CMS's 2024 "Ensuring Access to Medicaid Services" final rule requires that starting July 9, 2030, at least 80% of Medicaid payments for personal care, homemaker, and home health aide services must go directly to DIRECT CARE WORKER COMPENSATION — not administration, overhead, or profit.
The first state readiness deadline is July 9, 2027. In 2026, the rule faces real political headwinds: an 18-month enforcement delay was announced in February 2026, and repeal is being actively discussed in Washington.
But in my humble opinion "might be repealed" is not the same as "definitely won't happen," and if you start tracking the right data now then you will be in a stronger position no matter which way this goes. In this guide, I am going to explain what the rule actually requires, what's changing in 2026, and what HCBS agencies should start doing right now.
To all HCBS agencies: Let’s get prepared before a deadline catches you by surprise.
The Rule That's Going to Reshape How HCBS Agencies Think About MoneyDo you know that there's a regulation sitting quietly on the federal books right now that could fundamentally change how home and community-based services agencies structure their finances, track their payroll, and think about the relationship between what Medicaid pays them and what their direct care workers actually take home?
Most agencies haven't heard of it. Some who've heard of it think it's probably going to be repealed. A small group (including me) is paying very close attention and quietly getting their data houses in order.
The rule is CMS's Ensuring Access to Medicaid Services final rule, finalized in April 2024 and effective July 9, 2024. Buried inside a broad package of Medicaid access improvements is what the industry has come to call the "80/20 rule": a requirement that, by July 9, 2030, at least 80% of Medicaid payments for three specific HCBS service types must be spent on direct care worker compensation. No more than 20% remains for administration, overhead, and profit.
That's not a minor operational adjustment. For many agencies, it's a structural reckoning.
Here's how I recommend staying on top of this regulation
"Electronic Visit Verification (EVV) seems daunting at first and most agency leaders wish it would go away. I get that, but it won't. The best approach to take is to embrace it and take this as an opportunity to improve your operations. This could give you an opportunity to streamline billing, payroll and revenue collection, but especially in HCBS, it can dramatically improve the quality of your notes. Remember that you're team is enabling a person who in our parents era would have been relegated to institutional care, to live a rich and independent life in their community. Having an EVV app where they can speak their service notes and have progress summarized at the touch of a button will be a game changer for the agencies that take advantage of it." - Ken Accardi, CEO of Ankota
The stakes are high enough that it's worth understanding exactly what this rule says, what counts and what doesn't, where it stands politically in 2026, and what the actionable response is!
Let's start with the plain-language version, because the regulatory text is (predictably) dense.
Under the final rule, starting July 9, 2030, states must generally ensure that at least 80% of Medicaid payments for certain HCBS services are spent on compensation for the direct care workers who actually deliver those services. That leaves a maximum of 20% for everything else: agency administration, supervisory overhead, facilities costs, insurance, profit margin — the whole cost-of-running-a-business side of the ledger.
The three service types subject to the 80% requirement are:
Personal care services — assistance with activities of daily living like bathing, dressing, and meal preparation delivered by non-clinical aides.
Homemaker services — light housekeeping, laundry, shopping, and similar support services.
Home health aide services — health-related personal care tasks performed by home health aides under clinical supervision.
Habilitation is a notable exclusion: it's included in the earlier data reporting requirements but CMS explicitly carved it out of the eventual 80% minimum.
If you're primarily an I/DD provider whose HCBS work is habilitation-focused, the 80% floor doesn't directly apply to you — though the reporting requirements still do, and the broader HCBS compliance landscape is shifting in ways that affect all providers.
One of the most important nuances in this rule is what CMS means by "COMPENSATION" Because if you're an agency owner looking at your current numbers and thinking "we spend way more than 80% on our direct care workers' hourly wages," you might actually be closer to compliance than you realize. Or not. Trust me, the definition is specific enough to matter.
