What Republicans’ Medicaid Cuts Would Mean for Retirees

Cuts to Medicaid would ripple through the healthcare system, impacting retirees at all income levels, experts say. (Dreamstime)

Medicaid cuts being pushed by Republicans in Congress may help finance tax breaks. But they would also jeopardize long-term care for seniors—just as baby boomers need it even more.

More than half of Americans mistakenly believe that Medicare pays for long-term care, according to a recent survey by Nationwide. Yet Medicare only pays for limited stays under certain circumstances.

Instead, Medicaid is the country’s biggest payer of the support that many older adults eventually need: help with bathing, eating, and other daily activities. Recipients need to meet strict financial criteria that vary by state, but the high cost of care has meant that many middle-class families exhaust their assets and eventually qualify.

The nearly $800 billion in proposed Medicaid cuts in President Donald Trump’s One Big Beautiful Bill Act that Republicans aim to pass by July 4 would endanger long-term care for all seniors, not just those on government assistance, according to some experts. And it comes as the need for care will grow with the aging of the baby boomers, the oldest of whom are 79.

“This impacts everyone,” says Ron Mastrogiovanni, CEO of HealthView Services, a healthcare data analytics firm for financial advisors.

For a couple, the chances of at least one spouse needing long-term care are 75%, according to HealthView. The average length of a stay in a nursing home or other assisted-living facility is 33 months for women and 22 months for men. It’s barely affordable for many seniors, and will only get costlier. In 2045, when today’s 65-year-olds are likely to enter a nursing home, the cost will average $197,000, according to HealthView. Regional differences could push that figure to $402,000 in high-cost areas like Boston.

Medicaid pays for more than six in 10 nursing home residents nationwide, along with some adult daycare and home health services. The program also pays a portion of costs for 17% of assisted-living residents.

Republican lawmakers have said they aim to protect Medicaid for the most vulnerable. The Senate version of the bill exempts nursing homes from reductions in provider taxes, one source of Medicaid revenue. The House version freezes provider taxes and doesn’t exempt nursing homes, and the bills would have to be reconciled.

Medicaid, moreover, is a complex program that accounts for about 19% of the country’s healthcare spending. It’s impossible to isolate one group from cuts of the proposed magnitude, experts say.

“It’s all interrelated—you pull one thread and many things start to unravel,” says Martie Ross, a consultant in Kansas City with the PYA Center for Rural Health Advancement. As cuts ripple across the system and states look for cutbacks, they may impose an across-the-board cut on what they pay providers within Medicaid, she adds: “It’s the easy button.”

When doctors, hospitals, and nursing homes come under strain, all their patients could feel it. Funding cuts would likely affect staffing levels at facilities, which could force them to reduce services or close altogether.

Nursing homes already operate on thin margins and have high staff turnover. Lower reimbursements would add more strain. Long-term care facilities may have to raise what they charge private-pay clients to make up for lost Medicaid revenue, says Georgia Goodman, director of Medicaid policy at LeadingAge, a nonprofit for aging services.

The bottom line: Medicaid cuts would complicate an already complex landscape for families navigating long-term care. Understanding the limitations of federal assistance would be a good place to start in the planning process.

Write to Elizabeth O’Brien at elizabeth.obrien@barrons.com