Editor’s note: President Donald Trump signed the so-called One Big Beautiful Bill Act (OBBBA) into law Friday, a day after it was narrowly passed by Congress. On Monday, reactions included a statement from LeadingAge President and CEO Katie Smith Sloan, who said the legislation’s consequences “will not be pretty,” and warned that “Bandaids” such as – freezing, but not reducing, nursing home taxes and creating a rural health fund touted as a protection for older adults – will prove “ill-equipped to stop OBBBA’s damage” as states face budget “craters” from reduced Medicaid support.

The House passed the reconciliation bill on Thursday with the Senate-passed version largely intact. While the bill included some nursing home-friendly provisions – such as a 10-year delay on the federal staffing mandate and no change on nursing home provider taxes – it introduces sweeping spending cuts that will indirectly impact skilled nursing facilities (SNFs).

The bill slashes health care and food assistance spending by over $1 trillion, with cuts that could average $120 billion per year, and is projected to increase the national deficit by $3.4 trillion by 2034.

“Due to the level of deficit this bill will create, Medicare payments to providers may be reduced by 4% for the next ten years. Bandaids included in the bill – such as only-freezing-but-not-reducing nursing home provider taxes, and the creation of a rural health transformation fund–touted as protections for older adults and aging services providers – will soon prove ill-equipped to stop OBBB’s damage,” said Katie Smith Sloan, president and CEO, LeadingAge, in a statement. “And, as states respond to OBBB-created craters in their budgets due to reduced federal Medicaid contributions, the suffering will begin.”

Operators are also concerned about the state-level impact of the bill.

“There’s a pot of money that comes from the feds to the state for Medicaid [and] the state has to decide, ‘Do we want to let those people [previously on ACA] go without health care, or do we want to shore up this program with more state funding?’” Ron Nunziato, senior director of policy and regulatory at the Health Care Council of Illinois, told Skilled Nursing News earlier. “That’s the fear – we never really know until it’s all done, and how it’s going to affect us and what the state is going to do in response to that cut, or potentially more cuts.”

One major concern stems from reduced Medicaid support to hospitals, which, according to the American Hospital Association, will increase uncompensated care and strain already-stretched systems. As a result, these cuts are expected to ripple across the health care continuum, ultimately affecting long-term care, including SNFs.

“It will force hospitals to make service line reductions and staff reductions, resulting in longer waiting times in emergency departments and for other essential services, and could ultimately lead to facility closures, especially in rural and underserved areas,” the AHA noted in a statement issued ahead of the House’s passage of the bill.

States can fund Medicaid using sources like provider taxes. The reconciliation bill’s limitations on hospital provider taxes will weaken a key financing tool for Medicaid. And these changes could reverberate across the health care system, including skilled nursing and long-term care sectors that depend on hospital referrals and state Medicaid stability.

For states that have expanded Medicaid under the ACA, hospital provider taxes are still set to be reduced from the current federal ceiling of 6% to 3.5%. The reduction will proceed gradually, decreasing the allowable provider tax rate by 0.5% point each year until it reaches the new 3.5% threshold.

Despite initial resistance from Republican lawmakers worried about the bill’s high cost and deep health care cuts, they reversed course after political pressure and amid promises of future executive actions from the White House. Only two Republican Congressmen – Rep. Brian Fitzpatrick of Pennsylvania and Rep. Thomas Massie from Kentucky, remained opposed in the end.

Perhaps most significantly for skilled nursing facilities (SNFs), the bill’s $940 billion in Medicaid reductions over 10 years threatens home- and community-based services (HCBS), which are not federally mandated. As states face funding shortfalls, HCBS could be scaled back, pushing more individuals – particularly seniors and people with disabilities – into nursing homes. This shift would increase demand on nursing homes, potentially without proportional reimbursement increases.

Clif Porter, president and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), called out the underfunding of Medicaid.

“The reality remains that Medicaid is underfunded, and there are limited resources available to meet the growing demand for care. Provider taxes are a necessary tool in supporting states’ ability to fund daily services and supports for those on Medicaid, and any reduction in resources within the overall care continuum cannot be taken lightly,” Porter said in a statement. “We are grateful to the many leaders who have worked diligently to hear the concerns of our profession and who have advocated to protect long-term care throughout the process.”

The bill also extends the 2017 tax cuts introduced during Trump’s first term, while making the significant cuts to Medicaid. It introduces new tax breaks for tipped income, increases the defense budget by $150 billion, reduces clean energy tax credits implemented under President Joe Biden, and allocates $100 billion to Immigration and Customs Enforcement (ICE).