Under the final rule, "compensation" for direct care workers and their clinical supervisors includes:
Salaries and hourly wages — the obvious one. Whatever your workers earn before taxes.
Employer-paid benefits — health insurance, dental, vision, retirement contributions, paid time off, sick leave. All of this counts toward the 80%.
Payroll taxes — the employer's share of Social Security and Medicare taxes. Yes, these count. This is meaningful because payroll taxes add roughly 7.65% on top of wages, and many agency financial models don't separate them out clearly.
Workers' compensation insurance — in many states, this is a significant cost that now goes into the 80% bucket rather than the overhead bucket.
What's explicitly excluded from the calculation (and therefore doesn't count toward the 80%) are travel time and mileage reimbursements, training costs, and PPE costs. CMS made this call to acknowledge that these are real operational costs without letting them inflate the "compensation" number artificially.
The practical implication: before you calculate whether your agency is "at" or "under" 80%, you need to know your true compensation cost per Medicaid dollar - not just your wage bill.
Most agencies' accounting systems aren't set up to produce this number cleanly right now. That's one of the core reasons to start working on your data infrastructure today. Our guide to home care payroll software features and compliance covers the payroll data architecture that makes this kind of reporting possible and why agencies that track compensation comprehensively have a significant advantage here.
The 2030 enforcement date gets most of the attention, but the timeline that should actually be driving agency behavior right now is 2027. Here's the full sequence:
July 9, 2024: The final rule took effect. States began operating under the new framework.
July 9, 2027: States must report their readiness to collect the data necessary to measure compliance with the 80% requirement. This is the first concrete accountability moment and it almost certainly requires states to start collecting financial and payroll information from provider agencies. What that looks like will vary state by state, but agencies should expect to be asked for data they may not currently track.
July 9, 2028: States must begin formally reporting the percentage of Medicaid payments actually spent on direct care worker compensation for personal care, homemaker, home health aide, and habilitation services. This is the first year states submit actual numbers to CMS, which means it's the first year your data gets scrutinized.
July 9, 2030: The 80% minimum is enforced. States that can't demonstrate compliance face federal consequences, and the expectation is that states will have mechanisms in place to hold agencies accountable for the data behind those numbers.
The reason 2027 matters so much is simple: you cannot produce clean data in 2028 if you haven't been tracking it since at least 2027. And states need to demonstrate readiness in 2027, which means they'll need to have started building their data collection infrastructure before then.
FYI: The 2030 deadline is the finish line. The 2027 readiness checkpoint is the starting gun for the data sprint.
Here's where we have to be honest about what's actually happening, because this affects how you think about the urgency of the rule.
The 80/20 rule has faced significant political resistance since it was finalized. In February 2025, nine Republican members of Congress urged President Trump to repeal the provision, calling it an unfunded mandate introduced "without a basis in data, actual experience, or an understanding of costs associated with the provision of home-based care." The National Alliance for Care at Home has expressed confidence in administrative repeal.
In February 2026, CMS announced an 18-month delay in enforcement of certain Access Rule provisions — a significant development that signals the current administration's skepticism about the rule's viability in its current form. Against the backdrop of the One Big Beautiful Bill Act, signed July 4, 2025, which represents the largest Medicaid restructuring in decades, the 80/20 rule's future is genuinely uncertain.
So why track anything now, you might think? A few reasons, and they're all practical ones:
The reporting requirements haven't been repealed (only enforcement has been delayed.) The 18-month delay is on enforcement, not on the underlying requirement to collect and track the data. The reporting framework is still in place, and states are still expected to build their data infrastructure.
Even if the 80/20 floor goes away, the transparency provisions don't. The final rule also requires states to publicly publish average hourly rates paid for personal care, home health aide, homemaker, and habilitation services every two years. That wage transparency provision is less controversial and more likely to survive any political changes. Knowing your numbers before they're published publicly is basic organizational hygiene.
