The Centers for Medicare & Medicaid Services (CMS) has released guidance explaining how states must report the percentage of certain Medicaid home- and community-based services (HCBS) payments spent on direct care worker compensation.

Issued October 9, State Medicaid Director Letter 26-005 addresses reporting requirements established under the 2024 Medicaid Access Rule. CMS now refers to the provision as “direct care worker compensation reporting,” replacing the earlier term “HCBS payment adequacy reporting.”

Which Florida Providers Are Affected?

The requirement covers homemaker, home health aide, personal care, and habilitation services delivered under specified HCBS authorities, through both fee-for-service and managed care arrangements.

For Florida providers, the principal programs to watch include:

• Statewide Medicaid Managed Care Long-Term Care (SMMC LTC): Particularly homemaker and personal care services provided through Florida’s 1915(c) LTC waiver.
• Developmental disabilities waiver programs: Covered personal support and habilitation services under the iBudget waiver and the Intellectual and Developmental Disabilities Comprehensive Managed Care (ICMC) Program.

These programs offer services that fall within, or may align with, the federal reporting categories. The Florida Agency for Health Care Administration (AHCA) will need to identify the specific Florida services and payment arrangements included.

Not every Medicaid home health service is covered. CMS excludes benefits furnished under section 1905(a) of the regular Medicaid state plan, including state plan home health and personal care services— even when delivered through managed care. An agency providing both state plan and covered waiver services may therefore have some payments included and others excluded.

Key Dates

• July 9, 2027: States must report their readiness to comply.
• Beginning July 9, 2028: Annual compensation reporting requirements apply. Managed care applicability is tied to the first qualifying contract rating period beginning on or after that date.
• 2027 is the first measurement year: CMS’s technical specifications identify January 1–December 31, 2027, as the measurement period for reporting due in 2028.

Providers should distinguish these federal milestones from any earlier deadlines AHCA or health plans establish for collecting agency data.

What Will Be Reported?

States must calculate the percentage of qualifying Medicaid payments spent on direct care worker compensation separately for each covered service. Additional breakdowns address self-directed services and services delivered in provider-operated locations whose payment rates include facility costs.

The calculation divides qualifying compensation by Medicaid payments for the covered services, after removing excluded costs, and multiplies the result by 100. CMS identifies provider surveys, managed care plan data, and claims or encounter records as potential data sources.

Compensation Means More Than Wages

Under the Access Rule, compensation includes wages and certain benefits, such as paid leave, employer retirement contributions, and applicable employer payroll taxes.

Excluded costs include required training expenses, travel expenses, and personal protective equipment. However, CMS distinguishes those expenses from compensation paid to workers for their time. For example, mileage reimbursement is treated differently from wages paid for travel time, just as training materials are treated differently from wages paid while attending training.

How Does This Relate to the 80% Requirement?

Compensation reporting is separate from the Access Rule’s provision generally requiring at least 80% of certain HCBS payments to support direct care worker compensation, subject to exceptions and flexibilities.

The 80% provision has a later applicability date beginning in July 2030, with managed care timing tied to qualifying contract rating periods. It applies to homemaker, home health aide, and personal care services; habilitation is included in reporting but is not subject to that spending standard.

What Providers Can Do Now

Agencies serving waiver participants should consider these preparation steps:

• Review service and payer arrangements. Identify which payments support waiver services versus regular state plan benefits.
• Assess accounting capabilities. Determine whether payroll and financial systems can separate compensation, benefits, and excluded expenses by service.
• Coordinate internally. Bring finance, payroll, compliance, and billing staff into the planning process.
• Watch for Florida instructions. Monitor AHCA and contracted health plans for service classifications, reporting formats, and submission deadlines.

These are recommended preparation steps, not a substitute for Florida’s eventual implementation instructions.

HCAF’s Advocacy

HCAF supported greater Medicaid transparency and accountability in its 2023 comments on the proposed Access Rule, while raising concerns about a uniform 80% compensation mandate.

HCAF emphasized Florida’s reimbursement challenges, rising operating expenses, and the need to support both direct care workers and the infrastructure required to deliver safe, reliable care. That balance remains important as providers evaluate the operational implications of compensation reporting.

Providers can review the CMS guidance and accompanying technical specifications as they begin preparing.