Major Changes to U.S. Disability Law and Policy Continue

This summer, Congress passed the One Big Beautiful Bill Act (OBBBA), which enacted the largest-ever cuts to the Medicaid program, as part of widespread budget cuts. The non-partisan Congressional Budget Office (CBO) estimates these Medicaid cuts will total $911 billion over the next 10 years.

Since its creation in 1965, Medicaid has become a linchpin of the United States’ social security net. Economists, including Janet Currie and Jonathan Gruber,¹ have credited Medicaid with improving health outcomes² while also reducing health disparities,³ improving financial security,⁴ and promoting workforce participation.⁵ Because Medicaid aims to guarantee low-income Americans access to critical health and long-term care services, the effects of these historic cuts will not only be far-reaching, but also disproportionately affect at-risk groups.

What’s at Stake

Medicaid’s sheer size will make the effects of these planned cuts felt across American society. Per the National Association of State Budget Officers, Medicaid is the single largest source of federal funding for states. The Kaiser Family Foundation estimates that Medicaid funds account for nearly one-fifth of all spending across the U.S. health care system, and over three-fifths of total spending on long-term care. As a result, these cuts are expected to trigger waves of hospital closures and health care workforce layoffs.

With far fewer federal funds available to cover the costs of health care and long-term care services, states will also face hard choices about which individuals to cover. After all, Medicaid is the primary funding source for health and long-term care services for over 70 million low-income Americans. The CBO predicts 10.3 million people will lose Medicaid coverage by 2034, many of whom will belong to at-risk groups.⁶

These include persons with disabilities and older persons, who participate in Medicaid at higher rates than the general population. According to the Kaiser Family Foundation, Medicaid covers nearly 1 in 5 Americans, but more than 1 in 4 of all adults with disabilities, and about 5 in 8 of all nursing home residents. Also, Medicaid-funded services for disabled and older adults tend to cost more. For this reason, over half of all Medicaid funds are used to pay for long-term services and supports, which predominantly go to these groups.

Medicaid program rules will further contribute to the disproportionate effects on persons with disabilities and older persons. States are required to provide certain services, including inpatient hospital and nursing facility services, so states will have to find ways to continue to ensure access to these services amid funding shortfalls. However, other kinds of Medicaid services are optional and will likely be the target of states’ cost-cutting measures. Among these are “home and community-based services” (“HCBS”), on which approximately 4.5 million persons with disabilities and older persons rely to avoid living in segregated settings, such as institutions and nursing homes. HCBS programs allow states to leverage Medicaid funds to deliver an array of personal, respite, and health care services designed to prevent unnecessary institutionalization.

These programs have proven popular and cost-effective. For many persons with disabilities and older persons, access to HCBS has meant the difference between community integration and institutional segregation. For older persons with disabilities like Willowbrook State School survivor Bernard Carabello, HCBS represent a passport to the world. For others, including HPOD Self-Advocacy Associate Anne Fracht, HCBS has been a pathway to freedom. As disability rights advocate Rob Stone told The New York Times, “Medicaid helps me live a fulfilling, independent life in my community.”

But as happened following past Medicaid cuts, states are likely to drastically scale back HCBS programs by covering fewer individuals, limiting benefits, and reducing payments to providers. As a result, the quantity and quality of HCBS will suffer. Persons with disabilities and older persons may end up living in institutions, nursing homes, or even become homeless. Indeed, University of Massachusetts-Boston researchers predict that 3 million Americans aged 50 and over will be institutionalized due to these cuts. Starkly, researchers at Yale and the University of Pennsylvania predict that tens of thousands of disabled and older Americans will die. 

What to Expect 

The One Big Beautiful Bill Act (OBBBA) requires states to make numerous changes that will affect millions of persons with disabilities and older persons who rely on Medicaid and other federal assistance programs, including the Supplemental Needs Assistance Program (SNAP). Because these changes will be phased in over time, different individuals may feel their effects more acutely at different stages. These changes will also be felt more acutely in the 40 states that expanded their Medicaid programs following the Affordable Care Act’s passage in 2010.

