The 2026 Home Health Rate Cut: What I’m Modeling Now (and Why)

When CMS dropped the CY 2026 Home Health proposed rule, I did what every operator I respect did: I opened a spreadsheet and started pulling routes apart.

The headline: CMS proposes an aggregate −6.4% reduction to Medicare home health payments in 2026 (about $1.135B less than 2025), driven by a −4.059% permanent behavior adjustment plus a temporary −5% clawback—partially offset by a modest market basket.

The stat that changed my posture: CMS says payments exceeded costs by 33% in 2024. That single sentence explains the agency’s urgency to “true-up” rates under PDGM—and why we should plan as if much of the cut will stick.

I don’t share that to debate the number; I share it because it’s the assumption driving policy. If we ignore it, our budgets won’t be ready.

What’s in the proposal (plain English)

• Reduced reimbursements. The rule recalibrates the base rate using both a permanent and a temporary adjustment, yielding the −6.4% aggregate cut. CMS also proposes updated case-mix weights, functional impairment levels, comorbidity subgroups, and LUPA thresholds.

• Budget neutrality math. Hospitals and national associations are flagging the combined impact of budget-neutrality reductions as staggering (≈−8.4%) before market basket offsets. Translation: some markets will feel more pain than the headline number suggests.

• Access concerns. Provider groups warn the cut could be a “death knell” for many agencies—especially rural and nonprofit providers already operating on thin routes.

Bottom line: even with advocacy, we should model the full downside and make a plan we can live with.

Who feels it first (from my operator’s lens)

1. Rural and exurban agencies with long windshield time—where one extra mile per visit erases your margin.

2. MA-heavy agencies that depend on FFS oxygen to subsidize prior-auth friction.

3. Teams with uneven intake/auth workflows—because denials and delays get more expensive when the base rate shrinks.

What I’m doing in Q4 (so 2026 doesn’t decide our fate)

1) Rebuild routes around the first 72 hours

Front-load SOC and early skilled visits where risk is highest. If the map says a nurse needs 90 minutes of driving for a 45-minute visit, I’d rather split the territory than lose the outcome (and the margin).

2) Tighten authorization & documentation into one playbook

• One intake checklist (benefits, auth, clinical).

• Daily queue for pending authorizations (with escalation trees).

• Assistive AI for chart QA—reduce late notes and avoidable denials without adding clicks.
  These are dollars you either keep or leak in a rate-cut year.

3) Use “starter kits” for high-risk cohorts

CHF/COPD/wound: basic at-home monitoring + same-day call-backs. Not fancy—just reliable. If you prevent one potentially preventable hospitalization a week, it pays for itself.

4) Refresh payer negotiation posture

Come with your data: starts-of-care speed, hospitalization trend, overturn rates. If the FFS floor drops, MA partners need to see how you help stabilize their total cost of care.

5) Sequence hiring and mileage to the new base rate

I’m modeling compensation, mileage reimbursement, and visit patterns per ZIP code, not agency-wide. Margins live (or die) on the last five miles.

Advocacy matters—but so does readiness

I support the letters and Hill work. (Hospitals and associations are already weighing in forcefully.) But while we push, we also need to prove home health is the safest, most cost-effective setting for millions of seniors—especially when staffed and routed well.

So here’s my stance to our teams and partner agencies:

• We will operate as if a significant portion of the cut becomes real.

• We will protect caregivers first: fewer wasted miles, clearer playbooks, and faster decisions.

• We will show payers that well-run home health isn’t a cost center—it’s the avoidance engine that keeps people out of facilities.

If you’re an owner wrestling with what this means for 2026, I’m happy to compare models. Even small operational changes—tighter routing, faster SOC, cleaner auths—compound faster than any single line item in the proposed rule.

Sources & further reading

• CMS Fact Sheet (CY 2026 HH PPS Proposed Rule) — outlines the −6.4% aggregate impact and key policy changes. Centers for Medicare & Medicaid Services

• Federal Register (Proposed Rule text) — details on permanent/temporary adjustments, case-mix, LUPA thresholds. Federal Register

• CHAP summary — component breakdown (market basket, permanent and temporary adjustments totaling the −6.4% estimate). CHAP

• AHA comment letter — combined −8.4% budget-neutrality concern. American Hospital Association

• LeadingAge statements/analysis — provider impact and access concerns. LeadingAge+1

• ASHA summary of CMS rationale — “payments exceeded costs by 33% in 2024.” ASHA