The Medicare Payment Advisory Commission (MedPAC) recommended that the Medicare base payment rate for home health care be reduced by 7% for CY 2025.
The recommendation is another chapter in the contentious relationship between the commission and the home health industry. It also recommended that Congress eliminate any payment updates for hospice providers in 2025.
MedPAC — established by the Balanced Budget Act of 1997 — regularly informs Congress on Medicare spending and policy.
Repeatedly, its recommendations have come down hard on the home health industry.
According to MedPAC, there were about 11,300 home health agencies in 2022 that served about 2.8 million fee-for-service Medicare beneficiaries. In total, MedPAC estimates Medicare spent $16.1 billion on home health services in 2022.
MedPAC’s main reason for the 7% reduction is because it believes margins in home health are too strong.
Specifically, MedPAC cited home health margins at 22.2% on average — higher than the long-term average of 16.8% since 2001.
Evan Christman, a senior analyst at MedPAC, reported during a public hearing this month that the rise in margin is indicative that Medicare fee-for-service is paying significantly more than the cost.
One factor contributing to these supposed margins is a significant drop in the number of visits per 30-day period. Since the introduction of the Patient-Driven Groupings Model (PDGM) in 2020, these visits have decreased by over 15%, according to MedPAC.
That reduction includes a 3.5% drop between 2021 and 2022.
“Several factors may account for this decline, but an important one may be that the decline and the share of fee-for-service beneficiaries receiving inpatient hospital services — which are common precursors to home health — have declined on a per capita basis by 5.6% since 2020,” Christman said.
Home health providers, as usual, took exception to MedPAC’s calculations and their overall philosophy after the recommendation.
“MedPAC continues to contemplate only traditional Medicare rates and margin,” Choice Health at Home CEO David Jackson told Home Health Care News in an email. “That is a considerable disservice to the over 11,000 Medicare licensed and certified agencies across the nation that are providing care to beneficiaries under both Medicare and Medicare Advantage programs. While I understand the historic stance that Medicare should not supplement cost of care for non-Medicare patients, that premise seems inapplicable given the purpose of Medicare Advantage programs to provide services to the Medicare-eligible population in lieu of Medicare.”
If MedPAC continues to use its current approach to calculating margins in home health care, Congressional members and their staff “will continue to see a partial and distorted picture of reality,” VitalCaring President Luke James also told HHCN in an email.
“MedPAC needs to be instructed to include all Medicare reimbursements and related costs rather than just part A,” James said. “Part C — or Medicare Advantage — now represents more than half of the Medicare beneficiaries in our country. Home health providers didn’t ask for this reality nor did they cause it. But the industry is reeling from the numerous negative implications this reality has caused.”
Association leaders from the Partnership for Quality Home Healthcare (PQHH) and the National Association for Home Care & Hospice (NAHC) called MedPAC’s approach “flawed” and its conclusions “misleading.”
“Policymakers need a holistic, complete analysis that accurately illustrates the state of home health delivery across patients and payers,” PQHH CEO Joanne Cunningham said in a statement. “In particular, policymakers need to seek deeper analysis from MedPAC and other government policy entities about the access challenges happening right now that are compromising this important delivery system.”
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