Medicaid 80/20 Rule: A Guide for Homecare Agencies
The Medicaid 80/20 rule for homecare agencies: key dates, what counts as caregiver compensation, where repeal talk stands, and what to track in 2027.
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What Is the Medicaid 80/20 Rule?
Sagar Kumar, COO and Co-Founder, Verveware
The Medicaid 80/20 rule is back in the news, and many homecare agency owners have heard it's being repealed. As of October 28, 2026, it hasn't been. The rule is still in federal regulations, and the first year of data states will report to CMS is calendar year 2027. Here's what the rule requires and what to start tracking now.
The Medicaid 80/20 rule requires that at least 80% of the Medicaid payments a provider receives for homemaker, home health aide and personal care services go to compensation for the direct care workers who deliver them. The rest can cover administrative overhead and profit. It's part of CMS's 2024 Ensuring Access to Medicaid Services final rule, and the 80% minimum applies starting July 9, 2030.
Requirement | Date | What it means for your agency |
|---|---|---|
Effective July 9, 2024 | The 80/20 rule is in federal regulations (42 CFR 441.302(k)) | |
State readiness report | Due by July 9, 2027 | Your state decides how it will collect data from providers |
First state report to CMS | From July 9, 2028, covering calendar year 2027 | Your 2027 records are the first data your state will report |
80% minimum | From July 9, 2030 (managed care: first contract period starting on or after that date) | Your agency must meet the percentage your state applies |
CMS proposal to rescind or revise 2024 rule provisions | Under White House budget office review since May 12, 2026; not published | Nothing changes until a final rule takes effect |
Which Services and Workers the Rule Covers
The 80% minimum applies to homemaker, home health aide and personal care services in Medicaid home and community-based services (HCBS) programs under section 1915(c) waivers, and through cross-references, section 1915(i), (j) and (k) programs. The annual reporting also covers habilitation services and section 1115 demonstrations that include HCBS, in both fee-for-service and managed care.
Two exclusions matter for homecare:
State plan services. Personal care and home health services covered under the Medicaid state plan (section 1905(a)) aren't part of the requirement.
Some self-directed services. Services where the person receiving care sets the worker's pay rate are left out.
Direct care workers include home health aides, personal care attendants, direct support professionals, nursing assistants working under a nurse, nurses providing nursing services, and other staff paid to help clients with daily living tasks, including clinical supervisors. Time staff spend on unrelated administrative work doesn't count, but time spent on tasks tied to care, like completing timecards, does.
In Illinois, the Community Care Program's Persons who are Elderly waiver is a 1915(c) waiver, and its In-Home Service is the waiver's homemaker service. That puts IDoA CCP in-home service in scope, including for customers who get waiver services through a Medicaid managed care plan.
What Counts Toward the 80%
CMS's October 9, 2026 letter to state Medicaid directors (SMD 26-005) spells out the math.
Compensation (what counts toward the 80%):
Wages and salary, including overtime pay
Pay for time spent traveling between clients and in training, when you pay workers for that time
Benefits such as health and dental insurance, life and disability insurance, paid leave, retirement and tuition reimbursement
Your employer share of FICA, unemployment insurance and workers' compensation
Excluded costs (taken out of your Medicaid payments before the math):
Required training costs, such as trainers and materials
Travel costs, such as mileage reimbursement or transit passes
Personal protective equipment
Total Medicaid payments means what you actually collected for these services, not what you billed, minus refunds and recoupments. For managed care, it's what the plan paid your agency.
Where the 80/20 Rule Stands in October 2026
The rule is in effect. It's in the Code of Federal Regulations, and CMS's October 2026 letter tells states to prepare for reporting.
A proposal is pending. A CMS proposed rule (CMS-2450) has been under review at the White House Office of Management and Budget since May 12, 2026. Its regulatory agenda entry says it would rescind or revise provisions of the 2024 rules, but it doesn't say which ones. It hadn't been published in the Federal Register as of October 28, 2026. Even after it's published, a proposal needs public comment and a final rule before anything changes.
States have options. A state can set a different percentage for small providers and exempt providers facing extraordinary circumstances, using criteria developed with public notice and comment. Watch your state's notices.
Rates are public. States had to publish their average hourly fee-for-service rates for personal care, home health aide and homemaker services by July 1, 2026.
Records to Start Keeping for 2027
CMS says states may use provider surveys to collect the data, so expect your state or managed care plans to ask. Starting January 1, 2027, keep these by service and by payer:
Direct care hours and pay, separate from administrative time
Overtime, paid travel time and paid training time
Benefits and employer-paid taxes for direct care workers
Mileage, training costs and PPE, tracked apart from wages
Medicaid payments actually collected, net of recoupments
How Verveware Keeps Hours and Payments Together
Verveware payroll prep starts from confirmed visits. It confirms and locks schedules for the pay period, then generates a payroll export in your processor's native format, so the hours you bill and the hours you pay reconcile. The preview shows confirmed hours by day or by pay type, with rates and overtime depending on the format you select, and ADP and Paylocity Transport reports calculate travel time between multiple clients in a workday.
On the billing side, Verveware submits 837 claims, receives 835 remittance files and posts payments from each remittance. It bills state Medicaid programs and Medicaid managed care plans, and automates IDoA billing through eCCPIS, from the same verified visits.
This post isn't legal or accounting advice. Check your state's reporting instructions before you report.
Frequently Asked Questions
What Is the Medicaid 80/20 Rule?
It's a 2024 CMS rule requiring that at least 80% of Medicaid payments for homemaker, home health aide and personal care services go to direct care worker compensation, with the rest available for overhead and profit. The 80% minimum starts July 9, 2030.
Has the 80/20 Rule Been Repealed?
No. As of October 28, 2026, the rule is still in federal regulations. A CMS proposal to rescind or revise provisions of the 2024 rules has been under White House review since May 2026, but it hasn't been published, and it would need public comment and a final rule.
When Do Homecare Agencies Need to Start Tracking?
Now. States report to CMS starting July 9, 2028, and the first report covers calendar year 2027. The records your agency keeps from January 1, 2027 are the first data your state will use.
Does Overtime Count as Caregiver Compensation?
Yes. CMS counts overtime pay, along with paid travel time, paid training time, benefits and the employer share of taxes. Mileage reimbursement, training materials and PPE are excluded costs, taken out of Medicaid payments before the calculation.
Does the 80/20 Rule Apply to Private Pay Clients?
No. It applies only to Medicaid payments for homemaker, home health aide and personal care services in HCBS programs such as 1915(c) waivers. Private pay, VA and state plan services aren't part of the calculation.
Keep Caregiver Hours and Medicaid Payments in One Place
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