Myth: The OBBB’s Medicaid provisions will force nursing homes to close

Debunking the Myths of the One Big Beautiful Bill

Myth: The OBBB’s Medicaid provisions will force nursing homes to close

Key Facts

• Key provisions of the OBBB that reduce the growth of federal Medicaid spending will not affect nursing homes or their residents. These provisions—community-engagement requirements and more frequent eligibility reviews—are focused only on the able-bodied, working-age adults added to Medicaid under Obamacare.
• By rescinding the Biden Administration Nursing Home Minimum Staffing rule, nursing homes will face fewer costs to comply with government mandates, will gain flexibility and cost savings, be able to hire at more appropriate staff levels, and will be less likely to close— particularly in rural areas, where nursing homes were most at risk.
• The legislation also excludes nursing homes from the OBBB’s provider tax phasedown that occurs in Medicaid expansion states since nursing homes serve seniors, a traditional Medicaid group. This exemption should ease concerns from OBBB critics focused on short-term provider tax revenue losses.
• Federal policy, due to Obamacare, creates large incentives for states to direct Medicaid resources away from seniors and people with disabilities and toward able-bodied, working-age adults. States currently receive an average of seven times more in federal funding for every $1 they spend on expansion adults versus every $1 they spend on traditional enrollees.

Background

The OBBB effectively rescinds the Biden administration’s nationwide mandate on nursing home staffing. This Biden mandate, which was finalized in 2024, would have cost more than $40 billion over 10 years, imposed rigid minimum staffing ratios regardless of facility size or patient needs, and presented a major threat to rural and lower-margin homes. Those homes would have likely reduced care for their vulnerable residents. A 2023 survey showed 94 percent of nursing homes already faced staffing shortages. By overturning the rule, the OBBB lifts costly mandates and allows facilities to adjust staffing based on patient needs and local workforce conditions—helping avoid declines in care quality and potential closures.

Nursing homes also suffer under Obamacare’s funding formula, which gives states $9 in federal funds for every $1 spent on able-bodied, working-age adults, but only $1.33 for every $1 spent on seniors or people with disabilities. This disparity skews resources toward expansion adults at the expense of traditional enrollees. In states that adopted Obamacare’s expansion, OBBB adopts an Obama administration proposal to reduce Medicaid money laundering schemes by limiting the amount that states can raise through provider taxes to generate federal matching dollars. Provider taxes are particularly harmful when states funnel the money through expansion enrollees since they receive a much higher federal match. Nursing homes are specifically exempted from the provider tax phasedown because they serve traditional enrollees, not expansion enrollees.

By refocusing Medicaid on the truly vulnerable, the OBBB helps to protect seniors and individuals with disabilities. The OBBB reforms will result in lower state and federal Medicaid spending on able-bodied, working-age adults, preserving resources for those who truly need Medicaid, such as nursing home residents and people with disabilities.