The report below comes from Jim Pyles, an attorney with Powers, Pyles, Sutter and Verville. Jim is HCLA’s lobbyist on Capitol Hill and is steeped in healthcare experience across the continuum of care. His piece below outlines the impact on home health of President Obama’s proposed budget for FY 2013. You will find this not only on HCLA’s email but at our social media vehicles. We welcome your response and comment.
Final 2013 Overview Fact Sheet
President Obama’s Budget for 2013: What it Means for Home Health and DME
Yesterday President Obama released his proposed budget for fiscal year ending 2013. It contains additional cuts in payments under Medicare and Medicaid, and specifically cuts to the home health benefit under Medicare and the DME benefit under Medicaid. Summary material released by the White House is attached for your convenience. It is important to understand the magnitude of these cuts, but it is equally important to understand their significance and that it means for home health and DME with respect to business strategy.
The President’s budget would purportedly reduce the deficit over 10 years by $4 trillion (counting the reduction in spending of $1 trillion mandated by the Budget Control Act). Spending on Medicare would be reduced by $248 billion (which would extend the life of the Medicare Trust Fund from 2012 to 2015) while Medicaid spending would be reduced by $73 billion.
The budget would impose a copayment on the Medicare home health benefit of $100 per episode applicable to episodes with five or more visits not preceded by a hospital or other inpatient post-acute care stay. The copayments would apply to new beneficiaries beginning in 2017. It is estimated to save approximately $400 million. The rationales for both cuts to the home health benefit are that they were recommended by MedPAC. The budget also mentions the strong profit margins MedPAC has reported for home health agencies.
The budget also calls for rebasing the home health reimbursement methodology beginning 2014, as well as revising the reimbursement methodologies for skilled nursing facilities, long-term care hospitals and inpatient rehabilitation facilities, and reducing annual updates on payment rates. This is estimated to save approximately $32 billion, but not all of that would be from home health.
The budget also proposes to reduce Medicaid spending on DME to what Medicare would have paid under competitive bidding, beginning in 2013. This estimated to save $4.2 billion.
Significance
It is well known that the President’s budget is merely a set of proposals that seldom are enacted as proposed. However, copayments have not only been recommended by MedPAC but also by the Bipartisan Deficit Reduction Commission, by Congressional committees and previously by the President. Despite vigorous lobbying by the home health industry, this proposal keeps resurfacing. Rebasing of the home health reimbursement methodology is mandated by section 3131 of the Affordable Care Act which also authorizes different payment rates for for-profit and non-profit home health agencies and hospital-based and freestanding agencies. Further, it is significant that these proposals are being made by a Democratic President in an election year since democrats historically have been the stronger supporters of the home health benefit. It is unlikely Republicans will oppose copayments and other cuts on home health.
These additional cuts, which we have been predicting, are another illustration of the importance of home health providers diversifying into chronic care coordination services under Medicare, Medicaid and private insurance. Coverage and reimbursement continues to grow for those services that can show savings.
The provisions from the President’s budget appear below:
Introduce home health co-payments for new beneficiaries. Medicare beneficiaries currently do not make co-payments for Medicare home health services. This proposal would create a home health copayment of $100 per home health episode, applicable for episodes with five or more visits not preceded by a hospital or other inpatient post-acute care stay. This would apply to new beneficiaries beginning in 2017.This proposal is consistent with a MedPAC recommendation to establish a per episode copayment. MedPAC noted that “beneficiaries without a prior hospitalization account for a rising share of episodes” and that “adding beneficiary cost sharing for home health care could be an additional measure to encourage appropriate use of home health services.” This proposal will save approximately $400 million over 10 years. “Living Within Our Means and Investing in the Future”, Office of Management and Budget, p. 39 (Feb. 13, 2012).
Adjust payment updates for certain post-acute care providers. MedPAC analysis indicates that Medicare payment significantly exceeds the cost of patient care in post-acute care settings, resulting in high Medicare margins. This proposal would gradually realign payments with costs through adjustments to payment rate updates in 2014 through 2021 for these providers. These adjustments build on recommendations from MedPAC’s March 2011 Report to the Congress, in which they recommended that the Congress eliminate payment updates for each of these provider types in 2012.This proposal will save $32 billion over 10 years. OMB p.. 36.
Limit Medicaid reimbursement of durable medical equipment (DME) based on Medicare rates. Under current law, States have experienced the same challenges in preventing overpayments for DME that previously confronted Medicare. The Medicare program is in the process of implementing innovative ways to increase efficiency for payment of DME through the DME Competitive Bidding Program, which is expected to save the Medicare program more than $17 billion and Medicare beneficiaries approximately $11 billion over 10 years. This proposal extends some of these efficiencies to Medicaid, starting in 2013, by limiting Federal reimbursement for a State’s Medicaid spending on certain DME services to what Medicare would have paid in the same State for the same services. This proposal is projected to save $4.2 billion over 10 years. OMB p. 40.
Jim Pyles
James C. Pyles, Principal
POWERS PYLES SUTTER & VERVILLE PC
