CMS Wants to Cut Home Health Rates by 6.4%

Editor’s note: This story was updated July 1, 2025 with additional industry reactions. 

WASHINGTON—The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on Monday, June 30, that would permanently reduce home health payment rates by 4.059% in 2026 and add a temporary 5% clawback as well.

Altogether, with a range of increases and decreases, CMS estimates that Medicare payments to home health agencies would drop 6.4% or $1.135 billion compared to 2025. 

The Alliance for Care at Home said that if implemented, this rule will have catastrophic impacts on home health care access by forcing providers to close their doors, expanding existing and creating new home health care deserts, and leaving patients without the essential care they need.  

“CMS has failed not just our providers, but the millions of Americans who depend on home health services—whether they are recovering after a hospital stay or managing chronic conditions in the place they are most comfortable—at home,” said Dr. Steve Landers, CEO of the Alliance. “We are alarmed by the negligent proposed payment update, which deepens a heartless pattern of insufficient adjustments that have already led providers to close their doors and reduce services, and now threatens to further diminish care access by compelling more HHAs to take similar actions.”

The proposed rule would also: 

• Recalibrate PDGM case-mix weights
• Update the low utilization payment adjustment (LUPA) thresholds, functional impairment levels and comorbidity adjustment subgroups
• Update the fixed-dollar loss for outlier payments for calendar year (CY) 2026
• Change the face-to-face encounter policy to broaden the language 

The proposed rule builds upon methodology finalized in the agency’s 2023 rule regarding PDGM behavioral assumptions—a methodology that advocates have argued is flawed and sued CMS over. 

“For the CY 2026 HH PPS proposed rule, using CY 2024 claims and the finalized methodology, CMS determined that Medicare still paid more under the new system than it would have under the old system. Therefore, we are proposing an additional permanent adjustment of -4.059% to be made to the 30-day base payment rate,” CMS wrote in a fact sheet.

The agency also said it is “proposing to implement a temporary 5.0% reduction to the CY 2026 national, standardized payment rate. This proposal would begin recoupment of the retrospective overpayments for CYs 2020 through 2024.” This would collect about $786 million in 2026, 14% of a total “overpayment” of $5.3 billion from 2020-2024.

The Alliance reiterated in a release that “these payment cuts do not align with the requirements of the statute or its intent to ensure budget-neutral payment rates.” Since the inception of the new payment system in 2020, total Medicare home health expenditures have declined year-over-year, a fact that is directly at odds with CMS’s assertion that aggregate expenditures under the new system are higher than they otherwise would have been prior to the 2020 changes.  

“Instead of decimating this beloved, high-value program, CMS should focus on modernizing the home health benefit by expanding the role of telehealth, eliminating fraud, waste, and abuse, and ensuring access to care for the most medically and socially vulnerable populations,” Landers continued.  

Katie Smith Sloan, CEO of Leading Age, said the proposed rule would be “a death knell for many quality agencies” if it goes through. 

“For older adults and families in need of care, that’s bad; for many, already, access to care is challenging,” she said. “Between 2019 and 2023, the number of skilled home health agencies that treated more than 10 fee-for-service patients annually decreased or remained the same in 94.1% of U.S. counties, according to Trella Health. Half of U.S. counties have five or fewer home health agencies per 1,000 square miles, with many rural areas having access to only one agency or no agencies serving more than 10 patients. These are concerning statistics considering the growth in the older adult population and the focus on receiving care in the home.”