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Health Tracking

TRENDS

Medicare Home Health Before And After The BBA

After passage of the BBA, several policy analysts described problems that could occur for the sickest and most frail patients, but only a few limited impact studies have been done.¹ These studies focus on access issues using surveys of agencies, discharge planners and other key informants, and analyses of Medicare provider and claims data. Their findings indicate that a substantial number of agencies closed, utilization fell, and the marketplace changed greatly—but it is unclear if access to care has been adversely affected.²

This paper presents data on use of and payments for Medicare home health services from a nationally representative sample of beneficiaries, comparing the period before the BBA with the first two years after its implementation. implementation. It is the first part of a broader project examining how the BBA has affected Medicare beneficiaries, home health agencies, and the health care system.

Before The BBA

 
Between 1988 and 1996Medicare spending on home health increased an average of 31 percent per year, with dramatic increases in both the number of users and the amount of use.³ From 1988 to 1996 the number of beneficiaries receiving home health services rose 225 percent, from 1.6 to 3.6 million; annual visits per user increased 343 percent, from twenty-three to seventy-nine. Yearly payments per user increased 374 percent, from $1,287 in 1988 to $4,819 in 1996, an inflation-adjusted average yearly increase of 14.4 percent.⁴

A number of factors led to this acceleration. The loosening of eligibility and coverage criteria in 1989 as a result of a class-action lawsuit had a substantial effect.⁵ The inpatient hospital PPS, medical technology changes, and patient preference also likely contributed.⁶ Additionally, the agency reimbursement system encouraged agencies to provide more services, with little consideration of cost. It reimbursed the home health agencies their actual costs up to an annual limit, based on a national per visit amount for each type of visit multiplied by the agency’s number of visits of each type.⁷ Thus, an agency could increase Medicare net income simply by providing more visits while keeping its average costs per visit below the national limits.⁸

The BBA addressed these concerns by changing home health eligibility and coverage rules and reforming the payment methodology. In addition, even before the BBA, several federal agencies were acting to ensure that beneficiaries and services met Medicare requirements. We discuss these three areas of change below.

After The BBA

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

 
Eligibility and coverage. Eligibility for Medicare home health is limited to beneficiaries who are "homebound," need "intermittent" skilled nursing or therapy services, and are under the care of a physician who prescribes their plan of care. A beneficiary needing only personal care does not qualify. Once a beneficiary is deemed eligible, Medicare pays for unlimited visits for "part-time or intermittent" care from any of the six home health service disciplines (see Note 7), with no copayment or deductible.

U.S. General Accounting Office (GAO) reports in 1996 and 1998 indicated wide variation in the interpretation of the terms "intermittent," "part-time or intermittent," and "homebound."⁹ The BBA clarified the definition of "intermittent" for eligibility, specified the limits of "part-time or intermittent" care, and called for a Department of Health and Human Services (HHS) study of the criteria to determine if a beneficiary is "homebound."¹⁰ In addition, venipuncture (or blood drawing) was excluded as a basis for qualifying for home health services if it was the sole skilled service that the beneficiary required.

Reimbursement. Under the BBA, HCFA was required to put in place a home health PPS and, while that was in process, institute an IPS. The IPS was phased in beginning October 1997 with the start of each agency’s cost reporting period. The IPS constrained agency reimbursement not only by reducing the per visit limitations but also by adding a per beneficiary limit.¹¹ Regional home health intermediaries calculated the agency-specific limitations and determined interim claims payments.

Compliance initiatives. Several other activities occurring just before and after the passage of BBA may have slowed the growth of home health spending. In 1995 HCFA, the Office of Inspector General (OIG), and the Administration on Aging jointly implemented Operation Restore Trust (ORT) to identify fraud and abuse in home health agencies, nursing homes, and medical equipment suppliers. Initially begun in five states, it had expanded to eighteen states by 1998. ORT includes audits, criminal investigations, surveys, inspections, and hotlines. In addition to authorizing grants to expand ORT, the Health Insurance Portability and Accountability Act (HIPAA) of 1996 imposed civil monetary penalties on physicians who knowingly certified ineligible patients for Medicare home health.¹²

In September 1997 HCFA implemented a six-month moratorium on the certification of new home health agencies and increased cost report audits and medical reviews of claims. A sequential billing requirement was imposed in June 1998 whereby claims for a beneficiary would only be paid "in sequence," so that if a claim were under review, no subsequent claims for that beneficiary would be paid. This requirement was removed in July 1999 because it was creating a backlog of claims and cash-flow problems for agencies. In January 1999 the OIG issued a Special Fraud Alert to physicians concerning their criminal and civil liability for intentionally signing a false or misleading certification of medical necessity for home health.

