Home Health Medicare

MedPAC’s Home Health Recommendations

  • The Secretary, with the Office of Inspector General, should conduct medical review activities in counties that have aberrant home health utilization.  The Secretary should implement the new authorities to suspend payment and the enrollment of new providers if they indicate significant fraud.
  • The Congress should direct the Secretary to begin a two-year rebasing of home health rates in 2013 and eliminate the market basket update for 2012.
  • The Secretary should revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services and should no longer use the number of therapy visits as a payment factor.
  • The Congress should direct the Secretary to establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use.

See this post to review MedPAC’s earlier home health recommendations.

High Margins and CMS Response
Home health agencies’ (HHAs’) have high Medicare margins, averaging 17.4 percent between 2001 and 2008 and averaging 17.7 percent in 2009.  Much of these high margins may be due to an increase in the reported number of visits per home-health visit (since more visits per episodes leads to higher Medicare payments per episode). Payments per episode increased 7 percent from 2008-2009.  MedPAC believes that Medicare is currently overpaying for home health services.  To reduce both the margins and the expansion of HHAs, the Patient Protection and Affordable Care Act of 2010 (PPACA) includes the following provisions:

  • 2011—The base rate for a home health episode is reduced by 2.5 percent, and the market basket update is reduced by 1 percent.
  • 2012 and 2013—The market basket update is reduced by 1 percent.
  • 2014 to 2017—A phased rebasing of an episode payment is implemented to lower payments to a level equal to the costs of the average episode. The Secretary may lower payments by no more than 3.5 percent a year, for a cumulative reduction in payments of 14 percent by 2016. These reductions will be offset by the payment update for each year (under PPACA, the update in 2015 and following years will be equal to the market basket adjusted for productivity).

Other PPACA provisions include:

  • The Secretary has authority to halt the enrollment of new HHAs in areas deemed at high risk of fraud.
  • The Secretary also has the authority to suspend payment when unusual patterns are observed for providers or geographic areas.
  • The Secretary now has the  authority to require additional background checks for new providers of services deemed to be at high risk of fraud.
  • Physician review: Beneficiaries will need to have an encounter with a physician or nurse practitioner through an office visit or “telehealth” session when receiving home health care
  • The law passed a 3 percent rural add-on for episodes delivered in rural counties.


Quality is measured using the Outcome-Based Quality Monitoring (OBQM) data set, collected via the Outcome and Assessment Information Set (OASIS). At the Commission’s direction, the University of Colorado is examining two areas for more clinically focused measures: the amount of improvement in walking for beneficiaries who receive home health care after a hip or knee replacement and the hospitalization rate for causes that are potentially preventable.

Including therapy visits as part of PPS

An analysis by the Urban Institute found that the current case-mix system predicted 55 percent of episode-level costs for all non outlier episodes, but the explanatory power dropped to 7.6 percent if the number of therapy visits received was excluded as a case-mix grouping.  The steep decline in explanatory power indicates that the case-mix adjuster is highly dependent on the inclusion of therapy visits provided and that patient characteristics are less important in the predictive power attained by the current case-mix system. This reliance on the amount of services provided is counter to the goals of prospective payment, as the number of therapy visits provided is not a prospective attribute of a patient, but a factor under the control of the provider…The current case-mix system predicted about77 percent of the variation in episode-level therapy costs but less than 1 percent of the variation in non-therapy costs.

Beneficiary Cost Sharing

Adding a beneficiary cost sharing for home health care could be an additional measure to encourage appropriate use of home health services. The health services literature has generally found that beneficiaries consume more services when cost sharing is limited or nonexistent, and some evidence suggests that these additional services do not always contribute to improved health outcomes. Cost sharing may be appropriate for home health care because there are no clear clinical standards for many uses of the benefit…Adding a cost sharing requirement would give beneficiaries some incentive to weigh the value of home health services before accepting them and would dissuade beneficiaries from using it when it has minimal value. Cost sharing would also mitigate incentives in the home health PPS that reward volume.  One drawback, however, is that copayments encourage beneficiaries to use higher cost post acute care settings, such as skilled nursing facilities or inpatient rehabilitation facilities.  Thus, limiting copayments to community-admitted beneficiaries seems more reasonable.

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