, 2026 Eligibility to qualify and maintain coverage will become more burdensome, with redetermination now required every six months instead of annually. As of January 1, 2027, new and existing enrollees between the ages of 19-64 must meet certain conditions for coverage, including work requirements that prove they engaged in at least 80 hours of work, community service, or another approved activity each month (exemptions apply for certain individuals).
Reduced retroactive Medicaid coverage – effective January 1, 2027 The retroactive coverage window for non-expansion beneficiaries has been reduced from 90 days to one or two months before the application date, depending on the enrollee group.
Increased patient liability – starting in fiscal year 2029 Adults in the Medicaid expansion group with incomes over 100% of the federal poverty level could face increased out-of-pocket costs up to $35 per service, with an annual cap of 5% of family income (some exceptions may apply).
Limitations on provider state tax – effective July 4, 2025 with phase down beginning 2028 States are no longer allowed to introduce or increase provider taxes to fund Medicaid, freezing existing taxes at the current rate. Gradual reduction of the tax cap will reduce state revenue and potentially affect provider Medicaid payments as a reliable source of revenue.
Expansion of HCBS - effective July 1, 2028 States now have the option to expand HCBS eligibility to go beyond individuals who require an institutional nursing home level of care. This may provide an opportunity for more individuals to receive at-home care, potentially reducing nursing home demand, however funding is limited and states must demonstrate that the new waiver will not lengthen wait times for HCBS recipients who already meet the institutional-level-of-care criteria.
The Biggest OBBBA Challenges for LTPAC Providers – and How to Offset Them
Challenge #1: Increased administrative burden With double the previous amount of eligibility checks, the amount of paperwork will increase. Staff will need to spend more time helping patients navigate eligibility, over and over again.
Do this: Strengthen your admissions and business office communication, and look for new ways to streamline enrollment and other core back-office processes. This includes embracing technologies and strategically reallocating resources if necessary.
Challenge #2: Help patients maintain uninterrupted coverage With the eligibility process becoming more frequent and complex, it will become more difficult for individuals to maintain continuous coverage, even if they qualify. Missed verifications, incomplete forms or paperwork delays puts vulnerable people at risk of losing coverage, and enrollment lapses could result in unpaid services for your facility.
Do this: Get in the habit now of auditing Medicaid cases, by establishing stricter protocols for Medicaid application at admissions and ongoing verification on a regular basis thereafter. Assign dedicated and trained staff to spearhead and monitor enrollment and retention efforts, minimizing churn as much as possible. Include efforts to educate patients (or caretakers) on new coverage requirements and responsibilities, so there are no surprises. It is a good idea to update your admission agreements to address payment responsibility for any uncovered periods of care.
Challenge #3: More financial uncertainty These changes are likely to shrink Medicaid enrollment over time, reducing the number of insured long‑term care patients and reimbursements—which many providers rely on to remain financially viable. Providers will also face uncertainty from how states will adjust their budgets to make up for the cuts affecting their bottom line.
Do this: Prioritize long-term resilience by focusing on what you can control now. Use technology and data analysis to control costs and improve efficiency, and seek alternative revenue streams that will drive profitability. For providers that serve large Medicaid populations, improving your payer mix can help increase profits. With the right payer strategy, you can pursue more favorable contract terms with commercial payers, while still serving your community’s needs.
The American healthcare system is drastically changing, and long-term care providers need to understand what it means for their facility and their patients. Although the OBBBA is disruptive in many ways, there are opportunities for providers that are willing to adapt. The experienced team at Richter is familiar with the rules of OBBBA and the challenges it presents, and can help you build a strategy that protects your financial outlook—and the well-being of your residents.
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