Academic journal article Health Care Financing Review

Medicare Interim Payment System's Impact on Medicare Home Health Utilization

Academic journal article Health Care Financing Review

Medicare Interim Payment System's Impact on Medicare Home Health Utilization

Article excerpt


The Balanced Budget Act (BBA) of 1997 mandated that a prospective payment system (PPS) be implemented for Medicare HHAs by October 1999. (1) The BBA also required, however, that an IPS be imposed starting in fiscal year 1998. The IPS reduced per-visit payment rates and established an average beneficiary cost limit for Medicare HHAs. The latter provision introduced very strong incentives for HHAs to reduce the number of visits provided to each Medicare recipient and to avoid individuals whose plan of care was likely to exceed the average beneficiary cost limit.

National program statistics indicate that total expenditures for Medicare home health services declined dramatically after the IPS was implemented, falling 50 percent from $17 billion in 1996 to $8 billion in 1999. Statistics also showed that utilization rates declined, both in use of the benefit by enrollees and in the number of visits provided to users. Although the program statistics provide a global account of the effects of the policy changes (McCall et al., 2001), national level information has not been available on changes in Medicare home health utilization by particular subgroups of Medicare beneficiaries (e.g., fair or poor health, highly disabled). This absence represents a significant gap in our understanding of the impact of the IPS, because vulnerable subgroups of Medicare beneficiaries could have been particularly affected by the IPS cost limits (Smith and Rosenbaum, 1998; Komisar and Feder, 1998; Lewin Group, 1998).

The newly available 1999 MCBS Cost and Use Files (Adler, 1994) enabled us to conduct an analysis of changes in Medicare home health use before and after implementation of the IPS. We compare utilization in calendar years 1996 Oust prior to the IPS) and 1999 (when IPS was in full effect), and focus on the effects of the Medicare payment policy changes on subgroups of the elderly population, by health and socioeconomic characteristics. We address three questions in this article:

* How has the use of Medicare home health changed after implementation of the IPS, in terms of likelihood of any use and number of visits used?

* Has there been a change in who uses Medicare home health as a result of the IPS, in terms of medical and functional conditions (e.g., cognitively impaired, highly disabled) ?

* Were there differential effects for individuals who had prior use of hospitals and others who were not post-acute home health users?

Our analysis provides empirical information on Medicare beneficiaries who were most affected by the IPS. The following sections provide background on the Medicare home health benefit, data sources and methodology, and findings. Finally, we discuss policy and research implications.


Medicare Home Health Benefit

Medicare's home health benefit is intended to support medically-oriented services and must be prescribed (and recertified every 62 days) by a physician. Medicare provides home health benefits to enrollees who require intermittent or part-time skilled nursing care and therapy services, and who are homebound, defined flexibly to include individuals who can, on occasion, leave the home. There is no prior hospitalization requirement or limit on the number of visits a person may receive. Nor is there any copayment or deductible associated with home health visits.

Originally conceived as post-hospital care, the Medicare Part A home health benefit had evolved into more general home-based care requiring skilled services or supervision. The 1980 Omnibus Reconciliation Act, for example, rescinded a requirement that coverage for home health services require a prior hospitalization of at least 3 days and removed an existing annual limit of 100 home health visits. Nevertheless, application of eligibility and coverage requirements had acted to constrain Medicare home health spending prior to 1990. …

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