Is Medicaid a one-size-fits-all answer to the problem of costly long-term care? Clearly, if you’ve been listening to AgingOptions radio, you know the answer. Medicaid is a vital component of America’s delivery of long-term care services to seniors, but it clearly isn’t designed for everyone.
Here at AgingOptions, we have spoken and written a great deal over the years about the best strategies to employ to qualify for Medicaid benefits, and those strategies are still valid. But for this article, we’re examining some of the pitfalls of Medicaid in a bit more depth. Our guide for this review is a PBS report from one year ago, prepared by reporter Hanna Grabenstein. She was writing in mid-2025, weeks before the eventual passage of President Trump’s One Big Beautiful Bill which, among other things, made significant cuts to the Medicaid budget.
Reading Grabenstein’s report caused us to ask the question once again: is Medicaid the best solution to pay for long-term care? And is it really wise to focus one’s financial plans too narrowly on how to qualify for benefits? Let’s take a deeper look for some answers.
Medicaid Cuts Imperil a Program That Covers Most Long-Term Care
Before we examine our core question, a bit of history is in order.
Medicaid, launched in 1965, was originally intended to provide institutional care for low-income seniors with the most serious health needs. (This recent Blog article explains some of the Medicaid basics.)
A report from KFF states that Medicaid now covers more than 60 percent of long-term care costs for America’s senior population, which is vastly more than what was originally intended. Originally a safety net for those in greatest need, today Medicaid covers many middle-class seniors with few chronic maladies except those normally associated with aging.
“One Big Beautiful Bill” Cuts Funding at a Pivotal Time
As noted, the PBS report featured in this article appeared in late May 2025. Weeks later, according to news accounts such as this press release from the American Psychological Association, President Trump’s signature piece of legislation slashed Medicaid funding.
“On July 4, 2025,” says the APA, “the ‘One Big Beautiful Bill Act,’ H.R.1, was signed into law. The legislation cuts federal funding for Medicaid by 15 percent, or $1 trillion, over 10 years.” The Congressional Budget Office estimated at the time that the cuts could eventually cause nearly 20 million low-income Americans to lose all or part of their insurance coverage.
Sources also noted that, while cuts would primarily affect low-income individuals relying on state Medicaid programs for routine health care, the long-term care component of Medicaid would also be affected. “The $1 trillion in federal Medicaid cuts significantly destabilizes long-term care for seniors,” said one source, “by creating funding shortfalls that trickle down to facilities and state programs.”
Medicaid Cuts to LTC Facilities Reduce the Quality of Care
Writing for PBS, reporter Grabenstein tells the story of Holly Lewis, whose mother lives in a skilled nursing facility. During the COVID pandemic, Lewis saw the damaging effects of staff losses at her mother’s nursing home firsthand.
“As nurses and certified nursing assistants left,” Grabenstein writes, “her mom, Katherine, who has dementia, had to get accustomed to new faces, while new staff had to learn Katherine’s likes, dislikes, abilities and habits — details that affect quality of care.”
Lewis told PBS, “When the staffing is cut, those workers become overburdened.” Patient care inevitably suffers.
Long-Term Care Benefits Face a Range of Curtailments
With the passage of the OBBB, Grabenstein says, “Experts say there are a handful of ways long-term care services for older adults might be affected.” She spoke with Harvard Medical School professor David Grabowski, who noted that — even though states are required to provide nursing home benefits to those who qualify — cuts will either make care more expensive or less available. “It’s either in price or quantity,” said Prof. Grabowski.
As Grabenstein notes, “Medicaid, the largest payer for long-term care facilities, covers around 2 in 3 nursing home residents, and reducing dollars to the massive, yet already resource-limited, program could have disastrous effects on older adults’ health, safety and quality of life.” On average, she adds, Medicaid pays just 82 cents for every dollar of care cost.
For Seniors on Medicaid, “There Is No ‘Plan B’”
As most of our readers and radio listeners know, Medicaid requirements leave beneficiaries with few other options if long-term care becomes unavailable.
“Older adults must meet state-specific income and asset thresholds to qualify for that care,” says the PBS report, “which often requires them to spend down most, if not all, of their money, leaving them without a cushion or a backup plan.”
Jason Sullivan-Halpern, director of the California Long Term Care Ombudsman Association, told Grabenstein, “There’s no plan B. This was the only path that they had. And at that point, there is really nothing for them to return to.”
