Direct Care Worker Compensation Reporting: What CMS's New Guidance Means for Home Care

On Oct. 9, CMS sent state Medicaid directors a letter (SMD 26-005) explaining how direct care worker compensation reporting will work. The requirement itself dates back to the 2024 Medicaid Access Rule, but the letter fills in the details agencies have been waiting for. Starting July 9, 2028, every state must tell CMS each year what percentage of its Medicaid payments for homemaker, home health aide, personal care and habilitation services actually ends up as pay and benefits for the workers who deliver that care. States report the number, but as the Home Care Association of America points out, providers will be the ones supplying the data.

What counts in direct care worker compensation reporting

The guidance covers home and community-based services under sections 1915(c), (i), (j) and (k), plus section 1115 demonstrations, in both fee-for-service and managed care. Compensation includes wages and salary with overtime, benefits such as health coverage, paid leave and retirement, the employer share of payroll taxes for 1915(c) services, and paid time spent traveling or in training. Some costs are taken out of the calculation entirely: required training costs like trainers and materials, travel costs like mileage reimbursement, and personal protective equipment. Supervisors and administrators count only for the time they spend delivering services themselves, and CMS warns against shifting unrelated admin work onto direct care staff to make the numbers look better.

Why 2027 is the year that matters

The first state reports are due in 2028, but they will cover calendar year 2027. States must send CMS a readiness report by July 9, 2027, and CMS expects to post the reporting form by Sept. 1, 2027. In other words, the payroll and Medicaid revenue an agency books starting in January is the data that will be measured. Damon Terzaghi of HCAOA told McKnight's Home Care that he hopes states keep their provider requests high level and aggregated, but some could ask for line items such as wages, benefits, supervision, travel time and PPE. He also expects the reporting rule to stay even if CMS repeals the separate 80% wage pass-through requirement.

Getting ready without overbuilding

A practical first step is to make sure your payroll can split wages, overtime and benefits by service type, and that your accounting can tag mileage, training and PPE separately from compensation. Next, check that you can trace Medicaid revenue for each covered service back to the visits that were actually delivered. That last piece is where schedule data helps: if planned and completed visits are tracked in one place, as they are in CareSync®, it is easier to connect what was paid to what really happened. None of this needs to be finished this week, but agencies that start clean in January will have a much easier time when their state sends its first survey.

Sources: CMS SMD 26-005, McKnight's Home Care, Home Care Association of America, Direct Support News.