Medicare sets 2027 home-health pay with a 2.1% update and a 3% rate cut

The Centers for Medicare & Medicaid Services has finalised how Medicare will pay home health agencies in 2027. The final rule, published in the Federal Register on 9 November 2026 under docket CMS-1844-F, updates the Home Health Prospective Payment System (HH PPS) and related quality and enrolment policies [s1]. The home health payment provisions take effect on 1 January 2027 [s1].

An update and a cut, at the same time

Two figures move in opposite directions in this rule. CMS finalised the 2027 home health payment update percentage at 2.1 percent [s1]. At the same time, it finalised a temporary adjustment that reduces the 2027 base payment rate by 3.0 percent, applied as an adjustment factor of 0.97000 [s1]. Agencies that do not submit the required quality data have their update cut by the statutory 2 percentage points, to 0.1 percent [s1].

The 3 percent reduction is part of a long-running correction. When Medicare moved home health to a 30-day unit of payment and the Patient-Driven Groupings Model in 2020, it built the new rates on assumptions about how agencies would behave. CMS has since compared those assumptions to actual behaviour: it found that the 2025 base payment rate of $2,057.35, set on assumed behaviour, was higher than a recalculated rate of $1,959.08 based on actual behaviour [s1]. The law requires CMS to reconcile that gap. Rather than apply the full permanent correction at once, the agency is spreading it, and the cumulative permanent adjustment it describes reaching is -4.777 percent [s1]. The 3 percent reduction finalised for 2027 is a temporary step toward budget neutrality rather than the whole permanent cut.

What it adds up to

CMS estimates the net impact of the payment policies in the rule will be a positive 2.4 percent in the aggregate for 2027, or approximately $415 million [s1]. The agency states the net increase is mostly driven by the 2.1 percent payment update, partly offset by the temporary base-rate reduction and other adjustments [s1]. The rule also sets the 2027 fixed-dollar-loss ratio so that aggregate outlier payments are projected not to exceed 2.5 percent of total payments, as the statute requires [s1].

Alongside the rate update, CMS finalised recalibrated case-mix weights, updated functional-impairment levels, comorbidity subgroups and low-utilisation payment adjustment thresholds for 2027, and updates to the home health wage index [s1].

Quality reporting and value-based purchasing

The rule finalises changes to the Home Health Quality Reporting Program and summarises potential initiatives to improve alignment between that programme and the expanded Home Health Value-Based Purchasing Model [s1]. It also discusses and responds to comments on the provision of home health palliative care services, and summarises comments on a request for information about a home-health- specific wage index that was included in the proposed rule [s1].

Equipment and enrolment changes

Beyond home health itself, the rule reaches durable medical equipment. It clarifies how the face-to-face encounter requirement applies to the replacement of DMEPOS items, changes provider and supplier enrolment requirements, and implements a benefit expansion for infusion pumps and drugs [s1]. It also addresses collection-of-information changes on country of origin under the DMEPOS Competitive Bidding Program [s1].

From proposal to final

The final rule follows the proposed version CMS published on 6 July 2026 under the same regulation identifier, RIN 0938-AV80 [s2]. The 2.1 percent update was carried through from proposal to final [s1]. A final rule carries the force of regulation once effective; CMS says it reviewed and responded to public comments before finalising [s1].

What is settled

What this rule fixes is concrete. A dated final rule now exists, the 2027 update is 2.1 percent, a temporary 3 percent base-rate reduction applies through a 0.97000 factor, the net aggregate impact is estimated at positive 2.4 percent or about $415 million, and the home health provisions take effect on 1 January 2027 [s1]. These are not proposals.

What the rule does not do is settle the behaviour-adjustment dispute in full. CMS describes a cumulative permanent adjustment of -4.777 percent that it is still phasing in, so further reductions can follow in later years as the agency continues reconciling assumed against actual behaviour [s1]. Because the aggregate impact is an estimate built on projected utilisation and case mix, the realised figure depends on CMS's forecasts rather than on settled cost [s1].