Home health care involves medical services provided in a patient’s home, including skilled nursing care, physical, occupational, and speech therapy, as well as non-medical support like social services or assistance with daily living from home health aides. This care can be short-term, aiding recovery from illnesses or surgeries, or long-term for individuals with chronic conditions or disabilities. In 2023, approximately 2.7 million Medicare beneficiaries utilized home health care services, costing the program $15.7 billion. However, access to these services has been declining; in 2023, over one-third of Medicare beneficiaries discharged to home health did not receive it within seven days, leading to higher hospital readmission and mortality rates. Despite these challenges, a growing majority of older Americans prefer aging in place rather than moving to institutional settings.
Care provided at home is often more cost-effective and equally effective compared to care in hospitals or skilled nursing facilities. Recent studies have shown that home health care can reduce health care costs by more than 30 percent while improving patient outcomes, particularly through programs under development like Hospitals at Home. For example, Medicare beneficiaries discharged to home health saved an average of $4,514 within the first two months after hospital admission compared to those sent to skilled nursing facilities. Additionally, patients treated with home health care programs demonstrated an average savings of $15,233 per individual over a year post-discharge, even after adjustments. Moreover, as evidenced during the COVID-19 pandemic, receiving care at home can be a safer option, reducing exposure to infections and hospital-acquired complications.
This is a critical time to consider improvements to Medicare’s home health benefit. Democratic lawmakers increased the federal matching rate (FMAP) for Medicaid HCBS spending by 10 percentage points from April 1, 2021 through March 31, 2022 in the American Rescue Plan, (P.L. 117-2). However, their efforts to extend this funding in infrastructure or budget reconciliation legislation fell short.
Unfortunately, the House-passed fiscal year 2025 Budget Resolution would require the House Committee on Energy and Commerce to cut Medicaid by $880 billion. This budget reconciliation instruction would likely result in requiring per capita caps and/or lower FMAP in Medicaid. Reductions of this magnitude would be particularly harmful to Medicaid HCBS since most states would not be able to offset the federal share. Consequently, states might be forced to cut or eliminate HCBS since they are optional under Medicaid. The National Committee opposes proposals to cut Medicaid and Medicare and believes that access to home care should be improved for all beneficiaries.
What Medicaid Covers
The majority of home health services for seniors are financed by out-of-pocket payments or through Medicaid. However, Medicaid is only available to individuals who have limited incomes and resources. Because the United States lacks a comprehensive long-term care program, many middle-class seniors ultimately must spend down their resources to receive long-term care, including home care, through Medicaid.
Medicaid pays for some form of home care in all 50 states. However, while the federal government sets minimum standards on which home health benefits must be covered, states have flexibility in the administration of their Medicaid programs. States may offer home health benefits through their “original” Medicaid programs, or they may utilize HCBS Medicaid waivers or Section 1115 demonstration waivers to offer home care.
There are several issues that complicate access to Medicaid home health. For instance, although many states offer it, personal care assistance, which includes help with bathing, dressing, and eating, is not a federally mandated Medicaid benefit. Additionally, the “functional need” thresholds that partially determine eligibility for home health services vary by state. These disparities in eligibility and coverage mean that some seniors miss out on the care that they need because of where they live. Furthermore, HCBS through Medicaid waivers are not entitlement programs, meaning that meeting eligibility requirements does not automatically guarantee benefits. Many states have waitlists that create a barrier to receiving timely care.
What Medicare Covers
Medicare has a limited home care benefit. People with Medicare Part A (inpatient services and treatments) or Part B (outpatient services and treatments) can qualify for covered home health services if they are under the care of a doctor and are certified by a doctor as “homebound.” To be eligible, a beneficiary must need intermittent skilled nursing care or skilled physical therapy, speech therapy, or continuing occupational therapy, and must receive services through a Medicare-certified home health agency. Home health services are available to people with acute or chronic conditions, or both.
The following services are available for eligible beneficiaries with no coinsurance or deductible: intermittent or part-time nursing care or home health aide services, physical, occupational or speech therapy, medical social services, and medical supplies. These services may aim to improve, maintain, or slow the decline of a patient’s condition.
There is no limit on the length of time that a Medicare beneficiary can receive home health services. However, Medicare will only cover home health aide and medical social services for patients who are also receiving skilled care. Because most long-term care comprises non-medical personal care or assistance with activities of daily living, Medicare does not cover long-term care as a stand-alone benefit. Approximately 7.5 percent of seniors purchase private long-term care insurance but it is expensive, premiums can rise substantially over time, applicants can be denied insurance because of a pre-existing condition, and coverage can be limited.
