If you’re one of the 59 million people serving as a caregiver for a parent or other family member, you already know what an important balancing act it can be.1 As you help your parents age gracefully and manage their healthcare needs, it’s important to consider what their ongoing medical costs may be—and how they can be addressed without depleting your own resources.
As part of the sweeping 2025 One Big Beautiful Bill Act (OBBBA), some major policy changes have started to roll out. While the bill contains a wide range of tax and spending provisions, one of its more talked-about measures involves cutting Medicaid funding by an estimated $1 trillion over the next 10 years.2
If your parents are currently on Medicaid or could be in the future, now’s the time to get ahead of what’s changing in 2026 and beyond. Unless further legislative action is taken, these provisions will likely affect millions of Americans who depend on federal assistance (like Medicaid) for essential care.
Here’s a closer look at what’s changing, who may be impacted, and how you and your family can prepare.
Medicaid is a joint federal and state government program that provides health and long-term care coverage for around 77 million Americans, primarily those with limited income and assets.3 As a means-tested government program, a person’s eligibility depends on both their monthly income and total assets (minus certain exemptions, such as their primary residence). Specific requirements for Medicaid eligibility vary by state and program.
For those who are 65 and older, Medicaid can fill an important financial gap by covering expenses that Medicare doesn’t—particularly, long-term care.
As a reminder, Medicare and Medicaid sound similar enough, but they provide different levels of coverage for participants.
Just like privately-offered insurance, Medicare requires some monthly premiums and covers basic healthcare needs like hospital stays, physician visits, prescriptions, and short-term rehabilitation. But for the 12 million or so seniors who are eligible for both Medicare and Medicaid, the latter can step in and cover additional expenses such as:4, 5, 6
If your parents are on both Medicare and Medicaid, Medicare will cover their expenses first. Then, where Medicare’s coverage ends, Medicaid kicks in—up to the state’s cost limit.
The OBBBA’s cuts to Medicaid funding will reduce federal reimbursements to states, forcing many to take certain measures including:
If you care for parents who depend on Medicaid (particularly for nursing home care), these cuts could make access to coverage more difficult or delayed in the coming years.
As part of the OBBBA, Medicaid will impose work requirements on certain enrollees under the age of 64. To get or keep coverage, applicants will need to document at least 80 hours per month of one or more of the following:7
States must implement the requirements by January 1, 2027, though they do have the option to start as early as 2026.
The Center on Budget and Policy Priorities (CBPP) estimates that between 9.9 and 14.9 million people could lose coverage by 2034 as a result of these work requirement rules.8
While adults 65 and older won’t be subject to the work requirement rules directly, the effects could still reach them and their family members. Nonelderly spouses or live-in caregivers who share financial resources with Medicaid applicants may need to document income and work activity more frequently. If your parents are under 64, the work requirements may pose a challenge as well.
Historically, Medicaid eligibility has been assessed annually. Starting in 2026, states may start implementing new screening frequency guidelines, enabling them to review applicants’ eligibility every six months instead.
More frequent reviews could mean a greater possibility of missed deadlines, clerical errors, or otherwise accidental loss of coverage. As a caregiver or child of an older parent, you may be the one taking the lead on your parents’ annual Medicare application. Doubling the frequency puts more of a strain on your already-busy schedule, and increases the likelihood you’ll need to cover interim costs out-of-pocket while their eligibility is verified again.
The OBBBA places new restrictions on how states can raise funds for their Medicaid programs. In particular, states will be limited on what they tax providers, which may make it more challenging for hospitals and nursing facilities to fund care for low-income patients.
In the coming years, states may have less ability to fill funding gaps created by federal cuts. If no further legislative changes happen, participants may be met with critical challenges, including smaller provider networks, delayed reimbursements, or fewer available nursing home beds.
These policy changes come at a time when you may already be feeling the strain of balancing your parents’ needs with your own financial goals. With tighter Medicaid rules and increasing eligibility challenges, you (or your parents) may have to bridge longer financial gaps before coverage kicks in or resumes.
It’s not uncommon for seniors and their families to work around Medicaid’s asset and income limits by implementing asset transfer or spend-down strategies.
Essentially, seniors place non-exempt assets into a Medicaid Asset Protection Trust (MAPT), or sell or gift them to loved ones. Doing so lowers their net worth on paper, which helps them meet Medicaid’s eligibility requirements and get critical expenses (like nursing home care) covered in the future.
The big caveat of spend-down strategies is Medicaid’s five-year lookback period.
When Medicaid reviews your parents’ eligibility, they’ll review any asset transfer over the past five years to determine if the lookback rule has been violated. This may happen if assets were gifted to family members or sold for less than fair market value.9
If agents find that the lookback rule has been violated, a penalty period may be implemented and further delay the applicant’s eligibility.
Spend-down strategies can be risky and complicated to implement. If you or your parents have considered transferring assets for Medicaid eligibility requirements, speak with an advisor or attorney first.
Now, with major Medicaid cuts coming, relying on the program long-term for your loved one’s future care needs may expose them to added challenges. Eligibility requirements could continue to change over the coming years, potentially making it more difficult for certain seniors to qualify.
You and your family may want to discuss other care options in the meantime. While everyone’s needs are different, it may be worth creating and funding a dedicated medical savings account in the meantime to help cover out-of-pocket costs.
Long-term care insurance is another option to consider. Keep in mind, these policies tend to come with lower premiums the earlier they’re purchased, but that doesn’t mean seniors can’t still access them.
Since Medicaid programs vary by state, keep an eye on what your state chooses to do in the coming months. As we mentioned, states have some discretion to implement new rules in 2026 or wait until the federal deadline in 2027.
With more frequent eligibility checks and potential funding shortages, proactive planning is critical. Start getting organized by gathering up important documents (tax returns, pay stubs, property records, medical expense receipts, etc.) that you may need to apply or reapply on your parents’ behalf. Follow your state’s program changes closely, and consider what alternative options for covering medical costs may work best for your family.
As changes to Medicaid start rolling out, alongside many other OBBBA provisions, you may find it helpful to speak with a financial advisor about how your own financial picture could be impacted soon.