Medicare Payment Policy

188 Home health care services: Assessing payment adequacy and updating payments
The lower spending comes after several years of increases, as total spending
between 2002 and 2011 increased by 92 percent. Between 2002 and 2010, the
average number of 60-day episodes per home health user increased from 1.6 to
2.0, indicating that beneficiaries who use home health care stayed on service for
longer periods of time.
Quality of care—Quality was steady or showed a small improvement in measures
of beneficiary function.
Providers’ access to capital—Access to capital is a less important indicator of
Medicare payment adequacy for home health care because it is less capital intensive
than other sectors. According to capital market analysts, the major publicly traded
for-profit home health companies had sufficient access to capital markets for their
credit needs, although terms were not as favorable as in prior years. For smaller
agencies, the significant number of new agencies in 2011 suggests that they had
access to the capital necessary for start-up.
Medicare payments and providers’ costs—For over a decade, payments have
consistently and substantially exceeded costs in the home health prospective
payment system. Medicare margins for freestanding agencies equaled 14.8 percent
in 2011 and averaged 17.7 percent in 2001 through 2010. Two factors have
contributed to payments exceeding costs: Fewer visits are delivered in an episode
than is assumed in Medicare’s rates, and cost growth has been lower than the annual
payment updates for home health care. Medicare margins are estimated to equal
11.8 percent in 2013.
the Commission reiterates recommendation from prior years
In 2011, the Commission made a multiyear recommendation for home health
payments, and this report reiterates that recommendation (Medicare Payment
Advisory Commission 2011). The Patient Protection and Affordable Care Act
of 2010 includes reductions in payment for home health care, but these policies
will leave home health agencies with margins well in excess of cost. Overpaying
for home health services has negative financial consequences for the federal
government and raises the Medicare premiums beneficiaries pay. Implementing the
Commission’s prior recommendation for rebasing would reduce payments more
swiftly and better align Medicare’s payments with the actual costs of home health
agencies. ■