April 3, 2018

Near the bottom of a Medicare Advantage rate announcement yesterday, CMS (Centers for Medicare and Medicaid Services) stated that in 2019, they will allow Medicare Advantage plans to use Medicare benefits to pay for non-skilled home care. Medicare Advantage plans receive a lump sum payment for the individual patients they insure, and companies have increasingly realized that access to home care can save them money in other healthcare utilization. However, Medicare rules have traditionally barred payors from using the benefits for non-skilled care. 

In the announcement yesterday, CMS states "CMS would allow supplemental benefits if they are used to diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization." This language is meant to overturn Medicare's previous ban on paying for services intended primarily for daily maintenance. 

This change could create upheaval in the booming private-pay home care industry in coming years. Medicare is almost universally held by Americans over age 65. If it covers non-medical home care, the incentive to hire privately would decrease significantly. To date, this is only through Medicare Advantage, and Medicare Advantage plans have, in the past, been opaque and selective about whom they let in their networks. The potential for a massive thinning of choice in the home care industry exists, especially in the major metropolitan markets where Medicare Advantage plans are the strongest. Those Medicare-certified home health agencies that already provide non-medical home care will be positioned well for growth if these changes take full force. Medicare Advantage plans would likely require physician verification of need, turning non-medical home care into more of a referral-based home care provider and lessening the value of direct to the public marketing.

On the other hand, Medicare Advantage plans may charge separately for the non-medical home care benefit, making little more impact than traditional long-term care insurance benefits. They may also choose to not offer the supplemental benefits or offer benefits that are so thin that the need for private-pay home care will persist. Time will tell, but this is a variable to watch.