The federal budget was signed into law on July 4. It is massively complicated and massively controversial. In this post, we touch on provisions of the law most likely to directly affect our clients.
Drastic Cuts to Medicaid Likely to Imperil Seniors
Advocates for older adults are highly critical of the new law and have made dire predictions about its impact on health services for seniors. If you are worried about protecting your nest egg from nursing home costs, you will find little in the bill to be happy about.
The new law chops $800 billion from Medicaid over the next decade. Because Medicaid pays the bulk of nursing home costs in America, slashed federal payments may make it more difficult for already struggling nursing homes to stay solvent, stay open, maintain sufficient staffing, and provide residents with basic quality care. In fact, Kaiser Health News reports that in 2024, 28% of nursing homes were failing to provide adequate care. Katie Smith Sloan, President and CEO of Leading Age, doesn’t mince words: “This harmful, cold-heated bill will wreak havoc on our country’s fragile aging services infrastructure-at a time when demand for the Medicare and Medicaid supported services it delivers is growing.”
Says Rachel Werner, the Executive Director of the University of Pennsylvania Leonard Davis Institute of Health Economics: “My concern is that home-based health care is going to be cut.” She projects that the shortfall in Medicaid funding to states will result in a reduction of the community-based and in-home supports that allow elders to age at home. This will force many into nursing homes or require family members to step up and provide unpaid caregiving for their loved ones. Currently 65,300 elderly Floridians receive home and community-based services.
We cannot predict precisely how the budget will impact our middle-class clients seeking to preserve some of their assets from nursing home expenses. Most likely it will become more difficult to qualify. We will keep an eye on developments. Planning, now, may be an advantage to preserve assets.
Cuts on Unreimbursed Medical Expenses
The new budget bill also cuts the amounts of out-of-pocket expenses nursing home residents used to be able to get reimbursed. Before the bill, a nursing home resident could claim up to three months retroactive out-of-pocket medical expenses for the period before they moved to the nursing home, or for the three months before applying for Medicaid. This budget bill cut that eligibility down to only two months of reimbursable expenses.
Temporary Social Security Tax Cut for Some
Many seniors had anticipated that federal taxes on Social Security would be entirely eliminated. This did not happen. Social Security will continue to be taxed. However, higher-income seniors will benefit: the budget establishes a $6,000 tax deduction for people 65 and older whose income is under $75,000 for single filers, double that for married joint filers. The deductions decrease with higher income and are not available once a single filer’s income reaches $175,000 and a married couple’s income reaches $250,000. The deduction is also temporary: it expires in 2029.
Most Social Security beneficiaries will not be affected because they do not earn enough to pay taxes on Social Security income, says Howerd Gleckman, senior fellow at the non-partisan Urban Institute who writes about aging policy issues for Forbes. Currently, 64% of seniors collecting Social Security are already exempt from federal taxes on their benefits.
In this new landscape, advance planning is more important than ever before. If you or a loved one would like to explore how to maximize protections for assets from the costs of long-term care, you should call Burzynski Elder Law without delay at 239-434-8557.