May 15, 2023

Home Health Leaders Offer Medicare Solution to Address Increased Labor Costs

Home health providers are experiencing significant Medicare reimbursement constraints, including reductions in fee-for-service payments, and increasing enrollments in Medicare Advantage, which provides comparatively low payments. While the annual Market Basket Adjustment is meant to keep pace with inflation, actual price inflation in the market has not been reflected in the forecasts of the market basket updates applied for home health payments in Calendar Years (CY) 2021 and 2022.

In a recent letter to Centers for Medicare & Medicaid Services (CMS) Principal Deputy Administrator & Chief Operating Officer Jonathan Blum, the Partnership and the National Association for Homecare & Hospice (NAHC) asked CMS to make a one-time correction to ensure that actual price inflation during the years of 2021 and 2022 is reflected in reimbursements to providers.

Data from the CMS Office of the Actuary demonstrates a 5.1% cumulative shortfall from 2021 and 2022, exacerbating an already fragile economic environment in the home health sector, which is having negative consequences for patients seeking home health care.

In the letter, the Partnership and NAHC said:

“Home health providers are currently facing increased demand for services resulting from staffing shortages, reduced capacity, and staff turnover from employer competition. This comes at a time when home health providers are seeing significant reimbursement constraints arising from Medicare, including reductions in fee-for-service payments, and increasing Medicare Advantage enrollment with its comparatively low payments. In addition, Medicaid payments generally do not cover the cost of care. These reimbursement constraints further erode home health providers’ competitiveness in the labor market and ability to maintain staffing. The result is that fewer beneficiaries are currently able to obtain home health services. Current data trends on reduced home health admissions and conversion from hospital stays to home health care bear this out.”

Additional funding would improve patient access to home health by allowing providers to hire and retain more staff and appropriately cover the costs of the critical in-home services millions of beneficiaries depend on each year.

To read the home health leaders’ letter to CMS, click here.

To see the Partnership’s issue brief on this topic, click here.