Home Health & Hospice Week

Congress approves 2006 rate freeze, but glimmer of hope remains.

The week before Christmas turned into a wild budget ride ending in a crash for home health agencies.

HHAs' worst fears were realized when the House of Representatives on Dec. 19 approved a budget reconciliation compromise package that included a Medicare HHA rate freeze for 2006. The freeze would wipe out a 2.8 increase announced in November (see Eli's HCW, Vol. XIV, No. 40).

The House passed the freeze provision even though neither the House nor Senate's budget bills included it, and even though influential lawmakers had signed onto letters protesting the possible measure in days leading up to the vote.

As originally proposed by the Senate Finance Committee, the House also included in the approved package a one-year reinstatement of the 5 percent rural add-on for 2006.

What's more, the bill included a provision requiring agencies to report as-yet-unspecified quality data in 2007 or face a 2 percent reduction to the market basket index inflation update in that year. The legislation called on the Medicare Payment Advisory Commission to compile a report about home health pay for performance by June 2007 as well.

All eyes turned to the Senate, with hope that either the home care freeze would be thrown out or the bill wouldn't secure passage. But with Vice President Dick Cheney casting the deciding vote, the Senate package passed on a 51-50 margin on Dec. 21. A few changes were included, but none of them related to the home care provisions.

Medicare winners in the budget were physicians, who saw their scheduled 4.4 percent cut eliminated, and managed care and pharmaceutical companies, who succeeded in getting onerous provisions cut from the final version of the compromise.

"The effort to defeat the bill was clearly an uphill battle from the beginning," notes the Visiting Nurse Associations of America in a message to members. "The timing of MedPAC's announcement of average 16 percent Medicare home health [profit] margins during the conference negotiations certainly was a setback" (see Eli's HCW, Vol. XIV, No. 44).

DME Provisions Included Too

Congress' final budget package also addres-sed durable medical equipment.

Provisions in the legislation called for elimination of the DME rental option after 13 months and elimination of the capped rental option for oxygen after 36 months.

The capped rental provisions shift a great deal of the cost burden to Medicare beneficiaries, protested the American Association for Homecare. But the 36-month oxygen limitation was an improvement over the original measure, which would have ended rental payments after 18 months, notes the Associated Press.

Not Quite A Done Deal

Because there were a few changes when the Senate approved the package, the legislation now has to go back to the House for approval again. And this is where industry lobbyists are hoping to make a last stand over 2006 rates.

"We're hoping for another opportunity" to knock out the home care freeze, says William Dombi, vice president for law with the National Association for Home Care & Hospice's Center for Health Care Law.

The chances of securing home care changes may depend on how quickly the House mobilizes to approve the revised package, Dombi predicts. At press time, it was unclear when the House would vote. If representatives come back quickly and vote before Christmas, few changes are likely.

But if the House holds off until after New Year's, there's more opportunity for revision, Dombi expects. "There's a glimmer of hope."

There is also a chance for a defeat of the bill in the House, VNAA notes--but that's a long shot. "The freeze is likely inevitable," the trade group acknowledges.

Expect Payment Delays

If a home health rate freeze does pass into law, "it's going to make for a very messy January," Dombi tells Eli. The Centers for Medicare & Medicaid Services is ready to roll with 2006 payment rates in the system Jan. 1. If legislation changes those rates before New Year's, CMS still will need time to adjust. That could lead to cash flow problems, or at least delays in getting increased reimbursement for rural HHAs.

If Congress passes a freeze after Jan. 1, it could be applied retroactively, which brings its own set headaches, Dombi worries. "That's where it gets wild," he notes.

Bright spot: For the short term, HHAs with patients in rural areas actually fare better under the package's home care provisions, Dombi notes. While they lose the 2.8 percent inflation update, they gain the 5 percent rural add-on.

"While we are very disappointed that the HHMBI freeze was included, we are grateful for the 5 percent rural add-on," VNAA notes. The add-on "is very welcome news to our members who will benefit from this increase."

But because the add-on lasts only one year, the benefit to rural agencies disappears after two years, Dombi points out--unless Congress approves an extension of the add-on.