The Medicaid Cliff Is Coming. 4.5 Million Families Need a Backup Plan.

The call tends to come on an ordinary Tuesday. An assisted living facility leaves a voicemail, professional and regretful, explaining that it can no longer accept a parent's Medicaid rate. Or the home health aide who has been coming three mornings a week says her agency lost its state contract. Or a letter arrives from the state Medicaid office, informing a family that a father's eligibility is under review.

This is already taking shape.

The reconciliation package moving through Congress, informally called the "One Big Beautiful Bill," contains roughly $1 trillion in Medicaid cuts over the next decade.1 That is hard to grasp in the abstract, so here is what it looks like at ground level: an estimated one million dual-eligible older adults, people who qualify for both Medicare and Medicaid, could lose coverage. States facing tighter federal matching rates may eliminate optional benefits, including assisted-living waivers and home and community-based services. The 4.5 million Americans currently receiving Medicaid-funded home care are directly in the path of these changes.

Two out of every three nursing home residents in this country rely on Medicaid to pay their bills.2 That statistic cuts across every income bracket. It reflects what happens when anyone lives long enough to exhaust their savings, which is exactly what a $9,000-per-month memory care facility does to a middle-class retirement account in about three years.

The math isn't complicated. It's just brutal.

For any family with a parent currently receiving Medicaid-funded care, or a parent who may need it within the next five years, the time to build a backup plan is now. Not after the bill passes. Not after the state announces its response. Now. Here is what each step involves.

Step one: understand your parent's current Medicaid status

Medicaid is 50 different programs, one per state, each with its own eligibility rules, benefit packages, and waiver programs. A parent may be receiving services through a home and community-based services (HCBS) waiver, which is the category most vulnerable to cuts.3 Or they may be in a nursing facility under mandatory Medicaid coverage, which is harder, though not impossible, for states to cut.

Pull the most recent Medicaid determination letter. Know the program name, the benefit category, and the renewal date. Knowing which program a parent is on is the first piece of homework.

Step two: get the legal paperwork in order

A parent without a durable power of attorney, a healthcare proxy, and a current will needs an elder law attorney now. These documents cost between $1,500 and $3,500 to prepare, depending on complexity and location. Without them, no one can make financial or medical decisions on a parent's behalf, which means no one can respond to a coverage crisis when it arrives.

Every elder law attorney in the country is busier this year than last. The wait for an appointment is growing.

Step three: learn your state's Medicaid waiver programs

Each state runs its HCBS waivers differently. Some states, such as New York and California, have relatively generous programs. Others, such as Texas and Mississippi, have long waiting lists and limited slots. For a parent on a waiver, find out where they sit on the priority list and what would happen if that waiver program were reduced or eliminated.

A local Area Agency on Aging, found at eldercare.acl.gov or by calling 211, can walk a family through the state's specific programs.7

Step four: calculate the private-pay gap

If Medicaid coverage is reduced or eliminated, someone has to pay. The 2025 Genworth Cost of Care Survey puts the national median for a home health aide at $33 per hour.4 The other medians follow.

• Semi-private nursing room. $8,669 per month.
• Private nursing room. $9,733 per month.
• Assisted living. $5,511 per month.

These are medians. In major metro areas, add 30 to 60 percent. Pull together a parent's actual financial picture: Social Security income, pension if any, savings, home equity, life insurance cash value. Then compare that to the monthly cost of their current level of care at private-pay rates. The gap between those two numbers is the problem to solve.

Step five: explore every alternative funding source

When Medicaid shrinks, other programs can fill part of the space. Each is worth checking against a parent's specific situation.

• Veterans' benefits. The VA's Aid and Attendance program provides up to $2,431 per month for qualifying veterans and $1,318 for surviving spouses.5 A lot of families do not know this benefit exists.
• Long-term care insurance. For a parent who bought a policy years ago, read the benefit triggers. Many policies require help with two or more activities of daily living. If a parent meets that threshold, file the claim now, not later.
• Reverse mortgage. For a parent who owns a home, a Home Equity Conversion Mortgage can provide monthly income or a line of credit.6 The fees are significant, but for some families it bridges the gap.
• Life insurance conversion. Some policies can be converted to long-term care benefit plans through life settlements or accelerated death benefits, worth investigating for a face value above $100,000.
• Other programs. State pharmaceutical assistance programs, Supplemental Security Income, and Medicare Savings Programs can reduce out-of-pocket costs, freeing up dollars for care.

Step six: have the family meeting

This is the step nobody wants to take. Sit down with every sibling and every stakeholder, and put the numbers on the table. How much does care cost now? How much will it cost if Medicaid support shrinks? Who can contribute what, whether in money or in time?

A conversation with real numbers is uncomfortable. A crisis without a plan is worse. The legislative process is not finished. The final bill may differ from current proposals. Courts may intervene. States may find workarounds. But planning based on hope is just waiting.

Sources

1. KFF. "Potential Impacts of Medicaid Cuts on Older Adults and People with Disabilities." 2025.
2. KFF. "Medicaid in the United States." 2024.
3. Medicaid.gov. "Home and Community-Based Services." Centers for Medicare and Medicaid Services.
4. Genworth Financial. "Cost of Care Survey 2025."
5. U.S. Department of Veterans Affairs. "Aid and Attendance Benefits and Housebound Allowance."
6. U.S. Department of Housing and Urban Development. "Home Equity Conversion Mortgages for Seniors."
7. Eldercare Locator. U.S. Administration on Aging. eldercare.acl.gov.

This article is for educational and informational purposes only. It does not constitute medical, legal, or financial advice. Always consult qualified professionals for guidance specific to your situation.

© 2026 Aging Parent Care. All rights reserved. No portion of this article may be reproduced, distributed, or used in any form without the explicit written permission of Aging Parent Care.