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Legal Insights and Perspectives for the Healthcare Industry

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues, recently finalized and approved a series of recommended updates on January 16 that include payment reductions for hospice and home health.

Hospice

MedPAC recommendation: Hold Medicare base payment rates for hospice steady with no increase, and wage-adjust and reduce the hospice aggregate cap by 20%.

MedPAC addressed its concerns that “hospice payment rates may be higher than needed to ensure appropriate access to care” and recommended no payment update for hospice in fiscal year 2021. With respect to the aggregate cap, MedPAC recommended a wage-adjusted cap to improve equity across providers because high-wage-index areas are more likely to exceed the cap than low-wage-index areas (e.g., a hospice in San Francisco will reach the aggregate cap more quickly than one in Topeka, Kansas). MedPAC further asserted that a 20% cap reduction will improve payment accuracy by focusing payment reductions on hospices with long stays and high margins, characterized by MedPAC in its December meeting as “disproportionately for-profit, freestanding, urban, small and newer entrants into the Medicare program.” If adopted, this would be the first major aggregate cap change in many years.

Home Health

MedPAC recommendation: Reduce the calendar year (CY) 2020 Medicare base payment rate for home health agencies by 7%.

While acknowledging major revisions to home health payments in 2020, including a new unit of payment (Patient-Driven Groupings Model (PDGM)), the removal of therapy as a payment factor, and a new case mix system, MedPAC officials cautioned in the December meeting that Medicare has a history of overpaying for home health “since the PPS was established.” To that end, MedPAC commissioners voted in January to recommend that Congress reduce the CY 2020 Medicare base payment rate for home health agencies by 7% for CY 2021. Noting “home health payment adequacy indicators are positive,” MedPAC officials concluded that their recommended reduction “should not affect the willingness of providers to serve beneficiaries.” However, the agency also recognized that it “may increase cost pressures for some providers.”

What’s Next?

The recommendations will be included in the MedPAC’s March 2020 report to Congress on Medicare payment policy. Mandated by law, these reports hold great sway with Congress and the Centers for Medicare and Medicaid Services (CMS). However, neither Congress nor CMS is required to follow the MedPAC recommendations.