From the desk of Katie Alijewicz and Brittani Trujillo.

CMS State Medicaid Director Letter SMD #SMD 26-005 and Medicaid Access Rule: Home and Community-Based Services Access Metrics Technical Specifications and Resource Manual clarify the HCBS direct care worker compensation reporting requirement at 42 CFR 441.311(e). States must submit readiness reports by July 9, 2027, and the annual reporting requirement applies beginning July 9, 2028, using data collected from January 1 through December 31, 2027. States therefore need reliable collection processes in place throughout 2027.

The guidance defines covered programs, services, workers, compensation expenses, exclusions, and treatment of self-directed, facility-based, managed care, and complex payment arrangements. Direct care workers may include direct support professionals, personal care attendants, certain nurses, home health aides, nursing assistants, employment and behavioral support staff, and qualifying clinical supervisors whose work directly relates to beneficiary care.

CMS requires states to report five percentages in the table below for each of the four service types: homemaker, home health aide, personal care, and habilitation.

Because CMS does not allow sampling for this reporting requirement, states must establish processes capable of capturing complete reportable data across applicable services, providers, and delivery systems. The requirement applies to applicable services furnished under sections 1915(c), 1915(i), 1915(j), and 1915(k), and under section 1115(a) demonstrations that include HCBS. It does not apply to 1905(a) state-plan personal care, home health, and case management services.

Why This Matters

For many states, claims and encounter data alone will not support compliance. Reporting will require provider-level compensation, benefits, payroll tax, service-allocation, facility-cost, and exclusion data held across provider payroll systems, MCO processes, and state systems. Below we outline a four-pronged readiness assessment to support states in meeting this reporting requirement.

1. State Policy Readiness

A foundational step is identifying which services are subject to reporting requirements and how existing waiver services map to CMS reporting requirements. State agencies may need to:

• Inventory services under applicable 1915(c), 1915(i), 1915(j), 1915(k), and 1115 HCBS authorities and map state definitions to the four CMS reporting categories.
• Define allocation methods for bundled services, alternative payment models, incentives, and value-based arrangements.
• Identify excluded self-directed services and applicable exclusions for certain Indian Health Service and Tribal health program providers under 25 U.S.C. § 1641.
• Assign responsibility for policy, provider communication, data collection, validation, and reporting across Medicaid, operating agencies, waiver administrators, and managed care programs.

CMS encourages alignment with the 1915(c) Core Service Definitions and HCBS Taxonomy. PCG can help states map services, document a defensible classification method, and establish cross-agency governance and decision rights.

2. Provider Reporting Readiness

Provider organizations are the source of several data elements needed for reporting. States will need to determine whether providers can consistently report information such as:

• Direct care worker wages, salaries, overtime, benefits, other remuneration, and applicable employer payroll taxes.
• Medicaid payments and compensation by applicable service, including allocation of direct-care versus administrative or supervisory work.
• Payments and compensation by facility-cost category.
• Payments and costs for required training, travel, and personal protective equipment that must be excluded from the numerator and denominator.
• Documentation supporting reported amounts, allocations, and adjustments.

States can work with PCG to assess provider capacity, define data elements, develop standardized reporting tools and instructions, establish validation controls, and test collection approaches before statewide implementation. Engaging providers early will help states identify reporting limitations before finalizing collection systems and processes.

3. Managed Care Plan Readiness

Managed care adds a reporting layer because the denominator is the plan’s payment to the provider, including applicable state-directed payments. States need a consistent method to obtain, validate, and integrate provider payment and compensation data and should assess whether:

• Managed care plan-provider contracts or other reporting mechanisms need to be updated to establish applicable data-collection and reporting expectations.
• Providers and managed care plans can consistently collect, exchange, and report the required data.

PCG can help states translate federal requirements into MCO contract terms, common data standards, readiness assessments, and reconciliation and validation processes.

4. State Data Infrastructure and Governance Readiness

To prepare to gather all of the needed data, states should identify sources, submission and validation methods, storage location, and integration process. States should:

• Determine whether claims and financial data can distinguish included and excluded services and support reporting by service type, self-direction, and facility-cost category.
• Reconcile provider and MCO reports to state payment, claims, or encounter data and apply adjustments and exclusions to the correct service and period.
• Decide whether an interim or ongoing survey is needed and how FFS and managed care data will be integrated.
• Evaluate interfaces, validation edits, calculation logic, reporting functionality, error accountability, and audit-trail requirements.

States can strengthen their data infrastructure and governance with PCG’s support in documenting data flows and requirements, evaluating collection options, developing validation and calculation logic, supporting testing and implementation planning, and establishing ownership, documentation and exception standards, data-quality controls, allocation methods, and audit-ready records. Taken together, these activities can help states identify where required information resides today, where gaps remain, and which policy, contractual, operational, and system changes should be prioritized.

What States Should Do Now

A comprehensive readiness assessment can help states identify gaps and develop an implementation roadmap covering policy, provider and MCO engagement, data and systems, contracting needs, responsibilities, and federal milestones—with support from PCG at every step.

Beginning this work now can give states time to test reporting methodologies, address data-quality concerns, and establish a repeatable process before annual reporting begins. Connect with our team to discuss how PCG can help your state prepare.

(800) 210-6113 | [email protected] | Community LTSS Services | Aging & Disability | PCG

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