In-Home Care Providers Await Updates On CMS Medicaid Proposal, Begin Preparing For 80/20 Rule

Drawing parallels between the intentions of the Centers for Medicare & Medicaid Services (CMS) and the narrative of a Charles Dickens novel is an uncommon venture.

However, the metaphor is there for the taking when it comes to potential Medicaid policy.

“When the 80/20 rule came out, many of us saw this as a ‘Tale of Two Cities’ situation,” Dave Totaro, chief government affairs officer at Bayada Home Health Care, recently said during a Home Health Care News webinar. “On the one hand, we were thrilled that CMS was aligning with the industry on its overall goal of preserving and increasing access to care, improving quality health outcomes, and, even for the first time, addressing health equities.”


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The rule Totaro’s comments refer to is the proposed rule that would, among other provisions, establish national maximum standards for certain appointment wait times for Medicaid enrollees, require states to conduct independent secret shopper surveys and mandate that states report every other year on the HCBS Quality Measure Set for their HCBS program.

The proposed rule would also require that at least 80% of Medicaid payments for personal care, homemaker and home health aide services be spent on compensation for direct care workers. That’s opposed to expenses such as “administrative overhead or profit,” according to the agency.

“While that’s certainly well intentioned, that will have significant unintended consequences,” Totarto said.


The Moorestown, New Jersey-based Bayada is one of the largest home health providers in the country. The nonprofit has over 330 locations across 22 states and six other countries.

Currently, the rule is expected to be finalized sometime in the spring. The public comment window on the proposed rule received over 2,100 comments.

“While we understand and appreciate the linkage between caregiver wages and recruitment and retention, the non-uniformity of state program requirements and the disparity in reimbursement rates — both across and within states — preclude the implementation of a standard minimum percentage threshold for direct care workers’ compensation,” Darby Anderson, EVP and chief government relations officer for Addus HomeCare Corporation (Nasdaq: ADUS), wrote in a comment.

Since that comment window closed, HCBS providers have been preparing for the potential finalization of the 80/20 rule from CMS.

Although the possibility seems daunting, Totaro doesn’t believe providers will be stuck with the harshest of outcomes.

“We do expect that something will probably be published in the early spring period because the administration actually wants to get this thing done before the election year,” Totaro said. “What will that be? The consensus is it’s probably not going to be at [that 80% to 20% ratio] — but some type of lower ratio. And maybe a ratio with a three- to five-year plan to get to a higher ratio.”

Despite an optimistic outlook, some providers proactively took the proposed rule to heart and have begun to prepare for something that looks like the 80/20 rule.

“Putting on my operational hat here, the general theme here is that you’re going to have to adjust your business,” Care Advantage CEO Tim Hanold said. “Whether the message is coming from CMS or others, the perception of what a fair profit margin is in home care is the oxygen to this conversation. Regardless of how the 80/20 rule shakes out, you need to run your business keeping this in mind.”

Richmond, Virginia-based Care Advantage is a home-based care company that has more than 45 locations throughout Virginia, Maryland, Delaware, Washington, D.C., and North Carolina. The company offers both personal care and home health care services.

When the proposed rule was published, Hanold and his staff wasted no time. At first, Care Advantage modeled various scenarios to understand unit economics and tried to pinpoint exactly how much an hour of home care would cost in the Medicaid program under the proposed rule.

That process involved different populations, geographies, states and illnesses. After the modeling, Hanold came away with three essential elements for providers to succeed in this forecasting.

“One is that you need to scale in a material way,” Hanold said. “No. 2: You have to get consistent, healthy rate reimbursement — which is a bit out of our control. And No. 3 is OPEX containment. We would need to be much more selective in how we deploy our resources and assets serving this population [if the rule were finalized].”

The unreliable reimbursement rate environment will always throw a wrench into a provider’s ability to offer competitive wages. Beyond reimbursement, Hanold pointed to controllable elements within the business, such as caregiver volume through talent acquisition — a crucial factor for success.

“Caregiver volume through the talent acquisition function is a must-have,” Hanold said. “Caregiver utilization, retention, I’d argue these things go hand in hand. Practical improvements that can be made like maximizing caregiver experience, flexibility, a range of potential hours and geographies. Again, scale really helps a caregiver’s volume and the selection of the hours of work.”

Paying caregivers a competitive wage is “like a ticket to the ballgame,” Totaro said. It’s a given at this point.

“However, over the last several years, I think we’ve also come to realize that there are other factors that we have to address,” Totaro said. “The image of home care is something that needs to be improved. We have to fill the pipeline. There’s just not enough folks who are interested in this kind of service. Lastly, an issue that has risen to the top recently, has been safety and security issues. We have to make sure that the people who we care for who are going into these homes feel safe and secure.”

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