Medicare home health payment reform may jeopardize access for clinically complex and socially vulnerable patients

The Affordable Care Act directed Medicare to update its home health prospective payment system to reflect more recent data on costs and use of services-an exercise known as rebasing. As a result, the Centers for Medicare and Medicaid Services will reduce home health payments 3.5 percent per year in the period 2014-17. To determine the impact that these reductions could have on beneficiaries using home health care, we examined the Medicare reimbursement margins and the use of services in a national sample of 96,621 episodes of care provided by twenty-six not-for-profit home health agencies in 2011. We found that patients with clinically complex conditions and social vulnerability factors, such as living alone, had substantially higher service delivery costs than other home health patients. Thus, the socially vulnerable patients with complex conditions represent less profit-lower-to-negative Medicare margins-for home health agencies. This financial disincentive could reduce such patients' access to care as Medicare payments decline. Policy makers should consider the unique characteristics of these patients and ensure their continued access to Medicare's home health services when planning rebasing and future adjustments to the prospective payment system.