Home Health Medicare

MedPAC’s 2011 Home Health Reform Recommendations

In 2009, 3.3 million Medicare beneficiaries used home health.  In the past few years, the home health expenditure growth rate has outpaced Medicare spending in all other areas.  This finding is likely correlated with the 9.7% increase in the number of home health agencies between 2008 and 2009.  How should Medicare reform home health to improve outcomes and reduce spending.  A post by William Dombi of the National Association for Home Care & Hospice (NAHC) summarizes MedPAC’s recommendations.


  1. Eliminate any inflatinon update in 2012. In 2009, freestanding home health agency margins were 17.7% (although hospital-based home health agency margins were negative). Margins have average 17.1% since 2011.  With such large margins, MedPAC believes an inflation payment update is unnecessary.
  2. Eliminate the therapy utilization threshold. MedPAC staff belive that “the current case-mix system overpays for higher case-mix weighted services such as episodes with therapy care and underpays for many non-therapy related episodes.” Instead, the case-mix adjustment should rely on patient characteristics to set payment for both therapy and non-therapy services. The NAHC has long criticized using therapy thresholds for the purpose of case mix adjustment.
  3. Establish risk corridors. This recommendation would modify the payment system to included more of a mix of prospective and cost-based reimbursement. “The ‘corridors’ are effectively limits on profit and losses that come from an imprecise system or abusive clinical practices that define care needs based on a provider’s desired margin.” The GAO proposed this alternative a number of years ago.
  4. Beneficiary cost sharing. To reduce the rise in the number of home health episodes per beneficiary–many of which may be unnecessary–MedPAC recommends some form of cost sharing. In particular, since the growth in home health spending is primarily driven from community-admitted patients, the copayment would apply only to community-admitted patients rather than hospital-admitted patients. One suggestion for the copayment amount was $300 per episode. “..Medigap insurances would be prohibited from covering the cost of any home health copayment.”

The MedPAC commissioners will meet in January 2011 to vote on the recommendations and will issue a report to Congress in March 2011.

Additional Statistics

  • Number of home health beneficiaries: 3.3m
  • Number of home health agencies: 11,300.
  • Growth rates (2008-2009)
    • Users: 3.8%
    • Number of episodes: 7.5%
    • Episodes/user: 4.5%
  • Admission Source (2009)
    • Community-admitted: 64%
    • Hospital-admitted: 36%


  1. Your article makes recommendations on ways to reduce Medicare expenditures in the home health care field but it’s unclear whether all of the 11,300 home health care agencies your article mentions accept Medicare.

    My understanding is that very own health care agencies accept Medicare because of the tremendous amount of paperwork, regulations and red tape that are required in order to receive payments from Medicare.

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