- Email: [email protected]
Major medicare changes for home health industry
Major Medicare Changes for Home Health Industry by Mara Benner
S
weeping changes to the Medicare program take effect this fall for home health services. The changes are part of the Balanced Budget Act of 1997 that was signed into law by President Clinton on August 5. Earlier this year, key congressional leaders and the Clinton Administration agreed to achieve government savings from the federal budget. For Medicare, the government savings had to reach $115 billion over 5 years. For Medicaid, government savings were $14 billion during the same 5 years. The Congressional Budget Office (CBO), the government agency charged with “scoring” federal legislative proposals, projected government savings from home health services to be $16.2 billion over 5 years and $49.6 billion over 10 years. By comparison, the CBO estimated the total Medicare spending for home health services in 1996 to be $16.7 billion. The legislation moved quickly this year through the House committees for approval and then to the key Senate committee; compromised language between the House versions and the Senate version were negotiated and finalized by the end of July. The president gave his approval by the first week in August and signed the Balanced Budget Act into law. Most of its provisions took effect October I and went to the Health Care Financing Administration (HCFA), the government agency that oversees the Medicare and Medicaid programs, to determine regulations for applying the new legislation. What
232
new changes can the home health
HOME
CARE PROVIDER
industry
expect?
An interim payment system was established October 1 for home health agencies; the interim payment rate will remain effective until HCFA designs and implements a prospective payment system (PPS) in October 1999. The new interim payment will reimburse home health agencies whichever is the lowest of three amounts: l
l
Actual
costs
The cost per visit limits reduced costs for freestanding agencies
to
105%
of the median
An aggregate per beneficiary limit based on 75% of agency-specific costs and 25% on census region costs for cost-reporting periods ending during fiscal year 1994
l
Congress also Any increases place between disallowed for
included a cost limit freeze for future years. that occurred in the home health marketJuly 1, 1994, and July 1, 1996, are to be future determinations of the cost limits.
The home health industry, along with consumer groups and other key home health advocates, were temporarily successful in defeating a 5% copayment for home health services However, the Balanced Budget Act includes provisions to have government agencies review the effectiveness of home health copayments. As a result of the interest by congressional members to implement copayments, the home health industry may have only a temporary reprieve from a government mandate requiring copayments for home health services.
OCTOBER
lwi’,
VOL. 2 NO. 5
POTENTIAL
PROBLEMS
One of the trickier changes written into the legislative language is a provision that requires cost limits to be calculated by the geographic location of the patient’s residence. Currently the cost limits are based on the location of the home health agency. HCFA recognizes the difficulty in determining the location of patients for reimbursement purposes and may delay implementing this provision, which was scheduled to take effect October 1. Another area that will be difficult for HCFA to administer is a new provision requiring regulations for the frequency and duration of home health services or a determination of “normative standards” for claims denials. HCFA was mandated to have normative guidelines established by October I. An additional requirement is a process by which physicians are notified when the home health services they have prescribed exceed thresholds determined under the normative guidelines. To date, HCFA has no process to determine length or duration of home health services. Congress enacted changes to the definitions of part-time and intermittent cdre that took effect October 1, The new definition defines part-time or intermittent care as skilled Nursing and holne bealtb aide services provided to the patient axy numberof days Derweek.However, the combined services of skilled nursing and home health aide services must not be less than 8 hours a day and 28 or fewer hours in a week. A further clarification of intermittent is defined as skilled nursingseroices grovided less than 7 days a week or less thaw 8 hours of each duyfor intervalsof 2 1 days or less. The Secretary of Health and Human Services has been authorized to review the definition of bornebound for home health services. A report from this secretary will be sent to Congress by October 1, 1998, on criteria to determine whether a patient is homebound and meets Medicare eligibility requirements.
