What Medicaid changes can home care agencies expect in 2025? Tips to increase revenue stability.
Introduction
Significant changes to Medicaid will impact home care agencies across the US in 2025. Although these reforms aim to improve transparency and service delivery, they do present new challenges for providers of home-based services, especially those reliant on Medicaid reimbursements.
Home care agencies should proactively seek solutions to challenges regulatory upheaval could pose. Investing in an all-in-one home care software can help agencies tighten up operations and prevent excess revenue leakage. The right home care software will also help agencies meet their compliance metrics efficiently and effectively.
Recent Medicaid Reforms Taking Root in 2025
80/20 Compensation Rule
The Centers for Medicare & Medicaid Services (CMS) finalized a rule in 2024 requiring that at least 80% of Medicaid payments for specific home and community-based services—such as homemaker, home health, and personal care—be allocated directly to compensation for direct care workers. States are required to develop reporting structures by 2028. The payment adequacy threshold takes effect in 2030.
Enhanced Transparency Measures
CMS is implementing new state requirements to report publicly on the percentage of Medicaid payments spent on direct care worker compensation in both institutional and home-and-community-based settings. These measures aim to provide a comprehensive view of Medicaid spending on the direct care workforce.
Increased Oversight on Medicaid Use
Enhanced oversight with the goal of preventing states from using Medicaid funds to subsidize healthcare for ineligible individuals is a top priority for regulators. This increasing oversight is part of a broader effort to increase financial scrutiny and stop improper spending.
Proposed Medicaid Reforms in 2025
Millions of eyes are glued to Washington as they decide the final measures that will be taken to reform Medicare and Medicaid. Home care agencies will no doubt be impacted, regardless of which regulations makes it into the final bill.
Here are some of the proposed Medicaid reforms. Please note that these are proposals, and are subject to change until the bill’s final form is signed into law.
Community Engagement Requirements
By 2026, able-bodied adults would be required to complete 80 hours per month of work, volunteering, and/or attending school to maintain Medicaid eligibility. Certain exemptions would be worked into the language.
Increased Enrollment and Verification Standards
The bill proposes to pause implementation of certain rules that are meant to streamline enrollment. It also aims to enhance verification standards by requiring address and documentation verification for enrollment.
Increased Frequency of Eligibility Redeterminations
This regulation would require states to reverify Medicaid eligibility every six months, instead of once a year.
Moratorium and Limits on Provider Taxes
The proposed moratorium would freeze provider taxes (implemented by some states to increase revenue for Medicaid), and the limits would restrict how provider taxes can be used to finance Medicaid.
How Medicaid Changes Will Affect Home Care Agencies
Operational Adjustments
Agencies may need to revise their budgeting and payroll processes to comply with the 80/20 compensation rule. They must ensure that 80% of Medicaid payments are directed to direct care worker compensation and have a reliable reporting system in place so they don’t fall out of compliance.
Administrative Burden
Increased reporting requirements add to the list of administrative tasks. Home care agencies will have to further investigate alternate data management and reporting tools like software for home care agency management.
Workforce Management
Home care agencies might find it challenging to balance competitive wages with overall financial sustainability, especially as Medicaid funding is increasingly in question.
Proactively Preparing for Proposed Changes
By understanding and preparing for changes to Medicare in 2025, home care agencies can navigate the industry landscape and continue to provide essential services to their communities whilst growing their bottom lines. These three tips can help agencies through the process:
Review and Adjust Budgets
Ensure that financial plans align with the new compensation requirements ahead of implementation deadlines.
Invest in All-In-One Home Care Software
Invest in software that manages your agency’s operations from Intake all the way through Billing for accurate reporting, increased compliance, and operational efficiency.
Engage with Policy Updates
Stay engaged in ongoing Medicaid reforms to anticipate and adapt to further changes. Reactionary policy adjustments don’t hold up as well as proactively implemented plans.
Conclusion
There has been an onslaught of changes to Medicaid already – yet more are coming down the pipe. Regulatory upheaval can adversely affect revenue and morale as more administrative tasks are added to the already mile-high pile.
Home care agencies would benefit from making proactive preparations to ensure that all compliance metrics are met and revenue is shored up. Investing in the right software for home care agency management would also reduce administrative burden, increase compliance, and help agencies keep closer tabs on their revenue and bottom line.
Frequently Asked Questions
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The most significant changes include the 80/20 compensation rule, enhanced transparency on Medicaid spending, increased oversight of eligibility, and proposed regulations like community engagement requirements, biannual eligibility redeterminations, and stricter provider tax rules.
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The 80/20 rule mandates that 80% of Medicaid payments for certain home and community-based services must be used to compensate direct care workers. Home care agencies must adjust payroll structures and ensure compliance through accurate reporting tools.
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Agencies should adopt all-in-one home care software to streamline operations and generate the required financial and payroll reports. Proactive preparation will help reduce administrative burden and avoid compliance penalties.
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Yes, one proposed change for 2025 would require states to conduct Medicaid eligibility redeterminations every six months instead of annually, which may affect patient continuity and agency revenue if not monitored closely.
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If passed, able-bodied adults must complete 80 hours per month of work, volunteering, or education to maintain eligibility. This could reduce the number of eligible clients and increase turnover in agency caseloads.
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Agencies should update their financial plans, invest in compliance-driven software, track labor costs accurately, and stay informed about policy updates through associations and industry news sources.
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Enhanced financial oversight and stricter verification standards may delay or reduce reimbursements. Agencies should ensure accurate documentation, audit-proof processes, and real-time reporting capabilities.
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All-in-one software supports compliance by integrating care delivery, payroll, billing, and reporting. It ensures that agencies can meet the new Medicaid rules without increasing administrative overhead.
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Risks include non-compliance penalties, loss of Medicaid certification, revenue instability, and difficulty retaining qualified direct care workers due to inadequate compensation planning.
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Agencies should review and revise budgets, implement operational software tailored to Medicaid requirements, train staff on new policies, and monitor state-level updates as regulations evolve.
About CareVoyant
CareVoyant is a leading provider of cloud-based integrated enterprise-scale home health care software that can support all home-based services under ONE Software, ONE Patient, and ONE Employee, making it a Single System of Record. We support all home based services, including Home Care, Private Duty Nursing, Private Duty Non-Medical, Home and Community Based Services (HCBS), Home Health, Pediatric Home Care, and Outpatient Therapy at Home.
CareVoyant functions – Intake, Authorization Management, Scheduling, Clinical with Mobile options, eMAR/eTAR, Electronic Visit Verification (EVV), Billing/AR, Secure Messaging, Notification, Reporting, and Dashboards – streamline workflow, meet regulatory requirements, improve quality of care, optimize reimbursement, improve operational efficiency and agency bottom line.
For more information, please visit CareVoyant.com or call us at 1-888-463-6797.
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