MedPAC Recommends 5% Payment Cut for Home Health

After declaring home health margins were too high, members of the Medicare Payment Advisory Commission (MedPAC) voted to affirm their recommendation to lower home health payments during a recent meeting. The decision builds off the commission’s previous sentiment that home health payments have been too high for several years.

The commission, which provides recommendations to Congress on the Medicare prospective payment system (PPS), recommended a 5% payment reduction for home health agencies in 2018 followed by more rebasing to address what the commission calls high margins.

The cut would result in less spending, of between $750 million and $2 billion in 2018 and $10 billion in savings over five years. The recommendation was passed unanimously.  However, Congress and policymakers are not required to act on MedPAC recommendations, and often do not.


For example, home health payments will be cut $130 million, or 0.7% in 2017.

Home health margins were “especially high” over the last 10 years, MedPAC members said during the January meeting, citing averages of more than 15% even after rebasing and payment adjustments were made. Since 2001, average margins for home health have equaled 16.5% under the prospective payment system (PPS), according to MedPAC.

In 2015, margins for home health agencies were 15.6%, according to MedPAC, with marginal profit reaching 18.1%. The commission estimated margins for 2017 will reach 13.7%, on average.


The margins are for Medicare only; they are not reflective of a home health agency’s overall profit margin.

Beyond high margins, MedPAC has taken issue with the rising number of therapy visits provided in an episode, which increases payments.

“The Commission and others have noted that this incentive distorts decisions about care, and the higher rate of volume growth for these episodes may reflect financial incentives and not patient needs,” Evan Christman, MedPAC policy analyst, said.

As such, the commission recommends ending therapy visits as a payment factor and instead basing payments “solely on patient characteristics.”

The commission also voted on its hospice recommendations for payments, proposing a decrease in spending between $250 million and $750 million over one year, and less than $1 billion over five years.

MedPAC also continued its ongoing discussion on its still-developing proposal for a comprehensive overhaul of post-acute and fee-for-services payment system. The commission debated questions such as whether a transition period would be needed.

Written by Amy Baxter

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