Proposed substantial cuts to Medicaid funding by the Trump administration could severely undermine ongoing efforts to bolster staffing levels in the nation’s nursing facilities, according to a new brief from the Kaiser Family Foundation (KFF). This potential financial blow comes at a critical time when many states are actively leveraging Medicaid to address the chronic workforce shortages plaguing the long-term care sector.
The KFF brief highlights the direct correlation between higher staffing levels in nursing homes and improved resident outcomes and overall care quality. It also reveals that a significant number of states are proactively utilizing Medicaid to enhance their staffing capabilities. However, a budget reconciliation bill passed by the House last week threatens to slash an estimated $700 billion from Medicaid over the next decade, according to Congressional Budget Office estimates – a cut that long-term care experts warn the sector will not escape.
In response to dwindling staffing levels, 45 out of 49 states with Medicaid programs examined by KFF reported increasing nursing facility fee-for-service base rates in fiscal years 2024 and 2025. Iowa and Ohio, in particular, saw significant increases, at 25.5% and 17% respectively.
Beyond base rate adjustments, some states are also leveraging Medicaid to implement minimum wage increases for direct caregivers, a strategy adopted by eight states, and enhance benefits offerings, a move by five states. Furthermore, six states are now mandated to use Medicaid reimbursement rate increases specifically to expand nursing home workers’ wages.
“We’re seeing a proactive approach from states to address the staffing crisis, recognizing that adequate funding is essential for quality care,” explains Dr. Evelyn Ramirez, a long-term care policy expert. “Any significant reduction in Medicaid funding would not only halt this progress but likely reverse it, leaving both residents and staff in a precarious position.”
Connecticut serves as a prime example of a state investing in its direct care workforce through Medicaid. The state recently passed legislation to allow incremental Medicaid increases over the next three years, with plans to use some of this funding to boost direct caregivers’ pay to a projected $26 per hour for certified nursing aides. This represents a substantial jump of 44% and 18% from the current average wages of $18 and $22, respectively. These pay raises are part of a broader investment in nursing homes, totaling a combined $164 million over the next three fiscal years.
The imperative for such investments is underscored by persistent workforce challenges. The Skilled Nursing Workforce 2025 Report from MissionCare Collective points to low wages and limited access to benefits as key drivers behind the sector’s staggering 50% yearly turnover rate. This exodus has seen nearly 1.7 million long-term care employees either leave their organizations or exit the industry entirely, a trend that could be exacerbated by impending Medicaid cuts.
The potential for deep Medicaid cuts presents a serious challenge to the nursing home industry’s ongoing efforts to recruit and retain essential staff. As states work to improve compensation and benefits for direct caregivers, a reduction in federal funding could unravel these critical initiatives, ultimately impacting the quality of care for vulnerable residents.