CMS Finalizes 1.3% Medicare Home Health Payment Cut for 2026 Amid Industry Concerns

The Centers for Medicare & Medicaid Services (CMS) finalized a rule for calendar year 2026 that includes a 1.3% aggregate cut to Medicare payments to home health agencies, significantly less severe than the initially proposed 6.4% reduction. Despite the reduced rate cut, home health industry leaders express concerns about the ongoing challenges such cuts impose on the sector, emphasizing that any reduction may negatively impact access to care, particularly for older adults dependent on home-based services. The home health community has endured successive reimbursement cuts since 2019, contributing to staff shortages, agency closures, and constrained service availability. Advocacy groups and providers continue to urge Congress and CMS to reconsider payment methodologies and advocate against further reductions to safeguard the sustainability of home health care. Industry leaders highlight that the payment cuts exacerbate difficulties in recruiting and retaining nursing staff, sustaining operations in underserved and rural regions, and maintaining patient access to home care services. Organizations such as Bayada Home Health Care, VNS Health, and Compassus stress that increased labor costs and workforce shortages compound the negative effects of these reimbursement decreases. Providers are adapting by investing in technology to streamline documentation and improve care outcomes, while also restructuring organizations to prioritize frontline worker support. The CMS payment rate-setting methodology remains a focal point of industry critique, with concerns over the agency's use of cost data that may not fully represent actual care costs. CMS excludes the top and bottom 1% of cost reports to eliminate outliers but maintains that removing additional data to address alleged fraudulent billing requires new policy frameworks. Providers argue that better targeting of fraud and more accurate payment models would protect legitimate providers and enhance patient access. The finalized rule's approach to permanent and temporary payment adjustments considers data trends from 2020 to 2024 but continues to impose financial pressure on agencies. Leading policy voices from organizations like the National Alliance for Care at Home and LeadingAge underscore that ongoing cuts threaten service expansion, technology investments, and agency viability, potentially leading to mergers or closures. The Home Health Stabilization Act of 2025 is seen as a legislative effort to pause reimbursement cuts and reevaluate payment mechanisms to ensure stability. Stakeholders advocate for CMS to reopen the rulemaking process to revise methodologies and mitigate adverse impacts. In summary, the 2026 Medicare home health payment rule reflects a moderated reduction compared to initial proposals but sustains a trajectory of declining reimbursements. This situation presents operational and financial challenges for providers already navigating labor constraints and rising costs. Continued advocacy and potential legislative intervention aim to preserve access to quality home health care for Medicare beneficiaries amidst evolving regulatory and market conditions.