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Medicare Proposal Urges ‘Drastic’ Cut in Home Health Funding

Patients and providers concerned about regulation scheduled for 2019

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Despite the advantages of treating seniors at home for certain healthcare needs, the federal government has proposed changes to Medicare that would essentially cut in half the funding agencies have on hand to pay nurses and other homecare staff.

As part of a proposal due to be released in final form today, the federal Centers for Medicare and Medicaid Services has called for major revisions to how it pays healthcare providers to serve seniors who need short-term “episodic” care at home — things like wound treatments, physical therapy, or post-operative assistance. The most significant reforms, which have yet to be adopted, would take effect in 2019.

Provider groups are concerned the reform would limit the capacity of home healthcare organizations that already operate on a thin financial margin. In a letter to CMS, the head of the Home Care & Hospice Association of New Jersey, which represents dozens of providers, called it “the largest, most risky and most dramatic payment reform proposal” since the Medicare homecare payment system was established nearly two decades ago.

Diverting care?

Patient advocates, like AARP, also fear the proposed change, and others, would divert care from some senior citizens and could result in longer hospital and nursing home stays, and poorer health outcomes, for others. This comes at a time when the need for residential care is growing and the healthcare system has shifted in favor of outpatient care, which is generally less costly.

In New Jersey, nearly 103,000 of the state’s 1.5 million Medicare members received home healthcare services — more than 2.2 million visits in all — during 2015, according to the homecare association. For this work, providers collected more than $449 million in federal Medicare funds.

Dr. Steven Landers, president and CEO of the VNA Health Group, the largest nonprofit homecare provider in New Jersey, said the proposal to scale back these payments comes “just at the wrong time, as our country needs to be strengthening our home health resources for an aging population” that includes some 80 million-plus baby boomers hoping to remain in their private residences as long as possible.

“When we help seniors with serious illness succeed at home, we promote dignity and independence, keep families intact, and save on more costly hospital and nursing facility care,” he wrote in an op-ed published recently in The Hill. Given the growing need, he said, “now is the time for a more dynamic and strengthened home health sector, not one that is diminished.”

The most significant proposal from CMS would shift from funding home healthcare agencies in 60-day segments to 30-day periods, while reducing the associated funding by 50 percent. According to the published proposal, this change would save $950 million in 2019 alone, or 4.3 percent of the total home-healthcare payments, which totaled nearly $18.3 billion in 2015.

The potential change seeks to avoid funding unnecessary care, especially in cases where seniors did not need two months of home services. According to the proposal, first outlined in July, “doing so would better align home-health payments with the cost of providing care.”

Less up-front funding

While agencies could re-apply for a second payment cycle if the patient needed more care, provider groups said the change would result in less funding up front, limited flexibility in how they schedule visits, and more administrative burdens. Another major concern is that this model, which front-loads the care for the first month, has not been tested among Medicare members; generally, significant changes to federal programs like this involve a pilot program or phased rollout, they said.

The proposal “is a totally untested and unpredictable, ivory-tower top-down Washington science project being foist on America's most vulnerable seniors and the homecare nurses and caregivers they so deeply need and appreciate,” Landers wrote in his op-ed.

Landers noted that the proposal contradicted some of the promises President Donald Trump made on the campaign trail to protect Medicare, the insurance program that covers some 57 million Americans. He added, “there is no way to know how severely it will change home healthcare for older Americans.”

Christine Buteas, president and CEO of the homecare association, largely agreed. “Home health agencies provide high-quality, cost-effective care in the home — where people want to remain,” she said, noting that the payment change proposal “was never tested and will severely cut home-health payments when our services are needed more than ever to care for our aging population.” 

Economic impact

According to an economic analysis conducted for the association, more than one-quarter of the homecare agencies involved would see an economic impact of roughly 20 percent. Even the CMS proposal notes it would cause “significant economic impact on a substantial number of small entities” that provide care.

Federal officials also proposed changing the Medicare home healthcare system to provide higher payments for visits to patients who were discharged from a hospital than for care provided to those who haven’t had recent inpatient care. Another reform would decrease payments for physical-therapy sessions, compared to what is paid for skilled nursing and other care.

These proposals also raised red flags for AARP, which said the system should not “incentivize one type of care over another” or “skimp on necessary care” for any beneficiary. These payment changes “have a large impact on amount and types of home-health visits Medicare beneficiaries receive,” wrote David Certner, a legislative policy director with AARP.

“The incentives in the Medicare home-health payment system must safeguard access to necessary, high-quality covered services for all beneficiaries, without regard to the intensity or duration of care required. The Medicare home-health payment system should provide payments sufficient to ensure the provision of high-quality, necessary covered home healthcare to all eligible Medicare beneficiaries,” Certner added.

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