There is a lot to unpack in the recently enacted budget reconciliation bill. Known as the “One Big Beautiful Bill Act” before that title was stripped by the Senate, the 870-page law makes changes in taxation, increases funding for immigration enforcement and the military, and reduces funding for programs that make life better for many older adults, including Medicaid.
While most adults who are 65 or older have enrolled in Medicare, about 18% of Americans between the ages of 50 and 64 rely on Medicaid for their primary health coverage. More than 7 million low-income seniors who have reached the age of 65 depend on Medicaid, either in conjunction with Medicare or because they do not qualify for Medicare coverage.
How Medicaid Helps Seniors
Medicare is not free. Seniors pay a monthly premium that is typically deducted from their Social Security benefit. Seniors also pay an annual deductible and are responsible for paying 20% of most healthcare costs out of their own pockets.
Low-income seniors who are eligible for Medicaid may be able to reduce the cost of their healthcare by using Medicare Savings Programs to cover Medicare premiums and out-of-pocket expenses. Medicare Savings Programs are administered by state Medicaid agencies.
Low-income seniors also depend on Medicaid to pay for services, including vision and hearing care, that are not covered by Medicare. Seniors often turn to Medicaid to pay long-term care expenses that Medicare does not cover. About 30% of Medicaid expenditures pay for nursing home stays and caregiver expenses.
Medicaid Reductions
While President Trump promised that Medicaid benefits would not be touched in the new law, the nonpartisan Congressional Budget Office (CBO) determined that the Act will cut $1 trillion in Medicaid spending through 2034. The savings will be partially attained by eliminating millions of beneficiaries from the program.
Supporters of the Act contend that the reductions can be achieved by eliminating waste, fraud, and abuse, although they have not identified anything close to $1 trillion in wasteful or fraudulent spending. Fraud committed by beneficiaries of Medicaid is negligible. After all, Medicaid payments go to healthcare providers, not into the pockets of beneficiaries. The patients who benefit from Medicaid have no incentive to defraud the system.
While healthcare providers are routinely prosecuted when they overbill Medicaid for their services, Congress has not explained how the Act will encourage the discovery of fraud that the system presently overlooks. Nor did Congress explain how cutting $1 trillion in spending will only punish healthcare providers who commit fraud, as opposed to beneficiaries who depend on Medicaid to pay their nursing home bills.
Speaking to angry audiences in town hall meetings, some elected representatives claimed that the new law only forces undocumented aliens off the Medicaid roles. In fact, while a few states have chosen to use state tax money to fund healthcare for undocumented aliens, no federal Medicaid money pays for the routine healthcare of people who are not in the country lawfully.
Work Requirements
The reconciliation act imposed a work requirement on Medicaid recipients. The requirement was driven by unsupported claims that many able-bodied young people on Medicaid are spending their days playing video games instead of working. The reality is far from the spin.
About 64% of adult Medicaid recipients who are under the age of 65 and not receiving disability payments are working. About 12% are unable to work because of caregiving responsibilities. Adults who are in school or unable to work because of poor health make up 17% of Medicaid recipients. Most of the remaining 8% are either retired or unable to find work. Yet the CBO estimates that 4.8 million Medicaid beneficiaries will lose coverage because they do not satisfy work requirements.
While the new work requirement does not apply to Medicaid recipients who are 65 or older, the requirement may cause indirect harm to seniors. The new law requires Medicaid recipients to work in a paying job or community service position for at least 20 hours per week. The law exempts some disabled individuals, but only if they prove they have a qualifying disability.
While the law exempts parents of children under the age of 14, adult children who act as caregivers for their parents will be exempt only if they can prove that their parents are disabled. The burden of gathering records to establish a disability and regularly updating those records is so onerous that some family caregivers will need to choose between losing their Medicaid coverage or finding a job. The work requirement will therefore reduce the availability of family caregivers for many seniors.
The burden of proving an exemption from work requirements is real. Within nine months of implementing a work requirement in Arkansas, 18,000 Medicaid enrollees lost coverage. The people who lost coverage were generally eligible for Medicaid but were unable to comply with confusing and time-
consuming reporting requirements. A Georgia plan that imposed work requirements is so full of red tape that the state shifted its resources from paying for medical services to paying state employees to administer the program.
In addition to the people who will lose coverage for failing to satisfy work requirements, the CBO estimates that 2.2 million working Americans will lose health coverage because of difficulty verifying their employment. The complicated process of proving that adults are working fulltime to help disabled parents places unpaid caregivers at risk of joining the millions of Americans who are likely to lose their Medicaid benefits.
Provider Taxes
While Medicaid is a federally funded program, states pay a share of Medicaid benefits. Each state must offer a basic benefit package, but states have generally been allowed to use state revenue to pay for additional benefits.
Almost all states raise revenue to pay for their share of benefits, including expanded benefits, by taxing healthcare providers. The most common taxes are imposed on hospitals and nursing homes. While provider taxes have long been controversial, the new law requires some states to reduce their taxes and bans states from imposing new provider taxes. Unless states find new revenues elsewhere, they may be required to reduce state-funded Medicaid benefits in response to their lost revenue.
HCBS Waivers
While Medicaid generally covers nursing home services for disabled patients, many states have obtained Home and Community Based Services (HCBS) waivers that allow state programs to pay for care services in the patient’s home, provided the patient needs institutional-level care. The new law creates a new category of HCBS waiver that covers home-based care services for individuals who do not necessarily need the level of care that institutions provide.
While this should be good news for seniors, states cannot receive funding for the new waiver unless their new program does not increase the average wait times for individuals who need institutional-level care. Funding losses from Medicaid budget reductions will likely increase HCBS waiting times, making the new coverage illusory. In addition, funding allocated to the new waivers will only cover HCBS costs for an average of 27 people per state, again making the new waiver program a poor solution to the growing need for caregivers to serve seniors in their homes.
Rural Hospitals
About 2,000 rural hospitals depend on Medicaid funding to continue serving their patients. A typical rural hospital receives about $4 million each year from Medicaid. Rural hospitals operate on such thin profit margins that roughly 300 rural hospitals are already at risk of closing.
A report by the National Rural Health Association estimates that rural hospitals will lose $70 billion in Medicaid payments because of the new law. Supporters of the new law tried to address the Medicaid budget reduction by adding $50 billion in relief funding for rural hospitals, but that funding is likely insufficient to offset the loss of revenue to rural hospitals.
Rural hospitals are particularly important to seniors. The Census Bureau reports that 20% of Americans live in rural areas. However, the percentage of the rural population who are older than 65 is larger than the percentage living in urban areas. A closure of rural hospitals will disproportionately endanger the lives of the nation’s seniors.