Study Methodology

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

 
This study combines HCFA claims data from the 1 percent sample of Medicare beneficiaries with information from HCFA eligibility files. The study population consists of Medicare Part A fee-for-service (FFS) beneficiaries who reside in one of the fifty states or the District of Columbia. All home health users and a random sample of nonusers are included in the database. A home health user is defined as any person who received at least one home health visit during the applicable time period. Observations are weighted by the proportion of the year the beneficiary was eligible, and users and nonusers are weighted up to their proportions in the total Medicare FFS population.

The number of "visits" is the total number of units of services recorded in home health claims for any of the six home health disciplines. Home health "payments" are the sums of all the "paid dollar" fields in the claims for the six disciplines. These amounts are the interim payments made by the intermediaries to the agencies; they do not reflect final reconciliations that may take place because of agency cost settlements that occur at least two years after the service dates.¹³

Study Results

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

 
Use of Medicare home health services fell dramatically after the BBA. Exhibit 1 presents overall utilization statistics for three time periods: fiscal year 1997 (October 1996–September 1997), the twelve months prior to the beginning of BBA implementation; FY 1998, the twelve months during which the IPS was being phased in; and FY 1999, the twelve months after the IPS was fully implemented.

Quarterly trends.

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

 
Home health care use was relatively stable for the quarters prior to the BBA, from Quarter 1 of 1996 through Quarter 3 of 1997 (Exhibit 2). Beginning in Quarter 4 of 1997 when the IPS phase-in began, utilization rates began falling. By the fourth quarter of 1999, with the IPS fully implemented for five quarters, total spending per quarter had declined from $4.0 billion in Quarter 3 of 1997 to $1.8 billion. Over the same period, the user rate per quarter decreased from fifty-three to thirty-three per 1,000 Medicare beneficiaries. The number of home health visits and payments per quarter showed similar downward trends: visits decreased from thirty-seven to twenty-five visits per user per quarter, and the average quarterly payment per user fell from $2,338 to $1,749. The rate of decline when the IPS was fully implemented slowed from that during the phase-in period, especially for the number of visits and payments per user, which stabilized at around 25–26 visits and $1,700–$1,750. Users per 1,000 beneficiaries, however, continued to decrease.

Census region. Census region was related to substantial differences in utilization patterns both before and after the BBA (Exhibit 5). Before the BBA, West South Central, East South Central, and New England regions had the highest user rates (more than 120 home health users per 1,000 Medicare beneficiaries) and visits per user (ranging from 147 for West South Central to 90 for New England). The national rate was 101 home health users per 1,000 beneficiaries, with seventy-nine visits per user in 1997.

The drop in the rate of home health use varied from 7 percent in the Middle Atlantic region to 32 percent in the East South Central region. New England, which had one of the highest rates of use before the BBA, had the second-lowest reduction (15 percent). The decrease in visits per user ranged from 31 percent (Middle Atlantic) to 48 percent (Mountain). The regions with the smallest number of visits per user before the BBA generally decreased less, although the Pacific region, which had the lowest number of visits among users in FY 1997, had a 39 percent decrease, just below the average decrease.

Diagnoses. Larger-than-average decreases in visits and payments per user are found for several diseases of the circulatory system: cardiac disrythmias, cerebrovascular disease, and hypertensive disease (Exhibit 6).¹⁴ Smaller-than-average decreases in the number of visits and payments are found for those with diagnoses diagnoses of cancer and skin ulcers. The diagnoses with larger-than-average decreases were in general associated with higher percentages of aide services in the year before BBA implementation, while those with smaller-than-average decreases had higher-than-average percentages of skilled nursing and therapy services in the year before the BBA.

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

The proportion of beneficiaries using home health services dropped by more than one fifth after the BBA. To the extent that this reduction occurred as the result of the eligibility and coverage changes of the BBA and other eligibility tightening and fraud-and-abuse prevention activities, the nonusers will continue to be nonusers under the PPS. However, to the extent that the changes were the result of agencies’ reacting to IPS incentives to avoid higher -cost beneficiaries, which may be reduced under the PPS’s case-mix adjustment system, some nonusers may reappear as users.

