Overview: What MedPAC Found
The Medicare Payment Advisory Commission (MedPAC) has delivered a surprising verdict. Despite the explosive growth of Medicare Advantage (MA) enrollment over the past decade, post-acute care providers have largely held their financial ground. Skilled nursing facilities (SNFs), home health agencies (HHAs), and inpatient rehabilitation facilities (IRFs) have not suffered the widespread financial damage that many in the industry feared.
This finding, drawn from MedPAC’s ongoing review of post-acute care trends, challenges long-standing concerns that rising MA penetration would erode margins across the care continuum. However, the commission also acknowledges that the data has limits — and that the full story may be more complicated beneath the surface.
Medicare Advantage’s Rapid Rise
Medicare Advantage has grown from a niche insurance option into the dominant form of Medicare coverage. Today, MA covers more than half of all eligible Medicare beneficiaries — roughly 35 million Americans. That share has more than doubled since 2010, fueled by flexible benefits, out-of-pocket spending caps, and aggressive insurer marketing.
For post-acute providers, this shift has created a new reality. MA plans pay providers on a per-member, per-month basis, giving them a direct financial incentive to reduce the use of costly care settings. As a result, MA plans have imposed shorter approved stays, added layers of prior authorization, and pushed patients toward less expensive alternatives. Many providers expected these pressures to show up in their bottom lines.
Post-Acute Sector: Still Standing Strong
Despite those pressures, MedPAC’s analysis found that higher MA enrollment did not significantly drag down post-acute finances. Fee-for-service Medicare margins for SNFs, HHAs, and IRFs have remained above 10% for more than two decades, according to MedPAC staff. Indeed, the FFS Medicare margin for freestanding SNFs reached 24.4% in 2024 — up from roughly 22% in prior years — with projections pointing toward 25% in 2026.
Home health agencies have fared similarly well. Their average FFS Medicare margin held at 21.2%, prompting MedPAC’s chair to draft a recommendation for a 7% reduction in the 2026 base payment rate. IRFs, while somewhat more variable, have also maintained generally solid returns. These numbers suggest that the post-acute sector adapted more effectively than many anticipated.
Why Margins Stayed Resilient
Several factors help explain this resilience. First, FFS Medicare still accounts for a significant portion of post-acute revenue, and its favorable reimbursement rates have acted as a cushion against MA-related pressures. Second, providers have adapted operationally — optimizing case mix, improving throughput, and managing costs more tightly in response to MA utilization management.
MedPAC also noted that high margins and fee-for-service payment incentives may, in some cases, encourage a higher volume and intensity of care delivery than is strictly necessary. That reality has fueled the commission’s ongoing push for alternative payment models (APMs) and site-neutral payment reforms. The TEAM (Transforming Episode Accountability Model) demonstration, launched in January 2026 across 188 markets, is the latest effort to test whether bundled payments can cut costs while preserving quality.
Concerns the Data May Not Capture
Not everyone accepts the rosy picture at face value. Several MedPAC commissioners raised pointed questions about what aggregate averages may obscure. The American Hospital Association (AHA) argued that county-level averages fail to capture the administrative burden that MA imposes — prior authorization churn, delayed post-acute transfers, and denied claims rarely appear cleanly in cost-report data.
Some commissioners pointed out that providers may absorb hidden costs in other ways. Longer hospital stays, for instance, can occur when MA plans delay post-acute approval, shifting the financial burden back to hospitals. Revenue cycle data from Ensemble, a national firm, found the average MA reimbursement-to-charge ratio at just 90.37% — suggesting providers are effectively losing ground compared to traditional Medicare even when overall margins look healthy.
Additionally, analysts warned that the effects of rising MA penetration may not fully materialize until later. As more patients shift into MA, providers that currently rely heavily on FFS Medicare could find themselves more exposed over time.
What Comes Next for Post-Acute Providers
MedPAC commissioners expressed broad support for continued scrutiny of MA prior authorization practices, calling them “burdensome and abusive” in some cases. The commission plans to examine MA’s financial impact on SNFs and IRFs more directly in future work. There is also renewed interest in revising or eliminating the three-night hospital stay requirement, which currently serves as the gateway to SNF coverage under traditional Medicare.
At the same time, MedPAC’s payment cut recommendations — including a proposed 4% reduction for SNFs and a 7% cut for home health — signal that the commission sees room to tighten reimbursement without harming access. Post-acute providers, however, are pushing back. They argue that these cuts, combined with ongoing workforce costs and inflationary pressures, could undermine the financial stability that the data currently reflects.
Key Takeaway
MedPAC’s finding offers a measure of reassurance: MA’s rapid expansion has not, on average, severely dented post-acute finances. Nevertheless, providers and policymakers should look beyond the averages. Hidden administrative costs, geographic variation, and the evolving dynamics of MA utilization management mean the pressure on post-acute providers is real — even if it has not yet shown up in the margins.
