Just over a week after home health care providers were hit with the announcement that Medicare payment rates would be cut by a total of 1.3% in 2026, the Medicare Payment Advisory Commission (MedPAC) has agreed to recommend even deeper cuts next year.
On Friday, MedPAC released a draft report to Congress recommending a 7% reduction in Medicare's base payment rate for home health services for the 2027 calendar year.
The group said the cuts will not negatively impact access to care and will ensure that providers remain willing and able to treat Medicare fee beneficiaries.
Meanwhile, home health providers and advocacy groups say consecutive years of base payment rate cuts threaten provider sustainability and access to care.
“Recruiting and retaining nurses and caregivers, maintaining services in rural and underserved communities, and ensuring that patients who can safely care for themselves in their own homes continue to have that option have become increasingly difficult with annual attrition,” Justin Searle, director of home health care at Bayada Home Health Care, previously told HHCN.
Bayada, based in Pennsauken Township, N.J., is a nonprofit provider of home health care services with 370 locations in five countries.
MedPAC developed its draft recommendations based on its determination that four indicators of the Home Health Care Affordability Index are stable and most are positive or positive. These indicators include beneficiary access to care, quality of care, access to capital, and Medicare payments and costs.
MedPAC determined that home health agencies' financial performance will continue to be strong in 2024, with average fee-for-service margins of 21.2% compared to 19.8% in 2023. The organization predicts home health agencies' profit margins will reach 19% in 2026.
Other factors, such as the proliferation of Medicare Advantage, are also threatening home health agencies' profits.
“Even with all the reductions, there's still a 38% difference between what Medicare pays and what Medicare Advantage pays,” Luke Rutledge, president of HomeCare Homebase, previously told HHCN. “That's one of the things that's keeping people up at night. As this bar continues to rise on the Medicare Advantage side, people are trying to figure out how to close that 38% gap.”
Dallas-based Homecare Homebase is one of the largest technology and management services companies serving home care organizations.
The number of home health agencies decreased by 1% in 2024, according to a MedPAC report. California was excluded from this trend, but the number of health care providers in the state nearly doubled from 2019 to 2024. Much of this increase was concentrated in Los Angeles County, which has become the poster child for home health care fraud.
The increase in California raises “concerns about the integrity of the program,” MedPAC said. Los Angeles County accounted for $1.4 billion in paid home health spending in 2024. This represents 8.7% of total spend, but only 2.2% of paid subscribers.
MedPAC highlighted previous actions by policymakers to address integrity concerns, including suspending new provider enrollment in certain areas and instituting review selection demonstrations.
Utilization increased, with the number of 30-day periods per paid service beneficiary increasing by 2.6% to 24.3 days in 2024, according to the report. In 2024, nearly 8% of these beneficiaries used home health care.
While MedPAC plans to recommend a 7% base rate payment reduction, it finds that the quality of home health services will remain stable in 2024, with potentially preventable readmission rates low and patient experience measures stable.
