CMS proposes 6.4 percent cut to hospital at home programs

On June 30, the Centers for Medicare & Medicaid Services (CMS) proposed the steepest reduction to Medicare’s home-health payments in the program’s history, a move that industry leaders say could deprive older Americans of one of the few remaining on-ramps to at-home care. 

Under a 412-page draft rule, CMS would trim total payments to home-health agencies by 6.4 percent in 2026, or about $1.135 billion, after offsetting a modest inflation update with two deep “behavioral” adjustments that the agency says are required by law. 

The payment reductions stem from what CMS calls “behavioral adjustments” to the Patient-Driven Groupings Model, a payment system implemented in 2020 that was supposed to better align reimbursements with patient needs. Instead, the agency has repeatedly miscalculated how providers would operate under the new system, leading to what it now characterizes as overpayments that must be recouped. 

Katie Smith Sloan, president and CEO of LeadingAge, warned that the proposed 6.4 percent cut would be “a death knell for many quality agencies” in a response to the proposed rule. 

“CMS, since CY2023 has slashed payments by nearly 9%; add today’s more than 6% reduction, and for many agencies, especially the 7% of all who are nonprofit, the administration’s announcement is essentially pushing them to exit the business, close or severely limit services,” Sloan wrote. 

A System Under Strain 

The cuts are having real-world consequences for patient access. Half of all U.S. counties have already lost home health agencies, according to CMS data from 2020 to 2024, and in over 70 percent of counties, agencies are treating fewer traditional Medicare patients. 

The payment cuts come at a time when home health agencies are already struggling with severe workforce shortages and rising labor costs. Registered nurses, a core component of home health care teams, are in critically short supply nationwide. 

“Our mission-driven and nonprofit members battle daily in a very competitive labor market to recruit and retain RNs, which are in short supply,” Sloan noted. “A payment decrease presents real challenges for our members. Without staff, there is no care; ultimately, older adults and families will suffer.” 

The nursing shortage is likely to worsen as other healthcare sectors compete for the same pool of workers. New federal requirements for 24/7 nursing coverage in nursing homes will only intensify the competition for registered nurses. 

Looking Ahead 

CMS is accepting public comments on the 2026 proposed rule for 60 days. Industry groups are mobilizing to submit detailed responses urging the agency to reconsider the cuts, but previous comment periods have yielded only modest changes to proposed reductions.