WASHINGTON, December 27, 2024 — Medicare beneficiaries could soon face reduced access to vital home healthcare services. The Medicare Payment Advisory Commission (MedPAC) on Wednesday approved a draft recommendation to cut the Medicare base payment rate for home health care by 7% starting in calendar year 2027. This proposed cut, if implemented, would reduce Medicare spending on home health by $750 million in a single year and could total $25 billion over five years, according to the National Alliance for Care at Home (the Alliance).
A Looming Threat to In-Home Care
The proposed 7% cut to Medicare home health payments raises concerns about access to care for seniors and individuals with disabilities.
- MedPAC’s recommendation could significantly impact home health agencies’ ability to provide care.
- Industry advocates argue the cuts don’t account for the financial realities of agencies serving diverse patient populations.
- Concerns are growing that reduced payments will lead to service area reductions and agency closures.
The Centers for Medicare and Medicaid Services (CMS) often implements payment cuts when recommended by MedPAC, according to Hillary Loeffler, vice president of policy and regulatory affairs at the Alliance. “What we’re seeing on the ground is these continued rate pressures are actually causing a lot of instability in the industry,” Loeffler said. “We have patients [who] are not able to access care because our home health agencies aren’t able to hire enough staff. They’re reducing service areas, and some of them are closing altogether because of the continued rate pressures year after year after year.”
What factors determine whether a patient has access to home healthcare? MedPAC maintains that a 7% cut wouldn’t hinder access to care, asserting that providers would still be willing and able to treat Medicare fee-for-service beneficiaries. The commission’s calculations showed home health agencies had a strong financial performance in 2024, with an average fee-for-service margin of 21.2%, up from 19.8% in 2023. They project margins will dip to 19% in 2026.
However, Loeffler challenges MedPAC’s margin calculations, explaining that agencies also treat patients covered by Medicare Advantage or Medicaid, plans that often offer lower—or even negative—margins. “Taking a more comprehensive look at the state of the entire industry is really what MedPAC needs to do,” she said.
MedPAC’s definition of “access to care” is also under scrutiny. The organization currently defines access as simply the presence of a home health agency within a geographic area, without considering whether the agency is accepting new patients or if there are delays in starting care.
The proposed cuts also highlight disparities within the post-acute care landscape. MedPAC recommended a 7% cut for home health, while suggesting a smaller 4% cut for skilled nursing facilities, which generally have higher average margins. Loeffler finds this difference frustrating, arguing it lacks justification and doesn’t align with patients’ preference for receiving care in their homes.
The Future of Home Health Hangs in the Balance
Earlier this month, the Alliance sent a letter to MedPAC expressing “strong concerns” about the draft recommendation and the ongoing payment cuts facing the home health industry. The letter stated, “While recent data may suggest relative stability across certain access and quality measures, those signals lag the operational and financial pressures now shaping provider behavior and beneficiary access on the ground.” It further noted that agencies are already responding to cuts by limiting services, reducing service areas, and, in some cases, closing their doors.
The most recent cut to Medicare home health payments was an aggregate reduction of 1.3%, or $220 million. While smaller than initially proposed, industry insiders noted it didn’t “cure the illness” of ongoing rate reductions.
A potential positive development emerged from MedPAC’s meeting: a commissioner expressed a commitment to re-evaluating how access to care is determined. However, any changes resulting from this commitment won’t be reflected until at least 2027, as MedPAC’s 7% reduction recommendation is already included in their upcoming March report.
The Alliance plans to continue advocating for a more nuanced approach to assessing access to care and incorporating a broader range of data points. Loeffler emphasized, “And then also just getting them to think about what [they] are really accomplishing, recommending pretty sizable rate cuts year after year after year. Because the data is showing you how home health agencies are reacting to that. We can see that there are fewer home health agencies. There are service area reductions, and there are [fewer] visits to our seniors. At the end of the day, there just seems to be this focus on margins, but not about patient access to care. So they need to do a better job with that.”
