Traditional Medicare Provider Payment – Postacute Care

Postacute care under Medicare refers to services provided after inpatient hospitalization or outpatient treatment. These could be services such as skilled-nursing care and rehabilitation therapy. Postacute care is commonly provided by home health agencies, skilled-nursing facilities (SNFs), hospital outpatient departments, rehabilitation facilities, and long-term care hospitals.

In general, the Medicare benefit for SNF care (up to 100 days) requires a prior inpatient hospital stay of at least three days. This requirement may be waived, such as by health care organizations participating in certain alternative payment models. Time spent in the emergency room or under outpatient observation does not count toward the three days. After 20 days of SNF care, Medicare beneficiaries incur significant cost-sharing (which can be covered by Medigap plans). Medicare pays the full amount for the first 20 days of a covered SNF stay. From the 21st to the 100th day of an SNF stay, beneficiaries paid coinsurance of $209.50 a day in 2025. After 100 days, they were liable for the full cost.

Beneficiaries considered homebound—meaning that they are only able to leave home with considerable difficulty, the use of equipment (such as a walker), or assistance from another person—and needing part-time skilled-nursing visits or therapy services may receive home health care services. Home health care services do not require a prior hospitalization. Medicare covers medically necessary part-time or intermittent home health services, which may include skilled-nursing care; physical, occupational, and speech therapy; medical social worker visits; and home health aide services. However, Medicare requires that a beneficiary be homebound—that is, able to leave home only with great difficulty—and need skilled care, including skilled nursing or physical, occupational, or speech therapy. In Traditional Medicare, home health visits are not subject to deductibles or coinsurance. However, Medicare Advantage plans may charge copayment amounts for home health. In general, Medicare requires a face-to-face visit (which can be by telehealth) before a doctor, nurse practitioner, or physician assistant can certify that a beneficiary needs home health services.

Most postacute care providers are paid under a per diem or episode-based prospective payment system. An exception is in the case of outpatient rehabilitation services. They are paid under a fee schedule for individual services. As with other Part B services, Medicare pays 80 percent of the fee-schedule amount for rehab therapy services. CMS collects data from patient assessments conducted in the home when receiving home health care, in SNFs, and inpatient rehabilitation facilities. It uses this data to monitor quality and assess the adequacy of prospective payment system payments.

Postacute care benefit design and payment systems have several features that raise concerns about the adequacy of coverage. They include cost-sharing, the 100-day cap on SNF services, the three-day prior inpatient hospital stay requirement for SNF services, and payment incentives, which may reduce access for higher-need beneficiaries.

• The SNF coinsurance amount starting on the 21st day of a stay, which is computed on the basis of the Medicare hospital deductible, is much higher than the 20 percent coinsurance required for most Part B Medicare services.
• Medicare does not pay for SNF services after 100 days.
• The prior hospital stay requirement to qualify for SNF means that Medicare beneficiaries with skilled-care needs who are not admitted as hospital inpatients will not receive the SNF benefit. For example, this includes patients who have been receiving home health care or who are discharged from an emergency room after being held for observation for several days. In addition, the requirement creates a perverse and expensive incentive to hospitalize Medicare beneficiaries so they can qualify for the SNF benefit.
• The homebound requirement for Medicare coverage of home health services is too restrictive. It leaves many who have serious health conditions but who are not technically homebound without needed care.
• There is no statutory limit on the number of home health visits for beneficiaries who pass eligibility tests. However, the program’s payment system provides an incentive for home health agencies to avoid high-cost users and limit the number of visits.
• CMS runs demonstrations to test different payment approaches for postacute services. This includes a test programs of bundled payments for acute hospital and postacute care services for specified conditions.