MedPAC Affirms ‘First Step’ Toward New Payment System

The way home health agencies are reimbursed by Medicare could soon change, as members of the Medicare Payment Advisory Commission (MedPAC) voted to move ahead with an overhaul of the current payment system for post-acute care settings.

The commission recommends to Congress how much providers should receive in Medicare payments every year, but the commission’s April meeting affirmed its plan to create a single payment system across all post-acute care services. The aim of the new system is to reduce health care costs, improve care management and move away from the fee-for-service model in general.

“We want the policies to encourage care coordination and high quality care for beneficiaries, and at the same time, we don’t want the program to incur unnecessary spending,” Carol Carter, Ph.D. and principal policy analyst on the commission, said during the meeting. “….Given the shortcomings of fee-for-service, Medicare needs to move towards episode-based payments as soon as feasible.”


MedPAC has been tasked to prepare a report that considers the design of a prospective payment system (PPS) that spans the four post-acute care settings: home health agencies, skilled nursing facilities, inpatient rehabilitation faculties and long-term care hospitals. The passing of the IMPACT Act of 2014 defines the commission’s duty to study and create a PPS. The first report is due to Congress in June.

Under the current health care system, Medicare pays very different reimbursement rates across the four post-acute care settings, even for patients that are similarly treated. MedPAC has previously pointed to high reimbursement rates for home health agencies and called for lower base payment rates, as these settings are generally the lowest cost.

The new payment system, as outlined in the commission’s April 7 meeting, would reimburse for patient conditions, rather than care settings. The commission noted that payment adjustments should be made for home health agencies, to reflect the setting’s “considerably lower costs.”


Several home health industry groups have voiced their concerns over the timeline of some of the provisions of the IMPACT Act, which will require agencies to begin reporting on certain quality measures in 2017.  However, it is unclear how payments for home health agencies will be adjusted under a single payment system in the future.

“The post-acute care is a ripe candidate for that because the cost sharing is different across the settings, but we have not done the work to sort of construct what one might look like,” Dr. Carter said during the meeting on April 7.

A proposal for the final payment model will likely be due in 2023, after the Department of Health and Human Services (HHS) has a chance to review in 2022. The commission agreed a prospective system is achievable by 2023.

MedPAC stated that the new PPS is not the answer to fully moving away from fee-for-service, but new policies that change the payment system in the post-acute world is a step in the right direction and a good base for the future.

“Providers should be at risk for quality and spending over an episode of care, thereby reducing the need for companion policies aimed at dampening undesirable provider responses to fee-for-service,” Dr. Carter said. “Thus, a PAC PPS should not be considered the endpoint but, by beginning to align PAC providers’ payments, represents a good first step towards broader payment reforms.”

Written by Amy Baxter

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