MedPAC Recommends Reduction in Home Health Benefit

WASHINGTON, D.C. (March 18, 2019)—The Medicare Payment Advisory Commission (MedPAC), released its annual March report to Congress on March 15, 2019. MedPAC is required to produce this report; however, Congress is not required to act upon all the recommendations contained in the report and historically has not done so. Chapters 9 and 12 of the Report, Home Health Recommendations and Hospice Recommendations respectively, will be of most interest to NAHC members. A summary of the home health recommendations is provided below.

MedPAC is recommending a 5 percent cut in the Medicare home health base payment rate for 2020 and indicated that this cut would also need to be accompanied by a rebasing of the rate in order to align Medicare payments with providers’ actual costs. MedPAC indicated that the planned revisions to the home health PPS likely will alter the mix and level of services HHAs provide and future rebasing should reflect the new patterns of care. Those data will not be available until mid 2021.

MedPAC cited adequate payment, as evidenced by the following, as the basis for the payment cut recommendation:

• Beneficiaries’ access to care
• Quality of care
• Providers’ access to capital
• Medicare payments and provider’s costs

The Report indicates over 98 percent of beneficiaries lived in a ZIP code where an HHA operated in 2017, and 84 percent lived in a ZIP code with five or more HHAs. NAHC notes this is a decline from the past and no information about the 2 percent of the Medicare population (nearly 1 million people) who do not have any access to home health services is provided in the report.

“The recommendations from MedPAC on home health services and hospice are no surprise as the commissioners voted on them at their January meeting,” said NAHC president William A. Dombi, in response to the report’s release on the afternoon of Friday, March 15. “We disagree with those recommendations in all respects. The March report sets out the MedPAC analysis and basis for its recommendations. As in past years, the report falls short of a full disclosure and presentation of the facts relevant to Medicare payment rates. While there are some improvements in the way data is presented, the report continues to rely on simple averages that do not display the wide range in financials for providers, gives short shrift to hospital-based providers, and essentially ignores the overall financial status of home health agencies and hospices. Notably, the report presents trend analyses that do not focus on recent times in evaluating changes that are vital to whether care is accessible and in full use.”

“We will be working with Congress to provide all the needed information to assure a full understanding of the current state of home health services and hospice care,” said Dombi.

In 2017, freestanding HHAs’ marginal profit—that is, the rate at which Medicare payments exceed providers’ marginal cost—was 17.5 percent according to MedPAC calculations and suggests a significant financial incentive for HHAs to serve Medicare patients. The Medicare margins for freestanding agencies averaged 15.2 percent. The projected margin for 2019 is 16 percent. However, MedPAC also indicates that HHA volume dropped 3.1 percent in 2017, the total number of FFS users also fell slightly, and the average number of episodes per home health user declined by 1.4 percent.

NAHC and other industry stakeholders have had concerns about HHA profit calculations used by MedPAC. MedPAC specifies its marginal profit and Medicare margin calculations are for freestanding agencies only and also provides an average all-payer margin of 4.5 percent. This differs from the NAHC calculation which shows an average all-payer margin of 2 percent. NAHC has asked for an explanation of the MedPAC calculation.

Two factors were cited in the Report for payments exceeding costs:

• Agencies have reduced episode costs by decreasing the number of visits provided, and
• cost growth in recent years has been lower than the annual payment updates for home health care.

It is important to note, however, that home health agencies have incurred cost increases. Some cost increases were referenced by MedPAC as it relates to the PPACA (Patient Protection and Affordable Care Act) changes to home health payment, but MedPAC focused more on the “net payment reduction” impact of the PPACA. Congress has legislated an annual update formula for home health agencies that is intended to reflect cost increases, not simply to raise rates for no valid reason.

In the Report, MedPAC indicates that ensuring appropriate use of home health care is challenging. MedPAC acknowledges that skilled care and the homebound requirement are the primary determinants of home health eligibility; yet, MedPAC continues to focus on length of home health care and a shift in focus to episodes not preceded by a hospitalization. The home health benefit is a skilled care benefit without a durational limit provided the patient meets the skilled care and homebound eligibility criteria Congress constructed, maintained, and reinforced several times that the benefit is not limited in terms of a length of stay. Additionally, health care has changed significantly in the last decade and no longer are hospitalizations the starting point of care.

The quality of care is also addressed in the Report with MedPAC relying more on claims-based measures than provider-reported measures. MedPAC indicates that there has not been a significant change in patients who were hospitalized or received treatment in the emergency room during an episode in 2017, while measures of functional status, such as improvement in walking and transferring, increased.

Throughout the report, MedPAC provides a comparison of financial and utilization data for home health agencies over time. Much of the comparison in trends is for a span of more than 5 to 7 years, not the norm for what most parties would use for trend comparison. Overall, MedPAC estimates that home health margins will remain high for 2019—16 percent margin for freestanding agencies. It also acknowledges that home health care can be a high-value benefit when efficiently and appropriately delivered.

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