Another Year, Another Cut

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In its proposed 2026 Home Health Prospective Payment System (HHPPS) rule, CMS has announced yet another reduction in Medicare home health reimbursement.

The headline number: -6.4% aggregate cut.

This is on top of cuts in 2023, 2024, and 2025. Cumulative impact: agencies are operating with significantly less revenue per episode than just a few years ago.

Here's what you need to know.

The Numbers

Proposed 2026 Changes

Component	Impact
Base payment update	+2.6%
Behavioral adjustment (clawback)	-5.0%
Wage index adjustment	Varies
Net effect	-2.4% to -6.4%

The "behavioral adjustment": CMS claims agencies are coding cases to maximize reimbursement in ways that don't reflect actual patient complexity. This "clawback" is CMS taking back what they consider overpayments.

The industry disputes this analysis. The National Association for Home Care & Hospice (NAHC) argues CMS's methodology is flawed and doesn't account for genuine increases in patient acuity.

Cumulative Impact

Year	Rate Change
2023	-2.9%
2024	-3.6%
2025	-1.7%
2026 (proposed)	-6.4%
Total since 2023	~-13%

That's real money. An agency that received $100 in 2022 would receive about $87 in 2026—while facing increased labor costs, inflation, and regulatory burden.

Who's Affected

Medicare Home Health Agencies

Directly affected:

All Medicare-certified home health agencies
Medicare Advantage plans paying based on Medicare rates

Impact varies by:

Geographic location (wage index differences)
Case mix (which patient types you serve)
Efficiency (cost structure)
Size (smaller agencies feel proportionally larger impact)

Medicaid Home Care

Not directly affected by this rule.

Medicaid home care (including HCBS waiver services, personal care) has separate reimbursement systems. However:

Agencies serving both Medicare and Medicaid may cross-subsidize
Industry pressure affects all segments
State Medicaid rates often follow Medicare trends eventually

Who's Hit Hardest

According to industry analysis:

Rural agencies - Often already operating on thin margins
Smaller agencies - Less scale to absorb cuts
Agencies with older populations - Higher acuity, more affected by behavioral adjustments
States with lower wage indexes - Get less relief from geographic adjustments

Why This Keeps Happening

CMS's Perspective

CMS argues:

Behavioral changes: When PDGM (payment model) was implemented in 2020, agencies changed coding practices. CMS sees this as gaming.
Budget neutrality: Law requires budget-neutral implementation. If payments went up due to coding, they need to come back down.
Data-driven: Their models show actual spending exceeded projections.

Industry's Perspective

Home health advocates argue:

Patient acuity is real: Patients ARE sicker, need MORE care.
Flawed methodology: CMS's models don't accurately capture legitimate complexity.
Ignoring inflation: Costs have risen substantially; flat or declining rates mean real cuts.
Cutting during shortage: Reducing payments while demanding more access is contradictory.

The Politics

Home health cuts have bipartisan opposition:

Congressional letters pushing back
Industry lobbying intensifying
Home Health Stabilization Act aimed at pausing cuts

But CMS has statutory authority over rate-setting. Congressional intervention would require legislation.

Operational Impact

What Agencies Are Doing

Cost reduction:

Staff reductions (carefully)
Efficiency improvements
Technology investments that reduce per-visit costs
Supply chain optimization

Revenue diversification:

Expanding Medicaid services
Private pay offerings
Medicare Advantage contracts (with caution)
Diversifying payer mix

Coding accuracy:

Ensuring documentation fully captures patient complexity
Training clinicians on OASIS accuracy
Clinical review processes
Compliance programs to defend against audits

Advocacy:

Industry association membership
Direct congressional outreach
Sharing impact stories publicly
Supporting proposed legislation

What Agencies Shouldn't Do

Don't:

Cut corners on care quality
Underserve complex patients to avoid high-cost cases
Fraudulently inflate coding (will backfire)
Ignore the problem and hope it goes away

Strategic Responses

Short-Term (This Year)

Model the impact - What does -6.4% actually mean for YOUR agency?
Review cost structure - Where can you operate more efficiently?
Assess case mix - Are you documenting complexity accurately?
Prepare advocacy materials - Be ready to share your story

Medium-Term (1-2 Years)

Diversify revenue - Don't be 100% dependent on any single payer
Invest in technology - Efficiency gains compound over time
Strengthen referral relationships - Secure patient volume
Build reserves - Financial cushion for uncertain times

Long-Term (3+ Years)

Value-based arrangements - Value-based purchasing can provide upside
Market positioning - Differentiation for sustainable competitive advantage
Advocacy engagement - Shape policy, don't just react to it
Scale considerations - Is your size sustainable?

How to Comment

The Rulemaking Process

This is a proposed rule. CMS accepts public comments before finalizing.

Timeline:

Proposed rule published: Spring 2026
Comment period: ~60 days
Final rule: Fall 2026 (typically August)
Effective: January 1, 2027

How to Submit Comments

Go to regulations.gov
Search for: CMS-1801-P (or current rule number)
Submit comment by deadline
Be specific: CMS values concrete examples over general complaints

What to Include

Effective comments:

Impact on your specific agency (numbers help)
Patient population affected
Geographic considerations
Operational changes you'll be forced to make
Alternative approaches CMS could take

Less effective:

General complaints
Emotional appeals without specifics
Threats
Form letters (they count, but carry less weight)

Industry Coordination

Major associations coordinate advocacy:

NAHC (National Association for Home Care & Hospice)
LeadingAge
State home care associations

Consider joining industry coalitions for amplified voice.

Legislative Options

Home Health Stabilization Act

Proposed legislation to:

Pause behavioral adjustment cuts
Commission independent study of actual costs
Provide predictability for agencies

Status: Introduced, seeking co-sponsors.

What You Can Do

Contact your representatives - Ask them to support stabilization legislation
Share your story - Real examples influence policy
Participate in advocacy days - Industry associations organize Capitol Hill visits
Engage local media - Coverage creates political pressure

The Bigger Picture

Home Care's Value

While cutting rates, policymakers also say they want:

More care at home, less in institutions
Better outcomes, lower total cost
Healthcare workforce growth
Improved access, especially rural

These goals are incompatible with sustained payment cuts. At some point, agencies can't provide access at unsustainable reimbursement.

What's at Risk

If cuts continue:

Agency closures, especially rural
Service area restrictions
Longer wait times for patients
Difficulty hiring and retaining staff
Quality compromises under financial pressure

The caregiver shortage is already acute. Cutting funding to the sector isn't helping.

The Irony

We're in a period of:

Historic demand growth (aging population)
Historic workforce shortage
CMS goals to shift care to home settings
$517 billion market projection by 2035

And the response is... payment cuts?

The disconnect between stated policy goals and actual payment decisions is stark.

Resources

CMS Materials:

CMS Home Health PPS page
Federal Register (full proposed rule text)

Industry Analysis: