Following 7% Home Health Cut Recommendation, MedPAC Releases Annual Report To Congress

Back in January, the Medicare Payment Advisory Commission (MedPAC) voted unanimously to recommend a 7% payment cut for home health agencies in 2024. The commission officially released its report to Congress on Wednesday.

Broadly, the report covers Medicare payment policy, including the Medicare fee-for-service payment systems for home health care.

Roughly 3 million Medicare fee-for-service beneficiaries received care in 2021, and the program spent $16.9 billion on home health services, according to the report.


In total, 11,474 home health organizations were part of the Medicare program.

MedPAC deemed access to home health care adequate in 2021.

Specifically, more than 98% of Medicare beneficiaries lived in a zip code where there were at least two home health agencies that served the area. Also, 87.6% beneficiaries lived in a zip code where five or more agencies served the area.


From 2020 to 2021, there was an 0.8% drop in the number of agencies, which was a rate lower than past years.

“The slower decline in the supply of [home health agencies] suggests that neither the coronavirus pandemic, nor the major revisions to the home health prospective payment system implemented in 2020 had a significant impact on [home health agency] supply,” MedPAC wrote in its report.

When looking at the volume of services, the amount of fee-for-service beneficiaries that were receiving home health care saw a 1.1% drop. The volume of 30-day periods also went down 2.9%.

In general, fee-for-service saw an enrollment decline due to more beneficiaries enrolling in Medicare Advantage.

“As a result, the number of 30-day periods per 100 [fee-for-service] beneficiaries increased by almost 1% in 2021, and the share of [fee-for-service] beneficiaries using home health care increased to 8.3%,” MedPAC wrote. “The average number of in-person visits per 30-day period declined by 4%, but some of the decline could have been offset by greater use of virtual visits through telehealth.”

In terms of quality of care in 2021, the mean agency rate of successful discharge to the community from home health agencies was 52.2%, and the mean agency rate of hospitalizations was 18.2%.

“The pandemic and policies related to the public health emergency confound our assessment of trends in both quality measures,” MedPAC wrote. “Further complicating assessment, the home health payment system now uses a shortened unit of payment — a 30-day unit rather than 60 days — which changes the period used in the post-discharge hospitalization measure.”

The average cost per 30-day period dipped by 2.9% in 2021, which shows a decline in the number of visits per 30-day period. At the same time, Medicare’s payment per in-person visit jumped by 17.7%.

Plus, In 2021, Medicare margins for freestanding agencies averaged 24.9%, compared to 20.2% in 2020 and 15.4% in 2019. This was a historic high.

“These high margins indicate that the increase in payments in 2021 far exceeded the increase in costs,” MedPAC wrote. “In aggregate, Medicare’s payments have always been substantially more than costs: From 2001 to 2019, the Medicare margin for freestanding [home health agencies] averaged 16.4%.”

The estimated margin for 2023 is 17%.

Ultimately, MedPAC determined that access to Medicare home health services is adequate in most areas and that Medicare payments are “substantially in excess of costs.”

“Medicare’s payments for home health services are too high, and these excess payments diminish the service’s value as a substitute for more costly services,” the organization wrote. “On the basis of these findings, the Commission recommends that, for [the] calendar year 2024, the Congress should reduce the 2023 base rate by 7%.”

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