Medicaid Cuts to Long-Term Care Will Put Pressure on States
Grabenstein explains the scope of this vital program. “Medicaid covers more than 60 percent of residents in nursing homes, about 20 percent of people in assisted living, and more than half of all residents of long-term care facilities,” she writes. “States are required to cover nursing home care for all adults 21 and older, and cannot limit access to care or impose waiting lists.”
Medicaid is a combined federal/state program. If federal funding falls short, states either have to generate higher income or make cuts on their own. This might translate into higher taxes or reductions in coverage of care costs, eroding the quality of available care.
Federal Funding Cuts Could Reduce or Eliminate Some Services
“While the current proposal doesn’t appear to make any direct cuts to long-term care,” Grabenstein writes, “experts say reduced federal funding for Medicaid overall will still likely have indirect effects on states’ ability to pay for that care. That might look like ending assisted-living coverage, or reducing or eliminating the reimbursement offered to some home- and community-based caregivers.”
Other cost-trimming measures, besides lowering the reimbursement rate, could include more stringent eligibility requirements for qualifying for benefits. “Any one of those options would have profound effects, experts say. By reducing or eliminating the optional benefits states offer, such as assisted-living care, people would likely stay in their homes and go without the care they need until a crisis.”
Aging Population Means a Rising Need for Elder Care
The PBS article goes into considerable detail concerning the plight of long-term care facilities, many of which have closed in recent years due to economic forces. Others have had to reduce staff and lower care quality in order to stay in business. (You can access the article here.)
The irony is that market demand for services can only increase. “The number of people who need long-term care in this country is large, and it’s only going to grow as the baby boomers age and we have more older adults who need help with their activities of daily living,” one expert told Grabenstein.
In More Affluent Markets, Medicaid is Effectively Subsidized
Clif Porter of the American Healthcare Association explained to PBS that Medicaid cuts affect lower-income areas disproportionately. That’s because other payers, including private-pay residents and those with long-term care insurance, effectively help subsidize Medicaid patients. But if there aren’t enough non-Medicaid patients, “there might not be a market for nursing facilities, especially in lower-income areas.”
“These problems are solvable,” Grabenstein writes. “Experts told PBS News that there are ways to ensure older adults get the quality and type of care they need, whether at home or in a residential facility. But most require more investment and resources, not less.”
Considering Some Policy Alternatives for LTC
With all its challenges, says PBS, “some experts stressed that Medicaid is probably not the most effective way to deliver skilled nursing care.”
Dr. Rachel Werner, professor of medicine at the University of Pennsylvania, says she thinks a more “feasible alternative…would be to shift long-term care coverage to Medicare, since so many seniors rely on the program already.” She notes that, as seniors live longer, they have more chronic conditions which are “closely associated with long-term care needs.”
Werner adds, “I think that the idea that we should have a benefit designed that could help support people as they age to manage long-term care, manage chronic conditions, and then ultimately manage the fall from chronic conditions that requires long-term care, in some ways makes a lot of conceptual sense.”
Demographic Imperative Adds Urgency to Policy Changes
The PBS article ends with an acknowledgment that demographics demand a solution to the long-term care conundrum.
“By 2060,” Grabenstein writes, “nearly a quarter of the U.S. population, or around 95 million Americans, will be 65 or older — including nearly all millennials.” Now is not the time to be cutting long-term care benefits.
“We could solve some of our long-term care crisis by providing more support to staff, rather than less support to staff,” says Prof. Werner. “We should pay them a living wage. We should provide benefits. We should provide a career trajectory for them within the care that they do. And it would actually, I think, be cost-effective in the long run because it would reduce turnover and improve quality of care for nursing home residents.”
Is Medicaid the Panacea for LTC Costs?
We end where we began this article, asking whether Medicaid is for everyone.
With all the program’s challenges and limitations, Medicaid remains the only viable option for millions with low to moderate income when it comes to covering costs of long-term care. For those on the other end of the wealth spectrum, paying for care out of pocket seems like a better way to get the quality of care they desire.
Those in the middle face the biggest question mark. While it might make sense to adjust your financial plans with an eye toward qualifying for Medicaid, the challenges of eligibility combined with the risks of trying to access substandard care make the program potentially less attractive for many. (This recent Blog article lists some strategies to cover LTC costs.)
Our advice is to seek the counsel of a Medicaid expert, and to rely on a financial advisor to help you prepare a financial dashboard. Contact us and let us explain how these professional approaches work in tandem to help you make the choices that are best for you.
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