Home Health & Hospice Week

Budget proposed also targets hospice reimbursement.

Home health agencies are gearing up for another uphill battle this year against a Medicare rate freeze.

Strikes against the industry are piling up, including the most recent blow--President Bush's fiscal year 2008 budget proposal.

The President calls for a five-year freeze on Medicare rates to HHAs, from 2008 through 2012, according to budget documents. And after the freeze, the President wants to reduce agencies' annual inflation update by 0.65 percent indefinitely.

Hospices aren't exempt from budget cuts either. While the proposal doesn't include a hospice rate freeze, it does call for the 0.65 percent reduction to start in 2008 and continue indefinitely for those providers too.

Cost: The freeze and reductions would result in $410 million less in Medicare payments to HHAs in 2008 and $9.7 billion less over five years, notes the National Association for Home Care & Hospice. The hospice cuts would result in $60 million less in 2008 and $1.1 billion less from 2008 through 2012.

"Medicare is simply not sustainable in the long-term in its present form," Department of Health & Human Services Secretary Mike Leavitt says. "So we have proposed modest steps to strengthen and modernize Medicare, and to reduce the burden of entitlement spending on future generations."

Providers still will see payment increases, stressed Centers for Medicare & Medicaid Services acting Administrator Leslie Norwalk in a Feb. 5 press briefing. The proposals "are reducing the rates of growth, not cutting payments," Norwalk said in the briefing. That's "an important difference," she maintained.

HHA Challenges Mount

The President's budget proposal comes on the heels of the Medicare Payment Advisory Commission's decision to recommend an HHA rate freeze for 2008 (see Eli's HCW, Vol. XVI, No. 3). MedPAC will include the freeze endorsement in its March report to Congress.

Leavitt, Norwalk and the budget documents all cited MedPAC recommendations as support for their proposed freeze and reductions.

Alarm: Congress is hearing the budget-cutting urges from another quarter as well. The right time to start slashing Medicare spending was "ten years ago," Federal Reserve Chair Ben Bernanke told lawmakers recently. But unless Congress starts playing catch-up and fixing the program, the cuts will have to be "more severe" and "more draconian."

Demographic wave: The 78 million baby boomers will drive Medicare costs through the roof, Bernanke warned. In the process, "the U.S. economy could be seriously weakened," he added. Spending on Medicare, plus Social Security and Medicaid, will skyrocket during the next decade, doubling the programs' share of the gross domestic product by 2030.

Bernanke didn't offer specific suggestions, just dire alarms.

Even President Bush's political foes are in agreement on at least some home health cuts. House Ways & Means Health Subcommittee Chair Pete Stark (D-CA) expressed opposition to the budget proposal in general, but conceded that he might tap the inflation update reductions to fund other health care proposals, according to press reports.

Senate Finance Committee Chair Max Baucus (D-MT) also noted that Congress will be looking for savings in Medicare and Medicaid. But he pledged "to take a thoughtful look at ways to save money in Medicare and Medicaid without harming the health of America's elderly and disadvantaged," according to press reports.

But most Democrats and some Republicans are giving the President's proposed budget a chilly reception. Senate Majority Leader Harry Reid (D-NV) said, "His budget hands out favors for the oil and gas industry, while eroding health coverage for children and seniors."

Trade Group: President Doesn't 'Get It'

Industry trade groups have sounded off about the proposal's shortcomings. Cutting home care funding will reduce beneficiary access to the service and push them into costly institutional care, NAHC argues.

"The President just doesn't get it," NAHC President Val Halamandaris says in a release. "This is pennywise but pound foolish. America should be investing in home care, not cutting it back."

Secretary Leavitt himself has called for greater use of home-based care because "it's not only where people want to be served, but it's radically more efficient," notes the American Association for Homecare. And rising fuel costs have made HHA operations more costly in recent years.

"We call on Congress to preserve and expand the programs that help ensure services people need, when they need them, in the place they call home," Larry Minnix, President & CEO of the American Association of Homes and Services for the Aging, says in a release. "That's a commitment of conscience our country must make."

Profit Margins Industry's Albatross

With the Democrats in control of Congress and general ill will for cutting health care benefits, no one really expects the President's proposal to go anywhere, NAHC's Vice President for Law William Dombi tells Eli. But that doesn't mean that at least a 2008 rate freeze isn't a very real threat.

Lawmakers will be looking to trim the Medicare budget to fund a physician reimbursement fix, which the Bush budget omitted, and to reauthorize the SCHIP program that insures needy children. And they'll be turning to MedPAC and the budget proposal for cost-saving ideas. The five-year freeze and reduction proposal "is a factor, we can't ignore that," Dombi says.

Biggest obstacle: HHAs may be a prime target for cuts thanks to the average agency profit margin of 17 percent on Medicare business.

Most compelling argument: HHAs must tell their representatives that CMS hasn't yet implemented its major refinements to the home health prospective payment system. Congress shouldn't impose cuts until the distribution problems in PPS are fixed, Dom-bi contends.

Big job ahead: Like last year, providers will have to mount a vigorous grassroots campaign to get legislators to listen to their reasoning against a cut, industry reps say.

Other provisions in the budget that would affect HHAs and hospices include:

• Increased premiums. Individuals with annual incomes over $80,000 and married couples with incomes over $160,000 already pay higher premiums for Part B. The President's budget calls for a similar premium for the new drug benefit and no more inflation updates to the income threshold, which would result in more people paying as time goes on.

• Budget trigger. The President proposes a trigger for provider payment reductions. If projected general revenue funding exceeded 45 percent of Medicare financing, provider payments would decrease 0.4 percent annually until funding was brought back under the target.

• Survey fees. The budget calls for $35 million in user fees. CMS "would charge revisit survey fees to health care facilities cited for deficiencies during initial certification, recertification, or substantiated complaint surveys," according to the budget summary. 

Note: Details about the Medicare-related budget proposal items are in the HHS budget documents at www.hhs.gov/budget/docbudget.htm.