Present Challenges
- Access to Services: Medicare home health services have seen a significant decline, with utilization dropping by 88 percent between 1998 and 2017. This trend worsened during the COVID-19 pandemic, as home health use among Medicare beneficiaries decreased by 6 percent between 2019 and 2020. The shortage of home health aides continues to be a critical issue. By 2025, the demand for these workers is expected to outpace supply by over 446,000 positions due to low wages and high turnover rates. Most home health workers are women of color, who often face challenging working conditions coupled with stagnant pay rates averaging just over $14 per hour. Additionally, systemic barriers prevent beneficiaries from accessing the full scope of services they are eligible for under Medicare. A lack of oversight by the Centers for Medicare and Medicaid Services (CMS) allows some Medicare-certified agencies to avoid providing mandated services without consequences. This regulatory gap enables agencies to prioritize profit margins over patient care, further limiting access for those most in need.
- Perverse incentives: Under Medicare, home health is financed through a prospective payment system (PPS), in which reimbursement for services is made based on a predetermined fixed amount. While PPS was designed to encourage the delivery of efficient care, direct service organizations report that Medicare’s home health PPS has created a financial incentive for home health agencies to stint on care provision.
In addition, CMS’ home health quality measures have historically focused on rewarding improvements in patients’ conditions, such as recovery or functional gains, while often failing to adequately capture successes in maintaining a patient’s health or slowing decline. This emphasis creates incentives for home health agencies to prioritize care for short-term and post-acute care patients, who are more likely to show measurable improvement, while avoiding long-term and chronic care patients. Recent updates to the Home Health Quality Reporting Program (HHQRP) for 2025 have introduced new measures, such as the “Discharge Function Score,” which assess functional outcomes and risk-adjusted performance. However, these changes still primarily reward improvement rather than stabilization, leaving gaps in incentivizing care for patients with chronic or progressive conditions who may benefit most from maintenance-focused interventions.
- Low Worker Wages: Home health aides continue to face low wages and challenging working conditions, with a median wage of $14.15 an hour as of 2021. Despite modest increases in recent years, wages remain insufficient to support workers, with approximately 17 percent of caregivers living in poverty and over 40 percent relying on public assistance programs. The undervaluation of home health aides’ work has long contributed to these issues, exacerbating recruitment and retention challenges in a labor market that increasingly favors workers. Without significant investment in wages and benefits, the shortage of home health workers will likely worsen, further limiting access to care for vulnerable populations.
- Eligibility Rules: Medicare’s eligibility requirements for home health services remain restrictive, as beneficiaries are only eligible for home health aide services if they are also receiving skilled care, such as nursing or physical therapy. This policy excludes seniors who solely need assistance with personal care, activities of daily living, or light housework, leaving many older adults without access to essential support.
Potential Solutions
There are three broad categories of solutions to improve the Medicare home health benefit, including: (1) enforcing the current law; (2) improving benefits and (3) reforming the payment and/or delivery structure. These options are not mutually exclusive.
- Enforce Current Law: The landmark Jimmo v. Sebelius class-action lawsuit (to which the National Committee was a co-plaintiff), settled in 2013, clarified that Medicare coverage for home health services is determined by a beneficiary’s need for skilled care, regardless of whether they are improving or have the potential for improvement. The settlement confirmed that skilled care may be necessary to maintain a patient’s condition or slow decline, ensuring coverage for individuals with chronic or long-term conditions. Despite the outcome of Jimmo, many beneficiaries continue to face coverage denials due to the persistent misapplication of the outdated “Improvement Standard” by some Medicare providers and contractors. This noncompliance undermines access to care and perpetuates inequities for patients with chronic conditions. Additionally, the lack of robust quality measures to evaluate care for patients who cannot improve further incentivizes home health agencies to avoid serving these individuals, exacerbating disparities in care delivery.
- Improve Benefits: A standalone home health aide benefit should be covered by Medicare to allow seniors to live safely and comfortably at home without the requirement of also receiving skilled care. While Medicare Advantage plans have offered limited in-home support services (IHSS) since 2019, only about 1 in 10 Medicare Advantage members are enrolled in plans that include these benefits, and coverage is often restricted to a set number of hours annually, leaving gaps in care accessibility. In June 2021, the National Committee joined 79 other organizations in advocating for the addition of a standalone home health aide benefit to traditional Medicare. Such a benefit would improve access to long-term care for middle-class seniors who do not qualify for Medicaid, addressing critical needs for personal care and household assistance. Expanding this benefit beyond Medicare Advantage to all beneficiaries would eliminate the skilled care or homebound requirements, ensuring equitable access to essential services for seniors across all Medicare plans.
