If you’re a home care agency operating in Texas, the new HHSC payment model that took effect on September 1, 2025, is more than just a policy shift—it’s a complete overhaul of how you’re funded, how you report, and how you structure your payroll.
In Episode 13 of The Home Care Experience with T&A, Amy Taylor, Principal Consultant at Knight Home Care Financial, breaks down exactly what’s changed and what agencies need to do next to remain compliant and financially stable.
From new reimbursement mechanics to the truth behind the $13 wage rule, this guide offers clear explanations and practical strategies every provider needs to hear.
What Changed?
On September 1, Texas officially eliminated the Attendant Compensation Rate Enhancement Program (ACERS)—a tiered, opt-in system that provided higher reimbursement for providers meeting certain wage benchmarks.
In its place, HHSC implemented a flat-rate reimbursement structure that applies to all providers across the board. While the rate is higher than the historical baseline, it comes with new compliance requirements, including:
- A statewide $17.13/hour reimbursement rate for PHC non-priority services
- A 90% spend requirement tied specifically to wages and payroll costs
- A $13/hour average wage requirement (not a minimum wage)
- A transition to the STEPS cost reporting system
The $17.13 Reimbursement Rate—Breakdown
Effective 9/1/2025, Texas Medicaid providers are reimbursed at $17.13/hour for non-priority personal care services. This figure includes two key components:
- $14.82 allocated to attendant compensation (which includes $13/hr wages + 14% for payroll taxes and benefits)
- $2.31 allocated to support services, such as admin, overhead, and operations
What’s critical to understand: 90% of that $14.82 must be spent directly on attendants—or you risk being added to a new public-facing compliance list.
The “$13 Wage Rule” Isn’t What You Think
There’s been widespread confusion about the $13/hour figure. Contrary to what some contract monitors or case managers may have told agencies, this is not a minimum wage.
Instead, it’s an average wage requirement calculated across your entire attendant workforce.
Amy explains that many agencies made the mistake of immediately raising all attendant wages to $13/hour—only to later discover they were unnecessarily cutting into their margins. Under the rule, you can (and should) use tiered pay scales, tenure incentives, or performance-based bonuses to achieve the $13 average while maintaining financial flexibility.
What’s the 90% Spend Rule—And Why It Matters
To stay in compliance under the new model, 90% of your $14.82 wage allocation must be spent on:
- Taxable wages for attendants
- Payroll taxes (FICA, SUTA, FUTA)
- Employer-paid health, dental, or vision benefits
Notably, mileage is no longer included in this calculation. If you offer mileage reimbursements, that expense now counts toward your remaining 10%—the admin/support portion—not the 90% direct wage requirement.
While there’s no immediate financial penalty for missing the 90% threshold, failing to meet the benchmark will land your agency on a public compliance list, already dubbed by many as the “naughty list.”
This list is submitted to Congress and will include your provider name and number, creating both reputational and strategic risks.
Inside the New STEPS Cost Reporting System
Another major change is the rollout of the STEPS cost reporting platform, which features pre-populated data pulled from payroll and financial records.
While the goal is to streamline submissions and reduce errors, Amy cautions providers not to blindly trust automation. You must still manually verify that your data is accurate and that your reported wages reflect your actual compensation strategy.
Strategic Implications for Agency Leaders
If you’re running a home care agency in Texas, here’s how to think proactively:
- Don’t treat $13/hour as a flat minimum. Use wage diversity to reward tenure, location, or performance. Flexibility is key.
- Know what qualifies toward your 90%. Mileage, gift cards, and some stipends won’t count unless structured properly (e.g., as taxable wages).
- Monitor your margins. If you overspend on wages to meet the $13 average, you may cannibalize your service support component or struggle to cover admin costs.
- Use the 10% wisely. That sliver is your only buffer for profit, administrative overhead, and any additional employee incentives.
- Educate your team. Many wage and policy decisions were based on misinformation. Clear up the confusion now before it costs you later.
What About Providers Outside Texas?
If you’re operating in another state, don’t tune out.
Amy points out that Texas is effectively a pilot market for what many believe will be a national trend in Medicaid reform. Similar wage-based, data-driven reimbursement models are already being discussed in other states and at the federal level.
Final Takeaway: This Isn’t Just a Policy Change—It’s a Business Model Reset
This shift is about more than compliance—it’s about protecting your business model, your staff, and your sustainability in the face of increased oversight.
If you’re proactive and strategic, your agency can thrive. But staying uninformed or relying on outdated practices could cost more than just money—it could cost your agency’s future.
Need help interpreting the numbers, optimizing your payroll, or preparing for STEPS reporting?
Knight Home Care Financial is here to help.
We specialize in compliance-aligned financial consulting for Medicaid-funded home care providers. From wage modeling to cost report coaching, our team helps agencies make informed, strategic decisions.
