Medicare Compliance & Reimbursement

Big Medicaid cuts on the horizon, but Administration pushes home care

President Bush's budget proposal for fiscal year 2006 marks the beginning of a long legislative session which could inflict great pain on home care providers.

But the proposal itself has left home health agencies relieved, as it calls for no big cuts to Medicare - including the home care benefit.

Positive: The President's proposal does not adopt the payment rate freezes the Medicare Payment Advisory Commission has recommended, notes the National Association for Home Care & Hospice in its analysis of the budget.

Negative: It does, however, incorporate the elimination of the 5 percent add-on for rural home health agencies that is set to take place March 1, NAHC points out. Budget materials also tout competitive bidding for home medical equipment and average sales price for drugs, the American Association for Homecare notes.

Just because Medicare cuts aren't in the President's proposal doesn't mean providers won't see them this year, experts warn. When legislators start wrangling over the budget in earnest, home care providers are likely to see proposals such as copayments, rate freezes and rate cuts arise.

The President does propose some big changes in Medicaid. The Administration aims to cut $45 billion out of the Medicaid budget over 10 years.

But it is pitching home care as a way to save money over more costly nursing home care. Home care is "both less expensive and more effective than the care provided in institutions," the proposal touts.

Specifically, the President wants a five-year demonstration project under which the federal government will pay for the first year of a Medicaid beneficiary's home care services when she transitions from institutional care to the home. Under the "Money Follows the Person Rebalancing Demonstration," the state then would be required to continue the care after the first year. The project would cost $1.75 billion over five years.

The problem is that many states' Medicaid payment rates are so low that HHAs don't want any more Medicaid business, notes Chicago-based consultant Rebecca Friedman Zuber.