Imagine you are in your 70s or 80s and just underwent surgery. Your doctor asks you whether you’d like to stay in your hospital bed for the foreseeable future, or if you’d prefer to recover at home. The choice is easy, right? In recent years, 94% of Medicare beneficiaries indicated that they prefer home healthcare over institutionalized settings. And with good reason: Home health provides better health outcomes for patients recovering from a hospitalization and gives them the safety and comfort of being at home. But this care option should also be first choice for the government as it’s drastically more cost-effective, saving Medicare a projected $3.37 billion in 2023-2027.
Despite these facts, home-based care has consistently been underfunded in comparison to its facility counterparts. Now, the industry is facing an unprecedented access-to-care crisis resulting from an excess of pressures such as funding cuts, labor shortages, increased costs of doing business, all while trying to handle a rapidly rising demand for services. Aging Americans and those with permanent disabilities need the federal government to shift Medicare funding to the home setting — and yet, the Centers for Medicare and Medicaid Service (CMS) has decided to decrease funding and access to care instead.
The federal government determines how much it will allocate towards Medicare services such as in-home rehabilitation and nursing. This funding formula must cover all costs providers spend including nurses’ wages, training, supplies, innovation, technology, etc. Therefore, without adequate funding, home health companies like BAYADA can’t compete for the workforce. Our industry has always struggled with low funding, but the economic pressures from the pandemic have only exacerbated our ability to provide access to in-home care. And on top of that, the federal government is looking to cut funding for the second year in a row. These cuts mean that fewer Medicare beneficiaries will be able to use home health care and will be forced to choose much costlier options like full-time rehab facilities and nursing homes — significantly increasing Medicare spending.
We’ve all felt the sky-rocketing costs of living and doing business due to inflation — and home health providers are not immune either. Since 2019, fuel prices alone have increased by 43%. But it’s not just economic pressures — the rise of workforce wages has hit the industry hard.
Dobson DaVanzo & Associates recently conducted an independent analysis using Bureau of Labor Statistics (BLS) data and found that nursing staff wages have risen quarterly since 2021 from an increase of 6.1% in 4Q2021 to 7.7% in 1Q2023. And during this period, CMS has mandated cuts of 3.96% and has proposed an additional 2.2% cut in 2024 – which does not include nearly $4 billion in the unspecified future that they want providers to refund them for ‘overpayment’ of services throughout COVID.
This combination of simultaneous cost increases and payment reductions has already resulted in reduced services and increased numbers of patients being denied coverage. In the past year alone, the shortage of in-home caregivers coupled with the growing number of people who need this care has increased these denial rates from 54% in 2019 to 76% in just a few years.
Just as other industries must adjust, so must home health providers – but unlike other industries, home health providers must do so without the benefit of being able to increase our pricing. Providers like BAYADA cannot pass off these costs to consumers the way most industries do, which means costs must be reduced in other areas like training, innovation, and education for our skilled clinicians, which are all self-funded. CMS’s 2024 proposed rule would reduce payments for Medicare home health services by $375 million in 2024 and over $20 billion over the next 10 years.
Both the Biden Administration and Congress have stated they will not cut Medicare funding — both Democrats and Republicans have publicly supported this sentiment. However, this is exactly what CMS is doing by cutting these rates under their current methodology and analysis.
At a time when home has proven to be the right place — particularly for Medicare-eligible populations — this is the wrong time to devastate the industry. Reductions not only hinder providers’ ability to deliver rehabilitative services but will also severely limit access-to-care for millions of vulnerable Americans. All of which directly contradicts CMS’ goal in the Strategic Framework plan that outlines guidelines for the future of Medicare and Medicaid and the over 150 million beneficiaries who rely on these services. In its own plan, CMS states that its aim is to promote and improve access to care in rural and underserved areas, enhance health care innovation and technology, and expand beneficiaries’ choice of where they want to be cared for long-term. These are the exact tenets that will be hindered by its funding reduction proposal.
Home health care plays a vital role in the healthcare continuum. As more and more populations choose to age in place and be cared for at home, the very least that the federal government can do is recognize the importance of home health, and support aging and disabled Americans with proper funding and access-to care.
David Totaro is chief marketing and government affairs officer for BAYADA Home Health Care.
