H0863 Cuts To Residential Habilitation Providers Rates By $22M For FY27

OPPOSE - This bill cuts $21.8 million from residential habilitation services in response to Governor Little’s directive to reduce Medicaid spending by $22 million. Previously approved provider pay increases from 2022 are rolled back following a court order in K.W. v. Armstrong. The bill also caps Medicaid reimbursement rates, increases program oversight, mandates more spending on direct care wages, and shifts greater control over payment rates to the Legislature.

By reducing reimbursements and eliminating planned rate increases, the bill puts significant financial strain on home- and community-based service providers—likely forcing some to close. Fewer providers and downward pressure on wages will make it harder for people with disabilities to live independently, undermining housing stability for vulnerable populations. As a result, demand may shift toward more costly or less appropriate institutional settings.

This legislation was signed into law on March 26, 2026