The regulatory landscape for home health and home care agencies is shifting significantly in 2025. Three major compliance areas demand immediate attention: the CMS 80-20 payment rule, strengthened Electronic Visit Verification (EVV) requirements, and proposed federal labor law changes. Agencies that understand these changes now will be better positioned to adapt their operations and avoid costly penalties.

The 80-20 Rule: Medicaid's New Payment Standard

In April 2024, the Centers for Medicare and Medicaid Services (CMS) finalized the Ensuring Access to Medicaid Services rule (CMS-2442-F), which includes a requirement that will fundamentally change how home care agencies structure their finances. Often called the "80-20 rule," this provision requires that at least 80% of Medicaid payments for certain home-based services go directly to caregiver compensation.

Which Services Are Affected?

The rule applies to three categories of home and community-based services (HCBS):

  • Homemaker services
  • Home health aide services
  • Personal care services

If your agency provides any of these services to Medicaid beneficiaries, you'll need to prepare for this requirement.

Understanding the Timeline

While the final rule was published in 2024, agencies have time to prepare. The compliance timeline spans six years:

  • Year 3: States must report their readiness to collect compensation data from providers
  • Year 4: States begin reporting the actual percentage of Medicaid payments spent on direct care worker compensation
  • Year 6 (2030): The 80% minimum threshold takes full effect

What Counts Toward the 80%?

CMS clarified that the 80% calculation includes worker wages, benefits, and payroll taxes. Notably, costs for training, travel, and personal protective equipment (PPE) are excluded from the calculation entirely. This means agencies should subtract these costs from their Medicaid rate before determining whether they meet the threshold.

Exemptions and Flexibility

The rule includes two important exceptions that states may implement:

  • Hardship exemptions: Providers facing extraordinary circumstances may qualify for relief
  • Small provider provisions: States may establish separate performance levels for smaller agencies that meet defined criteria

Additionally, Tribal health programs and Indian Health Service facilities are exempt from this requirement.

Preparing Your Agency

Even though full compliance isn't required until 2030, agencies should start assessing their current compensation structures now. Calculate what percentage of your Medicaid payments currently goes to direct care worker compensation. If you're below 80%, you'll need to either increase caregiver pay, reduce administrative overhead, or find operational efficiencies elsewhere in your business.

How much is caregiver turnover costing you?

Use our free calculator to see your agency's annual turnover costs — and how much you could save with automated retention.

Calculate Your Turnover Costs
Free Download

2026 Compliance Checklist

Print-ready checklist covering the 80-20 rule, EVV requirements, FLSA changes, and general compliance infrastructure. Keep it on your desk.

Instant access. No spam.

Your checklist is ready!

Click below to open it. Use your browser's print function to save as PDF.

Open 2026 Compliance Checklist

EVV Compliance: Stricter Enforcement in 2025

Electronic Visit Verification has been federally mandated since the 21st Century Cures Act of 2016, but enforcement continues to tighten. In 2025, agencies face stricter audit protocols and reduced tolerance for errors.

What EVV Must Capture

All EVV systems must record six data points for every home care visit:

  • Type of service performed
  • Name of the individual receiving the service
  • Date of the service
  • Time the service begins and ends
  • Location where the service is delivered
  • Identity of the individual providing the service

2025 Enforcement Changes

CMS has strengthened EVV monitoring with several notable updates:

  • Faster data validation: Many states now require EVV data verification within 24 hours of service delivery, down from 72 hours previously
  • Tighter location accuracy: Geographic verification tolerances have been reduced from 1,000 feet to 500 feet in most states
  • Biometric pilots: Several states are testing multi-factor authentication requirements, with broader implementation expected by 2026

State-by-State Variation

EVV implementation varies significantly across states. Five common models exist:

  • Provider choice: Agencies select and fund their own EVV system
  • Managed care plan choice: MCPs choose the EVV vendor
  • State-mandated in-house: A standardized state solution is required
  • State-mandated external vendor: A single vendor is designated for all providers
  • Open model: A preferred system exists with alternative options allowed

Agencies operating across multiple states must navigate potentially different requirements, vendors, and timelines in each jurisdiction.