has an interest
HOME MEDICAL EQUIPMENT AND SERVICES PROVlSlONS The new Balanced Budget Act mandates reductions in home medical equipment (HME) reimbursement, Updates to the fee schedules for HME and orthotics and prosthetics will be eliminated for the years 1998 through 2000. For payments related to parenteral and enteral nutrients, supplies, and equipment, reimbursement will reflect 1995 rates for the years between 1998 and 2002. Another new provision will permit HCFA to write regulations permitting patients to purchase or rent upgraded HME and pay an additional amount out-of-pocket as long as the total does not exceed the applicable fee schedule. A 25% reduction of the 1997 rates will determine the 1998 reimbursement rate for oxygen and oxygen equipment. An additional 5% reduction of the 1997 rates determines the 1999 rates for both oxygen and oxygen equipment. The new provisions also require the General Accounting Office to submit a report to Congress within i 8 months addressing issues surrounding access to home oxygen equipment and recommendations for legislation. Beginning in 1998, home health services will be transferred from Medicare’s Part A to Part B during a T-year period. Under this provision of the Balanced Budget Act, Medicare reimbursement will be reduced to a maximum of 100 home health visits under Part A. This restriction will be effective only if the patient had a s-day prior hospitalization stay or had home health visits after receiving covered services in a skilled nursing facility. All other coverage would be reimbursed under Part B. For home health providers, some positive aspects of the Act are that all claims will continue to be reviewed and sent to fiscal intermediaries, and agencies can continue to receive administrative law judge hearings. RE
One extra provision within the Balanced Budget Act requires hospitals to provide patients at the time of discharge with a list of all qualified home health agencies. Home health agencies must request to be listed on the hospital’s discharge planning list and also must be located in the patient’s area of residence. The hospital will be required to disclose any entity on this list in which it has a financial interest, as will each home health agency that
OCTOBER
1997, VOL. 2 NO. 5
in the hospital.
HOME
REALTY
RE Most changes within the Balanced Budget Act will affect how Medicare reimburses home health agencies. Congress chose to retain cost reimbursement for home health agencies rather than make structural reimbursement changes to the Medicare program. More than 2 years ago, home health industry leaders collaboratively worked to seek a solution to the problems inherent within the Medicare
HOME
CARE PROVIDER
233
reimbursement system. At that time, the home health industry was facing a congressional mandate requiring a 20% copayment for home health servicesand the potential of bundling reimbursement with other health care payments. The home health industry-including state and national home health associations, providers, and consultantsworked to design a proposal that would reform the Medicare program. After months of hard work, the industry agreed on a PPS. No other segment of the health delivery system has ever come together and proposed structural reforms designed to achieve government savings from the services provided. The proposal would reform the Medicare program, decrease incentives for fraud and abuse, and could be implemented within 6 months of when the president signed the legislation into law. The proposal was adopted by Congress in t 9% as part of the budget reconciliation package. However, that entire package ultimately was vetoed by President Clinton.
while maintaining quality care and providing savings to the government. In particular, the home health industry recognizes that to preserve the home health program, structural reimbursement changes must be implemented in the Medicare program. Home health services are a cost-effective alternative to other institutional settings and should remain an option for the increasing older population. However, home health can remain a quality, cost-effective alternative only if the proper incentives are required in government programs, such as Medicare and Medicaid. BIBLIOGRAPHY Federal
Activities
August Health
Care
Financing
the House HHSSA’s
Report:
Powers,
Pyies,
Sutter & Verville:
1997
edition Administration’s
Commerce
Status
House
Commerce
House
Ways
Senate
Finance
Report:
1997
Committee
and Means Committee
Testimony
of March
5 before
Committee September Balanced
Committee Balanced
edition Budget
Act of 1997
Balanced
Budget
Budget
Act of 1997
Act of 1997
This year, during the congressional debate on the Balanced Budget Act, Congress chose to ignore the home health industry’s proposal and instead adopted HCFA’s proposal, which retains cost reimbursement for another 2 years and requires HCFA to implement a PPS by October 12, 1999. HCFA is required to develop, test, and implement the new PPS within 2 years. Ironically, in testimony before the House Commerce Committee on March 5, 1997, HCFA Administrator Bruce Vladeck conceded that his staff does not believe it can meet the October 12, I 999, deadline. As a result, structural reform for home health services under Medicare will be delayed further. The home health industry has stepped up to the challenge and has offered a proposal that truly reforms the program
234
HOME
CARE PROVIDER
OCTOBER
1997,
VOL.
