Home Health Payment Rates Will Increase 2.8 Percent for 2006, USA

CMS announced a 2.8 percent increase in Medicare payment rates to home health agencies for 2006. Medicare pays home health agencies through a prospective payment system (PPS), which pays at higher rates to care for those beneficiaries with greater needs.



CMS said rural home health agencies will see an estimated 3.4 percent increase and urban agencies will see a 2.5 percent increase in payments. This will add approximately $370 million in reimbursements for 2006. 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 calendar year 2006, the home health market basket percentage is 3.6. However, the Medicare Modernization Act of 2003 requires updates for 2005 and 2006 to equal the applicable home health market basket percentage increase minus 0.8 percent.



CMS is adopting the revised Metropolitan Statistical Area (MSA) definitions as announced by the Office of Management and Budget (OMB) in their July 6, 2003, OMB Bulletin. CMS uses MSAs to set payment adjustments to reflect variation in costs across the U.S. 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.



CMS is also updating the fixed dollar loss (FDL) ratio, which is used in the calculation of outlier payments, updating the FDL ratio from 0.70 to 0.65 for 2006, thereby qualifying more episodes for outlier payments.


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