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Optimizing the Medicare Home Health Benefit to Improve Outcomes and Reduce Disparities

For years, rising health care costs have led to a general movement of services out of facility settings and into the home, a trend that will continue as the population of aging Americans grows. By 2030, more than one in five people in the United States are expected to be 65 or older and, by 2035, the number of individuals over 85 will nearly double. The COVID-19 pandemic’s toll on patients and health workers in congregate settings has increased the urgency of bringing care to patients where they live. To facilitate safe access to Medicare services for the duration of the public health emergency, Congress introduced temporary flexibilities allowing new types of care to be delivered in the home setting, such as telehealth and hospital-level services.

These services constitute a narrowly defined benefit for individuals who need skilled care but are unable to leave home without considerable and taxing effort.

More than 3 million fee-for-service Medicare beneficiaries received home health services in 2019, at a cost of $17.8 billion to the federal government. However, the benefit does not adequately address the needs of beneficiaries with multiple comorbidities or complex conditions. This shortcoming is largely the result of fraud and abuse guardrails and updates to payment policies that temper access to the home health benefit and limit the availability of some services.

BPC’s Health Project conducted a literature review, interviewed more than 25 policy experts, and convened a roundtable with experts and stakeholders. Through those efforts, we identified the following key factors as having a deleterious effect on care delivery under the Medicare home health benefit:

  • Inconsistent Medicare coverage determinations influence which beneficiaries home health agencies serve.
  • Payment methodology and quality metrics disincentivize services for those with higher levels of need or without an expectation of functional improvement.
  • Home health agencies overlook the importance of home health aides on recovery and health outcomes.
  • Beneficiaries and family caregivers are not appropriately educated about home health services and do not receive adequate support.

A history of fraud and abuse in the home health sector has been a key driver of policymaking decisions. The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment policy, has regularly highlighted program integrity issues related to home health services. In response, Congress and the U.S. Department of Health and Human Services (HHS) have worked to curb overutilization of home health services, uncovering multimillion-dollar fraud schemes in the process. Increased oversight had the desired effect of reducing inappropriate payments. However, the increase in audits and medical necessity denials also reduced access to services for Medicare beneficiaries with complex needs. The Centers for Medicare & Medicaid Services (CMS) contracts with private insurance companies to review claims for home health services. Although these Medicare Administrative Contractors (MACs) base coverage determinations on the guidance provided by CMS, they apply their own “reasonable and necessary” standards for interpreting medical necessity. This discretionary authority has led to inconsistent, and potentially unwarranted, claims denials, placing home health agencies at risk of having to return payments for services that they have already provided.

Updates to payment policies also led to significant changes in the number of visits and type of services delivered.MedPAC attributes the alteration in care patterns to home health agencies shifting services to maximize reimbursement. The most significant change to home health payments was the result of the Bipartisan Budget Act of 1997, which introduced payment limits and led to the implementation of the Home Health Prospective Payment System (PPS). The PPS established a fixed payment for each 60-day period, or episode of care, instead of reimbursing agencies for individual visits. Home health agencies responded by dramatically reducing home health aide and social worker services and increasing rehabilitative therapy visits. Between 2001 and 2019, agencies more than doubled therapy visits, while reducing aide visits by 90%.

More recently, the Bipartisan Budget Act of 2018 required updates to the Home Health PPS to better reflect the costs of care. In 2020, CMS implemented the Patient-Driven Groupings Model (PDGM), linking reimbursement to patient complexity rather than volume of services. In addition, the payment period was reduced by half, with the first 30-day episode receiving the highest payment rate. These changes have reduced the availability of services for individuals who may require more visits or longer treatments.

Current policies lead home health agencies to alter delivery patterns to maximize profits or avoid providing services for fear of rejected claims. CMS should institute operational improvements to the administering of the home health benefit to ensure services are covered when eligibility criteria are met. In addition, payment policies should incentivize agencies to deliver an appropriate mix of services to qualified beneficiaries.

BPC acknowledges the importance of maintaining the home health benefit’s current structure and understands that Congress did not intend for Medicare to cover long-term custodial care. However, CMS must not overlook the needs of Medicare beneficiaries with chronic illness or the influence of current policy on racial and ethnic disparities among those receiving home health services. Given these realities, BPC developed policy recommendations for actions that can be adopted under the current regulatory framework using existing CMS authorities.

BPC recommends that CMS streamline coverage determination processes, alter payment policies that disadvantage higher-cost beneficiaries, confirm beneficiary needs are met to the extent allowed under current law, and ensure the practical availability of home health aides and clinical social workers for those qualifying for Medicare home health services.


Streamline Coverage and Eligibility Determinations

To improve the administering of the Medicare home health benefit and prevent unwarranted coverage denials, CMS should:

  • Implement uniform claims review processes, establish training requirements for MACs, monitor for outliers, and institute penalties for unwarranted denials.
  • Require MACs to report coverage denials by condition, service type, race, age, functional status, cognitive deficit, and episode trigger to identify access disparities.
  • Establish a baseline level of functional and cognitive impairment that should indicate medical necessity, similar to criteria used for chronic care management or Medicaid home and community-based services (HCBS).

Adjust Quality and Payment Incentives

To ensure that quality metrics and payment policies reward whole-person care, CMS should:

  • Confirm that updates to the Home Health PPS adequately capture the costs of providing care to those with chronic illness and cognitive deficits.
  • Develop measures reflecting the stabilization of a beneficiary’s condition in order to reward outcomes when improvement is unlikely.
  • Adopt measures with a focus on reducing racial and ethnic disparities and explicitly link payment to meeting performance benchmarks.

Optimize Service Availability

To ensure beneficiaries receive the services for which they qualify by appropriate members of the care team, CMS should:

  • Create a toolkit to assist home health agencies in determining the appropriate mix of services for a beneficiary.
  • Limit provider and beneficiary burden when implementing the proposed social drivers of health elements in the home care assessment.
  • Update home health agency conditions of participation to include standards for home health aide staffing, such as staffing ratios, and institute penalties for withholding services.

Improve Beneficiary Experience

To improve beneficiary and caregiver experience, CMS should:

  • Conduct educational outreach to certifying providers, beneficiaries, and family caregivers regarding coverage parameters and the full panel of home health services.
  • Establish a robust monitoring program to ensure beneficiary needs are met.
  • Enforce the family caregiver preparedness requirements that are included in current home health agency conditions of participation.
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