Clarified Oct. 5 | Lobbyists and some members of Congress are urging the Biden administration to abandon proposed cuts to home health service Medicare payment rates, arguing the cuts could have a lasting impact on the industry.

A proposed rule, which the Centers for Medicare and Medicaid Services releases annually to set rates for home health services, calls for a 7.96 percent permanent cut to payments starting next year. The cuts are part of the agency’s attempt to implement a new payment system for home health care that Congress passed in 2018.

The cut is intended to bring Medicare spending on home health services in line with what it spent before the implementation of the new payment system, but industry groups argue CMS’s math is wrong — and some members of Congress agree.

“We really see this as a huge issue for home health members, but it’s also a bad policy generally in aging services in this time of this workforce crisis and this time of recovery from the pandemic,” said Mollie Gurian, vice president of policy for LeadingAge, which represents aging services providers. “We’re hopeful that CMS is able to be responsive to that and if not, that Congress is responsive to that because it could lead to closures.”

The Medicare Payment Advisory Commission, or MedPAC, which advises Congress, supports the cuts, writing in its comment letter to CMS that “Medicare has long overpaid for home health care, and lower payments would better align payments with costs.”

A new payment system

The cuts stem from a 2018 law overhauling Medicare’s home health care payment system. The law required CMS to remove therapy visits as a factor in how much Medicare pays for home health visits, with MedPAC warning that the old system was becoming ripe for abuse and overspending.

But Congress also mandated the new system be budget neutral, meaning it can’t spend more on home health payments than it would have under the old system.

The new payment system took effect Jan. 1, 2020, but CMS initially held off on the cuts because of the COVID-19 pandemic.

While the proposed cuts are 7.96 percent, CMS also proposed a 2.9 percent pay increase for home health agencies in 2023, making the net cut closer to 5 percent or about $810 million, according to CMS estimates. In all, traditional Medicare spent about $17 billion on home health services in 2020.

But even a 5 percent cut would be devastating, warn those in the industry.

“The home health sector has not seen reductions like this in decades,” said Joanne Cunningham, CEO of the Partnership for Quality Home Healthcare. “These reductions are so massive that they represent an existential threat for a lot of home health agencies across the country.”

CMS is also asking for feedback on how to claw back about $2 billion in overpayments that the agency says resulted from the new payment system in 2020 and 2021.

Home health agencies have argued the methodology CMS is using is incorrect because it doesn’t control for differences between the old system and the new system or account for the impact of COVID-19 on the industry. They also charge that CMS isn’t being transparent enough about the methodology it is using.

In response to the proposed rule, the Partnership for Quality Home Healthcare commissioned an analysis from a law firm expressing concern with the legality of the proposed rule. The organization said it remains in open dialogue with CMS and is hopeful that the agency addresses its concerns in its final rule.

CMS has been meeting with stakeholder groups but hasn’t tipped its hand on what will be in the final rule, which is expected in November. Its next meeting is with the National Association for Home Care & Hospice and the Partnership for Quality Home Healthcare Oct. 11.

Industry challenges

The proposed cuts come as the industry deals with workforce challenges, with workers leaving for other jobs that are less demanding and that pay more money. Home health groups warn they might have to accept fewer patients, hire fewer people or even close if the cuts take effect.

But MedPAC has argued the cuts would not impact quality of care or impact access for Medicare beneficiaries.

If CMS sticks with the cuts — which it says it is required by law to do — it could set off a dash to block the cuts in the year-end spending bill.

Lawmakers have already introduced legislation that would block CMS from making the cuts through 2026 despite the recommendation from MedPAC.

“It is imperative that we continue to protect home health services from cuts,” Rep. Terri A. Sewell, D-Ala., said in a press release announcing the bill in July. The legislation is co-sponsored by Vern Buchanan, R-Fla., and 34 other lawmakers.

Sen. Debbie Stabenow, D-Mich., introduced a similar bill in the Senate in July with Sen. Susan Collins, R-Maine.

Congress has a track record of stepping in to cancel cuts made by CMS, doing so for the last few years for physicians paid under the Medicare Physician Fee Schedule. 

But for several years, MedPAC has urged Congress to reduce Medicare payments for home health. The commission wrote in a 2022 report that Medicare payments exceeded providers’ marginal costs by nearly 23 percent in 2020.

“Home health care can be a high-value benefit when it is appropriately and efficiently delivered,” MedPAC wrote in that report. “However, 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.”

This report was clarified to reflect the intent of a legal analysis by the Partnership for Quality Home Healthcare.