Home health care refers to medical care provided within a patient’s home. This encompasses skilled nursing care as well as physical, occupational, and speech therapy, and may also include non-medical skilled care such as social services or assistance with daily living from a home health aide. Home care can be provided in the short-term, lasting from a couple of days to a few months, while a patient recovers from an illness, injury, or medical procedure. Home care can also be administered in the long-term for people with disabilities or chronic conditions.  Around 3.3 million Medicare beneficiaries received home health care in 2019, costing the program $17.8 billion. Three quarters of Americans age 50 and older say they prefer to remain in their current residence as long as possible rather than live in an institutional setting.

Care provided at home is often less expensive and just as effective as care given in a hospital or skilled nursing facility. One study found that Medicare beneficiaries discharged to home health saved Medicare $4,514 on average in the first 2 months after the first hospital admission compared to those sent to a skilled-nursing facility. And, as the country learned during the COVID-19 pandemic, receiving care at home can be a safer option.

This is a critical time to consider improvements to Medicare’s home health benefit. The Biden Administration has included expanding access to home and community-based services (HCBS) under Medicaid in its American Jobs Plan. Shoring up HCBS has support on Capitol Hill, with many Democratic lawmakers pushing to include this in infrastructure or budget reconciliation legislation. The National Committee supports these proposals but believes that access to home care should be improved for all beneficiaries, not just those eligible for Medicaid.  It is important to consider the current challenges that Medicare beneficiaries face when trying to access home-based care, and to advance solutions that will improve the accessibility and quality of these services for America’s seniors.

What Medicaid Covers

The majority of home health services for seniors are financed by out-of-pocket payments or through Medicaid. However, Medicaid is only available to individuals who have limited incomes and resources. Because the United States lacks a comprehensive long-term care program, many middle-class seniors ultimately must spend down their resources to receive long-term care, including home care, through Medicaid.

Medicaid pays for some form of home care in all 50 states. However, while the federal government sets minimum standards on which home health benefits must be covered, states have flexibility in the administration of their Medicaid programs. States may offer home health benefits through their “original” Medicaid programs, or they may utilize HCBS Medicaid waivers or Section 1115 demonstration waivers to offer home care.

There are several issues with Medicaid home health. For instance, although many states offer it, personal care assistance, which includes help with bathing, dressing, and eating, is not a federally mandated Medicaid benefit. Additionally, the “functional need” thresholds that partially determine eligibility for home health services vary by state. These disparities in eligibility and coverage mean that some seniors miss out on the care that they need because of where they live. Furthermore, HCBS through Medicaid waivers are not entitlement programs, meaning that meeting eligibility requirements does not automatically guarantee benefits. Many states have waitlists that  create a barrier to receiving timely care.

What Medicare Covers

Medicare has a limited home care benefit. People with Medicare Part A or Part B can qualify for covered home health services if they are under the care of a doctor and are certified by a doctor as “homebound.” To be eligible, a beneficiary must need intermittent skilled nursing care or skilled physical therapy, speech therapy, or continuing occupational therapy, and must receive services through a Medicare-certified home health agency. Home health services are available to people with acute or chronic conditions, or both.

The following services are available for eligible beneficiaries with no coinsurance or deductible: intermittent or part-time nursing care or home health aide services, physical, occupational or speech therapy, medical social services, and medical supplies. These services may aim to improve, maintain, or slow the decline of a patient’s condition.

There is no limit on the length of time that a Medicare beneficiary can receive home health services. However, Medicare will only cover home health aide and medical social services for patients who are also receiving skilled care. Because most long-term care       comprises non-medical personal care or assistance with activities of daily living, Medicare does not cover long-term care as a stand-alone benefit. Approximately 11 percent of seniors purchase private long-term care insurance but it is expensive, premiums can rise substantially over time, applicants can be denied insurance because of a pre-existing condition, and coverage can be limited.

Present Challenges

Only a little more than half of all Medicare patients discharged from hospitals with home health referrals received a home health visit in 2016. There are various obstacles that make it difficult for beneficiaries to access the full scope of home health services they are eligible for under Medicare.