2 NO.
5
S
weeping changes to the Medicare program take effect this fall for home health services. The changes are part of the Balanced Budget Act of 1997 that was signed into law by President Clinton on August 5. Earlier this year, key congressional leaders and the Clinton Administration agreed to achieve government savings from the federal budget. For Medicare, the government savings had to reach $115 billion over 5 years. For Medicaid, government savings were $14 billion during the same 5 years. The Congressional Budget Office (CBO), the government agency charged with “scoring” federal legislative proposals, projected government savings from home health services to be $16.2 billion over 5 years and $49.6 billion over 10 years. By comparison, the CBO estimated the total Medicare spending for home health services in 1996 to be $16.7 billion. The legislation moved quickly this year through the House committees for approval and then to the key Senate committee; compromised language between the House versions and the Senate version were negotiated and finalized by the end of July. The president gave his approval by the first week in August and signed the Balanced Budget Act into law. Most of its provisions took effect October I and went to the Health Care Financing Administration (HCFA), the government agency that oversees the Medicare and Medicaid programs, to determine regulations for applying the new legislation. What
232
new changes can the home health
HOME
CARE PROVIDER
industry
expect?
An interim payment system was established October 1 for home health agencies; the interim payment rate will remain effective until HCFA designs and implements a prospective payment system (PPS) in October 1999. The new interim payment will reimburse home health agencies whichever is the lowest of three amounts: l
l
Actual
costs
The cost per visit limits reduced costs for freestanding agencies
to
105%
of the median
An aggregate per beneficiary limit based on 75% of agency-specific costs and 25% on census region costs for cost-reporting periods ending during fiscal year 1994
l
Congress also Any increases place between disallowed for
included a cost limit freeze for future years. that occurred in the home health marketJuly 1, 1994, and July 1, 1996, are to be future determinations of the cost limits.
The home health industry, along with consumer groups and other key home health advocates, were temporarily successful in defeating a 5% copayment for home health services However, the Balanced Budget Act includes provisions to have government agencies review the effectiveness of home health copayments. As a result of the interest by congressional members to implement copayments, the home health industry may have only a temporary reprieve from a government mandate requiring copayments for home health services.
OCTOBER
lwi’,
VOL. 2 NO. 5
POTENTIAL
PROBLEMS
One of the trickier changes written into the legislative language is a provision that requires cost limits to be calculated by the geographic location of the patient’s residence. Currently the cost limits are based on the location of the home health agency. HCFA recognizes the difficulty in determining the location of patients for reimbursement purposes and may delay implementing this provision, which was scheduled to take effect October 1. Another area that will be difficult for HCFA to administer is a new provision requiring regulations for the frequency and duration of home health services or a determination of “normative standards” for claims denials. HCFA was mandated to have normative guidelines established by October I. An additional requirement is a process by which physicians are notified when the home health services they have prescribed exceed thresholds determined under the normative guidelines. To date, HCFA has no process to determine length or duration of home health services. Congress enacted changes to the definitions of part-time and intermittent cdre that took effect October 1, The new definition defines part-time or intermittent care as skilled Nursing and holne bealtb aide services provided to the patient axy numberof days Derweek.However, the combined services of skilled nursing and home health aide services must not be less than 8 hours a day and 28 or fewer hours in a week. A further clarification of intermittent is defined as skilled nursingseroices grovided less than 7 days a week or less thaw 8 hours of each duyfor intervalsof 2 1 days or less. The Secretary of Health and Human Services has been authorized to review the definition of bornebound for home health services. A report from this secretary will be sent to Congress by October 1, 1998, on criteria to determine whether a patient is homebound and meets Medicare eligibility requirements.
