CMS Proposes Historic 6.4% Cut to Home Health Payments, Exclude Hospice

You may soon pay the price for Medicare’s latest move. The Centers for Medicare & Medicaid Services (CMS) has proposed a sweeping 6.4% reduction in Medicare payments to home health agencies (HHAs) for calendar year 2026 — the largest cut in recent history.

Announced on June 30, the Home Health Prospective Payment System (HH PPS) proposed rule would reduce estimated payments by $1.135 billion compared to 2025, despite excluding any changes to hospice services, leaving some in the industry stunned.

What Does Medicare Cover — And What’s Missing?

Many Americans mistakenly believe Medicare pays for ongoing help with daily living activities like bathing, dressing, or eating — but Medicare does not cover custodial care, which includes personal or supervisory assistance for chronic needs if no skilled nursing or therapy is medically necessary.

Here’s what you should know:

✅ What Medicare covers:

• Intermittent skilled nursing care ordered by a doctor.
• Physical, occupational, or speech therapy if needed to recover or improve a condition.
• Home health aide services — but only if you’re also receiving skilled care.
• Medical social services, medical supplies, and certain durable medical equipment.

❌ What Medicare doesn’t cover:

• Long-term custodial care (help with activities of daily living when you don’t need skilled nursing or therapy).
• 24-hour home care, meal delivery, or general housekeeping.

Medicare.gov Home Health Coverage Guide

When Does Medicaid Pay for In-Home Care?

For those with limited income and assets, Medicaid may cover in-home custodial care through Home and Community-Based Services (HCBS) waivers or state-specific programs. Medicaid eligibility and benefits vary by state, but typically:

• You must meet state income and asset thresholds.
• You must demonstrate a medical or functional need equivalent to nursing home-level care.
• Services covered can include personal care aides, homemaker services, respite, and home modifications.
• These benefits are designed to help you remain in your home rather than moving to a nursing facility.

Medicaid.gov HCBS Resources

Will the Proposed CMS Cuts Affect Medicaid Home Care?

The proposed 6.4% cut only applies to Medicare reimbursements for certified home health agencies under the HH PPS. Medicaid’s HCBS programs operate separately through state and federal Medicaid funding. However, indirect impacts are possible:

• Providers who rely on both Medicare and Medicaid funding could face financial strain, potentially limiting their ability or willingness to serve Medicaid clients in some areas.
• Reduced Medicare rates may accelerate agency closures or consolidations, especially in rural or underserved communities where providers already struggle financially.

Impact on Long-Term Care Insurance?

Private Long-Term Care Insurance is not impacted at all by this proposal. According to many experts, it is another reason why consumers should consider purchasing LTC Insurance as part of their retirement plan. LTC Insurance usually also covers hospice care.

Real Voices Sound the Alarm

Industry leaders and lawmakers are pushing back, warning you — and millions of seniors — could face reduced care options.

“This proposed rule threatens seniors’ access to critical home health services.” — William A. Dombi, president of the National Association for Home Care & Hospice

Lawmakers like Sen. Debbie Stabenow (D-MI) and Sen. Susan Collins (R-ME) have renewed calls for legislation to block severe cuts and stabilize home health funding. Both previously sponsored bills aimed at limiting Medicare payment reductions.

Meanwhile, the American Hospital Association (AHA) urged CMS to reconsider, saying in a June 30 release that the “unprecedented” cut will “undermine care for vulnerable patients at home.” AHA News, June 30, 2025.

Why Was Hospice Excluded?

Hospice providers were surprised to find no provisions for hospice payment or policy changes in this proposal. CMS confirmed the rule only targets home health agencies, while hospice updates were handled separately earlier this year, when the agency proposed a +2.4% hospice rate increase for FY 2026 (Hospice News, April 11, 2025).

How Does This Affect You?

If finalized, the proposed cuts could mean fewer home health providers in your area, longer wait times, and more stress on family caregivers. These changes come as the cost of long-term care continues to climb, according to the LTC News Cost of Care Calculator, which shows average U.S. home health costs already exceeding $5,000 per month in many states.

What’s Next?

• Public comments are open for 60 days from the rule’s publication in the Federal Register, giving providers, lawmakers, and you — as someone who depends on these services — a chance to speak up.
• CMS says it will use 2026 claims data to evaluate further adjustments in future years.
• Congressional efforts to reverse cuts, including bills like S.2137 and H.R.5159, remain active but face uncertain paths.

Key Takeaways

The proposed rule is not final. CMS will review comments before releasing a final rule, expected later in 2025. Please consult qualified professionals for decisions about long-term care planning.

Bottom Line: The CMS proposal marks the deepest home health cut in recent memory, sparking fears about reduced access for older adults. Hospice remains untouched, but Medicare’s narrow coverage of in-home care — excluding custodial care — means you’ll need to plan carefully or rely on Medicaid if you qualify.