The Medicare Payment Advisory Commission (MedPAC) for the second year in a row called on Congress to reduce Medicare fee-for-service home health payments by 7%.

In addition, the commission reported that the number of home health care agencies (HHAs) participating in Medicare increased in 2023, even though the number of beneficiaries decreased.

In regards to its recommended rate cuts, MedPAC cited high margins for HHAs, which it claims have experienced overpayments for more than 20 years. The commission projects that aggregated FFS Medicare margins for HHAs will reach 19% in 2025.

In 2023, approximately 2.7 million FFS Medicare beneficiaries received home health care, with the program spending $15.7 billion on these services. That year, over 12,000 HHAs were certified to participate in Medicare. While there was an overall increase in the number of HHAs, this was largely attributed to a rise in agencies located in Los Angeles County, California. Outside of that county, the number of participating agencies actually declined by 2.8%.

The report also noted significant fluctuations in the annual cost per 30-day period since 2020. In 2021, the price for a 30-day period decreased by 2.9%, but it increased by approximately 3.4% in both 2022 and 2023. These increases were primarily due to higher costs per visit, though they were partially offset by a decline in in-person visits during each full 30-day period.

Despite the rising costs, FFS Medicare margins for freestanding HHAs averaged 20.2% in 2023, indicating that FFS Medicare payments far exceeded costs that year. Additionally, the report revealed a 1.8% decline in the number of 30-day periods of care per FFS Medicare beneficiary in 2023. This decrease was associated with reduced use of home health care following discharges from acute care hospitals, a trend that has been consistently observed since 2020.

“Our review indicates that FFS Medicare payments for home health care are substantially in excess of costs,” MedPAC stated in the report. “Home health care can be a high-value benefit when it is delivered efficiently and appropriately, but these excess payments undermine that value.”