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This month, threats to the Medicaid program dominated the headlines, raising concerns and sowing uncertainty about how home-based care will be affected.
Already, some large providers such as Aveanna (NASDAQ: AVAH) are reevaluating their strategies in light of the Medicaid uncertainty.
The good news is that Aveanna CEO Jeff Shaner believes that “core” funding for home-based care providers will not be slashed. However, Arnall Golden Gregory Senior Counsel Bill Dombi told me this week that any reduction in the federal government’s Medicaid contributions to states will have consequences, and even politically unlikely scenarios have to be contemplated as providers seek to manage future risks.
While providers try to read the tea leaves on potential cuts to Medicaid, this month also brought news of concrete changes to the program, which will almost certainly make it more difficult for older adults to age at home. A shift to more institutionalized care would, of course, hurt the market for home care services.
In early April, the U.S. Department of Health and Human Services (HHS) announced drastic job cuts that could endanger the Program of All-Inclusive Care for the Elderly (PACE), which provides for medical care and social services to frail and older adults living at home, most of whom are dually eligible for Medicare and Medicaid.
A few days later, I reported that some home-based care services funded by Medicaid through 1115 waivers would no longer receive federal funding.
A copy of the Trump administration’s proposed fiscal year 2026 budget was leaked last week, showing a plan to cut HHS’ budget by about $40 billion. The news was met with criticism from aging services advocacy groups decrying cuts to the Older Americans Act (OAA) included in the budget.
The series of recent news, coupled with past actions from the Trump administration, paints an early picture of what home-based care providers who care for Medicaid beneficiaries can expect in the years ahead – and it’s not a particularly sunny outlook.
In this week’s exclusive, members-only HHCN+ Update, I discuss theoretical and concrete reductions to Medicaid funding to discover the likely scenarios for the future of Medicaid under the current administration, and I offer analysis and key takeaways, including:
- What the available evidence says about the Trump administration’s approach to Medicaid
- The potential impact of Medicaid cuts on home-based care providers
- My conclusions about what the home care community can predict
The body of evidence
The Trump administration has insisted that it won’t cut Medicaid benefits, as stated in a post on the official White House website.
“The Trump Administration will not cut Social Security, Medicare, or Medicaid benefits,” the statement, published on March 11, read. “President Trump himself has said it (over and over and over again). Elon Musk didn’t say that, either. The press is lying again.”
Instead, the Trump administration says it will eliminate waste, fraud, and abuse in entitlement spending, which Musk estimates amounts to between $500 billion and $700 billion. But nonpartisan experts have attested that the current administration’s plan to trim the deficit is not mathematically possible without cuts to Medicaid.
The recent evidence proves that Medicaid cuts are not only coming, they are already here.
On April 10, the Centers for Medicare & Medicaid Services (CMS) took action to limit Medicaid spending, directly impacting certain home-based services. The agency announced that it would not renew federal funding through section 1115 waivers for designated state health programs (DSHP) and designated state investment programs (DSIP), which fund certain non-medical in-home services, like housekeeping.
Section 1115 waivers are a tool used to provide care for patients with complex needs, who often receive other home-based care services.
But the most drastic changes to Medicaid are yet to come.
The Senate approved a proposed budget framework that would direct the Energy and Commerce Committee to save $880 billion over the next decade. Medicaid is the largest part of the committee’s portfolio, and while the budget has not yet been passed, the cards are yelling at me, saying that substantive reductions in Medicaid spending are coming.
Specific programs and protections for aging in place are also in danger.
The leaked budget update suggested that the Trump administration would break apart OAA programs crucial to older adults and their caregivers. The OAA helps provide older adults with in-home help with activities of daily living, chores, transportation, home- and community-delivered meals, as well as caregiver respite.
“By breaking apart and moving pieces of this vital program to different HHS agencies, the Trump Administration is damaging the efficiency and the effectiveness of a successful 60-year-old Act and undermining the federal commitment to assist older Americans in aging well at home,” Sandy Markwood, CEO of USAging, said in a statement. “We hope they will reconsider this decision immediately and reunify all the OAA under ACF, which is a more appropriate fit than CMS.”
If major initiatives instituted under the OAA are eliminated, older adults will be put at risk of being placed in institutional settings, Markwood continued.
