On June 30, 2025, CMS issued its proposed 2026 updates to Medicare payment policies and rates for home health agencies (HHAs), resulting in an unprecedented estimated decrease in payments of 6.4%, or $1.135 billion.
What Are the Proposed Payment Provisions?
While there are multiple provisions to the proposed rule, the most concerning are those contributing to the proposed payment decreases. Medicare pays HHAs based on a national standardized rate per 30-day period that is adjusted for patient-specific characteristics and location of service. Today, that rate is $2,057, which is proposed to decrease to $1,934 in 2026. The details behind this proposed decrease are complex, as illustrated below.
| 2026 Proposed Payment Provisions | ||||||
|---|---|---|---|---|---|---|
| 2025 30-Day Period Payment Rate | Permanent Adjustment | Case-Mix Weight Recalibration Neutrality | Wage Index Budget Neutrality | Payment Update | Temporary Adjustment | 2026 Proposed 30-Day Period Payment Rate |
| $2,057.35 | 4.059% reduction | 0.51% increase | 0.19% increase | 2.4% increase | 5% reduction | $1,933.61 |
Of the proposed provisions, HHAs have become accustomed to slight increases or decreases each year for case-mix weight and wage index neutrality. Likewise, the proposed inflationary payment update is typically based on historical CMS provisions. It’s the 9.059% proposed decrease of the combined permanent and temporary adjustments that is the source of this year’s concerns.
What Are the Proposed Permanent & Temporary Adjustments?
The proposed permanent and temporary adjustments are based on CMS’ assertion that the conversion from the Prospective Payment System (PPS) to the Patient-Driven Groupings Model (PDGM) in 2020 resulted in additional Medicare spending due to differences between assumed and actual HHA behavioral changes and, therefore, PDGM has not achieved budget neutrality. The 4.059% proposed decrease for 2026 marks the fourth consecutive year of permanent adjustments, accumulating to nearly 13% in reductions, whereas this marks the first year for the proposed 5% temporary adjustment, which could recur in future years.
How Are You Impacted?
Despite the proposed cuts, Medicare continues to be the typical HHA’s best payor, often subsidizing less adequate payments from Medicare Advantage (MA), Medicaid, and other payors. As MA penetration continues to expand throughout the nation, the impact of the proposed Medicare cuts could vary substantially based on your HHA’s payor mix, as well as its geographical service area and trends in Medicare patient characteristics. HHAs should conduct a financial impact analysis evaluating their own unique characteristics when budgeting for 2026.
What Can You Do?
While HHAs must adopt their own specific strategies to prepare for the proposed cuts, there are four actions that HHAs can take now.
Exercise Your Rights
Now is the time for HHAs to exercise their advocacy rights. National industry organizations, such as the National Alliance for Care at Home and LeadingAge, as well as state industry organizations, are actively leading advocacy efforts offering member HHAs education, tools, and data to support individual advocacy efforts. Inform your legislators on how the proposed cuts could impact Medicare beneficiaries’ ability to access care in your community.
Negotiate MA Contracts
National MA enrollment continues to surpass traditional Medicare enrollment in many regions throughout the nation, with national MA enrollment currently at 51%. HHAs should critically assess their MA contracts to determine whether their rates are financially sustainable. While the typical MA plan pays less than traditional Medicare, HHAs should assess whether contracted rates at least cover direct care costs and some portion of administrative costs and proactively seek to negotiate those contracts that are not financially sustainable.
Embrace VBP
2025 marks the first year Medicare began increasing or decreasing HHA payments by up to 5% according to their performance in the Value-Based Payment (VBP) national demonstration project, which seeks to incentivize HHAs to provide higher quality and more efficient care to Medicare beneficiaries. VBP offers HHAs an opportunity to improve Medicare payments by up to 5% by achieving patient outcomes, patient experience, and hospital utilization targets. While VBP offers HHAs a substantial opportunity to offset potential Medicare cuts, poor VBP performance can substantially compound such cuts.
Align Operational Costs
The typical HHA spends more than 70% of its revenue on labor expenses. Often, clinical compensation models are designed to incentivize visit volume rather than patient volume and lack consideration of care quality and patient experience. Likewise, administrative compensation models often do not incorporate accountability metrics specific to staff responsibilities. HHAs should assess whether their compensation and productivity models adequately align with care quality, patient experience, and financial performance objectives.
Forvis Mazars Can Help
If you have any questions, our Home Care & Hospice team can help. Please reach out to one of our professionals for assistance.