Home Health Care: What Proposed Medicare and Medicaid Reimbursement Changes Could Mean for Your Business
Home health care businesses serve as a critical component of the U.S. healthcare system, providing essential care to patients in their homes. However, the landscape is shifting, with proposed changes to Medicare and Medicaid reimbursement creating both challenges and opportunities for providers. As a business owner in the home health industry, understanding these changes is key to maintaining compliance, managing workforce costs, and ensuring continued high-quality care.
Content
- Understanding the Impact of Medicare and Medicaid Funding
- Existing HR Challenges in a High-Turnover, Part-Time Workforce
- Home Health Recruitment Struggles and Industry Barriers
- The Emotional and Physical Toll of Caregiving
- Aging in Place and the Growing Demand for Home Care
- What Home Health Businesses Can Do Now
- Technology and Payroll Integration: A Must for Compliance
- Building a Resilient Future for Home Health Care
Understanding the Impact of Medicare and Medicaid Funding
Home health care businesses rely heavily on Medicare funding, which directly affects wage structures, benefits, and overall financial stability. The Centers for Medicare & Medicaid Services (CMS) has proposed a 4.067% reduction in the CY 2025 home health payment rate, continuing a trend of decreasing reimbursements. While CMS asserts that these adjustments help align payments with patient care needs, the reality for home health agencies (HHAs) is a growing financial strain that directly impacts staffing and service capacity.
With previous reductions of 3.925% in 2023 and 2.890% in 2024, this latest cut compounds an ongoing challenge. Lower reimbursement rates mean tighter budgets, difficulty maintaining competitive wages, and increased pressure on home health businesses to optimize operations without sacrificing patient care. Additionally, CMS has proposed recalibrating case-mix weights, outlier payments, and the low utilization payment adjustment (LUPA) thresholds, all of which influence how providers are reimbursed for their services. For business owners, these changes demand a careful reexamination of financial and workforce strategies.
Existing HR Challenges in a High-Turnover, Part-Time Workforce
The home health industry faces a workforce crisis driven by shortages of direct care workers (DCWs) and home health nurses. The demand for home care workers has surged over the last decade, yet the workforce has struggled to keep pace, leading to widespread staffing shortages. By 2030, the number of Americans over age 85 is expected to double, further exacerbating this crisis.
Home Health Recruitment Struggles and Industry Barriers
Many agencies report turning away over 25% of referred patients due to a lack of available staff. Recruiting and retaining home health professionals is an uphill battle due to several industry-wide issues:
- Wage Pressures: Medicaid reimbursement rates have failed to keep up with inflation, making it difficult for agencies to offer competitive wages. Retail and hospitality sectors often pay higher hourly wages for less demanding work.
- Immigration Slowdown: The pandemic sharply reduced the flow of immigrant workers, who traditionally made up a significant portion of the direct care workforce. Visa issuance for permanent and temporary workers has dropped by over 50% since 2019.
- Public Assistance Cliffs: Many DCWs hesitate to accept full-time work for fear of losing vital public benefits such as housing or food assistance. More than 50% of DCWs rely on some form of government aid.
- High Turnover Rates: A staggering 64% of new hires leave within the first year, with many quitting within the first 90 days due to inadequate training, burnout, and lack of management support.
Home Health Workers Feel Devalued
The home health care workforce is predominantly women (nearly 90%), with over half identifying as people of color and more than a quarter being foreign-born. Despite being one of the fastest-growing professions, home health aides remain among the lowest-paid workers in healthcare, earning a median annual wage of $29,430 ($14.14 per hour). This places them in direct competition with fast-food and retail jobs that often provide better pay with less physical and emotional strain.
One of the greatest obstacles to higher wages is Medicaid reimbursement rates. States set these rates, which often cap home health agency wages, leaving many workers unable to earn more than $13-$16 per hour in states like Iowa and Indiana. As a result, agencies struggle to retain employees, and patients requiring home care may face service shortages or long waitlists for assistance.
