MedPAC Proposes 7% Medicare Payment Cut for Home Health in 2027

The Medicare Payment Advisory Commission (MedPAC) has proposed a significant 7% cut to the Medicare base payment rate for home health care services in 2027, following a recently announced 1.3% cut for 2026. MedPAC asserts that this reduction will not impair access to care or providers' willingness to serve Medicare fee-for-service beneficiaries. However, home health providers express concern that consecutive cuts threaten the financial sustainability of agencies and may impact access, particularly in rural and underserved areas. Financial performance metrics reviewed by MedPAC indicate strong margins for home health agencies, with an average fee-for-service margin of 21.2% in 2024 projected to slightly decline but remain robust through 2026. Nonetheless, challenges including the growing Medicare Advantage program, which pays substantially less for home health services, continue to pressure margins. The number of home health agencies has declined slightly nationwide, except in California, where agency numbers have nearly doubled, largely in Los Angeles County—an area noted for program integrity concerns due to disproportionate spending relative to enrollment. Utilization of home health services increased modestly in 2024, with stable quality indicators such as low potentially preventable readmission rates and steady patient satisfaction. MedPAC references past policy efforts like enrollment moratoriums and Review Choice Demonstrations aimed at addressing fraud and abuse risks in home health care. This proposed payment adjustment reflects ongoing regulatory and market dynamics influencing provider operations, reimbursement adequacy, and program integrity within Medicare's home health sector.