MedPAC Releases 2012 Report to Congress Recommending Copays, Rebasing

The Medicare Payment Advisory Commission (MedPAC) yesterday released its report to Congress concluding that while there is adequate access to home care across the nation, reimbursement changes are needed in order to bring federal spending in line with the cost of care. The report notes that high profits of Medicare home health agencies “indicates that Medicare overpays for home health services”, which led MedPAC to make the same four recommendations it offered to Congress last year. The recommendations detail ways to reduce spending, overutilization and rampant fraud and abuse, while also calling for a copayment for home health services.

The four recommendations to Congress are:

  1. Begin a two-year rebasing of home health rates in 2013 and eliminate the market basket update for 2012
  2. Revise the home health case mix system to rely on patient characteristics to set payment for therapy and nontherapy services and no longer use the number of therapy visits as a payment factor
  3. Establish a per episode copay for home health services that are not preceded by hospitalization or post-acute care
  4. Continue to address fraud and abuse in the Medicare system, and suspend payment and the enrollment of new providers if they indicate significant fraud

The State of Medicare Home Health

According to MedPAC, 3.4 million beneficiaries received services last year from almost 11,900 home health agencies across the United States, with more than 10% of those agencies located in Florida. The number of Medicare providers has increased 57% since 2000, and spending has increased from $9.6 billion in 2002 to $19.4 billion in 2010. Today, the average number of episodes per beneficiary is estimated to be 2.0 compared to 1.6 in 2002, and the average reimbursement per episode is estimated to be $5,679 compared to $3,803 in 2002.

MedPAC found that 99% of beneficiaries live in a zip code where a home health agency operates, and 98% live in an area with two or more agencies. Last year more than 400 new agencies opened across the nation, most of which were concentrated in Texas, California, Florida and Illinois, leading MedPAC to conclude that adequate access to capital exists to start-up new agencies. The report also found that although 181 agencies closed their doors in 2010, 831 opened up the same year.

The report also showed that several counties in six states including Florida have the highest home health utilization in the nation. Medicare home health recipients in Brooks County, Texas average four home health episodes episodes each, ranking Brooks the highest in the nation. Specifically related to Florida, only Miami-Dade County ranks in the top 25 counties (#9).

Medicare Spending

The report found that costs in 2010 decreased slightly while payments increased. In 2010, the average payment for a full home health episode of care increase by 4.5%, while costs declined by 1% compared with the prior year.

Freestanding agencies, which totals 90% of providers, averaged 19.4% profit margins in 2010, almost a two percent increase from the 17.5% average profit margin between 2001 and 2009. The profit margin for 2012 is estimated to average 13.7%.

To bring spending in line with costs, MedPAC again recommended a two-year rebasing of home health reimbursement rates beginning next year, which will lower payments and would also result in no market basket increase for that year. This initiative will reduce Medicare spending between $250 million and $750 million in 2013, and $5 billion to $10 billion over five years.

MedPAC also recommended adjusting the case mix system to rely solely on patient characteristics to set the payment rate for therapy and nontherapy services, as opposed to the number of therapy visits. Much controversy has surrounded the 13th and 19th visit requirement because critics point out that agencies have incentives to increase therapy visits in order to receive higher payments from Medicare. MedPAC referred to the U.S. Senate Finance Committee’s 2011 investigation into therapy practices of some of the largest home care companies which found that the practices found at some of these firms “at best represent abuses of the Medicare home health program…at worst, they may be examples of for-profit companies defrauding the Medicare home health program at the expense of taxpayers.” MedPAC concurred with the Senate’s finding that Medicare needs to initiate changes that remove therapy as a PPS payment factor.


For the second year in a row, MedPAC has called for a $150 home health copay for beneficiaries receiving services that are not preceded by a hospitalization or post-acute care (PAC) facility stay. The copay is expected to save Medicare between $250 million and $750 million next year, and between $1 billion and $5 billion over five years. MedPAC’s call for copays echoes those of President Obama, a bipartisan budget commission and members of both parties in Congress in order for seniors to have “skin in the game” and help reduce costs. Copays were a major consideration during last fall’s failed super committee deliberations.

MedPAC’s report found that of the 6.6 million episodes in 2009, 4.3 million were not preceded by a hospitalization or PAC stay and would have been subject to the proposed $150 copay. Conversely, 2.3 million episodes that same year would have been exempt from the copay because they were preceded by a hospitalization or PAC stay.

Fraud and Abuse

In 2011, Medicare implemented two major changes to strengthen program integrity for Medicare home health services, including the face-to-face encounter requirement and the tighter 13th/19th visit requirement for therapy services provided. MedPAC’s report encourages the Secretary of the U.S. Department of Health and Human Services to exercise authority granted to her under the Patient Protection and Affordable Care Act (PPACA), which gives her the authority to stop payment for fraudulent or suspect services. MedPAC notes that, so far, it does not appear that the Secretary has used this authority in any broad capacity considering that many of the top 25 counties with high utilization of home health services in 2010 have reappeared on the list this year.

As it relates to outliers, the report notes that some progress has occurred in Medicare’s efforts to reduce the vulnerability of home health outlier payments to fraud and abuse. In 2009, more than 56% of Miami-Dade County claims were due to outlier payments, much higher than the national average. But since CMS capped outlier payments in 2010 to 10% of an agency’s Medicare revenue, the county has seen a 50% decrease in outlier payments.

Take action!

Medicare home care copays were a major topic of discussion during last fall’s budget deliberations in Congress. President Obama and both parties in Congress supported copays for as little as $150 per episode, but other issues resulted in Congress’ failure to implement copays.

HCAF encourages Florida home care professionals to call on Congress to oppose Medicare home health copays. Click here to send a prepared message to Senators Nelson and Rubio and your U.S. representative!

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