The Big Beautiful Bill

With the passage of the One Big Beautiful Bill Act, clients are asking us almost daily how it will affect their wallets and the care they will need in the future. Like most pieces of large legislation, there is good and bad, winners and losers.

Without commentary on the law’s merits or its effect on the deficit, here is what we know so far and what worries industry leaders about the future.

The Rich Get Richer (or at least their children do).

The law leaves in place the huge estate tax exemptions wealthy families enjoy when passing down inheritances to their children. Without the law’s passage, individuals would “only” be able to pass down about $7,000,000 to their children without paying federal estate taxes ($14,000,000) per couple. Even at this level, only about 0.2% of estates paid any federal estate tax. Now, with the bill’s passage, the 2026 exemption will be $15,000,000 for individuals ($30,000,000) for couples. Only 0.14% of estates are projected to pay this tax.

Taxes on Social Security Benefits Remain, but Most Seniors Will Receive a Small, Temporary Tax Break

The new law includes a “senior bonus” of $6,000 ($12,000 for a couple), a deduction that seniors at least 65 years old can shave off their reported income when filing their taxes. It also applies to seniors taking the standard deduction. This is estimated to put about $670 in the pockets of about 34 million seniors each year. But it phases out for individuals whose income exceeds $75,000 ($150,000 per couple), and the senior bonus ends after 2028.

Medicaid Retroactivity Period Reduced

Any family that has applied for Medicaid knows that the process is a grind, particularly for those who still have some assets they are trying to protect.  The Ohio Department of Job and Family Services and Kentucky Cabinet for Health and Family Services can, and often do, ask for five years of prior bank and financial statements to prove an applicant’s eligibility. Because of that, if an applicant met the financial requirements but failed to get all of the documentation to the agency, Medicaid would still approve the applicant and retro their coverage back up to 90 days. Because Medicaid caseworkers are severely overworked, agencies routinely fail to meet their own deadlines in reviewing cases. And even the best workers can still find mistakes in the application weeks into the process. The Big Beautiful Bill reduces that window to just 60 days of retroactive coverage. The 90-day safeguard is a Godsend to many families because it allows them to fix problems with their original application while not being hooked for the cost of care during that 90 days. The shorter deadline will inevitably cost some families tens of thousands of dollars.

Older Adults Not Yet 65 Bear the Bill’s Greatest Burden

The bill enacts the largest funding cuts to Medicaid in the program’s history. Most of the cuts are targeted at the so-called “expanded Medicaid.” This branch of Medicaid was expanded under Obamacare, geared to helping the unemployed and working poor obtain healthcare coverage. The new law will require adults under 65 to document that they have worked, attended job training, or performed community services for at least 80 hours per month. There are several exemptions, such as for pregnant women, those caring for a child or disabled household member, and those receiving disability. But the devil is going to be in proving the details. The law requires that caseworkers re-verify eligibility every six months. Those caseworkers already struggle to keep up with the number of new applicants and annual recertification under the current law. Honest mistakes and delays, either by the applicants or the agencies, are bound to trigger interruptions in health coverage.

From Rural Hospitals to Nursing Homes, a Fear of the Unknown Persists

Rural Hospitals. By reducing funding and sources of revenue, a real fear persists that the new law will lead to the closure of rural hospitals. Individuals who lose their Medicaid coverage for whatever reason still get sick. And often, they end up at the hospital. Those hospitals will still have to treat them, and if they can’t get paid for providing that care, the financial strain becomes obvious. The bill did create a $50 billion fund for rural providers over the next five years. However, many in the industry fear this figure will not cover the looming Medicaid cuts.

Nursing Homes. Some view the law as a win for nursing home providers, mainly because it eliminates the Biden-era mandatory staffing requirements in facilities. That will directly impact the quality of care seniors receive, but it will help nursing homes financially get through the storm of change. The bill also preserves the nursing home provider tax. This is a state tax levied on nursing homes. However, facilities typically recoup the monies paid because states use them to fund their portion of the Medicaid program, leading to healthier reimbursement rates. Even so, the bill freezes the tax rate that states can charge, which will, in turn, cap the matching funds they receive from the federal government. That could lead to lower Medicaid reimbursement rates in the long run, which could affect care and nursing home Medicaid bed availability.

Home and Community-Based Services. Many states, like Ohio, offer Medicaid coverage for home care services and assisted living facilities – which are not federally mandated. Industry watchers fear these programs could see the first cuts because states have more discretion on what they can provide or eliminate. Fewer Medicaid dollars could translate into fewer services offered, shifting seniors from the community into nursing homes.