This article is a part of your HHCN+ Membership
Medicare Advantage (MA) companies have faced an unfavorable rate and regulatory environment over the last couple of years. That has given home health providers hope that MA penetration may cool off. It also has given them a bit more leverage in negotiations.
Plans will see a 0.16% decrease to core payments in 2025, a second-straight unfavorable rate update. Some of the largest MA administrators – such as Humana Inc. (NYSE: HUM) and UnitedHealth Group (NYSE: UNH) – will also see a reduction in star ratings across their networks, though both are fighting to undo those reductions.
With the Centers for Medicare & Medicaid Services (CMS) reducing home health payment rates in traditional Medicare, providers have been banking on an MA penetration plateau. And while there was evidence to suggest that plateau was coming, another Trump administration could change things.
MA plans generally pay far less for home health services than traditional Medicare, with plans often failing to update rates to cover the cost of care.
It’s expected that the Trump administration will be friendlier to MA companies, meaning those insurers could begin expanding again, as opposed to contracting.
“It seems that the Trump administration has talked more favorably about the Medicare Advantage players, which could affect home health,” Addus CEO Dirk Allison said Tuesday. “Managed care, they don’t pay quite what fee-for-service does.”
Another Trump administration will likely mean some positives and some negatives for the home-based care space. But in home health care specifically, an administration more friendly to MA could be a near- and long-term blow to providers.
I dive further into that subject in this week’s exclusive, members-only HHCN+ Update.
A tailwind for MA plans
President-elect Donald Trump nominated Dr. Mehmet Oz to lead CMS this week.
When he ran for a seat in the Senate two years ago, Oz – who will need to be confirmed to become CMS’ top leader – was very supportive of MA, even pushing for a “Medicare Advantage For All” plan.
Generally, the tea leaves suggest a friendlier MA environment is coming, whether Oz is confirmed or not.
All the while, CMS is currently sticking to its guns on home health payment rate cuts in traditional Medicare. The agency is also standing pat when it comes to ignoring MA payment for home health services.
While traditional Medicare rates are considered solid in a vacuum, with MA payment included, many providers have profit margins hovering around zero.
“Medicare does not set payments to cross-subsidize other payers, as we are mindful of our obligation to be responsible stewards of the Medicare Trust Funds,” the home health final payment rule read. “Many commenters stated outright that Medicare should consider all-payor margins when evaluating the accuracy of the Medicare home health payment rate. While CMS analyzes Medicare margins as a financial gauge overall to the soundness of the home health industry, we again note that 42 CFR 413.5 states that ‘costs attributable to other patients of the institution are not to be borne by the program’ – ‘the program’ being Medicare. In other words, when setting payment rates, CMS is not required to consider any shortfalls or deficits created by the payment rates of insurance programs covering other patients.”
With CMS “not considering shortfalls or deficits,” the home health benefit is at risk. The number of active home health providers has declined in recent years, while the referral rejection rate has skyrocketed.
While the Medicare Payment Advisory Commission (MedPAC) suggests traditional Medicare rates for home health services should be reduced, it, too, does not consider MA payments. It does consider all payers in other sectors, however.
In recent years, providers have had to begin walking away from MA plans in favor of business sustainability.
“With the MA plans, it’s just becoming incredibly difficult,” Jeanne Byl, owner and COO of Interim HealthCare Great Lakes, told me last month. “And quite honestly, we’ve had to walk away.”
Leaders from Interim HealthCare Great Lakes told me that one plan had offered them a rate increase for the first time in a decade recently. That increase was just 3%.
When plans began to leave markets, however, home health providers hoped for a respite from penetration.
Many MA plans offer incentives to their negotiators to keep all costs down, which hurts home health providers. But it makes sense, in theory: the less MA plans pay providers, the more profit they can keep at the end of the year.
I’ve argued in the past that this thinking is short-sighted, however. As home health providers struggle financially, walk away from MA plan contracts or shutter entirely, home health availability will dwindle.
If MA plans have fewer avenues to send beneficiaries down for home health services, their post-acute costs are likely to go up.
The plans that pay adequately for services – or even set up risk-sharing opportunities for providers – could gain an advantage. More home health care, after all, means more cost savings overall.
“You actually want more home health,” CareCentrix CEO Steve Horowitz told me earlier this year. “You want your home health costs to go up. You don’t want to overpay for anything, but you want your home health cost to go up, because it’s a cheaper setting than if you were taking care of the patient in the facility.”
But for the most part, providers have not had success selling that idea.
More oversight and meager rate updates for MA plans meant more contracting – and possibly a rethinking of their post-acute strategies.
With a more MA-friendly administration, however, that may be out the window.
What providers may see, though, is a return to reliable rate updates in traditional Medicare. During Trump’s first term, providers saw regular increases to payment in home health care.
Even if cuts are done away with in traditional Medicare, however, the overarching problem remains. One side of the house is subsidizing the other side of the house.
And, if the percentage of Medicare beneficiaries under MA plans continues to increase, home health providers’ “generational battle” with managed care will continue.
Companies featured in this article:
