On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law, which significantly impacts Medicaid and long-term care planning.

Medicaid Reductions and Long-Term Care Plans

One of the more controversial parts of the OBBBA is the estimated $1 trillion in Medicaid cuts over the next decade.

Much of the debate has focused on work requirements for Medicaid — provisions that could result in more than 5 million adults losing coverage. But most Medicaid adults under age 65 are already working.

Less attention has been paid to how Medicaid cuts could impact the long-term care of millions of Americans, many of whom need these services due to disabling conditions and chronic illnesses.

In the United States, Medicaid is the primary payer for long-term care services, including institutional care like nursing homes and care provided in a person’s home or community. According to KFF (formerly the Kaiser Family Foundation), 9.3 million people in the United States, older adults and disabled, received Medicaid for Long Term Services and Supports (LTSS) with approximately 5.8 million receiving this assistance for activities of daily living. This includes approximately 1.6 million people in nursing homes, and 4.2 million people in homes and communities.

States rely heavily on federal Medicaid funding, which generally covers 50 to 77 percent of traditional Medicaid populations and 90 percent of expanded Medicaid populations under the Affordable Care Act (ACA). In 2024, the federal government covered approximately two-thirds of total Medicaid costs. About one-third of Medicaid spending goes directly to long-term care services.

Reducing Medicaid spending (about 9 percent of the federal budget) could help offset the costs of extending the Tax Cuts and Jobs Act (TCJA) 2017 tax cuts. But these reductions — including rollbacks to ACA Medicaid expansion funding — may lead to cuts or shifts in long-term care services and other Medicaid services.

• Timing matters (and so do state budgets). Many of OBBBA’s Medicaid provisions will phase in over several years. The first major changes, stemming from work and community engagement requirements for certain adults, hit January 1, 2026. States can choose to implement changes earlier or delay them slightly, creating uncertainty about when — and how — families will feel the impact.
• State flexibility means outcomes will vary. Medicaid programs are state-administered within federal guidelines. States decide how to allocate long-term care funding, determine eligibility criteria, and choose whether to cover optional services like home- and community-based care (HCBS). In some states, budget shortfalls may lead to tightened eligibility or reduced long-term care benefits, while others may maintain broader coverage — at least for now. There are concerns that Medicaid cuts could force millions into nursing homes as non-federally mandated HCBS services are scaled back.
• Relying on Medicaid for long-term care could be riskier. With federal contributions shrinking and states under pressure to fill gaps, families who planned long-term care around Medicaid, including a Medicaid “spend down” strategy, should reassess.
• For example, starting January 1, 2028, OBBBA imposes a $1 million cap on home equity for Medicaid long-term care eligibility, with no adjustments for inflation. This means families with higher-value homes, even modest ones in certain markets, may no longer be able to rely on a residence as an exempt asset, potentially disqualifying them.

The bottom line: Medicaid funds nearly half of U.S. long-term care spending and, by default, has become the nation’s long-term care program. But under OBBBA, and with ACA expansion funding rolled back, how — and how much — Medicaid covers will depend on your state.

Reviewing your long-term care plan now can help avoid gaps if future changes reduce eligibility or available services. Tools such as irrevocable trusts or private long-term care insurance could help protect your assets and secure care options if coverage rules change in your state. For those using a Medicaid “spend down” strategy, OBBBA’s changes, such as the new home equity cap, may require a fresh look at long-term care planning options to maintain eligibility.

These are just a few of the changes tucked into the OBBBA’s hundreds of provisions, each of which can ripple into others, affecting everything from gifting strategies and philanthropic plans to business succession and real estate transactions.

Takeaways

• The OBBBA also includes an estimated $1 trillion in Medicaid cuts over the next decade. These reductions could impact long-term care services, potentially forcing families to reassess their reliance on Medicaid for such care.
• As of 2028, there will also be a $1 million cap on home equity for Medicaid long-term care eligibility.
• The OBBBA makes it essential for you to review your estate plans and long-term care arrangements with a trusted advisor.

With so many moving parts, reviewing your estate plan, tax strategies, and long-term care arrangements has never been more important. The estate and elder law attorneys at Kommer Bave & Ciccone LLP can help you evaluate your current circumstances and plans, understand how the OBBBA might affect them, and adjust strategies if needed.

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