Penalties for Non-Compliance

The consequences of EVV non-compliance can be severe:

  • Claim rejections and denials
  • Required repayments to Medicaid
  • Increased audit frequency
  • Potential suspension of services

At the state level, failure to implement EVV can result in reduced Federal Medical Assistance Percentages (FMAP), directly impacting state healthcare budgets and creating pressure for stricter enforcement against non-compliant providers.

EVV Compliance Best Practices

To stay ahead of enforcement:

  • Audit weekly: Review EVV logs for errors, missing data, or patterns that indicate systemic issues
  • Train thoroughly: Include EVV protocols in caregiver orientation with hands-on exercises
  • Monitor state changes: Watch for service expansions, vendor transitions, or updated requirements
  • Integrate with billing: Ensure your EVV data flows correctly into your billing processes to prevent claim denials

FLSA Changes: The Companionship Exemption Debate

In July 2025, the Department of Labor proposed a significant change to the Fair Labor Standards Act that could affect how agencies pay caregivers. The proposed rule would reinstate the companionship services and live-in domestic service exemptions for third-party employers like home care agencies.

Understanding the History

In 1974, Congress applied the FLSA to domestic service employees but exempted those providing "companionship services" from minimum wage and overtime requirements. Live-in domestic workers were also exempted from overtime. These exemptions remained largely unchanged until 2013, when the DOL revised the regulations to narrow the companionship definition and prevent third-party employers (agencies) from claiming either exemption.

The 2025 Proposed Rule

On July 2, 2025, the DOL issued a proposed rule that would restore the ability of home care agencies to classify certain caregivers as exempt from federal minimum wage and overtime requirements. On July 25, 2025, the DOL issued guidance instructing field offices to halt enforcement of the 2013 rule immediately.

Why the Change?

The DOL cited several concerns with the 2013 rule:

  • Providers and states imposed hours restrictions to avoid overtime costs, limiting care availability
  • Consumers found it harder to obtain adequate home care coverage
  • The rule did not significantly increase hourly wages or weekly earnings for caregivers
  • Turnover rates remain near 80% in the home care industry

What This Means for Agencies

If finalized, the rule would mean agencies are no longer required to pay federal minimum wage ($7.25/hour) or overtime to workers qualifying for the companionship or live-in exemptions. However, several important caveats apply:

  • State laws still apply: Many states have minimum wage and overtime laws that exceed federal requirements. Agencies in these states must continue complying with state law regardless of federal changes.
  • The rule is not final: Comments were due September 2, 2025, and the final rule may differ from the proposal.
  • Enforcement uncertainty: While the DOL has halted enforcement of the 2013 rule, it reserves the right to enforce specific matters as deemed appropriate.

Practical Considerations

Most home care workers earn well above federal minimum wage (the median hourly wage was $16.12 in 2023), so the minimum wage exemption may have limited practical impact. However, the overtime exemption could significantly affect agencies that schedule caregivers for 40+ hours per week.

Agencies should:

  • Review their state's minimum wage and overtime laws
  • Assess current scheduling practices and overtime costs
  • Wait for the final rule before making major policy changes
  • Consult with employment counsel on state-specific implications

Building a Compliance-Ready Organization

With multiple regulatory changes converging, home care agencies need systematic approaches to compliance:

Designate Compliance Ownership

Assign clear responsibility for monitoring regulatory changes and implementing necessary operational updates. Whether this is a dedicated compliance officer or a shared responsibility, someone needs to own it.

Invest in Systems

Modern compliance often requires technology. EVV systems, payroll software that tracks compensation percentages, and credentialing platforms can reduce manual effort and error rates.

Document Everything

When audits happen, documentation is your defense. Maintain clear records of training, EVV data, compensation structures, and policy decisions.

Stay Connected

Join industry associations, subscribe to regulatory updates, and participate in state advisory groups. The agencies that navigate compliance most successfully are those that see changes coming before they arrive.

Looking Ahead

The 2025 regulatory environment presents both challenges and opportunities for home care agencies. The 80-20 rule will push agencies toward better caregiver compensation. EVV enforcement will demand operational precision. And labor law changes may provide some financial flexibility while creating compliance complexity.

Agencies that proactively adapt to these changes will not only avoid penalties but may gain competitive advantages in recruiting caregivers and winning contracts. Those that wait may find themselves scrambling to catch up.