Industry Fears Medicaid Cuts

Republicans passed the reconciliation bill which included a 10-year delay on the federal staffing mandate, no change in nursing home provider taxes, and sweeping spending cuts that will indirectly affect skilled nursing facilities (SNFs).

This bill cuts $1 trillion in health care and food assistance spending but will increase the national deficit by $3.4 trillion by 2034.

“Due to the level of deficit this bill will create, Medicare payments to providers may be reduced by 4% for the next ten years. Bandaids included in the bill – such as only-freezing-but-not-reducing nursing home provider taxes, and the creation of a rural health transformation fund–touted as protections for older adults and aging services providers – will soon prove ill-equipped to stop OBBB’s damage,” said Katie Smith Sloan, president and CEO, LeadingAge, in a statement. “And, as states respond to OBBB-created deficits in their budgets due to reduced federal Medicaid contributions, the suffering will begin.”

Additionally, operators are concerned about the state-level impacts this bill will bring. “There’s a pot of money that comes from the feds to the state for Medicaid [and] the state has to decide, ‘Do we want to let those people [previously on ACA] go without health care, or do we want to shore up this program with more state funding?’” Ron Nunziato, senior director of policy and regulatory at the Health Care Council of Illinois, told Skilled Nursing News earlier. “That’s the fear – we never really know until it’s all done, and how it’s going to affect us and what the state is going to do in response to that cut, or potentially more cuts.”

A key concern is the reduction in Medicaid funds to support hospitals, which the American Hospital Association warns will lead to an increase in uncompensated care and further strain preexisting, overburdened systems. These cuts are expected to ripple across the health care continuum, ultimately affecting long-term care, including SNFs. “It will force hospitals to make service line reductions and staff reductions, resulting in longer waiting times in emergency departments and for other essential services, and could ultimately lead to facility closures, especially in rural and underserved areas,” the AHA noted in a statement issued ahead of the House’s passage of the bill.

The reconciliation bill’s limitation on hospital provider taxes will weaken a crucial Medicaid funding tool for the states. These changes will ripple through the healthcare system, affecting SNF and long-term care sectors that rely on hospital referrals and state Medicaid stability. In states that expanded Medicaid under the Affordable Care Act, hospital provider taxes will be gradually reduced from the current federal cap of 6% to 3.5%, decreasing by 0.5% increments each year until the new threshold is reached.

Although many Republican lawmakers were concerned about the bill’s high cost and intense healthcare cuts, they shifted their stance after receiving promises and pressure from the White House. Just two Republican Congressmen, Rep. Brian Fitzpatrick of Pennsylvania and Rep. Thomas Massie from Kentucky, remained in opposition to this bill till the end.

The bill’s $940 billion Medicaid reductions over 10 years threaten the non-federally mandated home- and community-based services (HCBS). With states facing funding shortages as well, this leaves seniors and those with disabilities at a loss for home-based care, pushing them into nursing homes. This creates an increased demand on nursing homes without proportional reimbursement increases.

President and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), called out the underfunding of Medicaid.

“The reality remains that Medicaid is underfunded, and there are limited resources available to meet the growing demand for care. Provider taxes are a necessary tool in supporting states’ ability to fund daily services and supports for those on Medicaid, and any reduction in resources within the overall care continuum cannot be taken lightly,” Porter said in a statement. “We are grateful to the many leaders who have worked diligently to hear the concerns of our profession and who have advocated to protect long-term care throughout the process.”