Direct care worker compensation is the right strategic problem regardless of regulatory mandate. States and providers are facing workforce shortages, particularly among HCBS direct care workers. The regulatory question of "what percentage of Medicaid goes to worker pay" is separate from the operational question of "are we paying enough to attract and retain workers?" Our analysis of why boomer aging and the caregiver crisis are forcing new care models covers why this workforce issue is structural, not cyclical.
The agencies that have their data in order are in a better position in every scenario. If the rule survives, you're ready. If the rule is repealed, you still have cleaner payroll data, better financial visibility, and a stronger position to demonstrate worker investment to your state Medicaid agency when rates are being negotiated. There's no downside to knowing your numbers.
Let's be concrete about what compliance actually requires because this is where the rubber meets the road for most agencies, and where the gap between "we think we're fine" and "we know we're fine" becomes very expensive.
The basic calculation sounds simple: take your total direct care worker compensation (wages + benefits + payroll taxes + workers' comp) for services covered by the rule, divide it by your total Medicaid payments for those same services, and the result should be at or above 0.80.
Simple to describe, sure. Genuinely difficult to produce cleanly for most agencies. AND I AM TALKING FROM DECADES OF EXPERIENCE HERE:
Most agencies don't have a clean payroll-to-Medicaid-payment linkage. Your payroll system knows what you paid your workers. Your billing system knows what Medicaid paid you. Connecting those two data streams at the service type level requires either an integrated software platform or a manual reconciliation process that most agencies don't currently run.
Service type allocation is complicated for multi-service agencies. If you deliver personal care, homemaker services, and habilitation, and some of your workers deliver more than one service type, how do you allocate their compensation across service types? The rule doesn't prescribe the methodology, which means states will likely develop their own approaches.
The 20% has to cover everything else. For many agencies, especially smaller ones, the math is genuinely challenging.
Commenters warned that if HCBS providers were required to spend 80% of a Medicaid payment on compensation, the remaining 20% would not cover business fees, administrative needs, supplies, or utilities.
CMS responded by clarifying that administrative activities would be covered in the 20%, but for agencies with high administrative overhead relative to direct service delivery, this creates real structural pressure.
The agencies that are quietly losing money without knowing it are often the ones whose cost structure has drifted in ways that won't survive 80/20 scrutiny.
CMS built flexibility into the rule, and knowing about it matters for how you plan:
Self-directed services where the participant sets the worker's pay rate are handled differently. The agency in these situations often isn't setting compensation - the participant-employer is. The rule accounts for this, though the details of how self-directed services factor into compliance calculations are still being worked out at the state level. For agencies running self-direction FMS programs, this is worth tracking closely through your state's implementation guidance.
Small provider exemptions. CMS specifically allows states to develop different standards for small providers and to develop reasonable criteria for defining what constitutes "small." If your agency is small, you may qualify for a different interim standard, but you still need to be able to demonstrate your compensation ratio, just potentially against a different threshold.
Hardship exemptions are available at the state's discretion. The mechanics of how hardship is defined and applied will vary significantly by state, which is why knowing your state's implementation timeline and approach matters as much as knowing the federal rule.
Certain tribal health programs have separate treatment under the rule.
The key takeaway on exceptions: they require you to know your numbers and document your situation, not avoid tracking entirely. Even the smallest provider claiming an exemption needs to understand its compensation ratio well enough to know whether the exemption applies.
Here's a connection that most industry coverage misses entirely, and I think it's worth spelling out because it changes how you think about your software investments.
EVV (Electronic Visit Verification, mandated by the 21st Century Cures Act) documents what care was delivered. It captures the service type, the worker, the recipient, the date, the location, and the start and end time. This is the "what happened" data layer of HCBS compliance.
The 80/20 rule is asking a different question: where did the Medicaid payment go after the care was delivered? It's the "what happened to the money" data layer.
