The One Big Beautiful Bill Act (OBBBA) has unintended consequences, with more tailwinds than headwinds, for nursing homes and other long-term care, placing greater burdens on states. 

According to ATI Advisory CEO Anne Tumlinson, who spoke at a webinar on Tuesday alongside other experts about the impact of OBBBA on long-term care, nursing homes are facing deepening challenges – evidenced by the steady closure of a large number of facilities, particularly nonprofit organizations in rural areas, over the past 25 years.

“This law has probably spared nursing homes from some of the most draconian measures related to the provider taxes. But they’re not entirely spared,” Tumlinson said.

The OBBBA placed a 10-year moratorium on the federal staffing mandate, which would have required nursing homes to maintain a minimum number of certified nursing assistants (CNAs) and ensure 24/7 registered nurse (RN) coverage. The law also protects facilities from losing Medicaid funding at the state level by prohibiting new cuts to provider taxes.

However, nursing homes will not go unscathed due to the indirect impacts at a time when demand is high, workforce is still scarce, and Medicaid reimbursement is stagnant.

“There’s still a freeze in effect [on provider taxes] that will affect [nursing homes], and it will affect the ability of states to raise revenue through that mechanism that then would have further supported their rates, which were already low,” she said.

Provider taxes allow states to tax health care facilities from nursing homes to hospitals, and then return these funds to providers via higher reimbursement rates. The federal government matches these increased payments, in turn expanding Medicaid funding without increasing general state spending. Many states rely on provider taxes to sustain safety-net providers, especially in rural areas.

For hospitals, OBBBA freezes the current hospital provider taxes for now, but after 2028, in Medicaid expansion states, there will be a gradual reduction in how much hospitals can be taxed. The safe limit for how much revenue can come from provider taxes will be gradually decreased, going from the current 6% down to 3.5% by 2031.

By capping and freezing these taxes, OBBBA limits how much money states have to support their health care systems, and for that reason industry advocacy groups, including the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), do not support cutting provider taxes.

OBBBA’s ripple effect on caregivers, workforce

Experts also raised concerns about the growing burden on family caregivers, particularly in cases involving severe dementia or end-of-life care where nursing homes remain a necessary option.

As more care shifts to home- and community-based alternatives, families are increasingly responsible for complex care coordination. New administrative requirements contained in OBBBA – like workforce exemptions and six-month eligibility redeterminations for Medicaid – add further stress and time burdens to an already overwhelmed group, ATI panelists said.

These will put extra burdens on the Medicaid expansion population in the Affordable Care Act (ACA), many of whom may be serving as care givers to aging parents or working in long-term care.

“A lot of families that I know and that I work with … are very reliant on nursing homes and really depend on them, particularly at the very end, when it’s just impossible, particularly in cases of very substantial dementia. So in general, as these are constrained, it puts an increasing burden on family caregivers if those family caregivers are also navigating to some extent the administrative components of this new law,” Tumlinson said.

To top it all, OBBBA’s limits on immigrant workers, which are an important part of the long-term care workforce, reduces the availability of direct care workers.

“There continues to be pressure on immigration, both administratively, but then also, this law has a number of provisions in it that add certain fees for processing asylum cases and various other immigration cases,” noted Allison Rizer, executive vice president of payer solutions at ATI. “Why does this matter? Because a third of our current direct care workforce are immigrants.”

About 820,000 direct care workers are immigrants, Rizer estimates.

“So as we continue to see pressure on immigration, that will result in pressure on an already strained direct care workforce.”

Advice to providers

Given all this, the environment for nursing home operators will likely become even more constrained, with mounting pressure from workforce shortages and unsustainable margins.

“Nursing homes are declining in number in the country,” Tumlinson said. “So we’re already in a fragile situation with respect to operating nursing homes or accessing [nursing home] care whether you’re a household discharge planner or family.”

Her advice to providers is to pursue quicker integration into value-based care models for long-stay residents and to build meaningful partnerships with hospitals and managed care organizations.

“Nursing homes aren’t the cool kids on the block,” she said, but collaboration with nursing homes is essential.

“[W]e are in the midst of a technological revolution, so we have the opportunity to monitor real time impacts,” said Tumlinson. “This moment creates a forcing function, one that, in my great hope, would accelerate preventive care, prevention of functional decline, adoption of value-based care, and kinds of upstream interventions that reduce ER visits, hospitalizations and ultimately the need for long-term care.”