What Seniors Need To Know About Congress’ Big Budget Bill

The massive 2025 budget bill, which Congress passed on July 3, would slash safety net programs for older adults, people with disabilities, and their family caregivers, though many of those cuts may not take effect for years. At the same time, the bill would lower taxes for some older adults.

The measure would reduce Medicaid spending by nearly $1 trillion over the next decade, largely by cutting the federal payments for the program and imposing a work requirement on many recipients, perhaps including some family caregivers.

It would block a Biden-era rule to require minimum staff to care for patients and residents of nursing homes while approving more spending to deport immigrants, which likely will make the current severe shortage of care workers much worse.

It also would increase the standard deduction for older adults, but excludes a tax break for family caregivers once promised by President Donald Trump and fails to enhance tax-free savings that can be used to pay for long-term care.

Here is what some key provisions will mean for older adults and people with disabilities:

Medicaid

About 7.2 million seniors and 4.8 million younger people with disabilities are enrolled in both Medicaid and Medicare. More than half of Medicaid dollars are spent on them. Medicaid is run by the states but about 70% of its funding comes from the federal government.

The budget bill would slash Medicaid spending by nearly $1 trillion over the next decade. About $336 billion of those cuts would come from requiring states to impose work requirements on recipients, about $60 billion from increased paperwork faced by recipients, and about $120 billion from changes to so-called provider taxes, which effectively reduce federal contributions to the program.

Work Requirement

Older adults and young people with disabilities generally are exempt from the work requirements. But because the law is so vaguely written, family caregivers of older adults may not be.

This would require low-income people to give up their Medicaid if they must leave a job to care for a loved one. In addition, experts expect that many eligible people will lose their benefits because they are unable to comply with onerous new paperwork requirements to prove they are exempt from the work rules.

States must impose work requirements by December 2026, right after that year’s congressional elections. They may do so sooner or could request a reprieve from the federal government until 2028 under certain circumstances.

Cuts To Federal Medicaid Contributions

The bill limits the ability of states to impose taxes on Medicaid providers, such as nursing homes and hospitals. That effectively will reduce the amount of Medicaid spending funded by the federal government, though the provider tax curbs will not take effect until 2028. Other changes limit federal contributions to states that expanded Medicaid under the 2010 Affordable Care Act. Those additional payments end on January 1.

All these cuts in federal Medicaid payments will force states to either cut benefits, limit eligibility, or raise taxes to make up for the lost federal dollars.

Since few states are likely to raise taxes, they’ll be forced to limit Medicaid services in some way. Crucially, states are required by federal law to provide long-term care in nursing homes. They are allowed to provide home-based care—and all do—but these are optional benefits and not required.

As a result, states are likely to respond to cuts in federal Medicaid payments by either reducing their home and community-based care or by cutting their payments to nursing homes.

Medicaid Home And Community-Based Care

Current law generally says states can provide home-based care only to people who otherwise would be living in a nursing home or other institutional setting. The bill gives states new flexibility to provide home-based care to people who do not need an institutional level of care, as long as they do not increase existing waiting lists for community care to do so.

The bill includes a small amount of money for states to implement this expansion. But given the massive cuts in federal payments, it seems improbable that states will be expanding HCBS anytime soon. In addition, the provision would not take effect until 2028.

Care Workers

The bill would effectively repeal a Biden Administration rule aimed at requiring nursing homes to maintain minimum levels of staffing, including 24/7 RNs on site. Industry groups sued to block the rule and a federal district judge in Texas halted it.

At the same time, the budget bill would increase spending by more than $100 billion for border security and the Trump administration’s efforts to deport immigrants. Trump’s promised mass deportations will make the existing shortage of medical and direct care workers much worse, increasing costs for families.

Taxes

The budget bill raises the standard deduction for older adults by $6,000. In 2025, a couple claiming the ordinary standard deduction, the current additional standard deduction for seniors, and the new standard deduction, could receive a total standard deduction of $46,7000. The senior deduction would be available even to those who itemize their deductions.

The extra deduction would be available only through 2028. It replaces President Trump’s campaign promise to exempt Social Security benefits from tax, an idea never seriously considered by Congress. The Tax Policy Center estimates that fewer than half of seniors would benefit from the higher standard deduction.

Two other important tax provisions never made it to the final bill. A caregiver tax credit, which President Trump promised during the campaign, never was pushed by the White House and was not included in any version of the budget bill.

And a House provision intended to double contributions to tax-free Health Savings Accounts was dropped. Those HSAs can be used to pay long-term care insurance premiums and for some care.

The big budget bill will have profound effects on older adults, especially the poorest of them. But, at least in some states, they may not feel much of the impact for a while.