Providers of home- and community-based services (HCBS) face ever-mounting challenges, including shifting regulations and Medicaid funding cuts.

As the operating landscape grows more complex, HCBS providers must balance providing quality care with the wages and hours caregivers requires, industry experts told Home Health Care News.

“I think success is ultimately going to be: Are you still delivering high-quality care? Are you still maintaining a healthy employment practice with good retention? Those are the outcomes that we have to look for at the end of this game,” President and CEO of Home Assist Health Sara Wilson told HHCN.

Phoenix-based Home Assist Health is a nonprofit provider of home health, home care and community health services in Maricopa County.

HCBS address an individual’s daily living needs and functional limitations, with care delivered in the home or community. HCBS can include home health care, personal care, adult day care, home assessments and other services.

About 8.4 million people receive Medicaid HCBS, according to an April report from the Brandeis University Community Living Policy Center.

Medicaid paid for more than half of the $286.5 billion spent on HCBS in the United States, according to data from 2024.

Over the past few years, several major policy shifts have altered how providers can deliver HCBS services. Notable changes include the 80/20 rule, which the Centers for Medicare & Medicaid Services (CMS) finalized in 2024. The rule requires HCBS providers to direct 80% of Medicaid reimbursements to caregiver wages, with the remaining 20% designated for overhead and profit.

The One Big Beautiful Bill Act, signed into law in 2025, also cut $1 trillion from the Medicaid budget. At the time, Katie Smith Sloan, president and CEO of LeadingAge, called the cut a “death knell” for many agencies.

More changes occurred in 2026, such as the Olmstead reversal. In July, the Department of Justice shifted away from requiring providers to care for individuals with disabilities within the home or community as opposed to institutions. Without federal enforcement to prevent unnecessary institutionalization, HCBS advocates voiced concern about providers’ ability to deliver care.

Contending with workforce shortages, breakneck regulations

When Medicaid budgets are cut, one of the first services to go is HCBS, Gal Wettstein, associate director of health and insurance at the Center for Retirement Research at Boston College, told HHCN.

“Where they can cut back is in these discretionary things they aren’t required to cover, the biggest of those is HCBS,” Wettstein said.

A workforce shortage is exacerbating the funding cuts. Though the 80/20 rule aimed to improve home-based caregiver workforce by improving wages, HCBS providers told HHCN that the limited labor pool is the main hindrance to delivering HCBS.

Caregiving is not only low-paying but also physically and emotionally demanding, Wettstein said.

“There are only so many people willing to do this job,” Wettstein said.

Retaining caregivers hinges on wages as well as the hours available to them, which depend on the amount of care authorized for clients.

“When you see things like authorization hours drop, that also means your employees are going to have fewer hours to work,” Wilson said. “You have to balance not only the quality of the care being received, but the work of your staff and maintaining their needed work schedules.”

This year, the HCBS caregiving labor pool was dealt additional blows from immigration enforcement actions, especially those targeting Haitian immigrants. In June, the Supreme Court allowed for the ending of Haiti’s Temporary Protected Status designation along with the work authorization tied to it.

Providers also must compete with large health systems for registered nurses, licensed nurses and other workers, said Flournoy Health Systems CEO Faris Flournoy told HHCN.  

“Right now, attracting individuals to a workforce for an industry that’s underpaid, that’s been our biggest struggle,” Flournoy said. “These are our certified nursing assistants, our personal care aides.”

Flournoy Health Systems, based in Milledgeville, Georgia, is a home care management company operating in Georgia and Indiana through a portfolio of brands, including Primecare Home Care and Just Care Home Care.

Beyond recruiting staff to deliver care, providers must keep up with changing regulations as well, Wilson noted.

“I do see [some of them being] very helpful and an improvement, but keeping up with it is strenuous,” Wilson said. “And you’ve got your staff — just as they interpret and understand one rule, there’s another one coming down.”

Other changes can drain the capacity of the nurses already employed. Flournoy said nursing requirements can add costs and place additional demands on clinical staff.

“Now the mandates are requiring the nurses to be a part of some of those visits, which becomes costly,” Flournoy said.

Looking to the future

While HCBS providers feel squeezed by morphing regulations, the future offers glimpses of hope.

For instance, in August, Democratic senators from Virginia and New Mexico introduced the Home and Community-Based Services Access Act. The bill aims to make HCBS mandatory under Medicaid, giving older adults and people with disabilities more robust choices in receiving care in the home, community or at an institution.

While HCBS have often been beleaguered, their value will become increasingly clear in the coming years, said Wilson. There have historically been few measurable metrics to demonstrate the value of HCBS, especially for older adults and individuals with disabilities, she added.

“You didn’t have a lot of data to show the value, and I do believe that as we go into maybe the later part of 2027 and into 2028, we’re going to start being able to prove more of that,” Wilson said. “There is a lot of work going into demonstrating outcomes and proving the value of home and community-based care.”

Technology can also help, Wilson said. For instance, improvements to electronic storage can enable providers to run more comprehensive reports and track trends more accurately and affordably.

For states, the question is how to preserve access to home- and community-based services while navigating competing demands on Medicaid funding, Wettstein said.

But despite the upfront costs to providing HCBS, the services can help states and taxpayers save money in the long run. HCBS not only cost less on average than a year in a nursing home, but can further reduce costs over time, according to Brandeis University.

“Working with a very small minimum reimbursement, it really constrains the opportunity to go through and support our community,” Flournoy said. “I do believe that investment in home and community-based services is a trickle-down effect.”