Press release


The Centers for Medicare & Medicaid Services (CMS) today announced their proposal for a 3.1 percent increase in Medicare payment rates to home health agencies for calendar year 2007.


The Centers for Medicare & Medicaid Services (CMS) today announced their proposal for a 3.1 percent increase in Medicare payment rates to home health agencies for calendar year 2007.   The increase would bring an estimated extra $460 million in payments to home health agencies next year.

“CMS is committed to the best possible care while avoiding any unnecessary costs. High-quality care requires objective information that doctors, patients, and everyone can use to get better care,” said Mark B. McClellan, M.D., Ph.D., administrator of the Centers for Medicare & Medicaid Services, which oversees the Medicare home health payment system. 

Medicare pays home health agencies through a prospective payment system (PPS), which pays at higher rates to care for those beneficiaries with greater needs.   Payment rates are based on relevant data from patient assessments conducted by clinicians as currently required for all Medicare-participating home health agencies (HHAs). 

Home health payment rates have been 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.  Section 5201(c) of the Deficit Reduction Act (DRA) of 2005 provides for an adjustment to the home health market basket percentage update for CY 2007 and subsequent years depending on HHAs submission of quality data. 

HHAs collect and report Outcome and Assessment Information Set (OASIS) data.  For CY 2007, CMS proposes to evaluate home health care quality by relying on the submission of 10 OASIS quality measures that are currently being publicly reported through the CMS Home Health Compare website. Continuing to use the current OASIS instrument ensures that providers will avoid the additional burden of reporting through a separate mechanism and the subsequent costs associated with the development and testing of a new reporting mechanism. 

HHAs that submit the required quality data would receive payments based on the full proposed home health market basket update of 3.1 percent for CY 2007.   If a HHA does not submit quality data, the home health market basket percentage increase will be reduced by 2 percentage points to 1.1 percent for CY 2007.  Rural home health agencies that participate in the ongoing quality measurement effort will see an estimated 3.3 percent increase in payment, while urban agencies who continue to provide quality data will experience an estimated 2.9 percent increase in payments.


To qualify for the Medicare home health benefit, a Medicare beneficiary must be under the care of a physician, have an intermittent need for skilled nursing care, or need physical or speech therapy, or continue to need occupational therapy. The beneficiary must be homebound and receive home health services from a Medicare approved home health agency.

CMS is also proposing to revise the payment methodology for oxygen equipment, oxygen contents and capped rental durable medical equipment (DME).   This proposed rule, which would implement Section 5101 of the DRA, as well as other requirements applicable to suppliers of oxygen, oxygen equipment, and capped rental DME, would ensure that Medicare pays appropriately for these items, and would reduce out-of-pocket costs for beneficiaries who pay a 20 percent coinsurance on this equipment.  These changes will improve value for Medicare beneficiaries, while maintaining access to quality equipment.

“We want to make sure that our payments for oxygen are appropriate to ensure beneficiary access to the latest technologies and that we are not paying rental amounts that exceed the cost of purchasing oxygen equipment many times over,” said Dr. McClellan.

The proposed rule provides for Medicare payment for up to 36 months of continuous rental of oxygen equipment.   After 36 months of rental payments, the supplier would transfer title of the equipment to the beneficiary.  Similarly, after a 13-month period of continuous rental payments, the supplier would transfer title for capped rental equipment to the beneficiary.  The beneficiary would continue to pay coinsurance of 20 percent of rental payments, but would no longer pay coinsurance on the equipment after the transfer of title. 

Medicare will continue to make monthly payments for oxygen contents for beneficiary-owned equipment as long as the beneficiary needs oxygen equipment. In addition, Medicare will pay for reasonable and necessary maintenance and servicing of beneficiary-owned oxygen equipment and capped rental DME not covered by a supplier’s or manufacturer’s warranty. 

CMS is proposing to use the authority provided in the Medicare statute to establish separate payment classes for: (1) new technologies that eliminate the need for refilling and delivery of oxygen contents; (2) delivery of portable oxygen contents; and (3) delivery of stationary oxygen contents.    The goals of this proposal are to ensure that payments for oxygen and oxygen equipment are accurate, that beneficiaries who use traditional portable oxygen systems have sufficient access to oxygen contents, and that Medicare payments do not create incentives to provide particular types of oxygen technology.  Since the law requires that these changes be budget-neutral, CMS is proposing to redistribute the current payment amounts for oxygen and oxygen equipment to offset any increase of Medicare payments that might otherwise occur as a result of the proposed new classes. 

The proposed rule includes additional supplier requirements to safeguard beneficiaries.   These include requiring a supplier who furnishes rented oxygen equipment or a capped rental item in the first month to continue furnishing the item throughout the entire rental period, not allowing suppliers to switch out equipment except under specified circumstances, and requiring a supplier to disclose its intentions regarding assignment for the entire rental period.

The proposed rule went on display at 4:00 pm this afternoon and will be published in the Federal Register later this month.  Comments will be accepted until September 25, 2006 and a final rule will be published later in the fall.  The rule can be located at and a backgrounder on the DME portion of the rule can be found at