How should Medicare payments change in 2012?

Report to the Congress: Medicare Payment Policy | March 2011

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SUMMARY OF RECOMMENDATIONS

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8-1 The Secretary, with the Office of Inspector General, should conduct medical review activities in counties that have aberrant home health utilization. The Secretary should implement the new authorities to suspend payment and the enrollment of new providers if they indicate significant fraud.

COMMISSIONER VOTES: YES 16 • NO 0 • NOT VOTING 0 • ABSENT 1

IMPLICATIONS

Spending

The Congressional Budget Office has already scored savings from the PPACA provision, so its baseline assumes savings for the new authorities. Implementing this authority for home health care would lower home health spending if fraud were discovered. CMS and the Office of Inspector General would incur some administrative expenses to conduct these activities.

Beneficiary and provider

Appropriately targeted reviews would not significantly affect beneficiary access to care or provider willingness to serve beneficiaries.

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8-2 The Congress should direct the Secretary to begin a two-year rebasing of home health rates in 2013 and eliminate the market basket update for 2012.

COMMISSIONER VOTES: YES 16 • NO 0 • NOT VOTING 0 • ABSENT 1

IMPLICATIONS

Spending

This recommendation would reduce Medicare spending $250 million to $750 million in 2012 and $5 billion to $10 billion over 5 years.

Beneficiary and provider

Some reduction in provider supply is likely, particularly in areas that have experienced rapid growth in the number of providers. Access to appropriate care is likely to remain adequate, even if the supply of agencies declines.

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8-3 The Secretary should revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services and should no longer use the number of therapy visits as a payment factor.

COMMISSIONER VOTES: YES 16 • NO 0 • NOT VOTING 0 • ABSENT 1

IMPLICATIONS

Spending

The approaches could be implemented in a budgetneutral manner and should not have an overall impact on spending.

Beneficiary and provider

This recommendation would increase payments for hospital-based agencies, rural agencies, and small agencies. Patients who need therapy may see some decline in access, but these services would be available on an outpatient basis after the home health episode ended.

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8-4 The Congress should direct the Secretary to establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use.

COMMISSIONER VOTES: YES 13 • NO 1 • NOT VOTING 2 • ABSENT

IMPLICATIONS

Spending

A copay of $150 per episode (excluding low-use and post-hospital episodes) would reduce Medicare spending $250 million to $750 million in 2012 and $1 billion to 5 billion over five years. Expenditures for services would decrease because some beneficiaries

who would otherwise use home health services might decline them. Since many of these services are funded by Part B, decreases in spending growth would reduce Part B premiums.

Beneficiary and provider

Some beneficiaries might seek services through outpatient or ambulatory care, for which Medicare already has cost-sharing requirements. Some beneficiaries who need relatively few services would have lower cost sharing if they substituted ambulatory care for home health care.

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Recommendation 3B-2A from the Commission’s March 2010 report

The Congress should direct the Secretary to expeditiously modify the home health payment system to protect beneficiaries from stinting or lower quality of care in response to rebasing. The approaches should include risk corridors and blended payments that mix prospective payment with elements of cost-based reimbursement.

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