User rates fell most for beneficiaries in rural areas and those with state Medicaid buy-in. Aggressive Medicare maximization by some state Medicaid programs might have inflated the rates of home health use prior to the BBA, which were two-thirds more than those for Medicare eligibles not receiving Medicaid.¹⁵ The above-average decrease for rural beneficiaries may reflect the increased closure of agencies in rural areas compared with urban areas. However, this finding is not consistent with the GAO’s earlier analysis, which found that agency closures in rural areas resulted in only slight decreases in the proportion of beneficiaries served.¹⁶

Medicare resources spent on those who used home health services after IPS implementation were also much less, with only approximately $3 of every $5 spent before the BBA still being spent on users in the year after IPS implementation. This reduction, which was greater than projected when the BBA was enacted, reflects both the tighter federal enforcement efforts to ensure that services are physician approved and reasonable and necessary, and the financial incentives of the IPS.¹⁷ The observed effect may be smaller under the PPS as the new payment incentives will no longer restrict visit payments or yearly costs per beneficiary and thus could result both in a lengthening of episodes (that is, beyond the first sixty days) and a reduction in the number of visits provided within each sixty-day payment period.

The strong decreases in use were most dramatic for aide visits and less so for skilled nursing services, and an increase in use was observed in the number of therapy visits. This increase reflects differences in treatment patterns that might result in changes and even improvements in the quality of care, although conclusions about this would require an evaluation that explicitly examines the quality of care delivered.

Although visits and payments per home health user declined among all of the subpopulations examined, the drop was relatively greater for beneficiaries age eighty-five and older, who are more likely than younger beneficiaries are to need personal care services because of their higher incidence incidence of chronic disabilities or conditions.¹⁸ These findings seem consistent with the widely recognized intention of the BBA to reduce use of the Medicare benefit to provide personal care services. Whether this will result in lowered quality of care, increased incidence of adverse effects, or less satisfaction with the provision of home care under the Medicare program is an important topic for future study.

The PPS that went into effect in October 2000 provides yet another set of financial incentives for agencies. The experience reported here indicates that agencies will take them seriously. The PPS provides a case-mix-adjusted capitated payment for a sixty-day episode of care. An unlimited number of episodes authorized by a supervising physician are permitted. Thus, agencies will no longer have incentives to avoid long-stay patients, although incentives will continue to avoid high-cost short-stay patients receiving care for fewer than sixty days.

In the BBA of 1997 Congress legislated a mandate for reforming Medicare payments for its postacute and chronic long-term care services. Home health, one of Medicare’s most popular services, has been dramatically affected. Home health expenditures have decreased sharply in the two years since its passage. The extent to which home health eligibility clarification, fraud-and-abuse enforcement, and the payment scheme have changed service-use patterns and how these patterns continue into PPS implementation are important to continue to monitor.

The demographic imperatives of the next fifty years will increase demand for chronic care services and promote the development of a fuller range of clinical, medical, and social support services. Home health will likely be an important component of the services desired. How we organize and pay for this continuum of services in a way that ensures access while promising efficient use of resources is the true future challenge for our country.

Editor's Notes

 
Nelda McCall is president of Laguna Research Associates in San Francisco. Harriet Komisar is assistant professor, Institute for Health Care Research and Policy, Georgetown University, in Washington, D.C. Andrew Petersons is a research analyst and Stanley Moore is a senior programmer at Laguna.

This paper is based on work funded by the Robert Wood Johnson Foundation (RWJF) through the Home Care Research Initiative at the Center for Home Care Policy and Research of the Visiting Nurse Service of New York; the Health Care Financing Administration (HCFA) under Contract no. HCFA-00-0108; and the Office of the Assistant Secretary of Planning and Evaluation (ASPE) under Contract no. HHS-100-99- 0021. The analysis and conclusions are solely those of the authors and do not express any official opinion of or endorsement by the funders. The authors thank the following persons who commented on an earlier version of this paper: James Knickman of the RWJF; Penny Feldman and Christopher Murtaugh of the Center for Home Care Policy and Research; Sydney Galloway, Ann Meadow, and Phillip Cotterill of HCFA; Kamal Hijjazi of ASPE; and Joseph Hafkenschiel of the California Association for Health Services at Home.

NOTES

Top Before The BBA After The BBA Study Methodology Study Results Quarterly trends. Discussion And Policy... NOTES

 