These two data layers are strategically related in a way that's practically important. The compensation ratio calculation for the 80/20 rule requires you to know — with precision — which service type was delivered (EVV), how much Medicaid paid for it (billing), and how much of that payment went to the worker who delivered it (payroll).
Agencies with integrated EVV, billing, and payroll systems can produce this calculation EFFECTIVELY. Agencies running three disconnected systems with manual reconciliation between them cannot — at least not without significant effort.
Our overview of HCBS software solutions covers how integrated platforms support this kind of cross-functional data availability and why agencies that have invested in connected systems are better positioned for both EVV compliance and 80/20 readiness than agencies running parallel tools.
For a deeper look at the EVV side of this, see our guide to Medicaid waiver billing software and how to avoid denials in HCBS.
Regardless of whether the 80/20 rule survives its current political challenges in full, partial, or modified form, here are five concrete actions worth taking now.
Start with a diagnostic. Take your last 12 months of payroll data for your covered HCBS service types — wages, benefits, payroll taxes, workers' comp — and divide it by your total Medicaid payments for those same service types over the same period. What's your ratio?
If you don't know, that's the starting point.
If you know and you're at 75%, the gap to 80% is a known, manageable problem.
If you're at 60%, it's a structural issue that requires a longer timeline to address. You cannot plan what you cannot measure.
The rule applies service type by service type, not to your total HCBS operation. If you deliver personal care, homemaker, and home health aide services, you need to know your compensation ratio for each, not just blended across all three. This requires cost allocation by service type, which many agencies currently don't do.
Start building that allocation methodology now, before a state requirement forces you to do it under pressure. Our guide to home care payroll software covers what the right payroll infrastructure looks like for this kind of service-level reporting.
Can you, today, answer this question: for every Medicaid dollar we received for personal care services last month, what fraction went to the workers who delivered that care?
If answering that requires pulling data from three separate systems and reconciling them in a spreadsheet over a weekend, you have an integration gap. Identify it now and start evaluating whether your current software infrastructure can be connected or whether you need a more integrated platform.
The billing-to-cash-flow connection is well understood by most agencies, the payroll-to-Medicaid-payment connection for 80/20 is the new requirement that most current architectures don't support cleanly.
The federal rule sets the floor. Your state sets the practical requirements for what you actually have to report, when, and in what format. Some states are moving proactively; others are waiting to see what happens with the rule's political future.
Find out where your state stands by monitoring your state Medicaid agency's website, your state association's communications, and CMS's implementation materials.
If your current cost structure puts you significantly below 80% of Medicaid payments going to direct care worker compensation, the 80/20 rule is telling you something important about your business model that's worth addressing regardless of regulation.
The agencies that will thrive through 2030 are the ones that have figured out how to run efficiently enough on 20% overhead that 80% can go to the workers, which is really a question about operational efficiency, technology investment, and service mix, not just compliance.
The 80/20 rule is fundamentally a data problem before it becomes a compliance problem. Agencies that can cleanly answer "what percentage of our Medicaid payments went to direct care worker compensation, by service type, for the last reporting period?" are in a categorically different position than agencies that can't.
And right now, most agencies can't, not because they're not investing in their workers, but because their systems weren't built to produce that specific data point.
Ankota's connected platform links scheduling, EVV-verified visit data, billing, and payroll into a single operational data layer. When a personal care visit is completed and verified, the associated worker compensation can be tracked against the associated Medicaid payment in a way that's clean, auditable, and reportable, without a manual reconciliation process sitting in between. That's the infrastructure difference that will matter when states start asking for 80/20 data in 2027 and 2028.
Different services have different compensation ratios, different Medicaid rate structures, and in some cases different exemption status under the rule. Managing that complexity across siloed systems is how agencies end up unable to answer basic questions about their own financial structure. Managing it in a connected platform is how agencies stay in control of both their compliance position and their operational decisions.
