About $1 trillion in Federal Medicaid cuts could affect senior living operators’ revenue in the year ahead and force them to shift their plans regarding certain services.
According to the Congressional Budget Office (CBO) the so-called “One Big Beautiful Bill” is set to cut almost $1 trillion from Medicaid spending over the next 10 years and imperil insurance access for fewer than 12 million people by 2034. Both U.S. states and the federal government jointly fund programs related to Medicaid and waiver programs.
Faced with a new shortfall from the federal government, some states are already making tough decisions about what to cut and what to fund following the bill’s passage. For example, North Carolina has instituted a minimum of 3% pay reduction for providers who treat Medicaid patients, according to reporting from NPR. The state is looking to lose $23 billion in funding over the next decade. In Idaho, state lawmakers made a 4% Medicaid pay cut, with nursing homes feeling the brunt of it.
The cuts are affecting the plans of senior living operators such as Longevity Senior Living, which previously planned to open communities under a sub-brand that would center on Medicaid waivers. New uncertainty around state Medicaid programs have thrown a wrench into that aspiration, according to CEO Carl Hirschman.
“It definitely makes us less aggressive on the opportunity,” Hirschman told Senior Housing News.
The cuts imperil long-term care providers in states like Idaho, according to Steve Laforte, chief financial officer and principal at Cascadia Healthcare, a company with 45 skilled nursing facilities and eight assisted living and independent living communities. On the senior living side, he added that operators face challenges surrounding residents with low incomes that rely on Medicaid payments to offset their assisted living costs.
“I think it’s going to spill over, because the margins are going to be tight with AL,” Laforte said.
Separately, the Trump administration has pushed for increasing Medicare Advantage capitation rates, or the amount reimbursed for certain services, with the senior living industry poised to reap some of the benefits. Earlier this year, the Centers for Medicare & Medicaid Services announced a 5.06% increase in the capitation rate beginning in 2026, a rate more than double from the previous year.
While the future of certain payment models like Medicaid waivers remains murky, some operators, such as Westerville, Ohio-based Ohio Living, are taking advantage of increased reimbursements from CMS under Medicare Advantage programs.
“We’ll take it because we need it,” Larry Gumina, CEO of Ohio Living, told Senior Housing News.
Ohio Living is part of the Perennial Consortium, an operator-owned MA network that operates special needs plans for residents on a state-by-state basis. Using such plans, residents can access care such as preventive care visits, care coordination and on-site diagnostic testing and treatment. Operators can use MA plans to offer services within their four walls without having to shoulder the costs of providing it.
Smaller slices of the pie
Operators that accept Medicaid waivers will need to advocate for themselves as states decide the future of such programs and seek to make budgets whole. Nursing homes were exempted from tax cuts as part of the tax and spending bill, but operators will have to compete with other healthcare providers for the shrinking amount of funding given to states.
Despite the exemptions established for nursing homes, state governments are already making difficult choices for Medicaid programs, according to Brian Perry, vice president of government relations for Direct Supply. Perry would know, having spent two decades studying public policy and setting strategy while at ProMedica.
Nursing home reimbursement rates are “always low-hanging fruit” for states any time they want to cut Medicaid, Perry said. But that doesn’t mean senior living operators with more minimal exposure to reimbursements, such as through Medicaid waiver programs, should rest on their laurels or assume they are safe.
“With $1 trillion less in the system … something that’s deemed an optional service could be one of the first things on the chopping block,” Perry said.
The prospect of cuts to state Medicaid programs changes operating plans for some operators such as Longevity Living. Originally, the company had plans to build a sub-brand around middle-market operations made more affordable thanks to Medicaid waiver programs. But recent events have made buildings planned under such strategies harder to underwrite, and Hirschman believes the company will be more limited in the states in which it can operate as a result.
“If you have a guaranteed payer source and a known amount of revenue, then you can build a business plan off of it,” he said. “If that is completely uncertain, now we need to control our own destiny and figure out what our payment is.”
Ohio Living currently takes Medicaid waivers for its smaller skilled nursing segment, but also offers various Medicare Advantage plans through the Perennial Consortium, among the latest of which is a prescription drug plan for its residents
Gumina is more optimistic about the overall impacts on the industry, given the private pay nature of the business and how operators don’t tend to rely on those payments to stay in business.
It also helps that Ohio increased its Medicaid waiver reimbursement rates in 2024, totaling $3.4 billion across the state, a move which was well received, he said. But that was the first time the state increased those rates in the last 10 years.
Ohio Living also has reduced its skilled nursing capacity by more than half to reduce its exposure to stagnant nursing home reimbursements, similar to other for-profit and nonprofit operators. If it hadn’t done so, the announced cuts would create far more challenges, Gumina said.
At the same time, the organization is investing in programs that help keep older adults well, including those who don’t live inside Ohio Living’s four walls. The operator repurposed space on its Ohio Living Rockynol campus for the organization’s first Program of All-Inclusive Care for the Elderly (PACE) program earlier this year, which has capacity to serve up to 400 participants.
The choice was a strategic way for Ohio Living to “jump into the value-based Medicaid world,” Gumina said.
Rural operators and communities are among those who will most likely be the first to feel the impacts of the cuts, along with being the first to close, according to Laforte.
“I think it is going to hurt, because the waivers make up enough to the B-level, the C-level operators that are serving the middle market on down … I think it’s going to spill over, because the margins are going to be tight with AL,” Laforte said.
Advocating for risk
As the future of Medicaid waivers in some states remains unclear, operators are having a slightly better time with another federally funded program: Medicare Advantage.
Ohio Living has taken on more risk on behalf of its residents by creating its provider-owned Medicare Advantage plans and offering its own insurance. As penetration rates for Medicare Advantage rise, Gumina thinks more operators should do the same.
Ohio Living’s value-based care services such as preventive care and medical concierges have been able to offset some of the costs of care for residents. Despite their increases in Ohio, Medicaid reimbursements have struggled to keep up over the past decade.
Because the operator’s medical loss ratio has been lower than the amount provided by the government for Medicare Advantage, it has recouped the savings. Other operators could “immediately mitigate the risk” by getting involved with the program, along with “keeping residents healthier, bending the cost curve and improving quality and access.”
“I’ve been a very loud public and private advocate of providers or operators under our umbrella to take more risk,” Gumina said. “They can create an opportunity to recoup that margin that is leaking out of their organizations.”
Perry added while he is not the most familiar with the intricacies of Medicare Advantage, the Department of Health and Human Services is making the program a focus given the reimbursement increases it laid out for 2026.
And looking ahead, Perry said now is the time for operators to begin advocating for themselves, particularly in unison with the greater healthcare industry to push back against cuts in Medicaid and Medicare programming.
“They’re going to drive trucks through us as they get to their policy end goals, because we’ve seen it for years and years and years, and it’s going to continue,” Perry said. “If we aren’t linking arms with everybody, from hospital to home health, and the American senior is going to be stuck in the middle, we’ll continue to see these things.”
