Gov. Pritzker Signs Medicaid Omnibus Bill into Law

Measures prioritize the protection of patients and community members; institutes financial reforms for hospitals and continues to increase quality standards for the long-term care industry

SPRINGFIELD, IL - Today Governor JB Pritzker signed SB3365 into law, building a foundation to protect patients in anticipation of significant changes to the healthcare system in Illinois due to the federal HR1 legislation. This law will deliver significant reforms to Illinois' hospital system and long-term care industry. The bipartisan Fiscal Year 2027 Medicaid Omnibus bill will strengthen the ability of the Illinois Department of Public Health (IDPH) and of the Illinois Department of Healthcare and Family Services (HFS) to detect hospital financial distress, assist financially vulnerable hospitals, ensure transparency, and prevent service disruptions that could negatively impact Illinois residents.

"Illinois continues to stand up to protect the right to quality, affordable healthcare in every region of the state," said Governor JB Pritzker. "Our latest Medicaid package takes necessary steps to support at-risk hospitals, strengthen our statewide care infrastructure, and defend the interests of patients and taxpayers."

"Every Illinoisan deserves access to quality, affordable healthcare, regardless of their ZIP code," said Lieutenant Governor Juliana Stratton. "This legislation strengthens protections for patients, supports hospitals and long-term care providers facing financial challenges, and helps ensure families can continue to access the care they depend on close to home. As uncertainty grows at the federal level, Illinois is taking proactive steps to protect residents and build a stronger, more resilient healthcare system."

The Medicaid Omnibus Bill includes approximately $110 million in State Fiscal Year 2027 ($221 million annualized) to support initiatives that expand and invest in Medicaid services in Illinois to improve the experience of residents. These initiatives include continuing investments in safety-net hospitals across the state and investments and innovation in Long-Term Care funding.

Key provisions of the bill create a limited loan program for hospitals in financial distress, require hospitals with outstanding debt to the state to develop a hospital emergency and financial contingency plan annually, mandate hospitals provide additional transparency into their financial information, and direct IDPH to develop a healthcare system reform report. This report will include findings and recommendations for how Illinois' healthcare system may best prepare to withstand the looming federal changes that will result in increased numbers of uninsured individuals and the loss of billions of dollars in Medicaid funds.

More details on these key initiatives of the Medicaid Omnibus Bill include:

• Distressed Hospital Loan Program: This initiative will establish a program effective January 1, 2027, and after administrative rules are solidified for the state to provide interest-free cash flow loans to stabilize hospitals in significant financial distress that have a plan to turn around their operations. The budget includes an $85 million appropriation to HFS for making loans under this program. Under the program, HFS will create a methodology to evaluate hospital applications that will consider factors such as whether a hospital serves a disproportionate share of Medicaid patients and whether a closure would significantly impact access to services in the hospital's service area. The program takes the place of the previous program under which HFS made advances to hospitals.
• Hospital Emergency & Financial Contingency Plan: The legislation requires hospitals that have outstanding debts to the state, such as tax arrears, Medicaid advance payments or debts under the Distressed Hospital Loan Program, to submit annual hospital emergency and financial contingency plans to IDPH. These plans must cover contingencies for the rapid and orderly resolution of finances and operations in the event of material financial distress. The plan must also include identification of any service area gaps due to emergency closure.
• Hospital Financial Transparency: Under the legislation, hospitals will be required to provide additional financial information to the Health Facilities and Services Review Board (HFSRB), giving the State greater insight into the financial stability of hospitals and health systems in Illinois. The new reporting requirements include the facility's most recent audited financial statements and the most recent month-end balance sheet detailing assets, liabilities, and net worth.
• Healthcare Access Report: Another provision of the legislation requires IDPH to work with national experts and stakeholders to deliver a list of recommendations to improve access to quality health care across Illinois. The report, due by January 31, 2027, will include ideas on how the resources of the state and other healthcare payers may be optimized to improve access to care and improve health outcomes; analyses of patient experiences, workforce needs, and the ability of hospitals to adapt quickly to unforeseen public health events; and recommendations on statutory or administrative changes that may be needed to strengthen health access.

The legislation also includes language to continue vital investments in the safety-net hospitals located in Illinois' most vulnerable communities. These include:

• Extending the Safety-Net Low Volume add-on payment; and
• Extending the safety-net hospital health equity add-on payment, which acknowledges the different levels of dependence on Medicaid within the safety-net category.

"Ensuring access to reliable, consistent care is critical to protecting the public health of Illinois communities. This legislation will protect that access by bolstering the financial and operational stability of hospitals and long-term care facilities across the state," said IDPH Director Dr. Sameer Vohra. "Thanks to the enhanced reporting requirements and additional fiscal assistance for hospitals, vulnerable hospitals now have a path to remaining open and in service for communities most in need."

"The measures included in this legislation work to bolster both financial stability for hospitals as well as transparency regarding their operations in order to continue improving the healthcare landscape in our state," said HFS Director Elizabeth M. Whitehorn. "Clear accountability and hospital support initiatives are a vital part of efforts to help ensure consistent access to care for all Illinois residents."

"Impending federal cuts to Medicaid are a threat to the stability of our health care system, risking access to care for thousands of Illinoisans," said Senate Majority Caucus Chair Omar Aquino (D-Chicago). "Safeguarding local hospitals and community-based services is needed to ensure our most vulnerable communities are not left behind."

"SB3365 is a comprehensive Medicaid package that strengthens Illinois' healthcare safety net, improves access to care, supports hospitals and community providers, and modernizes Medicaid operations-all while maintaining fiscal responsibility in light of looming federal cuts to Medicaid under President Trump's budget bill," said Rep. Anna Moeller (D-Elgin). "This legislation will help keep hospitals open, strengthens mental health services, supports seniors and people with disabilities, protects rural and safety-net providers, and ensures vulnerable Illinoisans can continue receiving care in their communities."

To address the needs of Illinois residents who rely on long-term care, Governor Pritzker has helped bolster the financial stability of long-term care facilities by investing $120 million annually into skilled nursing facilities and supportive living facilities. This investment includes:

• Building on the successful STRIVE (Staff Time and Resource Intensity Verification) staffing model that was part of 2022 Nursing Home rate reform, the legislation includes a $2.25 rate increase to the per-diem rate tied to meeting STRIVE staffing benchmarks, totaling a $26 million investment.
• Expanding what is known as a Medicaid Access per-diem payment for nursing homes with high Medicaid occupancy by approximately $78 million annually and, for the first time, tying these rate increases to a minimum staffing requirement and annual staff training requirements.
• Adding approximately $15 million annually to Supportive Living Program settings, which are an independent living alternative to nursing home care for low-income older persons and persons with physical disabilities under Medicaid.

The language also gives automatic eligibility for dementia care focused Supportive Living Program services for those over 44 who are diagnosed with Alzheimer's and invests additional funding into adult day services provided through the Department of Aging for elderly Medicaid recipients.

Finally, the bill creates the Staffing Improvement and Long-Term Care Oversight Fund, which will be funded by fines on nursing homes not in compliance with IDPH staffing requirements. Funds will be used to further strengthen oversight of nursing homes and to encourage workforce development for nursing home staff.