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Medicare Increases Home Health Payments 2.8 Percent
Should mean an additional $370 million to agencies
next year
Nov. 2, 2005 - Centers for Medicare & Medicaid
Services (CMS) Administrator Mark B. McClellan, M.D., Ph.D., today
announced a 2.8 percent increase in Medicare payment rates to home
health agencies for calendar year 2006. The increase will bring an
estimated extra $370 million in payments to home health agencies next
year. He also announced a change to metro area determination of rates.
Medicare pays home health agencies through a
prospective payment system (PPS), which pays at higher rates to care for
those beneficiaries with greater needs. Payment rates are based on
relevant data from patient assessments conducted by clinicians as
already required for all Medicare-participating home health agencies.
“This payment increase will continue to help home
health agencies provide high quality care to beneficiaries,” said Dr.
McClellan. “Rural home health agencies will experience an estimated 3.4
percent increase in payment, while urban agencies will see a 2.5 percent
increase in payments.”
Home health payment rates are updated annually by
either the full home health market basket percentage, or by the home
health market basket percentage as adjusted by Congress.
CMS establishes the home health market basket
index, which measures inflation in the prices of an appropriate mix of
goods and services included in home health services. For CY 2006, the
home health market basket percentage is 3.6. Section 701(b)(4) of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
provided that updates for CY 2005 and CY 2006 will equal the applicable
home health market basket percentage increase minus 0.8 percentage
point.
CMS is adopting the revised Metropolitan
Statistical Area (MSA) definitions as announced by the Office of
Management and Budget in their July 6, 2003, OMB Bulletin (OMB.03-04).
CMS uses MSAs to set payment adjustments to reflect variation in costs
across geographical areas.
In implementing the new MSA designations, CMS will
allow for a one-year transition with a 50/50 blend, consisting of 50
percent of the new MSA designations’ wage index and 50 percent of the
previous MSA designations’ wage index. Providing home health agencies
with a one-year 50/50 blend of new and old wage index values will help
to mitigate the impact on agencies as CMS moves towards a wage index
based entirely on the new MSA definitions in CY 2007.
CMS is also updating the fixed dollar loss (FDL)
ratio, which is used in the calculation of outlier payments. We are
updating the FDL ratio from 0.70 to 0.65 for CY 2006. We believe that
an FDL ratio of 0.65 continues to preserve a reasonable degree of cost
sharing, and continues to meet the statutory requirements while still
allowing a greater number of episodes to qualify for outlier payments.
To qualify for Medicare home health visits, a
beneficiary of Medicare must be under the care of a physician, have an
intermittent need for skilled nursing care, or physical therapy, or
speech therapy or continue to need occupational therapy. The
beneficiary must be homebound and must receive home health services from
a Medicare approved home health agency.
Information regarding CMS’ CY 2006 update to the
home health PPS rates is available at Medicare’s consumer web site,
http://www.medicare.gov and through Medicare’s help line,
1-800-MEDICARE (1-800-633-4227).
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