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CMS Releases Calendar Year 2026 Home Health Proposed Rule

The U.S. Centers for Medicare and Medicaid Services (CMS) has made available its proposed Calendar Year (CY) 2026 payment rule for Medicare home health here.

The Proposed Rule presents serious concerns for the home health community as CMS proposes further significant rate reductions to account for the change to the Patient Driven Groupings Model (PDGM) payment model in 2020. Since the inception of the PDGM, total Medicare home health expenditures have declined year-over-year, a fact that is directly at odds with CMS’ assertion that aggregate expenditures under the new system are higher than they otherwise would have been prior to the 2020 changes. However, Medicare law requires CMS to make permanent and temporary adjustments intended to ensure that the transition to the PDGM payment model is budget neutral in comparison to expected Medicare spending on the 2019 payment model.

All told, taking into account the various adjustments to the base episodic rate, CMS estimates the CY 2026 proposed rule will decrease Medicare home health expenditures by -6.4% or $1.135 Billion nationally when all the adjustments are applied. 

Significant highlights in the proposed rule include:

  • A market-basket increase of 2.4 percent based on an annual inflation update of 3.2 percent, reduced by a 0.8 percent productivity adjustment.
  • A -4.059% budget neutrality permanent adjustment to account for the one-half of the remaining adjustment from CY 2025 (-1.975%) plus the additional 2024 data year adjustment of -2.087%.
  • An additional -5% budget neutrality temporary payment adjustment to recoup approximately $786 million of the $5.3 billion in alleged overpayments from 2020-2024.
  • A decrease in the 30-day payment rate from $2,057.35 to $1,933.61 after application of the permanent adjustment factor, PDGM budget neutrality adjustment, market-basket update, a wage-index budget neutrality factor and case-mix recalibration neutrality factor adjustments. Agencies that do not submit required quality data will have that rate reduced by 2 percent.
  • Low Utilization Payment Adjustment (LUPA) rates set at the following amounts: Skilled Nursing: $176.95; Physical Therapy: $193.40; Speech Language Pathology (SLP): $210.23; Occupational Therapy (OT): $194.72; Medical Social Work: $283.61; and Home Health Aide: $80.11.
  •  An updated CY 2026 Wage Index. Nine Core-Based Statistical Areas (CBSAs) in New York are proposed to have increases, while 6 CBSAs are proposed to have decreases.
  • A recalibration of the 432 PDGM case-mix-weights (CMWs), including a modification of the LUPA thresholds.
  • The qualifying Fixed Dollar Loss ratio for outlier payment is increased from the current 0.35% to 0.46%. This proposal would decrease the number of episodes qualifying for outlier payments and result in an estimated reduction in payments to CHHAs of 0.5 percent.
  • A proposal to change who may conduct the Face-To-Face (F2F) encounter policy.
  • Updates the Home Health Quality Reporting Program (HHQRP) by removing COVID-19 and several assessment items.
  • A new Home Health Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) survey beginning April 2026.
  • Includes an update to the Home Health Value Based Purchasing Program (HHVBP) to reflect the new HHCAPHS survey and proposes four new measures.
  • Medicare provider enrollment revisions.
  • Includes three Requests for Information - Advance Digital Quality Measurement, Future Quality Measure Concepts, and Changes to the HHVBP.

Next Steps

HCANYS is extremely concerned with the CMS proposed rule. The stability of home health care is at risk, because once again CMS is proposing significant payment reductions based on the application of a flawed methodology for assessing whether the PDGM payment model led to budget neutral spending in 2020 and later years.

With significantly rising costs for staff, training and more, home health agencies cannot withstand the impact of the proposed rate cut.

HCANYS will exercise strong advocacy to protect the Medicare home health benefit, including immediate engagement with New York’s Congressional delegation in July, as well as working with our colleagues at The Alliance (formerly the National Association for Home Care and Hospice (NAHC).

HCANYS will continue to review the proposed rule and provide the membership with a more detailed analysis in the near future.