has an interest
HOME MEDICAL EQUIPMENT AND SERVICES PROVlSlONS The new Balanced Budget Act mandates reductions in home medical equipment (HME) reimbursement, Updates to the fee schedules for HME and orthotics and prosthetics will be eliminated for the years 1998 through 2000. For payments related to parenteral and enteral nutrients, supplies, and equipment, reimbursement will reflect 1995 rates for the years between 1998 and 2002. Another new provision will permit HCFA to write regulations permitting patients to purchase or rent upgraded HME and pay an additional amount out-of-pocket as long as the total does not exceed the applicable fee schedule. A 25% reduction of the 1997 rates will determine the 1998 reimbursement rate for oxygen and oxygen equipment. An additional 5% reduction of the 1997 rates determines the 1999 rates for both oxygen and oxygen equipment. The new provisions also require the General Accounting Office to submit a report to Congress within i 8 months addressing issues surrounding access to home oxygen equipment and recommendations for legislation. Beginning in 1998, home health services will be transferred from Medicare’s Part A to Part B during a T-year period. Under this provision of the Balanced Budget Act, Medicare reimbursement will be reduced to a maximum of 100 home health visits under Part A. This restriction will be effective only if the patient had a s-day prior hospitalization stay or had home health visits after receiving covered services in a skilled nursing facility. All other coverage would be reimbursed under Part B. For home health providers, some positive aspects of the Act are that all claims will continue to be reviewed and sent to fiscal intermediaries, and agencies can continue to receive administrative law judge hearings. RE
One extra provision within the Balanced Budget Act requires hospitals to provide patients at the time of discharge with a list of all qualified home health agencies. Home health agencies must request to be listed on the hospital’s discharge planning list and also must be located in the patient’s area of residence. The hospital will be required to disclose any entity on this list in which it has a financial interest, as will each home health agency that
OCTOBER
1997, VOL. 2 NO. 5
in the hospital.
HOME
REALTY
RE Most changes within the Balanced Budget Act will affect how Medicare reimburses home health agencies. Congress chose to retain cost reimbursement for home health agencies rather than make structural reimbursement changes to the Medicare program. More than 2 years ago, home health industry leaders collaboratively worked to seek a solution to the problems inherent within the Medicare
HOME
CARE PROVIDER
233
reimbursement system. At that time, the home health industry was facing a congressional mandate requiring a 20% copayment for home health servicesand the potential of bundling reimbursement with other health care payments. The home health industry-including state and national home health associations, providers, and consultantsworked to design a proposal that would reform the Medicare program. After months of hard work, the industry agreed on a PPS. No other segment of the health delivery system has ever come together and proposed structural reforms designed to achieve government savings from the services provided. The proposal would reform the Medicare program, decrease incentives for fraud and abuse, and could be implemented within 6 months of when the president signed the legislation into law. The proposal was adopted by Congress in t 9% as part of the budget reconciliation package. However, that entire package ultimately was vetoed by President Clinton.
while maintaining quality care and providing savings to the government. In particular, the home health industry recognizes that to preserve the home health program, structural reimbursement changes must be implemented in the Medicare program. Home health services are a cost-effective alternative to other institutional settings and should remain an option for the increasing older population. However, home health can remain a quality, cost-effective alternative only if the proper incentives are required in government programs, such as Medicare and Medicaid. BIBLIOGRAPHY Federal
Activities
August Health
Care
Financing
the House HHSSA’s
Report:
Powers,
Pyies,
Sutter & Verville:
1997
edition Administration’s
Commerce
Status
House
Commerce
House
Ways
Senate
Finance
Report:
1997
Committee
and Means Committee
Testimony
of March
5 before
Committee September Balanced
Committee Balanced
edition Budget
Act of 1997
Balanced
Budget
Budget
Act of 1997
Act of 1997
This year, during the congressional debate on the Balanced Budget Act, Congress chose to ignore the home health industry’s proposal and instead adopted HCFA’s proposal, which retains cost reimbursement for another 2 years and requires HCFA to implement a PPS by October 12, 1999. HCFA is required to develop, test, and implement the new PPS within 2 years. Ironically, in testimony before the House Commerce Committee on March 5, 1997, HCFA Administrator Bruce Vladeck conceded that his staff does not believe it can meet the October 12, I 999, deadline. As a result, structural reform for home health services under Medicare will be delayed further. The home health industry has stepped up to the challenge and has offered a proposal that truly reforms the program
234
HOME
CARE PROVIDER
OCTOBER
1997,
VOL.
2 NO.
5