Lack of oversight

Confusion about the law and which home health services are covered can lead to the spread of misinformation among providers as well as patients. According to the Center for Medicare Advocacy, “the Medicare home health benefit is misunderstood, inaccurately articulated, and narrowly implemented.” While there is some genuine misunderstanding surrounding Medicare home health laws, there are also instances in which patients are intentionally misled by home health agencies that are seeking to maximize profits. The Centers for Medicare & Medicaid Services (CMS) do not monitor or reprimand Medicare-certified home health agencies for failing to provide mandated services. This lack of oversight enables some agencies to get away with breaking the law and preventing patients from accessing necessary care.

Under Medicare, home health is financed through a prospective payment system (PPS), in which reimbursement for services is made based on a predetermined fixed amount. While PPS was designed to encourage the delivery of efficient care, direct service organizations report that Medicare’s home health PPS has created a financial incentive for home health agencies to increase profits by stinting on care provision.

Medicare home health services declined 88 percent between 1998 and 2017. The shortage of home health aides in America may further exacerbate the issue. The majority of home health workers are women of color. With a median wage of $12.60 an hour, more than 15 percent live in poverty. The work of home health aides has historically been undervalued, which has contributed to the low wages and tough working conditions that characterize this profession.

There are several barriers that prevent patients, especially those with chronic conditions and longer-term health care needs, from receiving the home care they are entitled to. Yet, even if all beneficiaries had access to the services that they are eligible for under the law, this would still prove inadequate to fully address the needs of the Medicare population. Beneficiaries are not eligible for home health aide services if they are not also receiving skilled care. This means that seniors who only need help with personal care or light housework are out of luck.

Potential Solutions

There are three broad categories of solutions to improve the Medicare home health benefit, including 1) enforcing the current law; 2) improving benefits and 3) reforming the payment and/or delivery structure. These options are not mutually exclusive.

Enforce current law

The Center for Medicare Advocacy (CMA) has previously encouraged the Administration and CMS to improve oversight of home health care delivery by redesigning quality measures and fraud investigation triggers. CMS’ home health quality measures mainly reward improvements to patients’ conditions and fail to capture successes in maintaining a patient’s health or slowing decline. This situation creates incentives to provide care to short-term and post-acute care patients, who are more likely to improve, and to avoid long-term and chronic care patients.

In 2013, a U.S. District Court approved a settlement agreement that “required CMS to confirm that Medicare coverage is determined by a beneficiary’s need for skilled care, not on a beneficiary’s potential for improvement.” This ruling was the result of the Jimmo v. Sebelius class-action lawsuit brought against CMS “on behalf of individuals with chronic conditions who had been denied Medicare coverage on the basis that they were not improving or did not demonstrate a potential for improvement.” The National Committee was one of the co-plaintiffs in Jimmo. The settlement applies to all Medicare beneficiaries, in various settings including home health, and clarifies that coverage depends on a beneficiary’s need for skilled care and not on their potential for improvement. Despite the outcome of Jimmo, there are still cases where coverage of homebound nursing and therapy services is denied on the grounds that such services violate a nonexistent “improvement standard.”  The lack of quality measures to evaluate care provided to patients with chronic conditions who cannot improve further encourages home health agencies to avoid these patients.

Improve benefits

A standalone home health aide benefit should be covered by Medicare, which would allow seniors to live safely and comfortably at home without the requirement that they also be receiving skilled care. The National Committee signed on to a letter with 79 national, state, and local organizations supporting this addition to the Medicare home health benefit. The creation of this benefit would improve access to long-term care for middle-class seniors who are not eligible for Medicaid. In 2018, CMS began to allow Medicare Advantage plans to offer a supplemental, limited in-home support services benefit. However, all Medicare beneficiaries, including those enrolled in traditional Medicare, should have access to home health aide services without a skilled care or homebound requirement.

While trained home health aides play a vital role in helping patients with activities of daily living, most of this long-term care is provided by unpaid family or friends. When considering adding a home health aide benefit to Medicare, policymakers may want to explore allowing family caregivers to be compensated for providing these services. Many seniors prefer receiving care from someone they are close to, and this option could help combat the home health aide shortage.

