The Storm Before the Calm Before the Storm: Medicare Home Care in the Wake of the Balanced Budget Act

Abstract

The last four years have seen the greatest turmoil and disarray in the history of the American home health industry, and while it is possible that a new short-term equilibrium may be emerging, it is also clear that the issues underlying the recent crisis are far from being resolved, and that a permanent sense of direction and stability is still off somewhere in the indistinct future. Things may quiet down for a while, but until there is a much broader consensus on the underlying issues among providers, policymakers, academic experts, and the general public, the home health community can continue to expect periodic reversals, upheavals, and confusion. The Balanced Budget Act of 1997 (BBA) and its associated sequelae produced unprecedented economic disruption in the home care community, but that legislation represented a short-term, and indeed somewhat improvisational, response to serious and urgent problems, which have still not gone away. And subsequent efforts to ameliorate some of the effects of the BBA, while bringing relief to some home health care providers, have not addressed the longer-term problems either. We thus find ourselves in a situation in which we know that the current state of affairs is largely unsatisfactory, but we don't have a very clear sense of how to get out of it without recreating the same problems that got us into our present circumstances. Only some creative thinking and some new ideas about where home health care should fit in the health system as a whole, and in the Medicare program in particular, can provide a way out of our current box. I propose to briefly review the background to enactment of the BBA, identifying in the process some of the more basic issues that fueled the problems the BBA sought to address. I will then summarize some of the effects of the BBA and the new policies it contains, or that were associated with it, and then conclude with a more general discussion of the current intellectual crisis in home care, and how we might begin to resolve it. HOW WE GOT TO THE BBA Defining home care as organized, non-physician, professional health services provided to patients in their homes, home care has been a part of the American health care delivery system for more than a century. Its role in that system, however, was relatively limited before the enactment of Medicare in 1965, and ever since, its evolution has been inextricably bound up in the development of Medicare policy, in a kind of push-me/pull-you relationship that has been optimal neither for Medicare nor for the home health community. Home health care for the elderly was a relatively limited and novel idea in 1965, but the case was made then, as it has been ever since, that organized home care services could reduce the length of inpatient hospital stays-the primary service for which the original Medicare program was designed to pay-and improve patient outcomes (although that terminology was not generally used at the time). The notion of a brief, time-limited intervention integrally connected to a preceding hospitalization was thus built into the Medicare home care benefit at the outset and has remained there ever since, even as the role of hospitalization in the spectrum of services needed by the elderly has shrunk, at least in proportional terms. For the first 15 years of the Medicare program, the primary perception about home care services was that there wasn't enough of them, although the Congress tinkered with the home care benefit periodically during that period. Finally, responding to the arguments of home care advocates that expansion of home care services would save money, in an era in which cost pressures were predominant and all sorts of measures were being tried to reduce Medicare hospital expenses, the Congress made major changes in 1980. On the supply side, it heeded the argument that the expansion of home care had been constrained by the dominance in the industry of public and not-for-profit agencies incapable of expanding to meet the growing need among Medicare beneficiaries, and opened the program up, for the first time, to fullfledged participation by for-profit providers. …