CMS Finalizes 1.3% Medicare Home Health Payment Cut for 2026
Medicare Home Health Payments See Smaller Cut Than Proposed, But Concerns Remain
WASHINGTON – Millions of Americans who rely on home healthcare services received a measure of relief this week as the Centers for Medicare & Medicaid Services (CMS) finalized its 2026 payment rule, significantly scaling back proposed cuts. However, industry leaders warn that even the reduced reduction in funding will likely exacerbate existing challenges in access to care, particularly for vulnerable populations.
The final rule, released Friday, estimates a 1.3% decrease in aggregate Medicare payments to home health agencies for 2026, equating to $220 million. This is a substantial improvement from the 6.4% cut initially proposed in June, a figure that sparked widespread alarm within the healthcare sector. The National Alliance for Care at Home estimates the revised rule will result in approximately $915 million more in payments than the original proposal, but stresses that a cut remains a cut.
A Fragile System Under Strain
Home healthcare plays a critical role in the continuum of care, allowing patients to recover from illness or manage chronic conditions in the comfort of their homes. It’s a particularly vital service for the growing senior population. According to the Centers for Disease Control and Prevention, the number of Americans aged 65 and older is projected to reach 80.8 million by 2040, representing over 20% of the total U.S. population. This demographic shift will dramatically increase the demand for home-based care.
“While we appreciate CMS responding to some of our concerns, a 1.3% reduction will inevitably lead to further strain on an already fragile system,” said Dr. Steve Landers, CEO of the National Alliance for Care at Home, in a statement. “We anticipate continued reductions in patient access, agency closures, and increased pressure on hospitals as patients remain institutionalized longer due to a lack of available home care.”
Understanding the Payment Adjustments
The finalized payment structure is complex, involving several adjustments. A 2.4% rate increase is offset by a permanent adjustment of -0.9% and a temporary adjustment lowering payments by 2.7%. Additionally, a 0.1% decrease is tied to updates in outlier payments. A key component of the adjustments relates to the Patient-Driven Groupings Model (PDGM), implemented in recent years to better reflect patient needs and resource utilization. CMS has finalized a permanent adjustment of -1.023% related to behavioral changes observed after PDGM’s implementation.
CMS acknowledged concerns raised by stakeholders that changes in care patterns following 2022 might be attributable to factors beyond PDGM, such as the introduction of the OASIS-E assessment tool, expansion of value-based purchasing programs, and the growing prevalence of Medicare Advantage plans. The agency also implemented a temporary -3.0% adjustment intended to “mitigate a significant single year payment reduction, financial instability and potential access to care issues.”
Delayed Rule Adds to Uncertainty
The release of the final rule was significantly delayed this year due to the recent 43-day government shutdown. Typically issued in late October or early November, the delay created considerable uncertainty for home health agencies as they prepared for the new year. This disruption underscores the broader impact of political instability on healthcare planning and delivery.
Katie Smith Sloan, president and CEO of LeadingAge, an association representing nonprofit aging services providers, described the final rule as “an improvement over past actions.” She emphasized the critical need for adequate payment support to meet the rising demand for home healthcare. “Since 2023, Medicare fee-for-service payment decisions have resulted in nearly 9% in cuts,” Sloan noted. “The 1.3% reduction finalized today, while still a cut, represents a step in the right direction.”
Beyond Payment Rates: Policy Changes and Fraud Prevention
The final rule extends beyond payment rates, incorporating several other important changes. CMS has finalized a policy change allowing physicians to perform required face-to-face encounters regardless of their role in the patient’s care, streamlining the process for both providers and patients. Modifications to the Home Health Value-Based Purchasing (HHVBP) model, updated Low Utilization Payment Adjustment (LUPA) thresholds, and recalibration of PDGM case weights are also included.
Furthermore, CMS is strengthening efforts to combat fraud, waste, and abuse within the home healthcare system through new and revised Medicare provider enrollment provisions. This focus on program integrity is essential to ensure that taxpayer dollars are used effectively and that patients receive high-quality, legitimate care. For more information on the final rule, visit the CMS fact sheet.
As the home healthcare landscape continues to evolve, ongoing monitoring of these policy changes and their impact on patient access and quality of care will be crucial. You can find more information on navigating the changing healthcare landscape on worldys.news/health.