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Costs & IRMAA

CMS Proposed a 2.4 Percent Home Health Rate Increase for 2027, but a Continuing Clawback Could Leave Many Agencies With a Net Cut

A proposed rule published in early July 2026 would raise Medicare home health payments by approximately 420 million dollars, but a separate 3.0 percent recovery adjustment tied to a 2020 payment model overpayment would offset those gains and could produce a net reduction for most agencies.

By the Goodsurance editorial teamJuly 15, 2026

A proposed rule published by CMS in July 2026 would increase aggregate Medicare payments to home health agencies by an estimated 2.4 percent, or approximately 420 million dollars, in calendar year 2027. The increase reflects the standard annual market basket update adjusted for productivity, as required under current law.

At the same time, CMS is proposing to continue a separate 3.0 percent temporary reduction unrelated to the rate update. This recoupment adjustment is designed to recover overpayments CMS estimates occurred when it implemented the Patient-Driven Groupings Model, known as PDGM, in January 2020. When CMS introduced PDGM, it projected the new payment system would be budget-neutral, but actual payments to agencies came in higher than anticipated. The agency has been recovering that difference through successive annual offsets.

Medicare proposes a 2.4% home health raise for 2027, but a separate clawback could leave most agencies with a net cut.

The projected 2027 recoupment is approximately 500 million dollars, which would exceed the 420 million dollar rate increase on a net basis for the industry as a whole. CMS estimates that cumulative PDGM recoupments reached approximately 4.9 billion dollars through 2025, with more remaining to be recovered.

Home health advocates have argued that the continued PDGM offset, combined with inflation in wages and other operating costs, is pushing some agencies toward closure and limiting Medicare beneficiaries' access to home-based care. CMS has stated the adjustment is a statutory obligation that will continue until the full cumulative overpayment is recouped.

Public comments on the proposed rule are due August 31, 2026. Final payment rates for 2027 will be set later this year.

In plain words

Medicare is proposing to pay home health companies about 2.4 percent more in 2027. But Medicare is also taking back money from those companies to repay an overpayment from a few years ago. That payback is bigger than the raise for most agencies, so many home health companies could end up receiving less money than before. Groups that represent home health agencies say this could force some closures or service cuts. That could make it harder for Medicare patients to get care at home. The public can send comments on this plan until August 31, 2026.

Understand the basics first

Source: CMS
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