The Emotional and Physical Toll of Caregiving
Caregiving is an emotionally and physically demanding job that requires significant skill, yet public perception often undervalues the profession. DCWs manage complex family dynamics, support individuals with cognitive decline, and handle physically strenuous tasks like lifting and transferring patients. The shortage of trained workers not only puts pressure on agencies but also forces family caregivers to step in, affecting their ability to work and maintain financial stability.
Additionally, home health aides frequently work unpredictable schedules, with little time for breaks or meals. Many leave the industry due to burnout, often citing physically demanding work, lack of career advancement, and low pay as primary reasons for exiting the profession. Without structural changes, such as higher wages, career development opportunities, and increased benefits, the home health industry risks losing even more workers at a time when demand is skyrocketing.
Aging in Place and the Growing Demand for Home Care
The shift toward aging in place, the preference of seniors and people with disabilities to receive care in their homes rather than institutional settings, has intensified the need for home health workers. The U.S. population of adults aged 60 and older is expected to increase by 30% by 2050, and with that, the demand for home health and personal care aides is projected to grow by 37% by 2028, according to the Bureau of Labor Statistics.
However, this demand may outpace supply if the workforce crisis is not addressed. Many seniors who rely on Medicaid-funded home health services may struggle to access care due to worker shortages, while wealthier patients may have better options through private insurance or out-of-pocket payments. The ongoing reimbursement cuts may further widen this gap, leading to disparities in access to in-home care.
What Home Health Businesses Can Do Now
With potential changes on the horizon, home health business owners should take proactive steps to mitigate risk and improve workforce management. Key actions include:
- Reviewing and Adjusting Compensation Strategies: Assess how reimbursement cuts impact wages and benefits, and explore alternative models for attracting and retaining caregivers.
- Enhancing HR Compliance Efforts:
Ensure that HR processes go beyond certifications to include labor law compliance, workforce scheduling, and record-keeping. - Implementing Workforce Retention Strategies:
Consider initiatives like on-demand pay, peer mentorship programs, and structured career paths to improve employee satisfaction and reduce turnover. - Integrating Payroll with Timekeeping and Billing Systems:
Align payroll with time tracking and Medicaid billing platforms to streamline operations and generate necessary compliance reports. - Preparing for Payroll-Based Journal (PBJ) Reporting and Outcome and Assessment Information Set (OASIS) Updates:
Evaluate whether existing payroll systems can produce the required Payroll-Based Journal files and adapt to new OASIS documentation standards.
Technology and Payroll Integration: A Must for Compliance
Many home health businesses rely on QuickBooks or specialized accounting software with built-in Medicaid billing capabilities. Payroll and workforce management systems are often secondary to billing and client contact platforms, making it crucial for businesses to ensure proper alignment between timekeeping, payroll, and compliance reporting.
One key requirement that may affect home health agencies is the PBJ file, a Medicare compliance mandate that requires detailed payroll data submissions. Additionally, the proposed changes to OASIS will affect how patient data is recorded and categorized, requiring agencies to ensure that payroll and HR systems align with evolving CMS data reporting standards.
Building a Resilient Future for Home Health Care
Despite the challenges posed by reimbursement changes and workforce shortages, home health agencies that invest in workforce optimization and compliance strategies will be better positioned for long-term success. A people-first approach, supported by robust payroll and HR solutions, can help home health businesses navigate these regulatory shifts while continuing to deliver quality care to their patients.
At PeopleWorX, we understand that strong businesses start with people. Our end-to-end workforce management solutions are designed to support home health providers in streamlining HR, payroll, and compliance processes, allowing them to focus on what matters most: delivering exceptional patient care.
If you’re ready to strengthen your home health workforce strategy, contact PeopleWorX today. Let’s build a resilient future together.
If you need help with workforce management, please contact PeopleWorX at 240-699-0060 | 1-888-929-2729 or email us at HR@peopleworx.io
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