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June 28, 2024
Health Law Weekly

Home Health Agencies Facing $280 Million Medicare Pay Cut in 2025 Under Proposed Rule

  • June 28, 2024

Medicare payments to home health agencies (HHAs) in calendar year (CY) 2025 would decrease in the aggregate by 1.7%, or $280 million, compared to CY 2024, under the Home Health Prospective Payment System proposed rule issued June 26.

The rates in the proposed rule, which is slated for Federal Register publication on July 3, reflect a 2.5% home health payment update ($415 million increase), an estimated 3.6% decrease from a payment behavior adjustment ($595 million decrease), and an estimated 0.6% decrease ($100 million decrease) from a proposed update to the fixed-dollar loss ratio used in determining outlier payments, the Centers for Medicare & Medicaid Services (CMS) said in fact sheet.

According to the fact sheet, the proposed negative permanent adjustment to the 30-day payment rate will ensure that aggregate expenditures under the Patient-Driven Groupings Model (PDGM), which was implemented in 2020, will be equal to what they would have been under the old payment system. The Bipartisan Budget Act of 2018 required implementation of the PDGM, which is intended to better align payments with patient care needs. The adjustment accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures.

In CY 2023 and 2024 final rules, CMS opted for cutting in half proposed payment cuts, citing concerns about making such sizeable payment reductions in a single year. CMS finalized a negative 2.890% payment adjustment in CY 2024, while applying a negative 3.925% adjustment in CY 2023.

The Partnership for Quality Home Healthcare blasted the latest proposed rate reduction, warning the third consecutive year of payment cuts will further undermine the delivery of high-quality home health care.

“We are very disappointed that CMS did not use its authority to suspend further reductions to home health payments in CY 2025, despite our repeated requests and data demonstrating decreased access to home health services,” said Joanne Cunningham, CEO of the Partnership in a statement. “The role of Congress in alleviating the burden of these cuts is now increasingly important, and we will be calling on our champions in Congress to finish the job on legislation to block these harmful cuts this year.”

A bipartisan group of lawmakers in the House and Senate have introduced a measure to block further cuts to the Medicare home health benefit in future years, the group noted.

In April, the U.S. District Court for the District of Columbia rejected a challenge to the home health rate reductions, finding the National Association for Home Care and Hospice (NAHC), which brought the action, failed to exhaust its administrative remedies. The group argued the payment cuts were based on an “illogical and invalid methodology.” National Ass’n for Home & Hospice Care v. Becerra, No. 1:23-cv-01942 (TNM) (D.D.C. Apr. 26, 2024).

Comments on the proposed rule are due August 26.