On December 13, 2024, the Medicare Payment Advisory Commission (MedPAC) issued draft recommendations that propose a 7% reduction in payments to home health agencies in 2026. The body, which advises Congress on Medicare payment issues, issued the same recommendations last year.

Key Findings on Home Health Payment Adequacy

MedPAC’s analysis showed mixed results for home health providers in 2023. Although access to home health services remained stable and quality indicators reflected positive trends, providers raised significant concerns regarding the proposed cuts:

• Access to Care: Over 98% of Medicare fee-for-service (FFS) beneficiaries lived in ZIP codes served by at least two home health agencies, and the majority of home health stays were initiated timely, with 96.1% starting on schedule.
• Utilization Trends: Despite stable access, the per capita volume of home health services declined by 3.9% in 2023. This decrease continues a downward trend observed before the pandemic, partially driven by reduced hospital discharge referrals to home health agencies.
• Financial Margins: Freestanding home health agencies reported robust Medicare FFS margins of 20.2% in 2023, with a projected margin of 19% in 2025. While these margins suggest financial health, providers argue that MedPAC’s analysis overlooks challenges related to low Medicaid and Medicare Advantage rates, which rely heavily on cross-subsidization from Medicare payments.

Industry Concerns Over Proposed Cuts

Providers and industry leaders strongly oppose the proposed reductions, citing potential risks to the financial stability of home health agencies and access to services. Dr. Steve Landers, CEO of the National Alliance for Care at Home, criticized MedPAC’s analysis, stating, "The recommendation for drastic cuts is based on a flawed analysis of agency margins that fails to account for all payers and the true financial health of the home health system.”

Providers argue that the ongoing cuts from Medicare, coupled with increasing operational costs, threaten their ability to deliver care to vulnerable populations. The Medicare payment system already includes permanent behavioral adjustments that further reduce provider payments.

Opportunities for Home Health Growth

Despite these challenges, MedPAC acknowledged that community-initiated home health services offer promising potential. These services often cater to sicker individuals with chronic conditions or dementia, addressing otherwise unmet long-term care needs. However, the decline in utilization of such services underscores the need for targeted policy measures to support their expansion.

Next Steps for Advocacy

MedPAC will vote on its formal recommendations in January 2025. HCAF will continue to monitor and report on MedPAC’s recommendations and their implications for Florida home health providers.