Surviving the -3% Clawback: Home Health Cash-Flow Planning for 2026-2027

Sep 3

3 min read

Even with a proposed 2.4% raise for 2027, CMS is keeping a -3.0% "temporary" adjustment in place to claw back what it calls billions in PDGM-era overpayments (CMS-1844-P). The headline increase and the clawback are two different things, and agencies that only read the headline are in for a cash-flow surprise. CMS's cumulative temporary-adjustment estimate has reached roughly $4.9 billion through CY 2025, and the recoupment is being spread across "one or more" years — meaning the -3% is unlikely to be the end of it. Here is how to plan cash flow around it.

Key Takeaways

CMS proposes a net +2.4% ($420M) payment change for CY 2027 — after the clawback is applied.
The -3.0% temporary adjustment continues, recouping CY 2020-2025 overpayments.
CMS's cumulative temporary-adjustment estimate is ~$4.9 billion through CY 2025.
No new permanent cut is proposed for 2027 — but permanent cuts of -3.925% to -1.023% hit 2023-2026.
The national freestanding margin is still 21.2%, and MedPAC wants a 7% cut — so more pressure is likely.
Plan for the clawback to persist beyond 2027; build it into multi-year projections.

The Headline vs. the Reality

The gross market-basket update and the clawback move in opposite directions. Read them together.

Component	CY 2026 (final)	CY 2027 (proposed)	Source
Net payment change	-1.3%	+2.4%	CMS rules
Base payment update	—	+2.1%	CMS-1844-P
Permanent behavioral adjustment	-1.023%	None proposed	CMS-1844-P
Temporary adjustment (clawback)	-3.0%	-3.0%	CMS-1844-P

The 2027 "increase" is a market-basket update partly offset by a clawback that isn't going away. The temporary adjustment is applied to the national standardized payment rate, so it hits every non-LUPA period.

Why the Clawback Will Likely Outlast 2027

CMS says it is recouping the overpayment "incrementally" through "one or more" temporary adjustments to avoid a single large cut. That's a signal, not a reassurance.

Fact	Implication
~$4.9B cumulative estimate through CY 2025	Only a fraction is recovered by a single -3% year
CY 2027 temporary collection estimated ~$500M	Roughly 10% of the cumulative amount
MedPAC recommends a 7% base-rate cut for 2027	Independent pressure on top of the clawback
Freestanding margin still 21.2%	CMS sees room to keep cutting

Translation: assume downward pressure on the base rate continues into 2028 and beyond, even though 2027's headline is positive.

Cash-Flow Moves for the Next 18 Months

Model net, not gross. Build projections on the rate after the -3% adjustment, and stress-test another -1% to -3% for 2028.
Protect the billing cycle. With rates squeezed, avoid self-inflicted losses — file every NOA within 5 days and manage LUPA thresholds (a late NOA cuts a period 1/30 per day).
Benchmark your margin against the 21.2% national figure; if you're below, the clawback will bite harder.
Build a reserve. Treat part of today's margin as pre-committed to future recoupment rather than distributable profit.
Tighten cost capture so your Medicare cost report reflects true costs — understated cost makes national margins look higher and invites more cuts.

Multi-year cash planning is now a survival skill in home health. Solid bookkeeping and financial reporting that separates sustainable margin from money you'll owe back is the difference between weathering the clawback and being caught flat.

The Clawback Isn't the Only 2026 Pressure

The −3% recoupment is one of several structural shifts hitting home health at once. CMS's Transforming Episode Accountability Model (TEAM) went live January 1, 2026, pushing hospitals to steer episodes toward the lowest-cost post-acute setting, and a national six-month enrollment moratorium effective May 13, 2026 froze new agency entry. Cash-flow planning now has to account for a squeezed rate, a shifting referral landscape, and constrained expansion options together (CMS/CMMI, TEAM Model, 2026; CMS enrollment moratorium, May 2026).

Sources

Centers for Medicare & Medicaid Services (CMS), CY 2027 Home Health PPS Proposed Rule (CMS-1844-P), July 2026
CMS, CY 2026 Home Health PPS Final Rule (CMS-1828-F), November 2025
Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Medicare Payment Policy, Chapter 8, March 2026

Last updated: September 2026. The CY 2027 figures are proposed and may change in the final rule (expected ~November 2026).

Soriaga & Associates, LLC is a CPA firm with 25+ years of home health and hospice accounting experience. Schedule a free consultation to build a clawback-ready cash-flow plan.