MedPAC home care cuts can harm home health agencies and impact senior Americans, says NAHC

Dec 11 2009

The Medicare Payment Advisory Commission (MedPAC) once again has used a flawed data analysis to recommend cuts that would severely damage the ability of thousands of home health care agencies to provide valuable services to the most vulnerable of Americans, the National Association for Home Care and Hospice (NAHC) said today.

“We have great respect for members of the Commission. However, MedPAC’s recommendations would threaten the existence of vital home health agencies that give seniors the independence they need to stay at home instead of a hospital or nursing home. These cuts would also jeopardize the jobs of about one million home health and hospice workers nationwide, at a time when our country can least afford to arbitrarily lose even one job,” said Val Halamandaris, NAHC’s President. Halamandaris also noted that Congress is already moving to address the concerns of MedPAC as part of health care reform.

The MedPAC data artificially inflates the profit margins of the entire industry, Halamandaris said, distorting the true financial picture of home health providers. “Home health is and has always been a ‘cottage industry,’ made up of small to medium-sized providers. In fact, about 23 percent of free standing providers lose money in providing Medicare services, and about 30 percent of them make less than 5 percent on their Medicare services,” he said.

Halamandaris pointed out several other flaws in MedPAC’s methods:

• MedPAC disregards facility-based home health providers’ margins in its calculations. Roughly 20 percent of Medicare-participating home health agencies are facility-based, and in some states, especially rural ones, hospital-based home health agencies make up a majority of the providers. Those providers have higher costs, resulting in an average negative Medicare profit margin of 7.82 percent, but MedPAC’s failure to include those figures artificially inflates the profits of the entire sector;
• MedPAC aggregates all home health margin calculations so that the home health sector is measured as if it were composed of a single agency, instead of over 9,800 distinct home health agencies;
• MedPAC does not consider that nearly 80 percent of home health agencies’ costs are labor-related, and go directly for salaries of nurses, therapists, home health aides and others who care for the aged and infirm in their homes or support these functions. Agencies have very limited options for finding revenues to make up for substantial payment cuts;
• MedPAC ignores the fact that most Medicare home health agencies also provide services to Medicaid and Medicare Advantage patients. When overall patient population is accounted for, the average free standing home health agency has a margin of approximately 1 percent;
• MedPAC fails to recognize legitimate and appropriate business costs including the cost of telehealth equipment and its related administrative and general costs, increasing costs for labor, emergency and bioterrorism preparedness, and system changes required to adapt to the new 2008 Medicare home health payment changes; and
• MedPAC fails to recognize that, according to the U.S. Bureau of Labor Statistics (BLS), two of the top three fastest-growing occupations (based on need) relate to home-delivered services -- services that could be greatly at risk if substantial cuts are imposed on the home health services industry.

“Home health care makes up just 3.5 percent of overall Medicare spending, but the MedPAC analysis consistently would force these massively disproportionate cuts onto vital home health care services,” Halamandaris said. “The people who will lose out most if these recommendations are adopted will be the patients who depend on home health care to maintain their freedom, dignity and peace of mind in their twilight years, and their families.”