1. Potential problems are analyzed in B. Gage,Medicare Home Health and the IPS: Is Access a Problem? (Washington: Urban Institute, April 1999); H. Komisar and J. Feder, The Balanced Budget Act of 1997: Effects on Medicare’s Home Health Benefit and Beneficiaries Who Need Long-Term Care (Washington: Georgetown University Institute for Health Care Research and Policy, February 1998); and Lewin Group, Implications of the Medicare Home Health Interim Payment System of the 1997 Balanced Budget Act (Washington: National Association for Home Care, March 1998). Studies of changes include U.S. General Accounting Office, Medicare Home Health Benefit: Impact of Interim Payment System and Agency Closures on Access to Service, Pub. no. GAO/HEHS-98-238 (Washington: GAO, September 1998); Medicare Payment Advisory Commission, Report to the Congress: Selected Medicare Issues (Washington: MedPAC, June 1999); Med- PAC, Report to the Congress: Medicare Payment Policy (Washington: MedPAC, March 2000); GAO, Closures Continue, with Little Evidence Beneficiary Access Is Impaired, Pub. no. GAO/HEHS-99-120 (Washington: GAO, May 1999); B.M. Smith, K.A. Maloy, and D.J. Hawkins, An Examination of Medicare Home Health Services: A Descriptive Study of the Effects of the Balanced Budget Act Interim Payment Systemon Access to and Quality of Care (Washington: George Washington University School of Public Health and Health Services, Center for Health Services Research and Policy, September 1999); and Office of Inspector General, Medicare Beneficiary Access to Home Health Agencies (Washington: U.S. Department of Health and Human Services, October 1999).
2. The GAO (1999) and OIG reports found few access problems, but the MedPAC and George Washington University reports indicate that agencies were excluding sicker beneficiaries or limiting their care.
3. MedPAC, Report to the Congress, 1999.
4. Ibid., data adjusted for the increase in the Consumer Price Index.
5. Duggan v Bowen, 691 F.Supp. 1487 (D.D.C. 1988).
6. Komisar and Feder, The Balanced Budget Act of 1997; and Lewin Group, Implications of the Medicare Home Health Interim Payment System.
7. This limit was 112 percent of the average cost per visit for free-standing agencies by discipline. The six home health disciplines are skilled nursing, physical therapy, occupational therapy, speech language pathology, medical social services, and home health aide.
8. Costs for each discipline did not have to be lower, as costs above the limit for one discipline could be offset by costs below the limit for another and still be under the aggregate per visit limit.
9. GAO, Medicare Home Health Utilization Expands while Program Controls Deteriorate, Pub. no. GAO/ HEHS-96-16 (Washington: GAO, March 1996); and GAO, Long Term Care: Baby Boom Generation Presents Financing Challenges, Pub. no. GAO/HEHS- 98-107 (Washington: GAO, March 1998).
10. The BBA defines "intermittent" skilled nursing as "skilled nursing care that is either provided or needed on fewer than 7 days each week, or less than 8 hours of each day for periods of 21 days or less (with extensions in exceptional circumstances...)." Balanced Budged Act of 1997, Sec. 4612(a). The DHHS study did not yield a new definition of "homebound" that was considered superior to existing law and recommended that the existing policy be retained.
11. The IPS reduced the national per visit cost limitations per discipline from 112 percent of the mean to 105 percent of the median per visit costs for free-standing home health agencies. For old agencies (those with a twelve-month cost reporting period ending in FY 1994), the per beneficiary limit was set at 98 percent of the blended (75 percent agency, 25 percent census region) average cost per beneficiary based on cost reporting periods ending in FY 1994. For new agencies the per beneficiary limitation was set at the national median of per beneficiary limitations. The Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) for FY 1999 raised the per visit limitation from 105 percent to 106 percent of the median. It also raised the per beneficiary limitation for some new agencies and old agencies whose per beneficiary limitations were less than the national median. Per beneficiary limitations for providers whose first cost reporting period began during FY 1999 were set at 75 percent of the median national per beneficiary limitation.
12. Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, Sec. 232.
13. Agencies have five months to file a cost report after the end of their cost reporting period, and intermediaries generally do not make settlement determinations until approximately eighteen months after receiving the cost report. In practice, there are often further delays because of late submission of cost reports and other administrative issues. For additional details, see GAO, Overpayments Are Hard to Identify and Even Harder to Collect, Pub. no. GAO/HEHS/AIMD-00-132 (Washington: GAO, April 2000).
14. Diagnoses selected were those that occurred most frequently in the home health claims database or were of interest for other reasons. The diagnoses and their codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) are diabetes, 250; hypertensive disease, 401–405; heart failure, 428; cardiac disrythmias, 427; chronic ischemic heart disease, 414; cerebrovascular diseases, 430–438; osteoarthritis and related disorders, 715; chronic airway obstruction, 496; skin ulcers, 707; and fractured femur, 820–821, 9053.
15. S.K. Long, K. Liu, and C. Rimes, Home Care Services under Medicare and Medicaid: Is There Evidence of Medicare Maximization? (Washington: Urban Institute, August 1999).
16. GAO, Closures Continue.
17. Congressional Budget Office, Estimated Budgetary Impact of H.R. 2015 (Public Law 105-33), The Balanced Budget Act of 1997 (Washington: CBO, 12 August 1997).
18. H.L. Komisar, J.M. Lambrew, and J. Feder, Long- Term Care for the Elderly: A Chart Book (New York: Commonwealth Fund, December 1996).

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