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Medicaid is the primary payer for nursing home care in America, covering 63% of all nursing facility residents, or roughly 782,000 people out of 1.24 million total residents living in certified facilities.
The 2025 federal budget reconciliation law includes massive reductions to Medicaid; an estimated $911 billion cut over the next decade, representing a 14% reduction in federal Medicaid spending.
Cuts of this scale threaten to undercut the stability of nursing homes nationwide. This analysis explores the impact of Medicaid cuts on nursing homes financially, operationally, and in terms of resident care quality.
Because many residents lack substantial income or private resources, Medicaid provides access to care but does so typically at reimbursement rates below the actual costs of providing services.
According to a 2025 survey by the American Health Care Association (AHCA), nearly two-thirds of nursing home providers report that Medicaid reimbursement covers less than 80% of the actual cost of care, with 11% receiving less than 50% of the cost.
This shortfall forces facilities to operate on razor-thin margins, cross-subsidizing care using higher Medicare payments or private pay when possible.
The AHCA survey of 363 nursing home providers provides a snapshot of the impact the federal Medicaid cuts will have on facilities across the country:
|
Result of Medicaid Cuts on Nursing Home Operations |
Percentage of Providers |
Potential Impact on Patients |
|
Would defer capital improvements/modernization |
77% |
Lack of amenities and resources may impact social and physical health outcomes of residents |
|
Would reduce current staff levels |
58% |
May lead to poorer patient outcomes, slower rehabilitation times, and fewer available beds |
|
Would reduce Medicaid census (available beds) |
55% |
Fewer options for low-income patients, patients required to travel further to receive critical care |
|
Would limit new hires and recruitment |
44% |
Staffing shortage force limitations on new patient intake and may result in worse health outcomes for existing patients |
|
Would be forced to close facilities |
27% |
Patients required to transfer to new facilities; families required to travel further to visit loved ones |
Financial stress from tight reimbursement can lead to closures. According to industry reports, 774 nursing homes have closed since 2020, displacing nearly 30,000 residents. Facilities with a high Medicaid population (about 62%) are more likely to close, and more than half of the facilities that stay open have indicated they may reduce their number of available beds for Medicaid patients.
Source 1 | Source 2 | Source 3
These closures and bed shortages disproportionately affect vulnerable populations, particularly in rural and underserved communities where alternative care options are scarce. Ultimately, families may be required to travel further to visit a loved one, or settle for care in facilities with lower CMS ratings due to a lack of other options.
Nursing homes are already struggling with staffing shortages. As of July 2025, residents receive an average of just 3.85 hours of nursing care per day, down 7% from 4.13 hours in 2015. This includes only 0.68 hours of registered nurse care, 0.87 hours of licensed practical nurse care, and 2.3 hours of nurse aide care per resident each day.
In response to the federal funding cuts, 58% of nursing homes say they would reduce current staff and 44% would curb new hires. Staff shortages compound the difficulty of meeting rising care demands, particularly as the U.S. population ages rapidly.
If facilities reduce staffing in response to Medicaid cuts, it’s likely to directly impact quality of care. Numerous studies have linked staffing levels with resident outcomes:
|
Outcome of Reduced Staffing Due to Budget Cuts |
Effect of Lower Staffing |
|
Pressure Ulcers (Bedsores) |
Higher RN staffing is associated with fewer pressure ulcers among residents; skill mix plays a significant role. |
|
Falls |
Understaffed facilities have a 22% higher rate of adverse events, including falls, compared with better-staffed facilities. |
|
General Infections |
Higher RN staffing and better skill mix are generally associated with lower rates of infections in nursing homes. |
|
Urinary Tract Infections (UTIs) |
Higher RN staffing is associated with lower UTI rates. |
|
Medication Errors |
Higher RN staffing is associated with fewer medication errors and an 87.5% reduction in overall adverse outcomes. |
The fact that 77% of surveyed nursing homes indicated they would defer improvements or modernization in response to federal Medicaid funding cuts could significantly impact quality of care. These facilities may:
Over time, these deferred investments can contribute to declining care environments, particularly in Medicaid-dependent facilities.
A Brown University analysis commissioned by Senate leaders identified 579 nursing homes nationwide at “elevated risk” of closure if proposed Medicaid cuts become reality. These facilities share three critical vulnerabilities:
The same Brown University study found 1,749 skilled nursing facilities nationwide with Medicaid patient shares greater than 85%, making them financially vulnerable. These facilities are disproportionately located in urban areas and concentrated in states like Illinois, Texas, California, and Georgia.
While many provisions in the reconciliation law don’t take effect until fiscal year 2027 or later, the impact of medicaid cuts on nursing homes is already being felt when making decisions about staffing, capacity, and investment priorities.
Some states may attempt to offset federal reductions through higher reimbursement rates or targeted relief, but many facilities, particularly those heavily reliant on Medicaid, will have limited flexibility to absorb the financial impact.
Without policy interventions, the long-term care system may see continued consolidation, reduced access for Medicaid residents, and widening gaps in care quality between well-resourced and underfunded facilities.
At Nightingale, we closely monitor policy changes and their implications for long-term care because they directly affect the people and communities we serve. Our team remains committed to delivering high-quality, resident-centered care while navigating an increasingly complex healthcare landscape.
For more information about the impact of Medicaid cuts on nursing homes, or to learn more about our services, contact Nightingale at Glenwood to speak with a member of our care team.
For more information about the impact of Medicaid cuts on nursing homes, or to learn more about our services, contact Nightingale at Glenwood to speak with a member of our care team.