One of the most important parts of the 330-pages of law for the disability community involves changes to Medicare and Medicaid. The deep cuts to these programs will undoubtedly affect many Americans who rely on these systems. Many of the cuts are not direct, they are hidden in new requirements that states and individuals may struggle to meet, reducing access to these vital programs.
Medicare and Medicaid affect hospitals and other systems in how they care for people. Many of the changes in the OBBB make new requirements for things to happen before hospitals and other health care systems can accept Medicare and Medicaid. Eligibility for the programs is also changing.
Cuts to Medicare and Medicaid will affect home and community-based services (HCBS). It will impact hospitals and how they care for vulnerable populations, medical professionals and billing, and much more. The new OBBB requirements will likely affect the future of mental health for people who rely on Medicare and Medicaid services, people with disabilities, and directly impact the structure of institutionalizations (hospitals, long-term care facilities, etc).
This blog specifically discusses how the policy changes will affect home and community-based services and what this means for institutionalization moving forward. It will also address rural hospitals and what this could mean for hospital care in those areas.
Let’s Talk Terms
The terms Medicare and Medicaid can be confusing and are often mixed up or used interchangeably when they are not the same thing.
Medicare
Medicare is a federal program for people who are 65 years old and over, and for people under 65 with disabilities that meet Medicare’s eligibility qualifications. There are four different parts to Medicare which pay for different parts of the health care process. These parts are titled: Part A, Part B, Part C, and Part D.
- Medicare Part A: (Hospital Insurance) covers hospital stays, skilled nursing, some home health care, and hospice.
- Medicare Part B: (Medical Insurance) covers doctor visits, outpatient care, some home health, and preventive services.
- Medicare Part C: also known as Medicare Advantage, is a type of insurance plan offered by private companies approved by Medicare. It combines the benefits of Part A, Part B, and often includes prescription drug coverage.
- Medicare Part D: covers prescription drugs.
Medicaid
Medicaid is a joint federal and state program that helps cover medical costs for some people and is based on income and resources. Because there is a state-funded element, benefits and requirements can vary based on the state someone lives in.
The Children’s Health Insurance Program (CHIP), is also a joint federal and state program that administers low-cost coverage to eligible children in families with incomes too high to afford Medicaid but too low to afford private coverage.
Medicare, Medicaid, and CHIP by the Numbers
Before diving into the impact of the OBBB on Medicare and Medicaid, we first need to discuss the number of people who rely on CHIP, Medicare, and Medicaid.
- According to the Centers for Medicare & Medicaid Services (CMS), about half of all children in the United States rely on Medicaid or CHIP at some point in their childhood.
- Medicaid and CHIP cover more than 82 million Americans, including adults, pregnant women, children, and people with disabilities.
- According to the Congressional Budget Office’s latest estimate, the bill would cut Medicaid by over $790 billion over 10 years.
- According to the Kaiser Family Foundation, As of July 2024, there were 1.2 million people living in nursing facilities, over 60% of whom had Medicaid as a primary payer. The share of people living in nursing facilities with Medicaid as their primary payer has remained steady, but the total number of residents living in nursing facilities decreased by 10% over the last decade.
- About 67.8 million Americans were enrolled in Medicare Part A and/or Part B in 2024. Of the 67.8 million, 7.2 million Americans identified as having a disability.
- Three out of every five nursing home residents rely on Medicaid to pay for their care.
Medicare institutional providers are organizations that deliver healthcare services to patients and are eligible to bill Medicare for those services. These include hospitals, skilled nursing facilities, home health agencies, and hospices.
In 2023:
- 5,410 rural health clinics were institutional providers.
- 5,995 total hospitals were institutional providers. This total includes various types of hospitals such as:
- Short-stay hospitals
- Psychiatric hospitals
- Rehabilitation
- Children’s hospitals
- Long-term facilities/hospitals
- Critical access Hospitals
- Religious non-medical hospitals.
