Beneficiaries Caught in the Crossfire:
The Battle Between Medicare
and the Home Health Industry

By Michele B. Gerroir, J.D., LL.M. candidate

Home health care provides an alternative to nursing homes and hospitals by allowing nurses and therapists to treat patients at home under the supervision of a physician. Typically, individuals who utilize home health care are recovering from strokes, surgery, or suffer from respiratory ailments or other chronic illnesses.

Until recently, Medicare has reimbursed home health benefits on a cost basis. According to government figures, Medicare expenditures for home health have skyrocketed from $2.4 billion in 1989 to $17.7 billion in 1996, an average annual increase of 33 percent. Much of this growth in expenditures is attributable to increases in the number of visits per home health user and the overall number of home health users.

In an effort to control these escalating costs, the administration launched an economic offensive against the home health industry by building home health costs controls into the Balanced Budget Act of 1997.Ultimately, Medicare will use a prospective payment system (PPS) to reimburse for home health visits. Until then, an interim payment system (IPS) has been implemented to reduce the limits on the costs per visit and impose a new cap on per-beneficiary costs.

To combat the financial constraints imposed by the IPS, the industry has responded by voluntarily and involuntarily closing hundreds of agencies nationwide and is rejecting patients who threaten to become a financial burden. In addition, the industry’s response has made access to services more difficult for beneficiaries with particular needs that make them likelier to be expensive to serve, such as those receiving multiple weekly visits over an extended period of time.

Congress, prompted by constituents' concerns over this situation, called for a status report from the General Accounting Office (GAO). The GAO was to determine the impact of the interim payment system on the home health industry. In September of 1998, the GAO published the results of its study. The GAO recognized that the primary objective of IPS, and ultimately the PPS, was to curb costs by decreasing the number of home health visits that are of marginal clinical value. The report concluded by stating any increased difficulties encountered by particular needs beneficiaries in obtaining care were an unintended and unacceptable consequence of the new system. However, the GAO was admittedly unable to distinguish between the intended and unintended effects of the IPS.

Particular needs beneficiaries are a vulnerable home health constituency. If they are unable to obtain home health care services, then a nursing home may be their only option. With this as the only option, these individuals are effectively denied the ability to live independently in their home. Moreover, nursing home care generally costs more than home health care; therefore, a greater financial burden is forced upon these individuals or public payors. Upon reading the study, it appears that the GAO would conclude that this situation falls under the category of unintended effects of the IPS. Yet the GAO’s inability to isolate these unintended effects suggests that nothing can be done to protect high cost beneficiaries from becoming a casualty of the system. It seems ironic that until there is a solution to this problem, Medicare will save money at the expense of those most in need of its services.