The Medicare Payment Advisory Commission (MedPAC) has recommended a 7% cut to the home health Medicare fee-for-service payment rate, prompting outcry from the home-based care community.
The recommendation would reduce home health Medicare spending by $750 million in one year and have cumulative impacts of up to five years, according to the National Alliance for Care at Home (the Alliance). The organization reported that it was “deeply concerned” by MedPAC’s recommendations for home health.
“MedPAC’s recommendation is dangerous and misguided, and would exacerbate a growing access crisis for care in the home,” Jennifer Sheets, CEO of the Alliance, said in a statement. “We know that cumulative year-after-year payment cuts have forced home health agencies to narrow service offerings, reduce service areas, and, at worst, close altogether.”
MedPAC’s report stated that Medicare fee-for-service home health payments are “substantially in excess of costs.”
“Home health care can be a high-value benefit when it is appropriately and efficiently delivered, but payments need to be reduced to align aggregate payments more closely with aggregate costs,” the report read. “The Commission recommends that, for calendar year 2027, the Congress reduce the 2026 Medicare base payment rate for HHAs by 7%.”
MedPAC stated that fee-for-service payments encourage unnecessary care, and that higher margins heighten those incentives. Meanwhile, value-based care, often touted as a way to improve sustainability for providers, has incentives that are “too small to encourage providers to improve quality.”
MedPAC identified Medicare Advantage plans as one way to counter fee-for-service volume incentives.
“Because plans are paid a monthly per-member amount, they have an incentive to lower their costs by lowering unnecessary service use,” the report read.
The organization stated that Medicare Advantage plans may have lower rates than fee-for-service Medicare, and that it planned to examine the impact of these plans on post-acute care providers’ financial performance in the future.
MedPAC’s impression of home health care
In its report, MedPAC stated that approximately 2.7 million Medicare fee-for-service beneficiaries received home health care in 2024, spending $16 billion on home health services.
MedPAC said that beneficiaries have good access to home health services, citing that 97% of beneficiaries lived in a ZIP code served by at least two home health agencies – a methodology that Hillary Loeffler, vice president of policy and regulatory affairs at the Alliance, has previously called into question. According to Loeffler, this methodology fails to account for whether an agency is accepting patients or for any delays in the start of care.
According to the Alliance, years of cuts to the fee-for-service Medicare home health payment have spurred the closures of home health agencies and reduced access to care.
“We can see that there are fewer home health agencies,” Loeffler said. “There are service area reductions, and there are [fewer] visits to our seniors. At the end of the day, there just seems to be this focus on margins, but not about patient access to care. So they need to do a better job with that.”
According to MedPAC, the number of participating home health agencies increased by 1.5% in 2024 – but the organization attributed this growth “almost entirely” to aberrant growth in the number of home health agencies in Los Angeles County, California, which has come to serve as the example of fraud in the home health industry.
Excluding the growth in California, the number of participating agencies actually declined by 1% in 2024, according to MedPAC.