CMS Proposes Broad Changes to Medicare Home Health Payment and Oversight

Key Takeaways

• Centers for Medicare & Medicaid Services (CMS) has proposed a 2.4% increase in Medicare home health payments for calendar year (CY) 2027 while introducing new policies aimed at strengthening provider oversight and program integrity.¹
• Beyond payment updates, the proposed rule would modify quality reporting, expand Home Health Value-Based Purchasing requirements, revise provider enrollment policies, and seek stakeholder input on a home health-specific wage index.¹
• The proposal reflects CMS' broader effort to balance provider reimbursement with oversight of Medicare spending as home-based care continues to expand.¹

A Broader Proposal Than a Routine Payment Update

Each year, CMS updates Medicare payment policies for home health agencies through the Home Health Prospective Payment System (HH PPS). While annual payment updates are routine, the CY 2027 proposed rule extends well beyond reimbursement, proposing changes affecting provider enrollment, quality reporting, value-based purchasing, and program integrity.¹

The proposal comes as demand for home-based care continues to grow and policymakers seek to improve care quality while addressing concerns about Medicare spending and fraud.

What the Proposed Rule Would Do

1. Increase Medicare Home Health Payments

CMS proposes an overall 2.4% payment increase for Medicare-certified home health agencies in CY 2027.¹

According to CMS, the update reflects:

• a 3.1% home health market basket update; 
• a 1.0 percentage point productivity adjustment; and 
• a 0.3 percentage point increase related to outlier payments.² 

CMS estimates the proposal would increase Medicare home health payments by approximately $420 million compared with CY 2026.¹

2. Continue Refining the Home Health Payment Model

The proposal also includes several technical updates to the Patient-Driven Groupings Model (PDGM), including:

• recalibration of case-mix weights; 
• updates to functional impairment levels; 
• revisions to comorbidity subgroup assignments; and 
• updates to low-utilization payment adjustment (LUPA) thresholds.¹ 

CMS states these changes are intended to better align payment with patient characteristics and resource utilization.¹

3. Expand Program Integrity and Provider Oversight

One of the most notable features of the proposal is its emphasis on strengthening Medicare program integrity.

CMS proposes new provider enrollment policies intended to:

• improve recovery of improper Medicare payments; 
• strengthen oversight of provider enrollment; 
• remove noncompliant providers and suppliers more efficiently; and 
• reduce opportunities for fraud and abuse.¹ 

These provisions build on CMS' broader efforts to modernize Medicare oversight while safeguarding federal health care spending.

4. Update Quality Reporting and Value-Based Purchasing

The proposed rule also would revise requirements for both the Home Health Quality Reporting Program (HH QRP) and Expanded Home Health Value-Based Purchasing (HHVBP) Model.¹ 

CMS says the changes are intended to improve quality measurement and encourage better patient outcomes through performance-based payment incentives.¹

5. Seek Input on a Home Health Wage Index

Rather than proposing immediate changes, CMS is requesting stakeholder feedback on whether Medicare should adopt a home health-specific wage index rather than relying on the hospital wage index currently used to adjust geographic payments.¹

The request for information suggests CMS is considering longer-term changes to how geographic labor costs are reflected in home health reimbursement.

Different Perspectives on the Proposal

CMS describes the proposed rule as part of its ongoing effort to update Medicare payment policies while improving quality, strengthening oversight, and protecting the integrity of the Medicare program. The agency also notes that the proposal includes routine statutory payment updates alongside measures intended to improve provider accountability.¹

The American Hospital Association (AHA) noted that the proposed payment update would increase reimbursement by 2.4%, while emphasizing that the rule also contains significant policy changes beyond payment rates. These include updates affecting provider enrollment, quality reporting, and value-based purchasing that providers will need to evaluate during the comment period.²

For home health agencies, operational changes related to compliance, reporting, and enrollment may be as significant as the payment update itself.²

Implications for Managed Care

Although the rule applies to Medicare fee-for-service home health payments, its provisions may have broader implications across the health care system.

Managed care organizations and providers may monitor:

• evolving payment methodologies for home-based care; 
• expanded program integrity expectations; 
• quality measurement initiatives; 
• provider enrollment requirements; and 
• future wage index reforms that could affect access to care in different geographic markets.¹ 

As home-based care becomes an increasingly important component of post-acute care delivery, Medicare payment policies often influence broader reimbursement and quality trends across the health care system.

The Bottom Line

The CY 2027 Home Health Prospective Payment System proposed rule represents more than an annual payment update.
While the proposed 2.4% payment increase may draw immediate attention, the rule also advances broader CMS priorities around quality improvement, provider accountability, and Medicare program integrity.¹

As stakeholders submit comments, the final rule will help shape not only Medicare reimbursement for home health agencies but also the future direction of oversight and quality measurement in one of health care's fastest-growing care settings.

References

1. Centers for Medicare & Medicaid Services. Calendar Year (CY) 2027 Home Health Prospective Payment System Proposed Rule Fact Sheet (CMS-1844-P). Published July 1, 2026. Accessed July 10, 2026. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2027-home-health-prospective-payment-system-proposed-rule-fact-sheet-cms-1844-p 
2. American Hospital Association. CMS proposes updates to home health payments for CY 2027, updates to provider enrollment and quality and value-based purchasing programs. Published July 1, 2026. Accessed July 10, 2026. https://www.aha.org/news/headline/2026-07-01-cms-proposes-updates-home-health-payments-cy-2027-updates-provider-enrollment-and-quality-and-value