The Medicare Payment Advisory Commission (MedPAC) voted to approve a draft recommendation that would reduce Medicare's base payment rate for home health services by 7% for the 2027 calendar year.
The draft recommendations released in December and approved Wednesday would reduce home health Medicare spending by $750 million in one year, with a cumulative effect of up to $25 billion over five years, according to the National Home Care Alliance. The Centers for Medicare and Medicaid Services (CMS) has often implemented payment cuts when MedPAC has recommended them, said Hillary Loeffler, the alliance's vice president for policy and regulation.
“What we're seeing on the ground is that continued interest rate pressure is actually causing a lot of instability in the industry,” Loeffler told Home Health Care News. “There are patients who are missing out on care because home health agencies are unable to hire enough staff. They are shrinking their service areas, and some are closing down completely due to continued rate pressure over the years. So we are very concerned that recommendations from MedPAC continue to cut payment rates further and further without careful enough consideration of what is happening to access to care.”
MedPAC previously said the 7% cut will not reduce access to care and will keep providers motivated and able to treat Medicare fee beneficiaries. According to MedPAC calculations, home health agencies' financial performance in 2024 was strong, with average fee-for-service margins of 21.2%, up from 19.8% in 2023. The agency projects its profit margin to fall to 19% in 2026.
The problem with MedPAC's margin calculations is that the provider also cares for patients who are reimbursed through Medicare Advantage or Medicaid, Loeffler said. Margins for these patients are low or negative.
“What MedPAC really needs to do is take a more comprehensive look at the industry as a whole,” she said.
Loeffler also took issue with MedPAC's characterization of access to care. The organization considers the mere presence of a home health agency in a particular area to provide access to complete care, without determining whether the agency is accepting patients or delaying treatment, she said.
MedPAC's calculations also show inequalities across the post-acute care industry. It recommended a 7% cut for home health care, while a 4% cut for skilled nursing facilities, which have higher average profit margins. Loeffler said the distinction is frustrating because it lacks justification and does not support patients' wishes to stay at home.
The future of home medical care
Earlier this month, the alliance submitted a letter to MedPAC expressing “strong concerns” about its draft recommendations and the annual payment cuts the home health care industry has faced in recent years.
“While recent data may suggest relative stability across specific access and quality metrics, those signals lag the operational and financial pressures currently shaping provider behavior and beneficiary access in the field,” the letter reads. “Agents are already responding to cumulative annual payment reductions by narrowing their service offerings, reducing service areas, and in some cases closing entirely.”
Recent reductions in Medicare home health payment rates included a total reduction of 1.3%, or $220 million. That number was much lower than the proposed rate cut, but industry insiders said the home health rate cut would not “cure the disease.”
Loeffler said one of the positive outcomes of the MedPAC meeting was that MedPAC commissioners expressed a commitment to taking a different approach to determining access to care. Such a change will likely occur in 2027 at most, as MedPAC's 7% reduction recommendation is already incorporated into its next March report.
Going forward, the Alliance will continue to discuss concerns regarding access to care metrics and other elements of home health data.
“And it also just makes you think about what (they) are actually accomplishing by recommending pretty significant rate cuts every year,” Loeffler said. “Because the data shows how home health agencies are responding to it. We're seeing fewer home health agencies. Service areas are being shrunk, and visits to seniors are (less). At the end of the day, it just seems like the focus is on margins and not patient access to care. So they need to do a better job in that regard.”
