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Obamacare's Surprise Medicare Cut

The government shrinks what it pays to treat seniors at home

One of the ways Obamacare aims to curb health costs is by encouraging home care for the elderly instead of expensive nursing homes and hospital stays. So home health providers were surprised to learn in November that they’ll be taking a sizable hit as a result of the law: The rate Medicare pays them is scheduled to drop 14 percent over the next four years, the maximum reduction allowed under the Affordable Care Act. In announcing the cuts, the Centers for Medicare and Medicaid Services said the lower rates “better align Medicare payments with home health agencies’ costs [of] providing care.”

Providers say they expected a reduction—Medicare frequently adjusts payments—but not such a big one. “We were just stunned,” says Eric Berger, chief executive officer of the Partnership for Quality Home Healthcare, a lobbying group representing a dozen large home health-care companies. Berger says the lower rates will force some agencies to close. Medicare’s payment for two months’ worth of home visits is $2,869 in 2014. That’s $81 less than last year, a cut offset somewhat by other adjustments to how Medicare calculates payments.