Medicaid Cuts: Impact on Long-Term Care and Family Caregivers

Proposed budget reductions could significantly affect millions of elderly and disabled Americans

As Congress works toward a major budget plan, proposed cuts to Medicaid could have far-reaching consequences for long-term care and the millions of family caregivers who depend on the program's support.

Medicaid's Critical Role in Long-Term Care

While often viewed primarily as health insurance for low-income Americans, Medicaid serves another crucial function: it is the nation's largest funder of long-term care services for elderly and disabled individuals, covering more than half of the $415 billion spent annually on these services.

"Medicare doesn't pay for long nursing-home stays or ongoing in-home help," notes David Grabowski, health economist at Harvard Medical School. Instead, Medicaid fills this gap, covering 60% of extended nursing home stays—nearly one million people nationwide.

Equally important, half of Medicaid's spending on elder care goes toward "home and community based" services, helping approximately 4.5 million Americans receive care at home rather than in institutions. These services include:

• Paying wages to caregivers (including family members)

• Funding adult day programs

• Providing social work assistance

• Offering caregiver training and respite care

The Human Impact of Potential Cuts

The House of Representatives recently passed a budget framework that could reduce Medicaid spending by up to $880 billion over the next decade. While President Trump and House Speaker Mike Johnson promise to target fraud and waste, federal investigations show that improper payments (including both fraud and paperwork errors) account for only about 5% of Medicaid spending—roughly $6.5 billion annually.

For families like Sharon Duchessi's, the stakes are high. Duchessi cares for her partner, who has diabetes and back problems. She receives $18.65 per hour from Medicaid, capped at 189 hours monthly, though she estimates her partner's care requires at least 250 hours each month.

"There's no way we could manage without Medicaid support," says Duchessi, who previously worked as a loan processor. The program pays her as a caregiver and provides healthcare for both of them, though they still struggle financially.

Shifting Costs to Families

If Medicaid funding is reduced, states will likely:

• Reduce provider payments

• Change eligibility requirements

• Cut back on services

"It'll put a huge burden on the family," Grabowski explains. "Even though there might be savings from a budgetary perspective, families bear this cost."

The average American caregiver already spends more than $7,000 annually out-of-pocket, according to AARP research.

Institutional Care vs. Home Care

Medicaid rules require coverage of nursing home stays for eligible individuals, but in-home personal care is optional. This creates a problematic dynamic if funding tightens: nursing homes will still receive payment, while home care services might be cut.

"There's a real likelihood of unnecessary institutionalization," warns Nicole Jorwic, chief program officer at Caring Across Generations. "Disabled and elderly people who could have stayed home with some assistance might need to enter a nursing home, simply because that's the only way they can get care."

This outcome contradicts decades of federal policy promoting home-based care, which is both more popular among patients and less expensive.

Medicaid spends approximately $47,000 yearly for a long-term nursing home stay—about $11,000 more than it costs to provide community-based and in-home care.

The Financial Reality

More than half of all Americans over 65 will need long-term care eventually, yet only 4% have long-term care insurance. For middle-class families, the cost of care can be devastating:

• Assisted living averages $70,800 annually

• A private nursing home room costs $127,750 per year on average

Michael F. Cannon, director of health policy studies at the Cato Institute, argues that reduced Medicaid spending would encourage more people to purchase long-term care insurance. However, this doesn't address the immediate needs of families currently dependent on Medicaid assistance.

Many states already have lengthy waiting lists for in-home care funding. "Cuts would mean the list would grow; some people would get cut from services," Jorwic notes.

What's Next

The Senate budget resolution passed on April 5 doesn't include the same reductions as the House version, and some Republican senators have expressed opposition to Medicaid cuts. The final budget, determining Medicaid funding for the next decade, will be negotiated between the two chambers later this year.

For caregivers like Duchessi, the outcome will have profound personal implications. If forced to return to traditional employment, she worries about finding quality care for her partner. "Caregivers—we're a different breed," she reflects. "It's not something I'd encourage anyone to do unless they're willing to do the work. It's hard work."