Another program designed to protect Medicaid beneficiaries is at risk. The HHS overhaul announced early this month reorganized PACE, prompting industry groups to speak out, urging the administration to protect the program.
More recently, the National PACE Association (NPA) addressed the potential for major decreases in federal Medicaid spending. A statement from the organization said that cuts would have a “dramatic, negative impact” on families caring for aging adults.
“Reducing access to PACE would be short-sighted fiscal policy,” Shawn Bloom, president and CEO of National PACE Association (NPA), said in a statement. “PACE is an innovative alternative to more expensive nursing home care. The PACE model of care enables seniors to remain living in their homes, providing comprehensive and coordinated care with a better quality of life, measurably improved health outcomes, and lower costs for the public sector.”
Impacts of Medicaid cuts
Medicaid rates for home-based care are already bare-bones. Drastic cuts would limit access to care, Sara Wilson, president and CEO of Home Assist Health, told me early this month.
Home-based care services, from my perspective, are unlikely to become direct targets for budget cuts. However, moves to reduce Medicaid spending that directly affect other types of providers would have downstream effects on the home-based care community.
“Any diminution of the federal share will have impact,” Dombi recently told me. “There is the issue of provider taxes, which generally don’t occur in the home care world, but are mostly there supporting hospitals and nursing facilities. But if you take support away from the hospitals and the nursing facilities, the balloon is going to be affected somewhere else in the Medicaid balloon.”
Provider taxes are a means for states to collect tax revenue from providers such as nursing home operators and, in turn, trigger a larger federal Medicaid contribution, enabling dollars to be redistributed to providers. Across-the-board restrictions on these taxes could save the federal government more than $600 billion over a decade, according to Congressional Budget Office calculations cited by the Wall Street Journal. To Dombi’s point, if states have a smaller pool of Medicaid dollars to distribute, they will have to make tough decisions about rate-cutting that could affect home-based care providers.
A graphic from the Center on Budget and Policy Priorities, a nonpartisan research and policy institute, demonstrates the point that cuts under almost any name will have the same bottom-line impact: reducing access to care.
The most anxiety-inducing possible Medicaid action is a per-capita cap on benefits, according to Dombi.
“That may or may not see the light of the day from the political side of it, but we can’t ignore that,” he said. “The risk that’s out there simply is, the feds say, ‘I’m only going to give you X amount of dollars. You figure out how you want to spend it, and X will be less than it was the year before.”’
The Medicaid forecast
While the extent of Medicaid funding cuts remains uncertain, the home-based care community is already updating strategies to prepare for potential fallout.
Home health care provider Aveanna Healthcare is currently seeking to expand its Medicaid services into new states. The threat of Medicaid cuts has prompted CEO Shaner to recalibrate his plans.
“The uncertainty regarding Medicaid and federal funding prompts us to reconsider any long-term investments and ensure we have strategically contemplated the reasons for such investments,” Shaner recently told HHCN.
Shaner went on to say that, while uncertainty regarding Medicaid is negatively impacting all health care companies, he believes funding for core at-home Medicaid and Medicare services would remain intact because home-based services are crucial to the aims of past, current and future administrations.
While I agree that the Trump administration is unlikely to almost totally dash funding for Medicaid, I’m left to wonder just how slim that core will be.
“From a forecasting perspective, the Energy and Commerce Committee is not going to be able to come up with $700 billion of Medicaid cuts,” Dombi said. “The hope is that it’s zero cuts, but the likelihood is it’s going to be material cuts in the Medicaid program.”
Medicaid funding will not be slashed without significant opposition. Home-based care organizations have taken a strong stance against substantial cuts to Medicaid. All Senate Democrats voted against the budget resolution that would require cuts to Medicaid – as well as two Senate Republicans.
Dombi predicts that other Republicans will oppose Medicaid cuts. He predicts that we will primarily see state-level Republican lawmakers, including governors, stand up for Medicaid, but that Republican members of Congress will also get on board. Shifts in who steps in to protect Medicaid could mitigate some of the threats, according to Dombi.
While it remains to be seen exactly who will stand up for exactly which Medicaid programs, one thing is clear.
“I don’t think anybody is forecasting that there will be no damage to Medicaid in 2025,” Dombi said.
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