Navigating the One Big Beautiful Bill Act: Challenges and Opportunities for Long-Term Care Providers
The One Big Beautiful Bill Act (OBBBA) introduces sweeping changes to Medicaid policy, with major implications for long-term care providers. While the headline is the $911 billion in projected federal spending cuts, the reality for providers is more nuanced. Some will face operational challenges; others may find themselves in a position to adapt and emerge more agile. Most will need to do both.
Medicaid Coverage and Eligibility
Much of the public focus on OBBBA has been on the estimated 4.8 million able-bodied adults who could lose Medicaid coverage under the bill’s new work requirements. While this has triggered alarming headlines, what’s often missing is the nuance: many of these individuals may gain coverage through other means—employer-sponsored insurance, ACA exchanges, or existing state-level programs. The number who will be permanently uninsured remains unknown.
For long-term care providers, the concern is limited. The population subject to work requirements doesn’t significantly overlap with LTC residents, who are typically elderly, disabled, or dual-eligible for Medicare and Medicaid. These populations are categorically exempt. So, while the Medicaid landscape is shifting, most LTC facilities won’t see their core census dramatically affected.
The broader Medicaid funding changes could still have some indirect, and even positive impacts. As recent reporting notes, cuts to hospital funding may lead to earlier hospital discharges and potentially increase skilled nursing admissions, at least temporarily. Although these admissions may come with greater clinical complexity, they may ultimately boost SNF census.
Administrative fallout may emerge in other ways. States under budget strain may respond to federal funding reductions with rate cuts or narrower coverage scopes and introduce new layers of complexity. This could mean more eligibility churn and delayed approvals for reimbursements.
To prepare, LTC operators should quantify exposure. What percentage of your census relies on Medicaid? How sensitive is your reimbursement to state rate changes? Are supplemental payments at risk? Build operational resilience now: invest in tools to track eligibility status, train staff to manage redeterminations, and model revenue impacts under various funding and enrollment scenarios.
The Quiet Rebuild of Medicaid Financing
Beyond eligibility and coverage, OBBBA introduces structural changes to how Medicaid is funded, changes that will require states to reassess and potentially redesign key components of their fiscal strategy.
OBBBA’s shift in the provider tax safe harbor—from 6% down to 3.5%—places direct limits on how states can structure provider taxes without incurring federal penalties. Under current rules, states can collect taxes from healthcare providers such as hospitals, nursing homes, and managed care organizations, and use those funds to draw down federal Medicaid matching dollars. The “safe harbor” provision exempts provider taxes from detailed federal review as long as they remain below a set threshold. Dropping this tightens the boundary, limiting how aggressively states can use provider taxes to generate matching funds before facing federal scrutiny.
This is especially disruptive in states like Nevada and Illinois, where provider taxes are engineered into the Medicaid financing system to boost reimbursement rates or fund supplemental payments. Reducing the allowable tax rate could blow holes in state Medicaid budgets and jeopardize funding streams that many providers rely on—particularly performance-based payments, rate add-ons, or enhanced funding pools.
As the safe harbor shrinks, states under pressure will need to revise how they tax providers or cut back on supplemental Medicaid payments. This could mean lower rates, fewer incentive programs, or more aggressive cost-shifting. Providers that understand their exposure can anticipate the impact. Those who engage early with their associations and state policymakers may help shape the new frameworks.
Tax and Timing: A Window for Strategic Moves
Despite the backlash, OBBBA includes some of the clearest pro-business provisions in recent legislation affecting business and healthcare alike. These targeted advantages, while easy to overlook in the noise, offer real strategic value to providers positioned to act, especially for providers who have room to move quickly.
For providers able to invest, OBBBA offers a meaningful set of incentives. Bonus depreciation allows immediate expensing of qualifying assets rather than spreading costs over years, while expanded Section 179 caps increase the dollar limits for immediate deductions, making capital upgrades cheaper. More generous interest deductions support borrowing for facility expansion or renovation.
Pair this with the temporary delay of federal staffing mandates—now postponed to 2034— which would have required costly hiring and compliance measures, and providers may now find a rare window to modernize, restructure, or grow while the regulatory pressure temporarily eases.
The Strategy Isn’t Avoidance. It’s Engagement.
What OBBBA requires from providers isn’t simply compliance; it’s active engagement. Understand your state’s funding model, participate in rulemaking, forecast revenue impacts under multiple scenarios, and rebuild your operating model so it doesn’t rely on yesterday’s Medicaid logic.
This is not the moment for panic or complacency. It is the time to assess with clarity—run the numbers, consult with policy and finance teams, and understand what these reforms mean in practical terms for your operations. Providers who engage thoughtfully and early will be better positioned to adapt—and possibly lead— in the new environment.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
