What is the 80/20 compensation rule in Medicaid for home care providers?

The 80/20 rule requires that 80% of Medicaid payments for certain home and community-based services be used directly to compensate direct care workers. This rule will be enforced by 2030, with reporting systems required by 2028.

How will HR1 (OBBBA) affect Medicaid eligibility requirements in 2025 and beyond?

HR1 introduces stricter Medicaid eligibility criteria, including enhanced verification standards, more frequent redeterminations every six months, and new community engagement requirements.

What is HR1 (OBBBA), and why does it matter for home care agencies?

HR1, or the OBBBA, is a legislative reform that changes Medicaid policies—impacting funding, eligibility, and compliance. Home care agencies must adapt to remain financially stable and compliant.

What are community engagement requirements for Medicaid recipients under HR1?

Starting in 2026, able-bodied adults aged 19–64 must complete 80 hours per month of work, volunteering, or education to stay on Medicaid. Exceptions apply to older adults and those with certain disabilities.

How often will Medicaid eligibility be reverified under the new rules?

Under HR1, states must reverify Medicaid eligibility every six months instead of once per year, increasing administrative requirements for both providers and beneficiaries.

How can home care agencies prepare for Medicaid funding cuts?

Agencies should revise budgets, invest in all-in-one home care software for operational efficiency, and stay current on compliance rules to minimize revenue disruption.

What are the reporting requirements for the 80/20 Medicaid rule?

States must publicly report the percentage of Medicaid funds used to compensate direct care workers by 2028. The 80% threshold must be met by 2030.

Will HR1 affect Medicaid provider taxes and funding at the state level?

Yes. HR1 imposes a moratorium and stricter limits on provider taxes, shifting more of the Medicaid funding responsibility to individual states, which may affect reimbursement rates.

Why is investing in home care software critical after Medicaid changes in 2025?

Modern home care software helps agencies streamline billing, compliance, and reporting—reducing administrative burden and helping meet the new Medicaid requirements efficiently.

How much Medicaid funding is expected to be cut under HR1 (OBBBA)?

HR1 is projected to reduce Medicaid funding by nearly $1 trillion over the next 10 years, potentially cutting coverage for up to 10 million individuals.

Medicaid Changes 2025: HR1 Impact on Home Care Agencies

What Medicaid changes can home care agencies expect after passage of HR1 (OBBBA)? Tips to increase revenue stability.

Introduction

Significant changes to Medicaid will impact home care agencies across the US in 2025 and the years to follow. Although these reforms are intended to improve transparency and service delivery, they present new obstacles for providers of home-based services, especially those heavily reliant on Medicaid reimbursements.

Home care agencies should proactively seek solutions to challenges regulatory upheaval pose. Investing in 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.

Medicaid Reforms for 2025 and Beyond Home Care Perspective - Infographic

Prior 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.

New Medicaid Reforms Introduced by HR1 (OBBBA)

Millions of eyes were glued to Washington as they determined the final measures to reform Medicare and Medicaid. The medical industry has been sorely impacted, and home care agencies must organize themselves around these changes sooner rather than later.

Below are some of the most notable Medicaid reforms.

Community Engagement Requirements

By 2026, able-bodied adults between the ages of 19 and 64 will be required to complete 80 hours per month of work, volunteering, and/or attending school to maintain Medicaid eligibility. Certain exemptions for people over the age of 65, or people with certain disabilities, have been worked into the language.

Increased Enrollment and Verification Standards

The bill pauses 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 requires states to reverify Medicaid eligibility every six months, instead of once a year.

Moratorium and Limits on Provider Taxes

The moratorium freezes 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. Effectively, this puts the burden of Medicaid funding further on the state rather than the federal government.

Decreased Medicaid Funding

Though it has its flaws, Medicaid has become the lifeblood of the healthcare industry, and even more so the home care sector. Placing the burden of Medicaid funding on states puts providers at risk, especially in states with a larger rural population. HR1 (OBBBA) decreases Medicaid funding by almost $1 trillion dollars in just a decade by dropping the coverage of approximately 10 million people.

How Medicaid Changes Will Affect Home Care Agencies

How HR1 Changes Affect Home Care Agencies

Operational Adjustments

Agencies may need to revise their budgeting and payroll processes to comply with the 80/20 compensation rule, which is still in play despite hopes of a moratorium. They must ensure that 80% of Medicaid payments are directed towards direct care worker compensation. Agencies must also have a reliable reporting system in place so they don’t fall out of compliance.

Administrative Burden

Increased reporting requirements are added 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 dependable Medicaid funding is not guaranteed.

Proactively Preparing for Proposed Changes

By understanding and preparing for Medicaid changes due to HR1, home care agencies can navigate the industry landscape and continue providing essential services to their communities whilst growing their bottom lines. These three tips can help agencies through the uneven terrain:

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 Medicaid and Medicare changes 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

The 80/20 rule requires that 80% of Medicaid payments for specific home and community-based services be spent directly on compensation for direct care workers. It will be enforced by 2030, with reporting frameworks due by 2028.
HR1 introduces stricter verification processes, more frequent eligibility redeterminations, and community engagement requirements for able-bodied adults to maintain Medicaid coverage.
HR1, also known as the OBBBA, is a legislative reform package that significantly changes Medicaid funding, oversight, and eligibility, directly impacting revenue, compliance, and operations for home care agencies.
Beginning in 2026, able-bodied adults aged 19–64 must complete 80 hours per month of work, volunteering, or education to stay eligible for Medicaid, with exceptions for older adults and people with disabilities.
Under HR1, Medicaid eligibility will be re-determined every six months, instead of annually, increasing the administrative burden for states and providers alike.
Agencies should revise budgets, streamline operations using all-in-one home care software, and focus on meeting compliance and reporting requirements to stabilize revenue.
States must develop and implement systems to publicly report how much Medicaid funding is spent on direct care worker compensation by 2028, with compliance thresholds enforced starting in 2030.
Yes. HR1 includes a moratorium and restrictions on provider taxes, shifting more financial responsibility for Medicaid to individual states, which may affect provider reimbursement rates.
Modern home care software helps agencies manage billing, payroll, compliance reporting, and eligibility verification—critical for maintaining efficiency and reducing revenue leakage under the new Medicaid rules.
HR1 is projected to reduce Medicaid funding by nearly $1 trillion over 10 years, with the potential loss of coverage for approximately 10 million individuals.

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.