HCBS Medicaid rates rise in 2025

States across the U.S. increased Medicaid payment rates for Home and Community Based Services providers in FY 2025 and are planning additional targeted increases in FY 2026. The actions are largely aimed at stabilizing the workforce and maintaining access to care as staffing shortages continue. These rate decisions are shaping the operating environment for HCBS and long-term care providers, especially as states weigh near-term workforce investments against emerging fiscal constraints.

What states did in FY 2025

In FY 2025, most states implemented or planned fee for service rate increases. HCBS and long-term care providers were among the most commonly targeted groups. Several states enacted substantial rate hikes for personal care and home health services. Additional rate actions are planned in FY 2026, continuing the focus on supporting provider capacity.

Why rates are rising

Increasing payment rates is the most common strategy states are using to address home care workforce shortages. Higher rates can give providers more room to offer competitive wages and strengthen recruitment and retention. The policy goal is operational stability. By improving the financial foundation for HCBS providers, states are working to maintain access to care while staffing remains a persistent challenge.

Budget outlook for FY 2026 and beyond

Looking ahead, fiscal pressures are expected to intensify. Federal Medicaid spending is projected to decline significantly over the next decade due to reconciliation legislation. Those reductions are expected to strain state budgets and limit flexibility around provider rate setting and service expansion.

As FY 2026 approaches, states are navigating a balance between short-term investments in HCBS providers and long-term budget constraints. Decisions in FY 2026 will likely reflect this tension, influencing provider sustainability, service access, and workforce stability.