Home Health & Hospice Week

HHAs, hospices face 2007 battle in wake of 2006 defeat.

The home care industry is mobilizing to oppose a new and menacing threat--President Bush's 2007 budget proposal.

The Bush Administration proposes another complete rate freeze for home health agencies in 2007, followed by a 0.4 percent reduction to the usual inflation update in 2008 and 2009, according to the proposal released Feb. 6. That would strip about $350 million out of the Medicare home care budget in 2007 and $3.5 billion over the next five years.

The Administration also calls for a 0.4 percent reduction to the inflation update for hospices for all three years, 2007 through 2009. That would reduce Medicare hospice payments by $40 million in 2007 and $550 million over the next five years.

The National Association for Home Care & Hospice blasts the President's proposal as "uncaring," NAHC's Val Halamandaris says in a release.

This Administration has imposed home care cuts in four of its five years, Halamandaris notes. Meanwhile, the number of home care beneficiaries has dropped from 3.5 million in 1997 to 2.8 million in 2005--while nursing home admissions have grown.

Reducing home care reimbursement further will lead to even more access problems for beneficiaries, charges attorney and lobbyist Jim Pyles with Pyles Powers Sutter & Verville in Washington, DC. That in turn will drive patients into higher-cost settings like hospitals and nursing homes. "This is mindless health policy," Pyles tells Eli.

Using home care clearly saves on health care costs overall, notes the American Association for Homecare in a statement. AAH cites a laundry list of studies that prove the cost effectiveness of home care. You can pay for a year's worth of home care with the cost of one hospitalization, Pyles emphasizes.

Health policy-makers must start looking at the bigger picture if they have any hope of containing costs as Baby Boomers age, Pyles points out. Home care saves money by keeping patients out of costlier institutional settings.

Home care providers may have a difficult time swaying lawmakers to their side, thanks to the Medicare Payment Advisory Commission's HHA profit margin and reimbursement recommendations.

MedPAC estimates agencies will have a 16 percent Medicare profit margin this year and plans to recommend another rate freeze for 2007 (see Eli's HCW, Vol. XIV, No. 44). The Bush Administration's budget proposal references MedPAC's findings and recommendations numerous times.

But MedPAC leaves nearly one-third of agencies--health system-based ones--out of its calculations, Halamandaris protests. And "virtually all of home health's Medicare profits disappear when all payment sources are factored in."

System flawed: In reality, one-third of agencies were losing money on Medicare before the 2006 rate freeze even took effect, NAHC says. The high profit margins alleged by MedPAC are concentrated in only a small segment of the provider population, NAHC contends. CMS should use case mix adjustment, not across-the-board rate freezes, to fix those flaws in PPS.

Policy-makers shouldn't get bogged down in provider profit margins anyway, Pyles exhorts. Instead, they should focus on what will reduce costs overall for Medicare--home care. "If you can save $15,000 [an average hospital DRG payment] by spending $2,300 [an average HHA episode payment], why wouldn't you?" Pyles asks. "Who cares what the margin is?"

Lawmakers Give Proposal Cold Shoulder

The President's proposal is getting a chilly reception from many lawmakers on Capitol Hill, including members of his own party. After passing unpopular entitlement spending cuts for 2006 by the narrowest of margins, many legislators are loath to make further cuts during an election year.

But home care providers shouldn't relax. Even if Medicare cuts don't go through this year for 2007, rising Medicare costs will ensure the topic stays on lawmakers' agenda in subsequent years, Pyles warns.