Congress Urged to Cut Home Health Medicare Payments

Home health agencies would see their Medicare reimbursements frozen in 2017 and then reduced starting the next year, if policymakers adopt the latest recommendations from the Medicare Payment Advisory Commission (MedPAC). Therapy visits also should no longer be factored into Medicare payments for home health agencies, according to the commission.

“The Congress should direct the Secretary [of Health and Human Services] to eliminate the payment update for 2017 and implement a two-year rebasing of the payment system beginning in 2018,” MedPAC recommends in its Report to the Congress, released last week.

Medicare rates for home health should be reduced because payments are “substantially in excess of costs,” the Congressional report states. Specifically, HHAs’ marginal profit in 2014 was 13.3%, which was 20% higher than the overall Medicare margin, the commissioners estimate. With certain base rate reductions, sequestration cuts, and other policies, the 2016 margin will be 8.8%, according to MedPAC calculations.

The therapy-related changes should go into effect concurrently with the rebasing in 2018, the report states. The current system is broken because it increases payments as the number of therapy visits increases, topping out at 20 visits—this incentivizes providers to maximize therapy visits regardless of patients’ actual needs, according to previous federal investigations cited in the MedPAC report.

Providers have protested that MedPAC considers Medicare margins in isolation, and overall margins are often dramatically lower—in part because other government programs such as Medicaid actually underpay for services.

The value-based purchasing initiative launched this year is a step forward in aligning payments with quality, although improvements could be made in the number of quality measures and other areas, MedPAC reiterates in the new report.

Adjusting payments to rural providers also should be undertaken, the commission argues. Currently, an add-on payment of 3% is tacked on for providers in rural areas. The policy, which expires in 2017, is meant to improve access to care by rewarding providers in remote areas, but utilization patterns suggest that many of the payments are going to areas that do not have any shortage of access to home health care, according to the report. In fact, most of the counties with the highest utilization rates in 2014 were rural.

All 17 MedPAC members voted in favor of the payment recommendation, which previously had been floated. MedPAC advises Congress on Medicare policy, but federal lawmakers are not obligated to follow the panel’s recommendations and often do not.

Written by Tim Mullaney