No Such Thing as Being Out of Harm’s Way 

“Hi, Chris and John! How are you doing?” 

Dawnie greets us cheerfully, pushing a cart full of dirty utensils towards the elevator of the nursing home we are visiting. My friend and I met her when she coordinated volunteers at the same facility. We ask her “Why the change in roles?”  

“Well, the hours are steady, and I am getting a regular paycheck.” We note to ourselves it is Sunday morning and she did not answer our question directly. “Before I came here,” she continued, “my boss at the hotel regularly under-reported our hours but I couldn’t do nothing because a lot of the girls I worked with didn’t have their papers, and I didn’t want to cause no trouble. But what can you do? I’m thankful to God for the steady work.”    

The elevator comes and we say goodbye. Downstairs she will pass Maria, the chatty front desk receptionist who works weekends in addition to her job in the school district, so she can make her car payments and rent and help out with the grandkids. 

We make our way to see Robert, the intellectually disabled amputee who is watching “Golden Girls” blankly in his room with a pile of old music magazines next to him. He has just been tended to by Diana, the nursing assistant who came to the country about four years ago because work was scarce in the Dominican Republic. She has now gone off to check on one of the “wanderers” – residents who walk laps around the secure floor. 

As in most nursing homes, the majority of the patients here have Medicaid. The workers and the patients they serve are part of the health care industry that now consumes 17% of our economy and 25% of government spending. How will they fare as states implement the massive changes to Medicaid included in HR1, “The One Big Beautiful Bill Act,” passed by Congress this summer?  

And what can state officials can do to minimize HR1’s harms and address the conditions that make health care — and these patients and the folks who serve them — a target for budget cutters? 

The Indirect Impact of HR1 on Nursing Home Residents 

At first glance, nursing homes and the people they serve would seem to be out of harm’s way from HR1. Very few of the estimated 10 million people who are expected to lose coverage due to the new measures in HR1, including work requirements, more frequent administrative redeterminations, and disallowance of state-only coverage of undocumented residents, are nursing home residents, or even elderly.   

But an estimated 30% of the direct care workforce nationally, such as Dawnie, Maria, and Diana’s colleagues, are enrolled in Medicaid themselves and could lose coverage temporarily or even permanently due to these measures. In addition, new limits in HR1 to provider taxes used to generate state revenues and draw federal Medicaid matching funds will result in reduced federal payments to states of an estimated $11.9 billion per year. Finally, newly uninsured people — whether from HR1 cuts or the November 1 expiration of enhanced ACA insurance exchange subsidies — will not stop needing medical care. Instead, they will seek it at community health centers and hospital emergency rooms, which will look for state funding for their increased uncompensated care burden.   

Faced with these revenue shortfalls and expenses, state budget officials will need to go where the money is being spent. Medicaid beneficiaries who are elderly or disabled represent 65% of the program budget. Many of these are nursing home residents. Given the magnitude of the Medicaid program — it provides health insurance for almost one in five people nationally — there is no such thing as being out of harm’s way.  

State officials should not view their responses to that allegedly Beautiful Bill merely as a tough budgeting exercise to make expenses match revenues in the current year. The tapeworm on the US economy that is health care (to quote Warren Buffet) will keep gnawing away at government budgets. The resulting hard choices should be guided by four principles.   

Four Principles to Guide Decision-Making 

Good administration and standards to keep people covered 

Continuous insurance coverage may be bad for current-year state budgets, but it is good for the health of patients and costs of administration. The new requirement that all Medicaid enrollees recertify every six months will create additional work for state officials, needless disenrollments and hassles for provider staff, and interrupted episodes of care for patients. States can minimize these impacts with less burdensome documentation standards and upgraded eligibility verification practices and systems like those used by the ACA exchanges. The Trump administration must be held accountable for its commitments to partner with states to make these system investments. 

Keep options affordable for individuals and families 

The average annual cost of family insurance in the US is now $26,000. In our national game of health-care hot potato — in which payers endlessly shift the costs — families and individuals should not be left with the burned hands, forced to delay or forego needed care or plunged into medical debt. Even as Congress debates the future of ACA exchange subsidies, state officials can limit the damage from high-deductible benefit plans and aggressive provider collection strategies. 

Follow the money 

States have aggressive and comprehensive systems for assuring the solvency of banks and insurers, yet most don’t have insight into the finances of health care providers. State policymakers often have little awareness or recourse when a health system pleads poverty and jacks up their commercial insurance prices, a nursing home hides behind an opaque ownership structure, or private equity owners of health care providers extract assets and value from local communities.  

One of the many lessons from the Peterson-Milbank Program for Sustainable Health Care Costs is that the pittance it costs to hire and empower public officials to monitor health system finances is well spent. This has allowed Oregon and Indiana to implement reference pricing, Rhode Island to limit the growth of hospital prices, and Vermont to push back on academic medical center budgets.     

Health care cost pressures will only grow. The ACA expanded coverage, but it also supercharged the growth of our very inefficient US health care system. That’s a lot of mouths to feed, and the distribution of dollars needs to be tracked.  

Establish structures and processes that prioritize covered services to maximize population health for all 

Faced with tight Medicaid budgets, policymakers have only three sure-fire options for cost reduction: cut provider rates, cut beneficiaries, or cut services. Cutting rates merely shifts costs to another payer. Reducing eligibility deems some people more worthy than others. That leaves services.   

In a world of limited resources how are health care service priorities best decided? Markets work well for consumer goods but not so well for services we deem essential. After all, federal law compels emergency rooms to treat all people. And health care purchasers like employers generally opt for broad covered benefits, delegating to health plans coverage decisions at the patient level that are achieved via prior authorization programs and payment reforms to ration care. Ballooning health care costs speak to the failure of these efforts to “outsource the no.”   

Faced with the stark reality of limited resources, it may be time to consider how to prioritize their use. The original Oregon Health Plan, developed for its Medicaid program over 30 years ago, acknowledged the realities that health care budgets are limited and care is already rationed in the United States. It would be better and fairer, the thinking went, to make that rationing explicit and apply to all in Medicaid. The Plan set forth a structure and process for defining and prioritizing “condition treatment pairs” based on cost and patient and societal benefit. The most cost-effective services rose to the top of the list, the least went to the bottom. More or fewer of these pairs would be covered depending on resources available.   

The Oregon Health Plan was much beleaguered and rarely tested, as state and federal officials identified additional revenues rather than trim services. The Biden administration — perhaps with echoes of Sarah Palin’s “death panels” in their heads — went so far as negotiate its suspension. Despite the absence of the hard financial constraint found in single payer programs (and public-school budgets) and its implementation issues, the Plan’s logic and morality remain solid and there are lessons to be learned from its implementation. As states confront the reality of Medicaid program cuts imposed by HR1, the needs of an aging population, and the increasing availability of expensive and effective new gene therapies, the need for trustworthy structures and processes to make these difficult prioritization decisions will only grow. 

The folks at the nursing home are no health policy experts and have limited political power. The staff are just trying to earn a decent living and do right for their poor, elderly, and disabled patients. HR1 may have been the precipitating event, but if it had not been tax cuts for the rich, some other federal policy imperative would have eventually forced this reckoning: we have a health system our government cannot afford. Congress responded by targeting poor people first and turfed the hard work of prioritizing limited resources to the states. By applying these principles, state officials can do right by Dawnie, her colleagues and their patients, and the public.      

Note: On December 1, 2025, Christopher Koller finished his tenure as President of the Milbank Memorial Fund.  

Acknowledgement: Milbank Memorial Fund Program Officer Rachel Block contributed to the development of the principles identified in this essay.