Yes, provider tax changes will likely reduce home care funding for dementia patients who rely on Medicaid. Provider taxes, state taxes on health providers that help fund the state's Medicaid share, are now frozen and will shrink in some states, leaving less money for home services. On July 4, 2025, Congress passed budget reconciliation law H.R.1, and Justice in Aging reports it cuts over $1 trillion from Medicaid, Medicare and ACA programs the Justice in Aging analysis. Medicaid is the major payer of home-based dementia care, spending about $10,805 yearly per adult enrollee with dementia, according to KFF the KFF brief on Medicaid and dementia.
Medical information disclaimer: This article is for general educational purposes only and does not provide medical advice, diagnosis, or treatment. Always consult a physician or other qualified health professional about symptoms, medications, tests, or treatment decisions.
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- //www.kff.org/medicaid/health-provisions-in-the-2025-federal-budget-reconciliation-law/). That freeze holds even as long-term care costs rise. States cannot raise this revenue source to keep matching federal dollars.
- Why is dementia home care exposed?
- Does the law eliminate home care?
- What could families see next?
- What can you do now?
//www.kff.org/medicaid/health-provisions-in-the-2025-federal-budget-reconciliation-law/). That freeze holds even as long-term care costs rise. States cannot raise this revenue source to keep matching federal dollars.
In ACA expansion states, the safe harbor will fall from 6% of net patient revenue by 0.5 points yearly from FY2028 to 3.5% in FY2032. CMS issued preliminary guidance on Nov.
14, 2025 setting an Oct. 1, 2026 zero-percent indirect hold-harmless threshold and defining grandfathered taxes. Providers and states now face a tighter, more detailed financing rule.
Why is dementia home care exposed?
Most Medicaid dementia spending supports home-based services through HCBS waivers. HCBS means home- and community-based services, such as personal care, homemaker help, adult day care, and home health aide visits.
Those services now exceed 60% of Medicaid long-term care spending but remain optional benefits. Analysts warn they face first cuts when state matching revenue falls, as summarized with federal data by NeurologyLive the NeurologyLive federal data summary. Optional status makes home care easier to trim than nursing homes or hospitals.
Does the law eliminate home care?
No, the law does not directly eliminate HCBS. It restricts financing while leaving waiver authority in place. A separate provision, Sec.
71121, creates a standalone 1915(c)-type HCBS waiver path from July 1, 2028. It also adds $50M in FY2026 and $100M in FY2027 planning funds. That path may help some states redesign programs, but it does not replace lost provider-tax dollars.
What could families see next?
Affected families relying on Medicaid HCBS face state rate freezes, waitlists or service trims. ATI Advisory warns the law strains HCBS providers and shifts shortfalls to states.
Fewer funded hours can mean shorter visits, staff turnover, or delayed start of services. People with dementia need steady routines, so even small trims can disrupt sleep, meals, medication prompts, and supervision.
What can you do now?
Ask your care manager what waiver funds your services and whether a waitlist or reassessment is planned. Keep a simple record of approved hours, actual visits, missed shifts, and new needs. Contact your state Medicaid office or local aging agency promptly if hours drop or providers change.
- Confirm your current care plan, authorized hours, and renewal date
- Report hospital visits, falls, wandering, or added supervision needs quickly
- Ask about backup options for personal care, respite, and adult day programs
- Save denial, reduction, or waitlist letters and appeal deadlines together
