With Medicaid already falling short of covering the cost of care in nursing homes, the One Big Beautiful Bill Act (OBBBA) will exacerbate a lot of issues already seen in the sector, driving providers to close, reducing access to services and worsening the workforce shortage.

Nursing home association LeadingAge and operator A.G. Rhodes joined Sen. Bernie Sanders (I-Vt.) in a press conference on Wednesday to draw attention to how OBBBA will affect the sector, touching on these pain points along with more indirect impacts from changes to retroactive Medicaid approval windows and uncertainty from how states will adjust their budgets to account for cuts and restrictions in OBBBA.

About 27% of nursing homes said they would be forced to close their doors, Sanders said, while 58% will have to reduce staff as a result of OBBBA.

“We have a very bad situation, which is only going to be made worse when you cut Medicaid by over $900 billion as this bill does,” said Sanders. “Nursing homes and long term health care providers will be losing a major source of their revenue. In other words, you have institutions all across this country that are struggling today, and now there’s going to be a significant decline in their revenue.”

Skilled Nursing News has heard a mix of reactions to OBBBA from the sector, with REITs like the Ensign Group (Nasdaq: ENSG) expressing gratitude that the sector was spared large direct impacts to Medicaid, instead focusing on workforce requirements and Medicaid eligibility.

Others in the industry have said that freezing, but not reducing nursing home provider taxes won’t stop OBBBA’s damage, while affecting the ability of states to raise revenue through that mechanism to support Medicaid rates.

Even before cuts in OBBBA, Medicaid payments didn’t cover full costs of care, Katie Smith Sloan, president and CEO of LeadingAge, said during the press conference. OBBBA weakens an already fragile system at a time when demand for services and care is growing.

“Who will older adults and their families turn to when the services they need are not available because the funding has been cut, and when providers of services can no longer deliver them and have to shutter their doors?” said Smith Sloan. “What will happen to the staff who are employed in many of these settings and who may themselves be on Medicaid?”

Smith Sloan added that older adults aged 65 or older represent nearly 20% of the country’s population, and that percentage is steadily increasing. As this population increases so will the demand for services and care, she said.

Another consideration is how states will respond to OBBBA, she continued. Cuts will create “craters” in state budgets as a result of reduced Medicaid contributions. Historically, state response to budgetary pressures has been to cut Medicaid eligibility, shave benefits and cut provider payments to cover the costs of delivering care, meaning fewer dollars to pay staff, she said.

“Workforce challenges, for a variety of reasons, are long standing in our sector,” said Smith Sloan. “These cuts will only make it harder for our nonprofit, mission-driven members to be competitive in the employment marketplace.”

‘More craters’ from shorter retroactive coverage

Deke Cateau, CEO of Georgia-based nursing home operator A.G. Rhodes, said 70% of its population are on Medicaid, and that Medicaid is the “only real payer” of long-term care.

As it stands, providers like A.G. Rhodes are is already “vastly underpaid” from Medicaid, and any cuts or cuts disguised as adjustments will have an immediate impact, Cateau said.

While Georgia isn’t particularly impacted by provider tax adjustments, retroactive Medicaid provisions will absolutely affect residents at A.G. Rhodes, Cateau said. The timeframe to get someone approved for retroactive Medicaid coverage has been reduced from 90 days to 60 days as part of OBBBA.

The 90-day window was already a challenge, he said.

“Most of these individuals, many living with dementia, they’re not the best historians. We have to check their finances … it’s a process that we do on behalf of the elderlyelder,” said Cateau. “That takes time.”

And if a resident isn’t approved for retroactive Medicaid coverage, such bills may be pushed onto states – it’s unclear how many more ‘craters’ will be created from retroactive Medicaid bills, he said.

“I come from a state that has been on the right side of aging, but nationwide, we don’t have many states that are in a fiscal position to fill in those gaps,” noted Cateau.