CMS just proposed a 2.4% home health payment increase for CY2027. Here's what the rule actually contains.

On July 1, CMS released the CY2027 Home Health Prospective Payment System Proposed Rule (CMS-1844-P), published in the Federal Register on July 6. The proposed net payment change: +2.4% aggregate, approximately $420 million more in Medicare payments compared to CY2026. That is a directional reversal from recent years — CY2026 finalized a 1.3% cut, and MedPAC had recommended a 7% cut for CY2027 in its March 2026 report to Congress. Comment period closes August 31, 2026 at 5:00 PM ET.

How the 2.4% is constructed

The proposed aggregate increase comes from two primary components:

• +2.1% market basket update (~$370M) — the routine annual inflation adjustment tied to the HH market basket index.
• Fixed dollar loss (FDL) outlier adjustment — a modest recalibration of the outlier threshold that reduces the net figure by approximately 0.3%.

The −3.0% temporary PDGM recoupment adjustment continues for a third year. This is the mechanism CMS uses to recoup retrospective overpayments from differences between assumed and actual behavior changes when PDGM launched. It was applied in CY2026 and runs again in CY2027. The 2.4% net increase is the year-over-year comparison with CY2026 rates — both years carry the −3.0% — so the market basket update is effectively doing all the lifting.

CMS is not proposing an additional permanent PDGM adjustment for CY2027. The agency will continue reviewing CY2026 claims data and may return with a permanent adjustment proposal in future rulemaking. The permanent rate floor holds for now.

LUPA threshold changes on 20 case-mix groups

Using CY2025 utilization data — one year fresher than the CY2024 data behind the CY2026 final rule — CMS is recalibrating PDGM case-mix weights and LUPA thresholds across all 432 HHRGs. For CY2027:

• 18 case-mix groups: LUPA threshold decreases by one visit — one fewer visit needed to avoid LUPA.
• 2 case-mix groups: LUPA threshold increases by one visit — one more visit needed to clear LUPA.

Fewer total moves than CY2026's 43 threshold changes, but any shift is operationally real. Schedulers targeting LUPA-safe visit counts from memory — and not updating those targets when the final rule publishes in November — will have patients sliding into LUPAs silently. That is typically a $1,500–$2,500 revenue swing per episode, per period.

RFI: a home-health-specific wage index

The proposed rule includes a Request for Information on developing a home-health-specific wage index. The current method applies the hospital inpatient wage index to HHA payments, which chronically mismatches hospital and home health labor markets. CMS is gathering data before proposing a replacement methodology. Agencies in high-cost metros — where HHA wages consistently outpace the hospital wage index benchmark — have the most data to contribute and the most to gain from shaping how this gets built. The August 31 comment window covers the RFI as well.

What your agency should do before August 31

1. Pull the LUPA threshold addendum when CMS publishes it. The 20 threshold moves will be in Addendum C of the proposed rule. For the 2 groups whose threshold increased, schedulers need updated targets before January 1. For the 18 that dropped by one visit, document the buffer — that is margin that did not exist in CY2026.
2. Model the CY2027 rate against your actual HHRG distribution. The 2.4% is a sector-wide average. Your case mix may shift differently once the CY2025 recalibration applies. Wound care, musculoskeletal, and behavioral health groups move at different rates — your specific exposure requires your specific HHRG data, not the aggregate headline.
3. Comment on the PDGM recoupment continuation. Three consecutive years of the temporary −3.0% is the clearest argument for a shortened recoupment horizon. If your agency has margin or access data that documents the impact, the administrative record is the right place for it. The National Alliance for Care at Home and NAHC state affiliates are coordinating comment efforts.
4. Respond to the wage index RFI if your market has a mismatch. This is the window to put specific labor-market data on the record before CMS finalizes the methodology. A comment with your MSA, your posted RN wages, and your actual HHA aide rates against the current hospital wage index benchmark is exactly what CMS says it needs.

What we built for this

Carelytic's LUPA Risk Dashboard surfaces every open 30-day period within one visit of the LUPA floor — sorted by margin-to-threshold distance — so schedulers see which periods need attention this week, not after the period closes and the revenue is gone. The Grouper Preview will be updated with CY2027 PDGM case-mix weights, recalibrated LUPA thresholds, and updated comorbidity subgroups when the final rule publishes in November. Until then, CY2026 data is the production baseline. The LUPA Risk Dashboard also lets you test the proposed threshold changes against your open periods before they are final — so you can see where margin shifts before January 1.