MedPAC Unanimously Recommends Home Health Payment Rate Cuts

In a unanimous vote Thursday, the Medicare Payment Advisory Commission (MedPAC) recommended that the Medicare base payment rate for home health care be reduced by 7% for CY 2024.

This recommendation is in line with previous recommendations by the commission over the years.

The implications of a 7% reduction would mean, among other things, a decrease in government spending by $750 million to $2 billion over one year, according to the commission’s members.

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“For beneficiary and provider implications, we expect that access to care should remain adequate and it should not affect the willingness of providers to serve beneficiaries,” Evan Christman, a senior analyst for MedPAC, said during the commission’s public meeting Thursday. “But it may increase cost pressure for some providers.”

The commission — established by the Balanced Budget Act of 1997 — regularly meets as part of its mission to inform Congress on Medicare spending and policy.

According to MedPAC data, Medicare spent $16.9 billion on home health services in 2021.

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There were over 11,400 agencies providing home health services to 3.3 million beneficiaries.

Elsewhere in its report, MedPAC suggested that access to home health care is adequate, citing that 98% of beneficiaries live in a zip code with two or more agencies in 2021.

“We saw a total volume decrease but a per capita volume increase,” Christman said. “Agencies had a positive Medicare marginal profit of 25.9% in 2021. For access to capital, the large, for-profit agencies continue to have adequate access to capital and we expect this to continue. The all-payer margins were positive in 2021 at 11.9%.”

Source: MedPAC

MedPAC was not able to measure the quality of care, Christman said, due to the pandemic and public health emergency-related policies.

Margins for Medicare payment and home health costs were 24.9% in 2021, with a median margin of about 28%.

Broadly, MedPAC has long pushed back against high home health margins, though the industry itself says the commission’s analyses are deeply flawed and unfairly inflated.

Because of that, MedPAC has a history of recommending home health cuts. Home health providers vehemently disagree with those recommendations, noting inflation, recruitment woes, needed investments and lesser payouts for services from Medicare Advantage plans.

Source: MedPAC

Apart from home health recommendations, MedPAC also voted to approve recommendations to reduce the 2023 Medicare-based payment rates for skilled nursing facilities by 3%, the hospice aggregate cap by 20% and inpatient rehabilitation facilities rate by 3%.

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