How Medicaid Cuts Will Impact Nursing Home Care

As the American population ages, access to quality nursing home care has never been more important. However, with the passage of the “One Big Beautiful Bill” (OBBB) in July 2025, Medicaid—one of the primary funding sources for long-term care—is facing substantial cuts. These changes are likely to trigger widespread consequences across the long-term care industry, jeopardizing the health and safety of millions of elderly and disabled individuals who depend on nursing homes and skilled nursing facilities. In this blog, we examine how Medicaid cuts will impact nursing home care, drawing on the latest data, expert projections, and federal policy updates.

Medicaid’s Critical Role in Nursing Home Care

Medicaid is the backbone of America’s long-term care system. According to the Kaiser Family Foundation, nationwide, the program funds care for about 62% of nursing home residents. Medicaid payments account for approximately 59% of all nursing home revenue, making it the largest single source of income for these facilities.

Despite its importance, Medicaid has long reimbursed providers at rates below the actual cost of care. On average, nursing homes lose between $30 and $50 per patient per day on Medicaid residents. As a result, many facilities operate on razor-thin margins. The American Health Care Association reports that 80% of nursing homes are operating at a loss or just breaking even.

Overview of the Recent Medicaid Cuts

The OBBB legislation passed in 2025 introduces sweeping changes that could affect Medicaid’s support of nursing homes. Among its most controversial provisions are:

• A reduction in retroactive eligibility coverage from 90 days to just 30 days.
• A nationwide cap on provider tax rates, dropping the maximum from 6% to 3.5%.
• A moratorium on new provider taxes that states use to fund Medicaid programs.
• Increased administrative burdens, including more frequent eligibility redeterminations and potential work requirements.

According to an analysis by the Center on Budget and Policy Priorities, these changes could slash federal Medicaid funding by as much as $1 trillion over the next decade. For nursing homes already struggling to make ends meet, these reductions could be catastrophic.

Staff Cuts and Lower Quality of Care

One of the most immediate effects of Medicaid reductions will be staffing cutbacks. A 2025 AHCA survey found that 58% of nursing homes anticipate reducing their current staff levels in response to lower Medicaid reimbursement rates. Additionally, 44% said they would curb or freeze hiring entirely.

Staffing is directly tied to the quality of care in nursing homes. When nurse and aide levels drop, residents are more likely to suffer from bedsores, falls, medication errors, and infections. In fact, a MarketWatch report found that low staffing often leads to an increase in the use of chemical restraints—antipsychotic medications used to sedate residents. These practices not only raise ethical concerns but are also linked to increased rates of mortality and injury.

Nursing Home Abuse and Neglect Could Rise

When nursing homes are understaffed and underfunded, the risk of abuse and neglect increases significantly. Residents may suffer from dehydration, malnutrition, untreated infections, pressure ulcers, and unsupervised falls, many of which are preventable with proper care. Families often discover signs of neglect only after serious harm has occurred.

With fewer nurses and aides available to supervise and assist vulnerable residents, the potential for both intentional abuse and systemic neglect rises. Overworked staff may take shortcuts, skip necessary hygiene routines, or miss medical red flags. In worst-case scenarios, residents may be left in soiled bedding, go hours without assistance, or face physical or emotional mistreatment.

Illinois has long recognized elder abuse as a growing concern. According to the Illinois Department on Aging, thousands of cases of suspected abuse and neglect are reported annually in nursing homes across the state. Medicaid cuts only make this situation worse by removing critical oversight mechanisms, delaying inspections, and creating an environment where profit-driven decision-making eclipses resident care. As these trends continue, families must stay vigilant and advocate for their loved ones’ safety.

Facility Closures and Limited Access

Cuts to Medicaid don’t just weaken existing services, they may lead to widespread facility closures. A 2025 analysis by Brown University researchers identified 579 nursing homes across the U.S. at elevated risk of shutting down due to declining Medicaid reimbursements. These facilities are typically located in urban and rural areas with a high concentration of low-income residents.

Beyond those closures, as many as 1,749 homes with a Medicaid payer share above 85% are considered at risk. This could create a massive shortage of available nursing home beds, particularly in underserved communities. Over half of nursing home operators surveyed said they would reduce the number of beds available to Medicaid patients, while 27% expect to close their doors completely.

For families with limited resources, this means longer wait times, fewer choices, and longer travel distances to find care. It also puts pressure on other parts of the healthcare system, such as hospitals and emergency rooms.

Ripple Effects on Hospitals and Rural Communities

The effects of Medicaid cuts will extend well beyond nursing homes. Rural hospitals, which often rely on nearby skilled nursing facilities to transition patients out of acute care, may be especially hard hit. The American Hospital Association warns that rural hospitals could lose an estimated $50 billion in Medicaid funding over the next 10 years.

With fewer nursing home beds available, hospitals may be forced to hold elderly patients for longer periods, delaying care for others and increasing costs. Emergency departments could see spikes in preventable visits as seniors lose access to consistent care.

The Medicare Rights Center estimates that Medicaid and SNAP cuts in the OBBB could result in 20,000 excess deaths annually due to staffing rollbacks, premature discharges, and reduced oversight.

Home and Community-Based Services at Risk

While the federal government has encouraged a shift toward Home and Community-Based Services (HCBS), Medicaid cuts threaten this model as well. States are likely to reduce or eliminate optional HCBS programs, forcing more seniors into institutional care they may not want or need.

According to the University of Pennsylvania’s Leonard Davis Institute of Health Economics, more than one million seniors are currently on HCBS waitlists. With further cuts, those waitlists will grow, and families will have no choice but to turn to understaffed, overcrowded nursing homes—or attempt caregiving themselves with little support.

This is particularly troubling given that nearly half of the home care workforce earns so little that they rely on public assistance themselves. Cuts to Medicaid further destabilize this fragile system.

Increased Financial and Emotional Burdens on Families

When Medicaid is cut, families are left to fill the gap. Nursing home care in the U.S. costs an average of $128,000 per year for a private room. Without Medicaid, many families would need to deplete their life savings or sell assets to cover care. Even those who qualify must navigate complex eligibility requirements, including “spend-down” strategies that often require legal guidance.

Medicaid planning has become essential for middle-class families who cannot afford long-term care insurance but do not want to leave their loved ones with crushing financial burdens. Beyond finances, the emotional toll is profound. Adult children balancing careers and caregiving may suffer from burnout, depression, and anxiety as safety nets disappear.

Contact the Award-Winning Illinois Nursing Home Neglect Lawyers at John J. Malm & Associates

The 2025 Medicaid cuts have put millions of elderly and disabled nursing home residents at greater risk of neglect, abuse, and poor health outcomes. Facility closures, staff shortages, reduced oversight, and rising costs are not just policy issues—they’re personal tragedies waiting to happen. Families deserve peace of mind, knowing their loved ones are safe, cared for, and respected.

At John J. Malm & Associates, we stand with Illinois nursing home residents and their families. If you suspect your loved one has been neglected or abused in a nursing home, or if you’re concerned about declining care due to systemic underfunding, you do not have to face this fight alone. Our experienced team of Illinois nursing home abuse and neglect lawyers is here to help you hold negligent facilities accountable and seek the justice your family deserves.

Contact us today for a free consultation. Let’s protect what matters most—your loved one’s safety and dignity.