- Compensating Family Caregivers: While trained home health aides play a critical role in assisting patients with activities of daily living, the majority of long-term care is still provided by unpaid family members or friends. As policymakers consider adding a standalone home health aide benefit to Medicare, they could explore options to compensate family caregivers for providing these services. Programs like Medicaid’s self-directed care models, which allow beneficiaries to hire and pay family members as caregivers, have proven successful in supporting seniors while alleviating caregiver burden. Many older adults prefer receiving care from someone they trust and are close to, and compensating family caregivers could help address the ongoing home health aide shortage.
- Reform Payment and/or Delivery Structure: Since the establishment of the Prospective Payment System (PPS) for Medicare home health services in 2001, payments have been based on a fixed, predetermined amount rather than actual care delivered. While PPS was intended to promote efficiency, spending for home care has often exceeded costs, and subsequent changes have introduced new challenges. The Bipartisan Budget Act of 2018 reduced the payment episode from 60 days to 30 days and eliminated therapy thresholds, aiming to curb costs. However, these changes have been criticized by advocates, including the National Committee, for creating financial incentives that may lead home health agencies to restrict services or avoid higher-cost patients.
Although eligibility rules and coverage for Medicare home health services were not altered by the 2018 Bipartisan Budget Act, there have been ongoing reports of agencies incorrectly informing beneficiaries that Medicare no longer covers therapy under the home health benefit. This misinformation persists despite clear guidelines stating that Medicare covers therapy services, such as physical, occupational, and speech therapy, when deemed medically necessary and ordered by a physician. Meanwhile, the Medicare Payment Advisory Commission (MedPAC) has continued to recommend payment cuts to address overpayments. In its March 2025 report, MedPAC proposed a 7 percent reduction in base payment rates for home health services for 2026, citing high margins among freestanding home health agencies. Advocates remain deeply concerned that layering these cuts over flawed payment incentives will further restrict access to care, particularly for patients with chronic conditions or complex needs, as agencies may reduce services or avoid higher-cost cases altogether.
The Center for Medicare and Medicaid Innovation (CMMI) which tests models that improve care, lower costs, and support patient-centered practices, should test innovative payment and care delivery models, as well as the authority to scale up these models nationwide if they prove successful. CMMI should use the lessons learned from the implementation of the flawed PPS to develop and test new methods of Medicare home health care delivery and payments that improve quality and access to services for seniors.
Beginning in January 2022, CMS expanded the Home Health Value-Based Purchasing (HHVBP) Model to all 50 states and U.S. territories. The HHVBP Model ties reimbursement to quality measures, relying heavily on patient improvement-centered criteria to promote competition among home health agencies. While the model has demonstrated successes, such as a 4.6 percent improvement in agency performance scores and $141 million in annual Medicare savings during its pilot phase, it has also faced criticism for incentivizing care primarily for patients whose conditions and functioning can improve. This design inadvertently excludes patients with long-term or chronic conditions who are less likely to meet improvement benchmarks, creating disparities in access to care. Additionally, CMS has yet to propose meaningful quality measures tailored to patients whose health cannot improve but who still require essential home health services. Advocates, including the National Committee, have urged CMS to refine the HHVBP Model to address these gaps and ensure equitable access to home health services for all Medicare beneficiaries, regardless of their condition or prognosis.
NATIONAL COMMITTEE POSITION
The National Committee supports efforts to improve Medicaid HCBS and opposes current efforts to slash the federal payment to state Medicaid programs. However, we also feel that the Medicare benefit should be broadened so that all seniors, not just those with low incomes, can receive these vital services. We favor efforts to limit fraud while retaining and improving access to home care. We support the addition of a standalone home health aide benefit, improvements to payment models to reduce barriers to care, and better oversight and enforcement of current law to ensure access to home care benefits. Quality measures should be revised to improve their accuracy and equitability. CMS could also better educate providers and beneficiaries about the legal scope of the Medicare home health benefit. Additionally, Congress should insist on the correction of policies that restrict access to legally covered home care services by CMS. Assuring that current Medicare home health laws are being appropriately enforced is an important first step in remedying the inequities in access to these benefits.
Government Relations and Policy
April 2025