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CMS PROPOSES 2.5 PERCENT INCREASE IN MEDICARE HOME HEALTH PAYMENT RATES

Today the Centers for Medicare & Medicaid Services (CMS) announced their proposal of a 2.5 percent increase in Medicare payment rates to home health agencies for calendar year 2006.  The increase would bring an extra $330 million in payments to home health agencies next year.

Medicare pays home health agencies through a prospective payment system (PPS), which pays at higher rates to care for those beneficiaries with greater needs.  Payment rates are based on relevant data from patient assessments conducted by clinicians as already required for all Medicare-participating home health agencies.

“This payment increase will substantially help home health agencies to provide the best possible care to beneficiaries, especially a growing demand in rural communities,” said Mark McClellan, M.D., Ph.D., administrator of the Centers for Medicare & Medicaid Services, which oversees the new payment system.  “An important aspect of this payment system is to ensure beneficiaries have access to high quality home health services.”

Home health payment rates are updated annually by either the full home health market basket percentage, or by the home health market basket percentage as adjusted by Congress.  CMS establishes the home health market basket index, which measures inflation in the prices of an appropriate mix of goods and services included in home health services.  For CY 2006, the proposed estimated home health market basket percentage is 3.3.  Section 701(b)(4) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 provided that updates for CY 2005 and CY 2006 will equal the applicable home health market basket percentage increase minus 0.8 percentage point.

CMS is also proposing to adopt revised Core Based Statistical Area market area definitions as announced by the Office of Management and Budget.  These market area definitions are used to set payment adjustments to reflect variation in costs across geographical areas.  As part of this proposal, we estimate that rural home health agencies will experience a 0.7 percent increase in payments.  Also, it is estimated that the combined effect of all changes in this proposed rule will result in a 3.5 percent increase to payments to rural home health agencies and a 2.3 percent increase in payments to urban home health agencies.

To qualify for Medicare home health visits, a beneficiary of Medicare must be under the care of a physician, have an intermittent need for skilled nursing care, or physical therapy, or speech therapy or continue to need occupational therapy.  The beneficiary must be homebound and receives home health services from a Medicare approved home health agency.

Information regarding CMS’ CY 2006 update to the home health PPS rates is available at Medicare’s consumer web site http://www.cms.hhs.gov/providers/hha/cms1301p.pdf  , and through Medicare’s help line, 1-800-MEDICARE (1-800-633-4227).  Comments are accepted until close of business on September 6, 2005.