The 24 Percent Margin Medicare Just Gave a Raise
MedPAC voted 17-0 in March to cut base rates for skilled nursing, rehab and hospice. Every one of those settings got 2.3 or 2.4 percent in the FY 2027 final rules that finished landing Tuesday. We price the distance between the votes and the rules at about $4.3 billion for one fiscal year, and show where it sits.
If you set the budget for a skilled nursing facility, a rehab unit or a hospice, an advisory commission voted unanimously in March to cut your base rate.
Every one of those settings got a raise instead.
Tuesday's IPPS final rule closed out the FY 2027 set in the Federal Register. Five payment systems, five updates, all of them between 2.3 and 2.4 percent.
Now put the March votes next to them.
What the Votes Said
MedPAC's March 2026 report carries four recommendations aimed at post-acute care, and the commissioners were not close to split on any of them.
All four ask Congress to move the 2026 base rate:
- Skilled nursing facilities, down 4 percent
- Home health agencies, down 7 percent
- Inpatient rehabilitation facilities, down 7 percent
- Hospice, eliminate the update entirely
Each one 17-0. No abstentions, nobody absent.
The arithmetic underneath is the margin table. Freestanding SNFs ran a 24 percent FFS Medicare margin in 2024, up from 22 the year before, on payments per day rising 4.9 percent against costs per day rising 2.3. Freestanding home health agencies, 21.2 percent. IRFs, 17.1 percent overall, which splits into 25.0 for freestanding facilities and 4.1 for hospital-based units. Hospice, 8.0 percent in 2023.
And general acute care hospitals: -12.1 percent.
That last one is the setting MedPAC did not ask Congress to cut.
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