MedPAC Recommends 7% Reduction in Home Health Payments, No Increase in Hospice Payments
On December 13, 2024, the Medicare Payment Advisory Commission (MedPAC) convened to assess, among other things, payment adequacy for home health and hospice services. The sessions addressed access, quality, financial performance, and draft recommendations to adjust Medicare base payment rates. Included below are the highlights from each session. Note that MedPAC is an advisory body that makes recommendations to Congress. Even with a unanimous vote in favor of any recommendation, Congress must adopt the necessary legislative changes to put these recommendations into effect. The National Alliance for Care at Home (Alliance) strongly disagrees with these recommendations and will advocate for payment rates that promote the sustainable delivery of high-quality care in the home.
Home Health
Draft recommendation: For calendar year 2026, the Congress should reduce the 2025 Medicare base payment rates for home health care services by seven percent.
MedPAC staff shared that beneficiary access to home health remained adequate, finding the following:
- Access to Care: According to MedPAC, beneficiary access indicators remained positive, with over 98% of Medicare beneficiaries living in areas served by at least two home health agencies (HHAs), and 96.1% of home health stays were initiated timely in 2023. MedPAC observed utilization of home health services after inpatient stays remained above pre-pandemic levels, although 30-day periods per fee-for-service (FFS) beneficiary volume decreased by 3.9%.
- Quality of Care: MedPAC observed that discharges to the community increased slightly from 79.3% to 80.6%, and patient experience measures remained stable.
- Access to Capital: Overall, MedPAC found the all-payer margin for HHAs in 2023 was 8.2%, although merger and acquisition activity has slowed in the past two years while some firms have continued to expand.
- Medicare Payments and Costs: MedPAC found that freestanding HHAs had a FFS Medicare margin of 20.2% in 2023, which is projected to trend downward to 19% in 2025.
Commissioners unanimously supported the recommendation but raised some concerns and areas for further analysis. Particularly, Commissioners emphasized the need to examine rural disparities in home health care access and outcomes and called out the implications of the declining use of home health aides and potential impacts on quality and workforce challenges. In addition, Commissioners requested additional analysis on the performance and margins of non-profit and for-profit HHAs.
Commissioners also suggested tracking the implementation of past recommendations and evaluating whether congressional action aligns with MedPAC guidance.
Hospice
Draft recommendation: For fiscal year 2026, the Congress should eliminate the update to the 2025 Medicare base payment rates for hospice.
No recommendation was made to reduce the hospice cap. MedPAC staff provided an overview of hospice use, spending, and quality, noting stable indicators and positive financial performance in 2023:
- Access to Care: According to MedPAC, beneficiary access indicators remained positive, with hospice use among decedents at 51.7% in 2023, an increase of 2.6 percentage points relative to prior years and similar to pre-pandemic levels, with a 1 day increase in the average length of stay to 96.2 days.
- Quality of Care: MedPAC observed that CAHPS scores remained stable, with stable or a slight increase in social work and nurse end-of-life visits, although nursing visits remained below 2019 levels.
- Access to Capital: MedPAC observed that access to capital remained adequate, citing positive perceptions of the hospice sector by investors, although highlighted slower merger and acquisition activity in recent years.
- Medicare Payments and Costs: MedPAC found the aggregate FFS Medicare margin for hospices was 9.8% in 2022, which varied by provider type. A projected 2025 margin was not provided.
While Commissioners unanimously supported the recommendation, several raised concerns about its impact on nonprofit providers and considered whether hospice should be carved into Medicare Advantage. One Commissioner raised questions about delayed hospice enrollment, and questioned whether this may stem from patients needing to forgo active treatment upon enrollment. Questions were also raised about whether there should be different payment mechanisms for short-term and long-term stays, an area that MedPAC is looking into.
“The recent recommendations by the Medicare Payment Advisory Commission (MedPAC) regarding Medicare home health and hospice policy are misguided and deeply troubling,” said Alliance CEO Dr. Steve Landers. “As an aging nation the most patient-centered, compassionate, and cost-effective strategy for Medicare is to have robust and thriving options for care in the home and community setting, and care that meets the individualized and holistic needs of people with serious illness later in life. Freezing and cutting investments in hospice and dramatically cutting home health are exactly the opposite approaches from what is needed. Medicare hospice spending has not kept up with labor inflation in the past five years and the typical length of stay and proportion of beneficiaries accessing hospice has stagnated. With respect to home health, the recommendation for drastic cuts is based on a flawed analysis of agency margins that fails to account for all payers and the true financial health of the home health system.”
Further information about the sessions and slides from the presentations are available HERE.
