Effects of the Home Health Care Interim Payment System on Access to Home Health Care for People on Medicare

Abstract

In the Balanced Budget Act of 1997 (the BBA), Congress established an Interim Payment System (IPS), effective October 1, 1997, and directed the Health Care Financing Administration (HCFA) to promulgate a Prospective Payment System (PPS) to pay for home health care by October 1, 1999. Since the inception of IPS, the Medicare Rights Center,1 through our work with people on Medicare across the country, has seen a marked increase in the number of people who are eligible for the home health benefit, but who are unable to access it. In particular, we have found that the reduced reimbursement to home health agencies under IPS has meant that agencies have increasingly refused, reduced or terminated care to people with costly, complex or chronic illness. Because establishment of PPS has been delayed until October 2000, we recommend immediate reforms to constrain or reverse the pernicious effect of IPS on the frailest and sickest people on Medicare. MEDICARE HOME HEALTH CARE BENEFIT: BACKGROUND The Medicare home health benefit consists of skilled nursing, therapy, and related services provided by a Medicare-certified home health agency (HHA). To qualify for Medicare home health services, the patient must be homebound and require skilled nursing care or physical, speech or occupational therapy on a part-time or intermittent basis or need daily skilled services for a finite and predictable period of time.2 The services must be furnished under a plan of care prescribed and periodically reviewed by a doctor. If all of these criteria are met, Medicare will pay for home health visits provided by a registered nurse, a physical, occupational, or speech therapist, a social worker, and a home health aide. Medicare regulations do not impose limits on the length of time a patient may continue to receive home health benefits. Medicare will pay for home health care as long as the patient meets Medicare eligibility criteria (see Note 2) and home health care is reasonable and necessary for the treatment or management of a patient's illness or injury. There are no limits on the number of visits or length of coverage, and there are no copayments or deductibles for the benefit. Today, approximately 3 million acutely and chronically ill seniors and people with disabilities on Medicare depend on home health care as part of their medical care (Smith, 1999). Because patients must be homebound in order to qualify for the benefit, they are typically the sickest and the oldest people on Medicare. They are disproportionately female and 85 years of age or older. About 70 percent have incomes of $15,000 or less (Smith, 1999). Home health care has been one of Medicare's fastest growing benefits over the last 15 years. In 1990, the Medicare home health benefit was used by 57 out of every 1,000 people on Medicare. By 1997,109 out of every 1,000 were using the benefit. In the same time period, the average number of visits per user in Original Medicare, the government-run fee-for-service program, went from 36 to 73. Expenditures rose from 3.2 percent ($3.7 billion) of total Medicare spending in 1990 to 9 percent ($17.8 billion) in 1997. This translates to an average annual growth rate of 25.2 percent, compared with 8 percent for the Medicare program as a whole (GAO, May 1999). While some of this growth was attributable to fraud and abuse on the part of disreputable home health providers, much of it came as a result of improved access to the benefit by people who needed home health care and the shift in common health care practices toward an emphasis on outpatient care and managing serious illnesses at home. The United States General Accounting Office (GAO) and other researchers attribute the following factors to the rise in home health care costs over the past 10 years (GAO, May 1999, Komisar, 1998): 1. Change of home health care coverage guidelines to include patients with chronic healthcare needs as a result of a 1988 lawsuit. …