Cuts and changes coming to Medicaid and Affordable Care Act (ACA) programs as a result of the 2025 budget reconciliation legislation, signed into law on July 4, will likely have big implications for Americans age 50-plus.
This caution was shared during a July 9 briefing by leaders of KFF (formerly Kaiser Family Foundation), an independent nonprofit focused on health-policy research. The briefing focused on what the new law, dubbed the “One Big Beautiful Bill” by the Trump administration, could mean for health coverage affordability and states.
Why should financial advisors care? The cuts and changes can impact your clients who lose workplace-provided health insurance before they become Medicare-eligible, your clients or their family members who require nursing-home care or are disabled, and client families living in rural areas.
“What we’re looking at today is really noteworthy because it’s never happened before. This is the first rollback ever of our major healthcare programs, two of the three,” Drew Altman, KFF’s president and CEO, said in his introductory remarks. The third major healthcare program is, of course, Medicare.
Indirect Effects
Larry Levitt, KFF’s executive vice president for health policy also weighed in. “This represents the biggest rollback in federal support for health coverage ever,” he said. “But the law is complicated and few of the provisions are direct cuts in Medicaid or ACA benefits or eligibility, though they would have that effect indirectly.”
For example, “new income verification procedures [for ACA eligibility] would make it harder for people to sign up, and those new procedures would effectively end automatic renewal of coverage which could lead to many people having their coverage canceled,” Levitt said. Additionally, “there would no longer be any caps on how much people have to pay when they file their taxes if their incomes end up higher than expected, which could be a nasty surprise for some people.”
Tax-Credit Unknown
Altman also raised another big concern he says hasn’t received enough attention since it wasn’t included in the reconciliation bill: whether the enhanced ACA tax credits are extended or “allowed to disappear.” Should these enhanced tax credits disappear in 2026, “premiums in the marketplaces will skyrocket by, on average, more than 75%, but it’s 90% in rural areas,” he said.
Rural hospitals, which rely heavily on Medicaid funding, are poised to lose a lot of this money under the reconciliation law. A temporary $50 billion rural health fund was added to the legislation to help these rural communities, said Levitt, “but it won’t fully compensate for the cuts, especially since it’s temporary and the cuts are permanent.”
According to preliminary estimates Levitt cited from the Congressional Budget Office, the reconciliation legislation would reduce overall federal health spending by more than $1 trillion dollars over the next decade and increase the number of people uninsured by 11.8 million.
A Conundrum for Early Retirees
Before implementation of the enhanced tax credits, individuals didn’t receive subsidies for health-coverage premiums if they earned more than four times the poverty level — the equivalent of a little over $60,000 a year for a single taxpayer, said Cynthia Cox, director of KFF’s program on the ACA.
If the tax credits are eliminated, “those folks might go from paying roughly 8 ½% of their income for a premium to paying whatever the sticker price is, which could be 15, 16, 20% of their income on a premium,” she said. And these “people who make more than four times poverty are disproportionately older adults, like pre-retirees or early retirees, they’re more likely to live in rural areas and they’re more likely to be small business owners.”
Pre-retirees forced to retire early, due to poor health or because they’ve been laid off and can’t find a new job, may need to rely on Medicaid if they can no longer afford a plan in the ACA marketplace. But the new law’s Medicaid work requirement may also exclude some of these individuals from Medicaid eligibility.
“When we look at the data, the people at greatest risk for losing coverage under these work requirements are adults ages 50 to 64,” said Jen Tolbert, deputy director of KFF’s program on Medicaid and the uninsured. These are “adults who likely have spent a lifetime working and may have retired, in part, because of previously doing physically demanding jobs and now no longer are able to because of chronic health conditions or disabilities.”
Nursing-Home Concerns
Many once-wealthier seniors also enroll in Medicaid after spending down their assets on care in assisted-living facilities and nursing homes. The majority of consumers (60%) responding to a survey last year through the Center for Retirement Research at Boston College said they plan to rely on Medicaid to cover nursing home care.
“Medicaid is the primary payer and provider of long-term services and supports in this country. That’s institutional and home and community-based services,” said Robin Rudowitz, director of KFF’s program on Medicaid and the uninsured. States are required to cover nursing-home care, while home and community-based services are generally optional for them, she added.
“Six in 10 nursing-facility residents are covered by the Medicaid program,” said Rudowitz, “So to the extent that there are changes in reimbursement or other things that affect nursing facilities, that has to have implications for Medicaid enrollees.”
But it’s not just Medicaid enrollees who can be impacted by the legislative changes: The 2025 reconciliation law repeals implementation of a nursing-facility staffing mandate that was finalized in 2024 by the Centers for Medicare & Medicaid Services.
“Prohibiting implementation of that rule for minimum staffing could exacerbate the issues with staffing, which ultimately lead to quality issues in nursing facilities,” Rudowitz said.
SNAP Cuts Also Impact Seniors
Tricia Neuman, executive director for KFF’s program on Medicare policy, added, “There have been so many horror stories over the years about quality concerns” in nursing homes. She also voiced concern about the effect that the reconciliation law’s planned reduction in payments for the Supplemental Nutrition Assistance Program (SNAP) will have on older adults.
Although SNAP recipients are unlikely to be advisory clients, they’re likely members of your community. According to the U.S. Department of Agriculture, 18.3% of SNAP recipients are age 60 an older. The National Council on Aging has noted that 4.8 million adults age 60 and older are enrolled in SNAP — less than half the eligible population.
Living Independently May Become More Challenging
When states are under fiscal pressure, one of the ways they respond is to cut back on optional benefits, “which can be very important to people with disabilities,” said Neuman. “While it’s not clear how states will respond or if they will cut back on optional home-care benefits or transportation benefits, or some of the additional benefits that make life possible for people to live independently, I could see that being an issue for this population.”
As Altman sees it, the “strategy for selling these cuts has been, to this former political scientist, reasonably textbook: Wrap them up in a giant reconciliation bill that moves pretty fast; make changes, many of which are kind of too wonky for people to talk about around the kitchen table.”
Clients need your help figuring out how the legislation may impact them and their families — especially if they think they are immune.
Jerilyn Klein is editorial director of Rethinking65.
