Industry experts say providers of home- and community-based services are under increasing pressure due to Medicaid funding cuts and regulatory changes, making it challenging to balance quality care with fair wages and hours for caregivers, according to Home Health Care News.
“I think success is ultimately going to be: Are you still delivering high-quality care? Are you still maintaining a healthy employment practice with good retention? Those are the outcomes that we have to look for at the end of this game,” Sara Wilson, president and CEO of Home Assist Health, said.
Home Assist Health, a Phoenix-based nonprofit, offers home health, home care, and community health services in Maricopa County.
What are home- and community-based services?
These services address daily living needs and functional limitations, provided in the home or community. They include home health care, personal care, adult day care, home assessments, and more.
About 8.4 million people receive Medicaid home- and community-based services, according to an April report from the Brandeis University Community Living Policy Center.
Medicaid covered over half of the $286.5 billion spent on these services in the U.S. in 2024.
Several policy changes have reshaped how providers deliver these services. One key change is the 80/20 rule, finalized by the Centers for Medicare & Medicaid Services in 2024.
This rule mandates that providers allocate 80% of Medicaid reimbursements to caregiver wages, with the remaining 20% for overhead and profit.
The One Big Beautiful Bill Act, signed into law in 2025, cut $1 trillion from Medicaid. Katie Smith Sloan, president and CEO of LeadingAge, called it a “death knell” for many agencies.
In 2026, the Olmstead reversal occurred. The Department of Justice shifted in July, no longer requiring providers to prioritize home- or community-based care over institutions for individuals with disabilities.
Without federal enforcement, advocates worry about providers’ ability to deliver care.
Funding cuts and workforce shortages
When Medicaid budgets shrink, home- and community-based services are often the first to go, said Gal Wettstein, associate director of health and insurance at the Center for Retirement Research at Boston College.
A workforce shortage compounds the funding cuts. While the 80/20 rule aimed to boost caregiver wages, providers told Home Health Care News that a limited labor pool hinders service delivery.
Caregiving is low-paying and physically and emotionally demanding, Wettstein added.
“There are only so many people willing to do this job,” they said.
Retaining caregivers depends on wages and available hours, which are tied to client care authorizations.
This year, immigration enforcement actions, particularly targeting Haitian immigrants, further strained the labor pool.
In June, the Supreme Court ended Haiti’s Temporary Protected Status and its associated work authorization.
Providers also compete with large health systems for registered nurses, licensed nurses, and other workers, said Faris Flournoy, CEO of Flournoy Health Systems.
Flournoy Health Systems, based in Milledgeville, Georgia, operates in Georgia and Indiana through brands like Primecare Home Care and Just Care Home Care.
Beyond staffing, providers must keep up with changing regulations, Wilson noted.
New nursing requirements add costs and demands on clinical staff, Flournoy added.
In August, Democratic senators from Virginia and New Mexico introduced the Home and Community-Based Services Access Act.
This bill seeks to make these services mandatory under Medicaid, offering older adults and people with disabilities more care choices.
“By 2027 and 2028, we’ll start proving their value,” Wilson said.
States must balance preserving access to these services with competing Medicaid demands, Wettstein said.
Despite upfront costs, these services save money long-term, according to Brandeis University.
They cost less than nursing home care and reduce expenses over time.
Challenges in Nursing and Technology Solutions
Nursing requirements can increase costs and burden clinical staff, according to Faris Flournoy. Mandates now require nurses to participate in certain visits, adding expenses. Flournoy also highlights how low reimbursements limit support for the community.
