Medicare Compliance & Reimbursement

Rural add-on falls short of hopes.

Home health agencies may have celebrated their political good fortune a bit too soon.

Even though the dreaded home health copayment isn't in the final Medicare bill, there are plenty of other provisions that could plague HHAs for years to come. But it's not all bad news either, with a bone thrown to rural agencies.

The bill includes the following HHA-specific provisions: a reduction of 0.8 percent to the inflation update factor (the market basket index) for three years, 2004 through 2006; a 5 percent rural "bonus payment" for one year; a cap of 3 percent for allocation of outlier payments under the prospective payment system; no copay.

Avoiding a copay this year was a major victory, says William Dombi, vice president for law with the National Association for Home Care & Hospice's Center for Health Care Law. "We've come out well in comparison to where we were" when legislation first was proposed, Dombi says. "We had a very tough battle" to get the copay out of the pending bill.

Beating the copay this year "seemed to be an insurmountable goal," agrees Visiting Nurse Associations of America President and CEO Carolyn Markey in a message to members. The home care industry's grassroots effort ultimately "was a force that could not be defeated," she says.

But that doesn't mean the legislation is a bed for roses for HHAs. "Reductions in the HHMBI will negatively affect VNAs' missions and disproportionately harm non-profit home health agencies," Markey says in a Nov. 18 letter to Senate Majority Leader Bill Frist (TN). The reduction "will further erode VNAs' ability to serve as safety-net providers in their communities by cutting into their miniscule budget margins or budgets already in the red."

The -0.8 reduction factor is a bit better than the originally proposed -0.9 one, allows John Beard, president of Alacare Home Health and Hospice based in Birmingham, AL. But for Alacare, the losses from three years of inflation cuts still will outweigh the gains from one year of a 5 percent rural add-on, Beard judges. Alacare does about 60 percent of its business in rural areas, he says.

The MBI reduction generally is thought to have come in lieu of the originally proposed copay. But the trade-off may not have been the smartest move in the long run, Beard worries.

The copay "appears to be an issue that will not go away based on the philosophy of some members of Congress that all services need a copay," Beard tells MLR. HHAs are receiving cuts that may mean "not having enough revenue to properly fund current patient care and address future needs," he says. And at the end of the day, copays may be imposed anyway.

But now that the bill has passed, another major Medicare package won't come along for a few years, Dombi predicts. And if lawmakers try to pass a copay in a year when there isn't something as distracting as the Medicare prescription drug bill to take attention away from the matter, it will be much more difficult to sneak it past America's seniors.