Academic journal article Health Care Financing Review

Constraining Medicare Home Health Reimbursement: What Are the Outcomes?

Academic journal article Health Care Financing Review

Constraining Medicare Home Health Reimbursement: What Are the Outcomes?

Article excerpt

The use of home health services under Medicare has undergone dramatic changes in the last 15 years: first accelerating growth and then substantial contraction. Whenever service reductions occur, there are concerns about what the unintended effects may be. This study examines the outcomes experienced by Medicare beneficiaries who use home health services before and after the contraction in utilization that followed enactment of the 1997 BBA.

From the late 1980s through 1996, Medicare's payments for home health increased dramatically as home health services grew more than 30 percent per year (Medicare Payment Advisory Commission, 1999a). Efforts to rein in Medicare home health costs began with Federal compliance initiatives focused on the home health industry in the mid-1990s and culminated in July 1997 with the enactment of the 1997 BBA.

In 1995, three government agencies--the Health Care Financing Administration, the Office of the Inspector General (OIG), and the Administration on Aging--jointly implemented Operation Restore Trust, an effort to identify fraud and abuse in home health agencies (HHAs). The Health Insurance Portability and Accountability Act of 1996 imposed civil and monetary penalties on physicians who knowingly certified non-eligible patients for Medicare home health, and in September 1997, HCFA enacted a 6-month moratorium on certification of new HHAs and increased cost audits and claims reviews.

In addition to enacting compliance initiatives, attention was also focused on reforming home health's relatively open-ended reimbursement system. The BBA addressed this issue by legislating the implementation of a home health prospective payment system (PPS) and the immediate enactment of an interim payment system (IPS) to limit costs until the PPS was implemented in October 2000. The BBA also clarified some definitions related to home health eligibility and coverage.

The IPS was phased in beginning October 1997 with the start of each HHA's financial reporting period. Under the IPS, agency reimbursement was limited by both a restriction of an already existing aggregate per-visit cost limitation and the enactment of a new agency aggregate per-beneficiary limit. The home health industry and policy analysts immediately voiced concerns about whether these aggressive reforms would result in reduced access to home health care for beneficiaries who were most in need, resulting in poor outcomes (Komisar and Feder, 1998; Smith, Rosenbaum, and Schwartz, 1998; Lewin Group, 1998; Gage, 1999; Medicare Payment Advisory Commission, 1999a).

Review of Medicare claims experience after the BBA's passage dramatically demonstrated its rapid and substantial effect. While the rate of home health use per Medicare beneficiary and the number of home health visits per user had been surprisingly level for the seven quarters before October 1997, rates of both plummeted beginning in the first quarter of the phase-in of the IPS. Comparing the year before the phase-in began (FY 1997) with the year after full IPS phase-in (FY 1999), the rate of use decreased 21 percent and visits per user decreased 41 percent. Overall interim Medicare payments for home health services were cut in one-half (McCall et al., 2001) and vulnerable subgroups of the population were differentially impacted in their reduction of service use (McCall et al., forthcoming).

But were the utilization reductions simply the appropriate response to efforts to make the Medicare home health benefit more consistent with its intent or did they result in harm to the program's beneficiaries? This article looks at this issue through an analysis of outcomes that can be identified in the claims files. These occurrences may be reflections of either worse or better quality of care or the substitution of less or more appropriate care. Other analyses will examine the BBA's impacts on the quality of home health provided and on HHAs care users' satisfaction with the services provided, and will study effects on HHAs and on the health care system. …

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