Freeze Home Health Payments, Medicare Advisors Again Tell Congress

Home health Medicare payments should not increase next year, considering providers’ unreasonably high margins, a prominent panel of advisors has again stated in its annual report to Congress.

Each year, the Medicare Payment Advisory Commission (MedPAC) recommends how Congress should shape Medicare policy. Lawmakers are not obligated to implement the commission’s ideas — and they often do not — but Medicare-certified providers still use the report as an indication of what changes might be considered on Capitol Hill. 

As it did in last year’s annual report, MedPAC drew attention to home health agency margins in the report it issued last week. Freestanding home health agencies (HHAs) averaged a 17% margin on Medicare payments between 2001 and 2013, and the commission estimates that the margin this year will be 10.3%.


“The high margins of HHAs since the start of the PPS [prospective payment system] in 2001 indicate that the payment rates assumed more services than were actually provided,” the current report states.

With this in mind, MedPAC reiterated its call for a lower base payment rate, as well as no market basket update for 2016. The market basket update is a payment adjustment based on how much providers are expected to spend on goods and services that are needed to render care, taking inflation into account.

For calendar year 2015, the home health market basket percentage increase was 2.6%, but this was reduced to 2.1% due to adjustments mandated by the Affordable Care Act. The Centers for Medicare & Medicaid Services also is implementing a phased, four-year rebasing of the home health PPS rates. This and other factors meant that despite the market basket increase, home health agencies were projected to experience an overall $60 million (0.30%) reduction in Medicare payments this calendar year.


Officials in the government and the post-acute sector have in the past criticized the way MedPAC calculates and considers margins in its recommendations, saying the group does not take into account how high Medicare rates might offset low payment rates from Medicaid and other payors. 

MedPAC also renewed several other home health recommendations in its latest report, including:

  • Therapy payments should be based on patient characteristics rather than number of therapy visits
  • Payments should be reduced for home health providers that have high risk-adjusted rates of hospital readmissions
  • Beneficiaries should have a co-pay for home health care that is not preceded by a hospital or post-acute facility stay
  • Federal watchdog agencies should do medical reviews focused on counties with “aberrant” home health utilization and take appropriate enforcement actions, including payment suspensions
The way Medicare reimburses for post-acute care needs comprehensive reform, so that payments are based more on patient characteristics and less on the care setting where services are provided, MedPAC consistently has recommended.
Certain steps have been taken in this direction, such as a move toward equal payments for certain services provided by skilled nursing facilities and inpatient rehabilitation facilities. However, “fundamental payment reforms” for post-acute care remain “on the distant horizon,” the report states.
Click here to access the complete document.

Written by Tim Mullaney

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