Sustainable Growth Rate Legislation Includes Two-Year Extension of Rural Add-on
March 24, 2015 03:29 PM
The U.S. House of Representatives this Thursday will consider legislation on the floor to permanently repeal the Sustainable Growth Rate (SGR). The National Association for Home Care & Hospice (NAHC) has learned that this legislation will include a two-year extension of the Medicare Home Health Rural add-on at its current 3% level, which is set to expire at the end of this year.
As previously reported, the Rural Add-on extension has been one of NAHC’s top priorities for the SGR bill and it would be a huge victory for home care. However, the SGR legislation—as currently drafted—also includes some problematic provisions for home care and hospice, including a reduction in the annual inflation update and imposition of a surety bond on home health. In addition to keeping the rural add-on extension language in the bill, NAHC is working to mitigate the payment cut and remove the surety bond requirement from the legislation.
The legislation will extend the current 3 percent payment rate add-on for home health services delivered to residents of rural areas. This is exactly what NAHC recommended to Congress in its Legislative Blueprint for Action. Loss of the add-on would likely result in agencies having to turn away patients and even eliminate services in rural areas. The delivery of care in rural areas generally costs more than it does in urban areas due to a number of factors. Rural agencies endure fixed costs with fewer patients and visits, resulting in higher per-patient and per-visit costs. Rural agencies also tend to lack access to capital for technological advances that can improve efficiency. MedPAC has consistently found that rural agencies have profit margins below those of urban agencies. For those reasons and more, rural home health services have had a payment differential in one form or another for most of the last 25 years.
An important element of the rural add-on extension is that the bill does not include any “offset” whereby home health care itself is forced to pay for the cost of the add-on. It is estimated that the add-on cost for two years exceeds $200 million. NAHC had been prepared to cover that cost with adjustments to outlier episode funding, but it appears that is now unnecessary.
While inclusion of the Rural add-on is good news, the legislation would also impose a harmful surety bond requirement on home health agencies. NAHC has argued against similar proposals to impose a surety bond in legislation and in the President’s budget. Currently, Medicare has the authority to impose a surety bond on home health agencies but has chosen not to do so. The legislative change would make the surety bond a mandatory condition of participation in Medicare for all home health agencies. Further, it would require that a bond be no less than $50,000 in value with the authority to scale the bond amount to much higher levels based upon the Medicare revenue in the home health agency.
With the SGR bill going to the House Rules Committee on Wednesday, NAHC is taking the opportunity to try to eliminate the surety bond requirement. The fate of the requirement lies in the hands of Congressman Jim McDermott of Washington State (D-WA-7) who is the ranking member of the House Ways and Means Subcommittee on Health. This week, Washington State home health agency representatives are meeting with their congressional delegation in hopes of convincing Congressman McDermott to withdraw the provision. NAHC and the Washington State members have enlisted the support of Senator Patty Murray (D-WA) to encourage the Congressman to drop it.
NAHC learned that the Congressional Budget Office determined that the bond requirement would bring only $10 million in Medicare savings over 10 years. The bonds are estimated to cost $130 million over that same 10 years. The small savings is indicative of the fact that virtually all Medicare overpayments are fully repaid by home health agencies.
Reach out to your member of Congress to reject the surety proposal through the NAHC Legislative Action Center by clicking here.
The SGR bill also includes a hardwired 1% inflation update for all post-acute care and hospice providers in 2018. That preset update includes a rescission of the annual productivity adjustment leading to a rate reduction likely equivalent to 1 point. That estimated rate reduction is derived as follows: estimated 2018 Market Basket Index (2.5%) minus Productivity Adjustment (0.5%) equals 2.0%; 2% update minus 1% update cap equals a 1 point reduction.
NAHC continues in its efforts to stop that cut for both home health agencies as well as hospices. However, NAHC is also prepared to present alternative reforms that could achieve comparable savings in Medicare spending. There are indications that the House intends to present such an opportunity later this year. Part of the House plan in setting a rate cut date of 2018 is to provide the opportunity for health care sectors to develop substitute reforms.
At this stage, the SGR bill does not include relief from the burdensome face-to-face physician encounter requirements. NAHC has had extensive discussions with members of Congress and their staff on necessary F2F reforms, but no agreement was reached on the nature and substance of those reforms. NAHC wants changes that will significantly address the documentation requirements, the criteria for qualifying a physician to perform the face-to-face encounter, the use of telehealth services as the means to the encounter, and exceptions to the requirements overall. Work continues in that direction.
If the House ultimately passes the SGR bill, its fate in the Senate is uncertain. There are indications that the Senate may pass the bill, however there remains concern with certain issues such as the extension of the Medicaid children’s health program. Senate home care allies are positioning their support for home care related improvements if that opportunity surfaces. It is also likely that a very short-term patch bill arises to give physicians temporary relief, while giving the Senate some time to consider the complexities of the bill. The Senate is scheduled to leave for recess on Thursday so time is extremely limited.
Stay tuned to NAHC Report and NAHC Alerts for emerging developments. Reach out to your members of Congress through the NAHC Legislative Action Center by clicking here.