Reform payment and/or delivery structure

Since the PPS for Medicare home health services was established in 2001, spending for home care has exceeded costs. The Bipartisan Budget Act of 2018 led to several changes in home health payment, effective January 1st, 2020. For instance, CMS introduced the Patient-Driven Groupings Model (PDGM) as a new value-based payment system to control the cost of home health care. The PDGM relies on clinical characteristics and other patient information to assign periods of home health care into different payment categories. According to former CMS Administrator Seema Verma, this change was supposed to eliminate incentives to provide unnecessary care. CMS also replaced the 60-day unit of home health payment with a 30-day unit of payment. This change was intended to align payment more closely with beneficiaries’ health conditions and medical needs. Additionally, therapy volume as a determinant of payment for home health agencies was eliminated under the Bipartisan Budget Act of 2018. Previously, payment was determined in part by the number of therapy visits a patient received. This may have encouraged volume over value if agencies overprovided therapy to qualify for a higher payment level.

Since its implementation, the PDGM has been criticized for prioritizing admission source and timing over patient needs in the calculation of payments. The new 30-day unit of payment is also a problem for patients, as it encourages shorter periods of care. Further, ending the therapy utilization payment threshold has lowered the financial incentive to provide physical, occupational or speech language pathology therapy, reducing access to care and leading to layoffs of the providers of these services. Although eligibility rules and coverage for Medicare home health services were not altered by the Bipartisan Budget Act of 2018, there are reports of agencies incorrectly telling beneficiaries that Medicare no longer covers therapy under the home health benefit.

In its March 2021 report to Congress, the Medicare Payment Advisory Commission noted that Medicare payments for home health care tend to significantly exceed costs and has suggested that Congress reduce the 2021 Medicare base payment rate for home health agencies by 5 percent in 2022. Curbing overpayments to home health agencies would produce savings for the Medicare program. But, according to CMA, 87 percent of the home health industry is under for-profit ownership. Given the evidence that many home health agencies engage in profit-maximizing behavior, simply reducing the base payment rate may prompt agencies to further restrict the services they provide per episode of care and continue to prioritize a steady flow of patients with short-term needs over less lucrative beneficiaries with long-term needs.

The Center for Medicare and Medicaid Innovation (CMMI) which tests models that improve care, lower costs, and support patient-centered practices, should test innovative payment and care delivery models, as well as the authority to scale up these models nationwide if they prove successful. CMMI should use the lessons learned from the implementation of the flawed PPS to develop and test new methods of Medicare home health care delivery and payments that improve quality and access to services for seniors.

On July 7, 2021, CMS published a proposed rule that includes home health PPS rate updates, Home Health Value-Based Purchasing (HHVBP) Model expansion, and quality reporting requirements, among other provisions. The HHVBP Model relies on patient improvement-centered criteria to promote competition among home health agencies and allocate rewards and penalties to providers. This incentivizes providing care to beneficiaries whose conditions and functioning can improve, to the exclusion of patients with long-term conditions who are not expected to improve. Expanding the HHVBP Model would be detrimental to patients with chronic needs. Additionally, CMS fails to propose appropriate quality measures applicable to patients who are unable to improve. The National Committee believes that changes should be made to this proposed rule to protect the interests of all Medicare beneficiaries.


The National Committee supports efforts to improve Medicaid HCBS. However, we also feel that the Medicare benefit should be broadened so that all seniors, not just those with low incomes, can receive these vital services. We favor efforts to limit fraud while retaining and improving access to home care. We support the addition of a standalone home health aide benefit, improvements to payment models to reduce barriers to care, and better oversight and enforcement of current law to ensure access to home care benefits. Quality measures should be revised to improve their accuracy and equitability. CMS could also better educate providers and beneficiaries about the legal scope of the Medicare home health benefit. Additionally, Congress should insist on the correction of policies that restrict access to legally covered home care services by CMS. Assuring that current Medicare home health laws are being appropriately enforced is an important first step in remedying the inequities in access to these benefits.

Government Relations and Policy

November 2021