States are Advancing Homecare’s Next Big Step — Paying Caregivers for Skill, Not Just Time

Home- and community-based services (HCBS) have always supported populations with complex care needs, but demands on the sector have grown significantly over time. The industry reacted by expanding to provide the additional services people require to live safely at home. To meet changing needs, agencies became more sophisticated. They built stronger training programs and invested in caregivers with advanced skills to assist a wider range of clients.

In most industries, that kind of evolution would naturally raise prices: when services become more specialized and staff develop new skills, the value of what they deliver rises. However, standardized service rates have been the historical norm for HCBS reimbursement, leaving less room for rate variation based on caregivers’ specific skills or specialization. 

Today’s homecare providers offer advanced support and address higher-acuity needs, requiring teams with more structured education and greater confidence in areas like care coordination, safety monitoring, and recognizing changes in condition. Reimbursement models that base payment on the hours of care supplied, rather than the level of expertise required during those hours, don’t reflect the work being done. The disconnect makes it difficult for agencies to recruit and retain employees, who may face limited wage and career growth. States that recognize that mismatch and explore tiered Medicaid reimbursement, which ties pay to proficiency, can help move the industry toward better caregiver development and improved care delivery.

Homecare work has advanced alongside need

As the U.S. population grows older and more people choose to age in place, HCBS increasingly depend on caregivers’ skill level as much as the volume of support they provide. Across the industry, homecare providers are expanding into higher-acuity offerings, including post-hospital support, chronic disease assistance, and memory care. These programs — which focus on care coordination, safety monitoring, and specialized training — reflect a growing expectation that caregivers assist clients with more expansive needs.

However, even as caregivers take on expanded responsibilities, agencies continue to face persistent worker shortages. There’s a misalignment between what caregivers are expected to do and what the system recognizes financially.

A caregiver helping with medication routines or supporting a client with dementia often earns the same hourly rate as someone handling basic activities of daily living. If attracting and retaining dedicated professionals is truly a priority, the financial model has to reflect the reality of their work. Providers already understand this and have put plans in place to build highly trained teams that offer excellent care. 

Nearly 70% of homecare providers already offer specialized training programs to their staff. The most common type, disease-specific training, prepares caregivers to handle a variety of higher-need situations, such as dementia and Alzheimer’s care, chronic disease support, and post-acute recovery and rehabilitation. With the workforce already meeting many of these demands, policy and reimbursement structures are beginning to make progress.

States are defining caregiver skills through training standards 

Across the country, states are implementing stricter training parameters that define exactly what it means to be a qualified caregiver. These standards are the building blocks of future skill-based billing frameworks.

New York, for example, requires 40 hours of training to qualify as a homecare aide, followed by an examination within six months of hire. The Department of Health-approved development program covers an array of topics, including injury prevention, pain management, mobility, recognizing changes in a client’s body function, and nutrition and hydration basics.

Caregivers in Washington must complete 75 hours of state-approved training and pass a certification exam, using a structured curriculum designed by the Department of Social and Health Services. The program includes core caregiving skills, hands-on practice, and population-specific instruction tailored to client needs. Oregon has gone further by establishing standardized training, competency requirements, and continuing education expectations for homecare workers, supported by a state-sponsored curriculum.

By setting these guidelines, states are effectively standardizing caregiver skill levels. Once these tiers of expertise are clearly defined, it becomes much easier to attach tiered reimbursement rates to them.

Skill-based billing will benefit the workforce and clients

Transitioning to a skill-based billing model offers a solution to some of the industry’s biggest challenges. For Medicaid programs, adopting tiered reimbursement makes sense for three reasons:

1. It strengthens the caregiver workforce: When caregivers see a direct link between their skills and their paycheck, they have a clear reason to stay in the field. Skill-based billing creates a natural career ladder. It rewards specialization and encourages agencies to invest in ongoing training, giving caregivers a path to grow professionally without having to leave homecare.

2. It improves patient outcomes: Better training leads to better care. Caregivers with specialized knowledge are equipped to manage conditions like dementia, chronic illnesses, and post-hospital recovery. When a trained professional can spot the early warning signs of an infection or a change in a client’s baseline health, they can flag changes early. These proactive measures directly reduce hospitalizations, emergency room visits, and the need for institutional care.

3. It supports value-based care models and industry goals: Medicaid is increasingly focused on rewarding better health outcomes and lowering the total cost of care. Traditional fee-for-service models based strictly on time do not fit well with this goal. Skill-based billing aligns payment with the level of expertise delivered and support delivered in the home, moving the entire system closer to a value-based approach.

Advanced homecare support can lower Medicaid spending

When discussing higher reimbursement rates, the immediate concern is often the cost to state budgets. However, higher-skilled caregivers can help states save money in the long run.

A caregiver who knows how to properly support a client recovering from a stroke — by assisting with daily routines, reinforcing care plans, and recognizing early changes — can help prevent a hospital readmission. Similarly, workers with behavioral health training can help de-escalate situations and alert clinicians when intervention is needed, reducing unnecessary ER visits. Keeping clients safely in their homes prevents premature nursing facility placements, which are far more expensive for Medicaid than community-based care.

Skill-based billing doesn’t necessarily mean higher overall spending — it means smarter spending. By investing upfront in a more highly trained homecare workforce, states can avoid the massive costs associated with acute interventions and admissions to hospitals and residential facilities.

Medicaid pilots could boost industry’s skill-based billing journey

As more states experiment with how they pay for homecare over the next few years, the industry will likely see a surge in Medicaid pilot programs testing these new models. Credential-based billing structures may also become more common, allowing agencies to bill different rates based on certifications — for example, when a certified dementia specialist performs a visit. 

Skill-based billing offers a clear path forward that should be integrated into broader value-based contracts. This approach strengthens the care systems that support millions of Americans who rely on services to age safely at home. The teams who made this movement possible are continuously adapting to the growing complexity of clients’ needs. Now it’s time for reimbursement models to do the same.

Photo: Alistair Berg, Getty Images

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