Home Health Care: To Regulate or Not?

Abstract

Look closely at your health insurance policy to find out if home health care services are covered. You will probably encounter language best described as vague: a benefit covering some percentage of reasonable cost after [the] deductible [has been paid], when medically necessary, as [an] alternative to hospitalization, up to a limit of perhaps 90 days per calendar year. Typically missing from this language are specific definitions of home health or home medical care.1 The vagaries are surprising for a product whose time has so obviously come. For certain types of medical conditions-chronic illnesses or cancers requiring intravenous therapies-home health care is clearly cheaper than in-patient hospital care per day. For many terminal illnesses, home health care both costs less than a hospital and enhances dignity by enabling a patient and his or her family to control the use of extraordinary measures to keep the patient alive. In a nation scrambling to control health costs and at a time when many people are writing living wills and asking that they not be kept alive with mechanical devices, we might reasonably expect home health care to be widely embraced. Instead, private insurance companies shy away from promoting it, while Medicare and Medicaid heavily restrict its use. Their primary argument against expanding home health care is that it will be used, not as a substitute for hospital care, but as a substitute for currently unpaid, informal care by relatives. Various attempts to test this hypothesis have not found conclusive evidence for or against it. But for the more narrow definition of home medical care for people with specific cancers or chronic conditions, home health care is far more likely to substitute for hospital care. Beyond the reluctance of insurers to cover home medical care, AIDS advocacy groups, in particular, have charged that home health care agencies have been charging excessive fees for various types of services. They argue, in effect, that the market for home health care suffers from market failure and needs to be regulated, both with respect to price and to quality standards. The purpose of this article is to assess the reasonableness of this argument and the appropriate role of government, if any, in the home health care market.