Medicaid is the primary payer for long-term care in the United States. Nearly half of its funding is directed toward Home and Community-Based Services (HCBS), which support 4.5 million elderly and chronically ill patients. The proposed funding reductions are likely to impact resources allocated to a wide range of providers, including home health and personal care agencies.
In uncertain times like these, being prepared pays dividends. Maintaining a strong understanding of your top and bottom lines, ensuring your cash flow remains healthy, and reducing expenses - without compromising on service quality - is a challenging but critical balancing act. Learn the ins and outs of what the proposed cuts could mean for your business, and how Flychain can help you gain clearer financial visibility and navigate these changes with greater confidence.
The Projected Impact on Funding for Home Health, Personal Care, and HCBS (Home and Community-Based Services)
In April 2025, the GOP-led House passed a non-binding budget resolution that proposes reducing Medicaid spending by $880 billion over the next decade. While this is not yet law - the resolution signals a push toward capping Medicaid growth at 3% annually, compared with the 4-6% required to maintain the current status-quo.
In layman’s terms, this means Medicaid’s growth could be limited by as much as 50% compared to what is needed to maintain current service levels. As a result, medical practices must carefully evaluate any planned service expansions to ensure they are financially sustainable and aligned with core patient needs.
With the possibility of reduced Medicaid reimbursements and tighter state budgets on the horizon, it will be more important than ever for long-term care providers to closely monitor their business finances, maintain a strong accounting method, and safeguard their overall financial health. Ensuring accurate and timely bookkeeping will be critical. Healthcare organizations must actively monitor their margins and cash flow to stay ahead of potential disruptions and adapt to a shifting funding environment.
Two areas of particular concern include:
- Impact on HCBS Providers:
This is especially important for personal care, in-home support, and other HCBS providers, whose services are funded by Medicaid but are not part of the federally mandated benefits.
Unlike nursing home care, which Medicaid requires states to cover, HCBS programs are considered optional and can be scaled back more easily - particularly when states face reduced federal funding or tighter budgets. This makes HCBS providers especially vulnerable, potentially straining their financial stability and threatening the critical services they offer to elderly and chronically ill populations.
- Reduction of Support Programs:
States facing budget shortfalls may scale back or eliminate funding for critical support programs, including adult day services, caregiver training initiatives, and in-home aid. This would not only affect patient access but could also increase strain on remaining service providers.
In uncertain times like these, controlling operational costs becomes vital. Many small businesses and healthcare providers unknowingly overspend on underutilized services, subscriptions, or administrative overhead. Flychain’s financial dashboard helps surface these inefficiencies, making it easier to identify cost-saving opportunities and maintain healthier margins.
Many physicians in long-term care centers serve patients whose services are funded through Medicaid programs.Risks to Continuity of Care and Workforce Stability
The proposed budget framework would significantly cut Medicaid funding, posing substantial risks to the continuity of patient care and the stability of the caregiving workforce as a whole. These reductions could disrupt HCBS services that assist individuals with essential daily activities such as bathing, dressing, and meal preparation.
- The ripple effects of these proposed Medicaid cuts for the healthcare sector could be severe. The risk is clear: we are facing potential reductions to critical services relied upon by millions of elderly and disabled Americans to maintain their independence and quality of life.
- Harvard health economist David Grabowksi warns that these cuts could result in increased hospitalizations, greater strain on emergency rooms, and even premature deaths due to inadequate access to care. Reduced funding also risks widening existing gaps in care delivery, making it harder for providers to maintain service levels without adequate resources.
The stability of the sector is already fragile. Due to persistently low wages, the direct care workforce is experiencing high turnover, with median hourly wages hovering around $16.72.
Approximately 70% of home- and community-based services (HCBS) are funded through Medicaid, meaning that budget cuts could exacerbate staffing shortages - especially as many states already report long waiting lists for HCBS services.
Keeping an eye on workforce trends is crucial, as the U.S. Bureau of Labor Statistics projects a need for an additional 1.2 million direct care workers by 2030 to meet growing demand. This target will be difficult to achieve under a constrained funding environment. Ensuring payroll stability and addressing workforce retention should remain top priorities for long-term care providers navigating the road ahead.
Doctors at a long-term care facility supporting patients who rely on Medicaid-funded services.Reduced Reimbursement Leading to Delayed Growth, Hiring, or Expansion
Reduced Medicaid reimbursement rates proposed under the new budget framework could significantly hinder growth and expansion within the long-term care sector. States facing constrained budgets are likely to reduce provider payment rates to cope with diminished federal assistance, as has been observed in previous periods of fiscal pressure (MACPAC, 2023).
This dynamic could discourage providers from accepting Medicaid patients, reducing access to care and further worsening workforce shortages. A survey by KFF indicated that 48 states recently increased compensation to address ongoing staffing challenges. However, with proposed cuts to Medicaid and related health programs reaching up to $2.3 trillion over the next decade - and $880 billion specifically targeting Medicaid - these efforts to stabilize the workforce could be severely undermined.
Strained reimbursement rates are likely to stall service expansion, delay hiring, and limit the sector’s ability to meet growing demand from an aging and vulnerable population. Demand for long-term care services will continue to rise, even as providers face mounting financial constraints.
In this environment, maintaining financial resilience will be critical. Providers must rethink how they view financial statements, manage cash flow, assess expenses, and identify efficiencies. Tools and partners that offer real-time financial insights, cost-saving strategies, and support with working capital will play an increasingly important role.
In the next section, we’ll explore practical strategies for managing these funding challenges, and how leveraging the right financial tools and medical bookkeeping software can position your business for survival and long-term success.
Need Advice on How to Manage These Medicaid Cuts?
Navigating these funding reductions requires more than just tightening budgets: it demands a smarter, more proactive approach to financial management. That’s where Flychain becomes your best ally.
We’re here to help! Our team of dedicated healthcare bookkeepers and financial experts partner with your practice to help you overcome challenges and get an accurate overview of your finances. In addition to our full-service healthcare accounting system; we help providers make sense of their financial data and take action. Our platform surfaces cost-saving opportunities, benchmarks your performance against local peers in your specialty, and provides advanced financial analysis - from contracted rate analysis and payroll benchmarking to budgeting and understanding profitability by service line.
And if you need working capital to bridge cash flow gaps, Flychain offers the friendliest, most transparent solutions to help you stay on course without falling into predatory lending traps.
Flychain is purpose built for healthcare providers, by healthcare providers - put Flychain through its paces with a free consultation and absolutely no obligation - book a call today! Flychain’s team will demonstrate exactly how the platform works and answer any questions you have.
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