SNAP recipients will be among the first affected. Later this year, they will have to comply with expanded work requirements. Exceptions to comply with work requirements for certain at-risk groups will be eliminated, causing hundreds of thousands to lose food assistance. Also, the Thirty Food Plan, which serves approximately 3.8 million adults with disabilities receiving SNAP benefits, will also be frozen. Depending on forthcoming guidance from the Department of Health and Human Services, the effects of work requirements could be even more expansive, and render many more disabled and older beneficiaries ineligible.

In 2027, new work requirements will also come into effect for Medicaid recipients who became eligible through Medicaid programs in 40 states and Washington, DC. Beyond new work requirements, Medicaid expansion beneficiaries will also have to participate in a new eligibility redetermination process every six months. Experience has already shown that, much as the case for SNAP recipients, implementing work requirements for Medicaid recipients can cause many persons with disabilities to lose benefits due to the increased administrative burden on beneficiaries and the inaccessibility of the systems used to show compliance.

In 2028, new rules for Medicaid reimbursements will also force states either to shoulder more of the costs of Medicaid and SNAP benefits or to pass those shortfalls on to service providers or individual beneficiaries. In Medicaid expansion states, a cost-sharing mandate will also require low-income beneficiaries above the federal poverty line to contribute to the costs of certain services. Also, these states will face restrictions on their use of a so-called “provider tax,” which nearly all states have used to defray the costs of services provided to Medicaid recipients. Finally, new caps on “state-directed payments” will hamper states’ ability supplement federal reimbursement rates for service providers.

The effects of the OBBBA may be compounded by other proposed cuts to federal programs. For example, a proposed regulation would cut Supplement Security Income (SSI) benefits for low-income persons with disabilities and older persons. In most states, SSI beneficiaries are automatically eligible for Medicaid. As a result, many persons with disabilities who rely on SSI for supplemental income will have even less ability to privately pay for anticipated reductions in Medicaid services.

What’s Next

Now, each state must make hard choices about how to implement OBBBA-mandated changes to federal assistance programs. The size and scope of Medicaid programs vary widely across states. Thus, the state-level effects of the OBBBA’s changes will also vary based on a variety of factors, including the structure of a state’s Medicaid program, limitations imposed by state laws, and the actions of state-level policymakers.

Although many of the OBBBA’s changes will not take effect until 2027, some states have already begun enacting changes in anticipation of federal funding shortfalls. Some states have adopted measures seeking to implement work requirements ahead of schedule. Also, some states have so-called “trigger laws,” which require policymakers either to end coverage for their Medicaid expansion population, or to avoid using state funds to offset lost federal funds. Medicaid recipients in these states face more immediate risks of losing coverage.

States may also adopt different approaches to how they comply with the expanded work requirements and re-eligibility determinations, which may cost states additional tens of millions of dollars per year. Depending on how states design and implement their compliance systems, even Medicaid-eligible beneficiaries may be unable to establish or maintain their eligibility for services. Even though the Kaiser Family Foundation has reported that only a small share of Medicaid beneficiaries would not meet work requirement criteria or qualify for exemptions, greater administrative burdens alone will likely cause them to lose coverage.

All states will likely reduce provider reimbursement rates, though the amount of the reductions and affected services may vary. For example, at a time of rising costs, North Carolina has already decided on an across-the-board rate cut of 3%, with steeper cuts for inpatient services, residential services, and behavioral therapy. Provider organizations will face financial pressures to find efficiencies or shoulder costs, and some may limit their offerings or shut down entirely. Such cuts will affect not only service provider organizations, but also many family members who have paid caregiving roles. Many Medicaid beneficiaries will likely experience reduced availability and quality of care.

Some states may seek to raise taxes as a strategy to offset reduced federal funds while preserving access to services. However, that’s not possible everywhere. For example, Colorado’s constitution requires a balanced budget, which limits state lawmakers’ ability to increase revenues from taxes. Cuts in services may be steeper in states with fewer options for raising funds to offset the federal funding shortfall.

Faced with unprecedented Medicaid cuts, states will feel unprecedented pressures to make up the difference. While certain states may be more successful than others in mitigating the adverse effects of the OBBBA, many persons with disabilities and older persons will have little choice but to prepare for them. That may include planning for painful reductions in caregiving hours or paying caregivers out of pocket. Ultimately, the far-reaching effects of these historic cuts will test the resilience of states, service providers, and the disability community itself, with lasting implications for disability inclusion in America for years to come.

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