At Paradigm, we have closely followed the development of the Medicaid Access Rule and its potential impact on home care providers and the individuals they serve. While we appreciate the rule's intention to improve caregiver compensation and increase transparency in rate-setting, we have serious concerns about the unintended consequences of the 80/20 provision, which is set to go into effect in 2030.
The 80/20 provision mandates that home care providers allocate 80% of reimbursement for Home and Community-Based Services (HCBS) to caregiver wages. This requirement, as highlighted by the Home Care Association of America (HCAOA) and other industry organizations, may lead to several negative outcomes.
Many Medicaid providers may be forced to curtail services or cease providing services entirely, reducing patient access, particularly in rural and underserved communities. According to the 2023 HCP Benchmarking Report, the average operating expenses for home care agencies range from 21-30%. Under the 80/20 rule, agencies would be required to allocate 80% of Medicaid reimbursement to caregiver wages, leaving only 20% for operating expenses. This means that for every hour of care provided to Medicaid clients, agencies would be operating out-of-pocket. Despite their higher purpose of caring for our aging population, home care agencies must still operate as financially viable businesses to sustain this mission. The 80/20 rule may force agencies to reconsider accepting Medicaid clients, as the financial burden could be unsustainable, ultimately leading to reduced access to care for those who need it most.
The rule may also compel providers to cut workforce support measures, such as training, career advancement opportunities, and recognition programs, further exacerbating the existing caregiver shortage. Furthermore, the 80/20 provision could undermine the different rate methodologies employed by each state, as several state agencies have formally opposed the rule for this reason.
Despite these challenges, we believe that not all hope is lost. Paradigm is committed to increasing our advocacy efforts to address the concerns raised by the 80/20 provision and to ensure the long-term sustainability of home care services. We will work tirelessly with industry partners, policymakers, and other stakeholders to advocate for solutions that prioritize patient access, quality care, and the well-being of our dedicated caregivers.
We firmly believe that the true solution lies in addressing the underlying issue of inadequate Medicaid reimbursement rates. By encouraging states to increase reimbursement rates we can more effectively raise direct care worker wages without compromising patient access or quality of care.
As we navigate the challenges posed by the 80/20 provision, Paradigm will continue to provide updates and resources to our clients and partners. We urge our clients and partners to stay informed, engage with industry organizations, and advocate for policies that support the long-term sustainability of home care services. Together, we can work towards a future where quality care remains accessible to all those who need it, while ensuring fair compensation for the caregivers who make it possible.
Resources:
- 2023 HCP Benchmarking Report on average operating expenses for home care agencies
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