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NAHC sues Medicare to preserve home health service benefit

The lawsuit argues that Medicare is required to institute the payment model changes in a budget neutral manner.

Jeff Lagasse, Associate Editor

Photo: Pichsakul Promrungsee Eyeem/Getty Images

The National Association for Home Care and Hospice has filed a lawsuit against the Centers for Medicare and Medicaid Services and the United States Department of Health and Human Services that challenges the validity of a change in Medicare home health payment that NAHC said reduced rates by 3.925% in 2023, with significant additional cuts expected over the next several years.

CMS has proposed an additional 5.653% permanent rate cut to begin in 2024, based on the same challenged payment methodology, NAHC said.

Information released last week by CMS indicated that home health agencies will get a 2.2% payment decrease compared to 2023, due in part to a permanent behavior assumption adjustment. CMS issued a 2.7% payment increase for 2024, but by statute that amount was offset by a 5.1% decrease of permanent behavior assumption adjustment and by another 0.2% decrease due to the fixed-dollar loss ratio, according to the 2024 Home Health Prospective Payment System Rate Update proposed rule released on June 30.

The lawsuit argues that Medicare is required to institute the payment model changes in a budget neutral manner, rather than enact rate cuts that may result in service limitations or more restricted access to care.


Until recently, nearly 3.5 million Medicare beneficiaries received home health services annually.  Since the new payment model began in 2020, over 500,000 fewer Medicare patients have accessed home health services, according to NAHC.

The lawsuit was filed in the U.S. District Court for the District of Columbia. It alleges that CMS and HHS promulgated an invalid methodology in determining whether expenditures stemming from payment rates established in 2020 were "budget neutral" in comparison to the estimated expenditures that would otherwise have occurred under the previous payment model.

Budget neutrality is required under a 2018 law that mandates certain payment system reforms, the lawsuit states.

NAHC cited data from the Congressional Budget Office to highlight the extent of its grievance with CMS. Following the 2018 enactment of the payment reform legislation, CBO projected 2023 Medicare expenditures at $23 billion. In May 2023, CBO revised its 2023 projections downward to just $16 billion.

The lawsuit seeks declaratory and injunctive relief, including a reversal of the rate adjustments in the 2023 rule, and a requirement that Medicare implement the budget neutrality mandate.


The CMS rule proposed a permanent, prospective adjustment to the CY 2024 home health payment rate to account for the impact of the implementation of the Patient-Driven Groupings Model (PDGM). This adjustment, said CMS, accounts for differences between assumed behavior changes and actual behavior changes on estimated aggregate expenditures due to the implementation of the model and 30-day unit of payment as required by the Bipartisan Budget Act of 2018.

CMS previously finalized, for CY 2023, a permanent adjustment that was half of the estimated required permanent adjustment.

In addition, CMS is also proposing to rebase and revise the home health market basket; revise the labor-related share; recalibrate the PDGM case-mix weights; update the low utilization payment adjustment thresholds, functional impairment levels and comorbidity adjustment subgroups for 2024; codify statutory requirements for disposable negative pressure wound therapy; and establish regulations to implement payment for items and services under two new benefits: lymphedema compression treatment items and home intravenous immune globulin. 

These actions, CMS said, would help improve patient care and also protect the Medicare program's sustainability for future generations. In addition, the proposed rule includes several hospice-related enrollment provisions that more closely scrutinize hospice owners to ensure they do not pose program integrity risks.

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