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by Kristin Rowan, Editor
MedPAC Proposes Drastic Cuts
Five Year Decrease Not Enough
The onset of PDGM and the recalculations of payments in 2020 have led to an overall decrease in Medicare reimbursement rates for home health by approximately 12%. CMS continues to calculate budget neutrality with flawed formulas. The Alliance, along with several other advocacy groups as well as agencies and individuals, continues to fight against the formula and the pay cuts, estimating that nearly half of all home health agencies will be losing money in order to stay open.
Industry Report
Despite the continual decrease in payment rates, MedPAC recommends additional steep cuts. Highlights from the MedPAC report include:
- 97% of beneficiaries have access to 2 or more HHAs
- The total number of HHAs declined 1% in 2024 (excluding CA)
- Only 7.9% of beneficiaries used HH in 2024
- Number of 30-day periods per beneficiary increased 2.6%
- The overall profit margin for Traditional Medicare is 21.2%
- The overall profit margin for all payers is 5%
- Anticipated profit margin for 2026 is 19% for Traditional Medicare (3% overall)
Less than 0
The Traditional Medicare profit margin in 2026 is projected at 19%. This is offset by the negative profit margin from Medicare Advantage and private insurance plans. It may not be realistic or fair for the taxpayer to offset poor policies in Medicare Advantage and private insurance plans, but that has been the reality for years. Medicare Advantage plans yield high profits for insurance payors, and negative margins for HHAs. With an overall profit margin of 3%, lowering the Medicare reimbursement rate by more than 3% will put all HHAs in the red.
The Math Isn't Mathing
The numbers are there. HHAs earn 5% now, 3% next year. MedPAC recommends that CMS reduce the 2026 rate by an additional 7%.
NET PROFIT MARGIN -4%
Conclusion from MedPAC: This will not impact care; providers will still be willing to treat Traditional Medicare beneficiaries.
That statement may be true. However, in order for HHAs to survive, they will have to drop all MA plans. More than 50% of Medicare beneficiaries are on MA plans. 40% of MA patients use HH care after hospitalization. Medicare Advantage will survive through hospitals and physicians, but the Home Health benefit won’t have any providers.
Hospice Tie-In
CMS is currently weighing the option of the hospice carve-in to Medicare Advantage plans. The pilot plan failed miserably and yet rolling this out across all plans is an option, somehow. CMS and MedPAC must not be able to see what has happened to Home Health under MA plans. Hospice will suffer the same fate through the carve-in. It is irresponsible and destructive to add Hospice to MA. For that matter, it is irresponsible and destructive NOT to remove Home Health from MA. Move it all back to Traditional Medicare where at least the profit margin is above 0.
May Cooler Heads Prevail
From the proposed rule in July to the final rule in November, CMS lessened the permanent rate cut by about 5%, finally hearing the concerns of advocates who told them HHAs would go out of business. We certainly hope CMS will keep that in mind when considering the MedPAC recommendation.
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Kristin Rowan has been working at The Rowan Report since 2008. She is the owner and Editor-in-chief of The Rowan Report, the industry’s most trusted source for care at home news, and speaker on Artificial Intelligence and Lone Worker Safety and state and national conferences.
She also runs Girard Marketing Group, a multi-faceted boutique marketing firm specializing in content creation, social media management, and event marketing. Connect with Kristin directly kristin@girardmarketinggroup.com or www.girardmarketinggroup.com
©2025 by The Rowan Report, Peoria, AZ. All rights reserved. This article originally appeared in The Rowan Report. One copy may be printed for personal use: further reproduction by permission only. editor@therowanreport.com
