CMS Proposes 2.4% Medicare Home Health Pay Increase

Overview of the CY 2027 Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) released its Calendar Year (CY) 2027 Home Health Proposed Payment Rule on Wednesday, July 1. This marks a meaningful shift for the home health sector. After years of aggregate cuts to Medicare home health payments, providers are finally seeing a positive proposal on the horizon.

Beyond payment updates, the rule also introduces a series of strict new anti-fraud measures and seeks to expand access to home-based palliative care. Stakeholders across the care continuum are studying the proposal closely ahead of the 60-day public comment window.

Breaking Down the 2.4% Payment Increase

What the Numbers Actually Mean

The rule proposes an aggregate payment increase of 2.4%, or $420 million. This represents a significant change from years past, which included aggregate cuts to Medicare home health payments.

The increase draws from two distinct components. First, it includes a 3.1% market basket update, reduced by a 1.0 percentage point cut for productivity, as well as a 0.3 percentage point increase related to outlier payments. Second, a 0.3% increase relates to the Fixed Dollar Loss (FDL) ratio.

No New Permanent Adjustment This Year

CMS did not propose an additional permanent adjustment to the CY 2027 30-day base payment rate. Instead, the agency will continue to analyze claims data through CY 2026, as required by law, to determine whether any future permanent adjustments are needed to account for the impact of the Patient-Driven Groupings Model (PDGM).

The 3% Temporary PDGM Adjustment Explained

A Continued Recoupment Effort

While the headline figure is positive, providers must understand an important offset. CMS proposed a temporary adjustment of -3% to the 2027 national, standardized payment rate. This proposal continues the recoupment of retrospective overpayments made for CYs 2020 through 2025 through one or more temporary adjustments.

Why CMS Chose an Incremental Approach

CMS frames this approach as responsible fiscal management rather than punitive action. The agency believes that continuing to incrementally adjust the base payment rate to account for the calculated temporary dollar amount may help reduce the need for a large reduction in future years.

Industry Reaction: Providers Push Back

The Alliance Acknowledges Progress — With Caveats

The National Alliance for Care at Home (the Alliance) issued a statement calling the proposed aggregate payment increase of 2.4% a positive step. However, the Alliance warned that the 3.0% temporary adjustment would mean Medicare payment rates do not align with the cost of delivering care and could jeopardize access to in-home care.

Provider groups across the country share this concern. They argue that a net effective reduction — when the temporary offset is applied — directly threatens the financial sustainability of home health agencies, particularly smaller operators in rural and underserved markets.

New Anti-Fraud Enrollment Measures

Making Revocations Retroactive

CMS is proposing a series of anti-fraud measures that would make all Medicare enrollment revocations retroactive and broaden the agency’s authority to deny or revoke enrollment for providers and suppliers linked to compliance violations.

Currently, certain revocations take effect prospectively — 30 days after CMS mails notice to the provider. Going forward, CMS proposes to make all revocation grounds retroactive. This action would help CMS recover monies paid to non-compliant providers and ensure taxpayer money is paid only to legitimate, compliant providers.

Ownership Changes and New Denial Grounds

CMS also proposes several new grounds for revocation or enrollment denial, including changes in majority ownership. Home health agencies, hospices, and suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) must reenroll in Medicare as a new provider and undergo a survey or accreditation if they experience certain changes in majority ownership.

Context: A Broader Crackdown on Fraud

These measures reflect a key priority of CMS under the Trump administration. During Trump’s second term, CMS is aggressively tackling fraud, waste, and abuse in the home health and hospice sectors. In May, the Trump administration issued a six-month moratorium on hospice and home health agencies enrolling in Medicare as part of its efforts to combat fraud.

Quality Reporting and Palliative Care Updates

Faster Data Submission Deadlines

Transparency in quality data is another priority in the proposed rule. CMS is proposing to shorten the Outcome and Assessment Information Set (OASIS) data submission deadline from 4.5 months to 45 days. This gives Medicare beneficiaries more timely information to make informed care decisions. CMS estimates the proposal could make publicly reported quality information available up to three months sooner.

Aligning QRP and HHVBP

CMS also proposed to revise assessment data submission deadlines beginning with the CY 2027 Home Health Quality Reporting Program (QRP) year. The agency aims to align reporting timeframes to cover a full calendar year of data and improve digital information transfer, supporting closer integration between the Home Health Quality Reporting Program and the expanded Home Health Value-Based Purchasing (HHVBP) Model.

A New Focus on Palliative Care

In the proposed rule, CMS stated its belief that the Medicare home health benefit can serve as an important step in the care continuum when a patient needs palliative care, either during episodes of serious or progressive illness. CMS is seeking comments on how to best promote access to community-based palliative care services through existing Medicare benefits.

What Comes Next for Home Health Agencies

The 60-Day Comment Window

CMS will accept comments on the proposed rule for 60 days following publication in the Federal Register. Home health agencies, advocacy groups, and clinicians should use this window to formally respond — particularly regarding the PDGM temporary adjustment and its real-world impact on care delivery.

Key Takeaway for Providers

The CY 2027 proposed rule offers both promise and challenge. The 2.4% aggregate increase signals a policy environment that recognizes rising care costs. Yet the 3% temporary PDGM offset means the effective reimbursement picture is more complex. Agencies should model the net impact on their revenue cycle now and engage in the comment process rather than wait for the final rule.