Last year, home health agencies narrowly escaped a freeze to their 2007 Medicare inflation update of 3.3% because of strong allies on Capitol Hill who stepped up to the plate during last-minute negotiations on the Tax Relief and Health Care Act of 2006 (P.L. 109-432). Given the odds that the industry faced, because of the recommendation to Congress by the Medicare Payment Advisory Commission (MedPAC) that home health's 2007 update be eliminated (MedPAC report), this caught many in Washington by surprise. In fact, a December 2006 CQ HealthBeat article by John Reichard referenced a healthcare expert who assessed the home health industry as one of the biggest winners in the 2006 legislation because of the industry's avoidance of a 2007 "freeze" and other Medicare reimbursement cuts.

Looking Ahead

Despite the success of the Visiting Nurse Associations of America (VNAA) last year, and the change in party leadership in both the House and Senate, VNAA believes that home health and hospice continue to be in danger of cuts to Medicare reimbursements for the following reasons:

* The Democratic leadership in both the House and Senate has embraced a return to the "pay-go" federal budget process, meaning that any new federal spending must be offset by federal program savings.

* The President's FY2008 Budget proposed $66 billion in spending cuts to entitlement programs, including $9.7 billion to Medicare home health and $1.14 billion to Medicare Hospice over 5 years.

* Reauthorization of funding for the State Children's Health Insurance Program (SCHIP) must be approved this year and will cost approximately $50 billion over 5 years.

* Congress will address the projected 20% payment shortfall in Medicare reimbursement for physicians in 2008. A 1-year repeal is estimated to cost up to $20 billion; a permanent "fix" will cost more than $100 billion.

This means that Congress will have to find as much as $100 billion in budgetary savings to implement any of the preceding scenarios if it sticks to its "pay-go" rule.

Congress typically turns to MedPAC and the Congressional Budget Office for guidance on where to find offsets, and MedPAC has already recommended that Congress eliminate home health's 2008 Medicare inflation update. (At MedPAC's March meeting, MedPAC Commissioners voted to recommend that Congress eliminate the Medicare payment update to home health agencies in 2008.) In the past, the Congressional Budget Office recommended that Congress implement a 5-year freeze of the Medicare home health inflation update (savings: $6.3 billion [Congressional Budget Office, 2005a] and a 10% co-pay on each home health episode; savings: $11.8 billion) to achieve Medicare savings (Congressional Budget Office, 2005b).

Home health and hospice providers continue to have their work cut out for them in convincing Congress that home health and/or hospice spending cuts do not make sense for the following reasons:

1. Cuts would increase Medicare spending over the long term because home health and hospice are cost-effective alternatives to institutional care.

2. According to MedPAC's March 2006 report, 20% of home health agencies have negative Medicare margins (MedPAC report).

3. The history of Medicare freezes has limited home health agencies' ability to upgrade their technology, including the purchase of telemedicine equipment. Such equipment would likely improve access to Medicare home health services for Medicare beneficiaries, because it enables providers to supplement nursing visits with 24-hour oversight of their patients, which is an increasing necessity as the supply of nurses and home health aides continues to fall.

The VNAA has begun to address these challenges. We are confident that by building on our successful 2006 strategy we will once again defeat any freeze or cuts to the Medicare home care and hospice benefits this year.

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