What Happened and What Does this Mean for Home and Community-Based Services?
The writing within the OBBB states that its goal is to give people more flexibility to stay in their homes rather than institutions. The section about HCBS and Medicaid falls under the umbrella of “Expanding Access to Care” within the law. However, the way the OBBB is written is that this new law is intended for people to stay in their houses as long as it does not cost more for the state. One big problem with the requirements that the OBBB places on states is that many of them do not have the infrastructure set up to do what the law is saying they need to. And if states cannot do what they are supposed to do, then they will lose funding. The OBBB will continue to harm vulnerable groups, especially those who rely on Medicare and Medicaid. While some effects are hard to predict, specific impacts on community-based services and institutional care are outlined below.
“Medicare beneficiaries depend heavily on Medicaid, rather than Medicare itself, to cover their long-term care needs. In 2022, Medicaid funded 61% of all long-term care services nationally and over 70% of Home- and Community-Based Services that allow people to remain in their homes and communities.”
The OBBB requires most adults ages 19 to 65 on Medicaid through Obamacare to work, train, or volunteer at least 80 hours per month. Many people with disabilities cannot meet this requirement due to health issues, yet they are not automatically exempt. If they do not meet this requirement, they risk losing their coverage, which could potentially force them into costly institutional care, losing their independence. Also, many people will need to now have redeterminations of their eligibility for medical assistance under a State Medicaid plan (or waiver) every 6 months instead of every year or every 12 months. These stringent reporting requirements make it more difficult for people to keep their coverage, and potentially stay in HCBS.
The OBBB also sets a cap on home equity ($1 million) for individuals applying for long-term care under Medicaid. This means that it would make it harder for people with expensive homes to access coverage for long-term care including home and community-based services (HCBS) or other long-term supports. This would likely cause greater impacts on people who live in areas with more expensive houses.
Beginning in the middle of 2028, OBBB will let states give out HCBS waivers for people who do not need institutional level of care. On paper, it sounds like more people will be able to access care earlier, which prevents or delays institutionalization, but many states will not have the capacity to take all of the newly eligible people.
Medicaid cuts could also lead to reduced spending for home care, through a continued shortage of direct support professionals and long-term care provided in people’s homes and the community, nursing home facility staff, hospitals, and other short- and long-term care facilities.
What Does this Mean for Rural Hospitals?
The OBBB claims to improve rural health, but instead of funding hospitals directly, it creates a state-run program managed by the Administrator of the Centers for Medicare & Medicaid. This Administrator has broad authority to decide how states use the funds and can withhold or reclaim money if they believe it is misused. Any unspent funds must be returned to the U.S. Treasury, raising concerns about oversight and the potential loss of critical resources.
The OBBB does not directly fund rural hospitals, leaving many to struggle. In rural areas where people rely on Medicaid heavily, this could mean losing access to essential care. In addition, states that fail to meet reporting requirements set by the Administrator may also lose funding.
Many hospitals, including rural hospitals, also rely on Medicaid for funding to treat people who are not currently citizens of the United States– with and without disabilities. The OBBB limits funding to states for the purposes of treating people who do not specifically fall under the umbrella of certain citizenship requirements.
Conclusion
The future of people who rely on Medicare, Medicaid, and CHIP, along with many others is uncertain. The cuts to funding, although not direct, leave many people wondering how they will satisfy the new requirements to keep their healthcare and access.
Where Can I Learn More?
After the “One Big, Beautiful Bill” was passed, the website, govfacts.org published “How the “One Big, Beautiful Bill” Targets Medicare and Medicaid,” which offers a detailed explanation of the legislation. Similarly, www.healthinsurance.org provided additional insides, here. Both sources focus on the law’s impact on Medicare and Medicaid beyond this blog.
There is so much more in the OBBB. For now, check your Medicaid eligibility here: Health Insurance Plans & Quotes | HealthCare.com.