Want to understand where your agency stands on 80/20 readiness, and what your current software infrastructure can and can't support? Talk to our team and we'll walk through your service mix, your current data architecture, and what it would take to produce clean compensation ratio reporting when your state starts asking for it.
The 80/20 rule is a provision within CMS's Ensuring Access to Medicaid Services final rule, published April 2024 and effective July 9, 2024. Starting July 9, 2030, states must generally ensure that at least 80% of Medicaid payments for personal care, homemaker, and home health aide services are spent on compensation for the direct care workers who actually deliver those services. No more than 20% can remain for administration, overhead, and profit. It is not part of the 21st Century Cures Act — that's a separate mandate related to EVV — though the two are strategically connected through the data they require agencies to track.
What counts as "compensation" under the 80/20 rule?"Compensation" is broader than just hourly wages. Under the final rule, it includes direct care worker and clinical supervisor salaries and wages, employer-paid benefits (health insurance, dental, vision, retirement contributions, paid time off), employer payroll taxes (Social Security and Medicare contributions), and workers' compensation insurance in many cases. Travel time, mileage reimbursement, training costs, and PPE are excluded from the calculation rather than counted as administrative overhead. This means agencies need to know their total compensation cost — not just their wage bill — to accurately calculate their ratio.
Is the 80/20 rule going to be repealed?As of August 2026, the rule faces significant political headwinds. In February 2026, CMS announced an 18-month delay in enforcement of certain Access Rule provisions, and repeal is being actively discussed. However, the rule has not been repealed, and the underlying reporting requirements remain in place. The prudent approach is to treat the rule as "uncertain but possible" rather than "definitely going away" — because the agencies that have their compensation data in order benefit in every scenario, while the agencies that don't are exposed in every scenario where the rule survives.
Which services are NOT covered by the 80% requirement?Habilitation services are explicitly excluded from the 80% minimum, though they are included in the earlier data reporting requirements. Partial hospitalization and facility-based services such as rehabilitation or clinical services are also excluded. Self-directed services where the participant sets the worker's pay rate are handled differently. The 80% floor applies specifically to personal care, homemaker services, and home health aide services within Medicaid-funded HCBS programs. For agencies primarily delivering habilitation or self-directed services, the direct 80% exposure is lower — but the reporting and transparency requirements still apply.
What are the key deadlines agencies should know?The three key milestones are: July 9, 2027, when states must report their readiness to collect compensation data from providers; July 9, 2028, when states must begin formally reporting the percentage of Medicaid payments spent on direct care worker compensation; and July 9, 2030, when the 80% minimum is enforced. The 2027 readiness deadline is the one driving near-term action — states can't demonstrate readiness in 2027 without having started data collection infrastructure in 2026, which means agencies should expect data requests from their state Medicaid agency before the formal 2028 reporting date. Note: as of February 2026, CMS announced an 18-month enforcement delay for certain provisions, though the underlying framework remains in place.
How does the 80/20 rule connect to EVV?EVV (mandated by the 21st Century Cures Act) documents what care was delivered — the service type, worker, recipient, date, and visit time. The 80/20 rule asks where the Medicaid payment went after that care was delivered. Producing a clean compensation ratio requires connecting three data streams: EVV data (what service was delivered), billing data (what Medicaid paid for it), and payroll data (what the worker who delivered it earned). Agencies with integrated platforms can produce this calculation efficiently. Agencies running disconnected EVV, billing, and payroll systems face a significant manual reconciliation burden. Our guide to Medicaid waiver billing in HCBS covers the billing side of this data infrastructure in detail.
Ankota's mission is to enable the Heroes who keep older and disabled people living at home to focus on care because we take care of the tech. If you need software for home care, EVV, I/DD Services, Self-Direction FMS, Adult Day Care centers, or Caregiver Recruiting, please Contact Ankota. And if you're ready to see how the most innovative agencies are using AI to empower their caregivers and automate the rest, meet your new companion at www.kota.care.