More Congressional Support for Rural Add-on Extension
March 31, 2015 09:29 AM
The 3 percent rural add-on payment for home health services is currently set to expire at the end of 2015. Last week, NAHC reported that the House-passed bill to permanently replace the sustainable growth rate (SGR) includes a two-year extension of the 3 percent rural add-on. Subsequently, the Senate adjourned for a two-week recess before voting on the bill. However, Senate leaders have indicated they plan to consider it after returning on April 13. The Senate is expected to pass the legislation, including the rural add-on, with strong support on both sides of the aisle.
Before the House took this action extending the rural add-on for two years, U.S. Senators Susan Collins and Maria Cantwell, last week, introduced S. 839, a bill that would extend the rural add-on for another five years. Senator Collins had previously expressed to NAHC her interest in introducing this bill. The support from these Senators and others in Congress contributed significantly to the inclusion of the two-year extension in the SGR bill.
“I know how important the add-on is for our rural areas – it’s a matter of life and death,” said NAHC’s President Val J. Halamandaris. “To breathe the clean air should not be a death sentence, and our Medicare system should not discriminate based on an accident of birth. I want to thank Senator Collins, along with Senator Cantwell, for championing the rural add-on extension and protecting the ill, aged, and disabled in rural areas.”
The rural add-on used to be higher than 3 percent. From April 2001 to April 2003, the add-on was 10 percent for home health services delivered in rural areas. Congress then reinstated the add-on at 5 percent, until it expired in 2006. It was not until the Patient Protection and Affordable Care Act (PPACA) in 2010 that the rural add-on was reinstated at 3 percent. Under the PPACA, the rural add-on payment became effective for visits from April 1, 2010, through January 1, 2016.
In its Legislative Blueprint for Action, NAHC recommended that Congress should extend the current 3 percent rural add-on. Without the add-on, many agencies would likely be forced to turn away patients and even eliminate services in rural areas, where access to care is a critical issue. As evidence of this, some agencies reported that they had to eliminate delivery of services to remote areas during the period of time, before 2010, when the add-on was unavailable.
It often costs more to deliver care in rural areas than in urban areas. Agencies in rural areas are typically smaller scale operations with fewer patients and visits. Smaller agencies must spread fixed costs over fewer patients and visits, resulting in higher per-patient and per-visit costs. Smaller agencies are also more likely to have a lower volume of patients, meaning they lack access to a varied case-mix. Profitable cases do not always offset the resource-intensive, expensive cases. With an inconsistent census of patients, a smaller agency also faces difficulty retaining full-time staff.
Rural agencies also face more difficulty in hiring staff because they are unable to compete with the wages and benefits that hospitals offer. Furthermore, home health agencies, unlike hospitals, are ineligible for reclassification of their wage index.
Another challenge for rural agencies is they often lack access to capital for technological advancements and efficiency improvements. Not to mention Medicare payment policy does not allow for reimbursement of such technology.
As a result of all of this, rural agencies have had consistently lower profit margins than urban agencies, a fact that MedPAC has confirmed. NAHC projects that by 2017—with the loss of the rural add-on and the continuation of rebasing—fifty-seven percent of rural agencies would be underwater, meaning they would receive less in Medicare payments than their costs.
So it is good news that Congress—with the leadership of individuals like Senators Collins and Cantwell—is demonstrating support for the importance of extending the rural add-on. NAHC is pleased that, additionally, the rural add-on extension in the SGR bill does not include an “offset” requiring home health care to pay for its cost. The cost of a two-year extension is estimated to exceed $200 million. While NAHC has been prepared to cover that cost with adjustments to outlier episode funding, it appears that is now unnecessary.
NAHC will continue to engage Congress to ensure the current 3 percent add-on is extended. Please contact your members of Congress using NAHC’s Legislative Action Center to extend the rural add-on and cosponsor S. 839, introduced by Senators Collins and Cantwell.