Medicare home healthcare faces a funding cut. A new bill aims to halt that.

By Jessica Hall

The home-healthcare industry, which boasts rich profit margins, doesn't want the rate cuts

About 2.7 million traditional Medicare beneficiaries received home healthcare in 2023, and the program spent $15.7 billion on those services.

A proposed Medicare rate cut that threatens home-healthcare services for seniors and disabled people may be halted under a bipartisan bill.

The bill, called the Home Health Stabilization Act of 2025, seeks to pause a rate cut for Medicare home-health services for 2026 and 2027 that would reduce payments by $1.135 billion, or 6.4% from this year's levels.

If rates were cut for home healthcare, providers could reduce services, forcing people who need care into more expensive settings such as hospitals or nursing homes, said U.S. Rep. Kevin Hern, an Oklahoma Republican, and U.S. Rep. Terri Sewell, an Alabama Democrat, the legislators who introduced the bill last week.

"Slashing home health payments not only undermines access to this critical benefit, but it also drives up overall Medicare costs by forcing patients into more expensive care settings. This bill ensures seniors can get the care they need at home," Hern said in a press statement.

The bill comes as increasing numbers of older adults seek to remain in their homes rather than move into nursing homes or assisted living - and as the cost of home services rises and finding staff can be difficult.

As many as 77% of adults 50 and older want to age in place in their homes, according to AARP. Yet to accomplish that, 70% of older adults will need some support, according to Harvard University's Joint Center for Housing Studies.

Medicare covers home healthcare under certain conditions, such as when a patient is homebound, needs skilled nursing or therapy services, and has a doctor-ordered care plan from a Medicare-certified agency. It does not cover 24-hour-a-day care at home, or homemaker services like meal delivery, cleaning or laundry.

"Home health agencies deliver critical services that help older adults in healthcare recovery or ongoing aging in place," Katie Smith Sloan, president and CEO of LeadingAge, an advocacy group representing care providers for older adults, said in a press statement. The proposed cuts to Medicare fee-for-service payments threaten beneficiaries and providers, she said, and make it more difficult for providers to serve as a safety net or offer essential services.

The Centers for Medicare & Medicaid Services announced the proposed rate cut for home-health services in June through its annual Home Health Prospective Payment System rule proposal.

That 6.4% cut proposed by CMS was less than the 7% reduction for 2026 recommended in a report earlier this year by the Medicare Payment Advisory Commission, an independent congressional agency that advises Congress on issues affecting the Medicare program.

"The impending cuts to the Medicare home-health program will leave lasting negative impacts on patients and their families. It is imperative to prevent such cuts from taking effect," Sewell said in a press statement.

Home healthcare is getting harder to come by. Since 2020, more than 1,000 home-health agencies have closed, and nearly one-third of patients referred to home healthcare by hospitals are unable to receive services due to difficulty finding workers and to industry funding issues, according to Hern's press statement.

In 2023, about 2.7 million traditional Medicare beneficiaries received home healthcare, and the program spent $15.7 billion on those services. In that year, there were more than 12,000 home-healthcare agencies certified to participate in Medicare, according to MedPAC.

However, rate cuts have been recommended for years, because home-healthcare companies see hefty profit margins on the Medicare services they provide.

"In the home-health market, MedPAC for years has suggested rate cuts," Christen Young, a visiting fellow at the Center on Health Policy at the Brookings Institution, told MarketWatch. "A cut of 6.4% may be a big hit to take in any one year, but CMS's actions here are consistent with the path Congress set a few years ago."

Medicare's payments have been substantially greater than costs for more than 20 years, with the Medicare margin for a home-health agency averaging 17.1%, according to MedPac. The agency projects a margin of 19% for 2025.

The proposed legislation would allow time for CMS and Congress to work with the industry and other stakeholders to correct methodological errors, combat fraud and strengthen access to home health, Steve Landers, chief executive of the National Alliance for Care at Home, an industry trade group representing home-care companies, said in a press statement.

The concerns of companies wanting to protect the income stream that comes from Medicare aren't new.

"The claims are familiar. Change is hard at any time," Young said, adding that any payment decision will be decided by Congress.

-Jessica Hall

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09-10-25 1535ET