Affordable Care Act’s cuts for home health draw fire, with crit­ics say­ing other changes could end up rais­ing costs

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Home health providers wary over cuts, other pro­posed changes

Be­fore they feel the sting of nearly $40 bil­lion in Medi­care cuts from last year’s health re­form law, home health­care ad­vo­cates are busy ad­dress­ing a more ur­gent concern: the pos­si­ble re­quire­ment of a home health co­pay­ment for ben­e­fi­cia­ries.

As part of the Pa­tient Pro­tec­tion and Affordable Care Act, the home health­care in­dus­try will ex­pe­ri­ence a re­duc­tion in the mar­ket­bas­ket start­ing in 2012 and a “re­bas­ing” of the pay­ment sys­tem that will be phased in from 2014 to 2017, ac­cord­ing to an anal­y­sis from the Kaiser Fam­ily Foun­da­tion.

The re­bas­ing would ac­count for the num­ber, mix and in­ten­sity of ser­vices pro­vided and the av­er­age cost of pro­vid­ing care; au­tho­rize the HHS sec­re­tary to ac­count for dif­fer­ences in providers (such as hos­pi­tal-based ver­sus free­stand­ing, ur­ban ver­sus ru­ral, or not-for-profit ver­sus for-profit providers); and limit the an­nual ad­just­ments to no more than 3.5% per year, rel­a­tive to 2010 pay­ment lev­els.

The rea­son for the pay­ment re­bas­ing is pri­mar­ily be­cause the home health prod­uct has changed since the orig­i­nal prospec­tive pay­ment rates in 2000 were based on use of ser­vices in the late 1990s, says Bill Dombi, vice pres­i­dent of law at the Na­tional As­so­ci­a­tion for Home Care & Hospice in Wash­ing­ton. Back then, there were about 34 or 35 vis­its per 60-day home health episode, while to­day it’s more like 25 vis­its, he says.

And while skilled-nurs­ing vis­its have gone up, home health aide vis­its have gone down. The change has been a good one for pa­tients, Dombi says, be­cause the vis­its to­day fo­cus on re­ha­bil­i­ta­tion, whereas the home health aide vis­its pro­moted more de­pen­dence on the home health visit—which in­creased uti­liza­tion.

As Dombi ex­plains, the orig­i­nal House ver­sion of the re­form leg­is­la­tion in­cluded about $57 bil­lion in cuts for home health. So while he says the amount of cuts in the fi­nal law was seen as “some­what of a suc­cess” given the al­ter­na­tive, he con­tends the cuts—spread out over 10 years—are still large in con­text of over­all Medi­care spend­ing.

“Of the hun­dreds of bil­lions cut from Medi­care spend­ing, $39.7 bil­lion is home health—or about 9%,” of the to­tal cuts, Dombi says. “It’s dis­pro­por­tion­ate for home health be­cause home health is about 4% of Medi­care spend­ing.” Ac­cord­ing to the Medi­care Pay­ment Ad­vi­sory Com­mis­sion, Medi­care spent about $19 bil­lion on home health in 2009.

There are two pri­mary ex­pla­na­tions why the in­dus­try took such a hit, Dombi says. First, MedPAC has in­di­cated that Medi­care mar­gins for the sec­tor are too high. “In other words, that the ser­vice is over­priced,” Dombi says. “When you look at the mar­gins, MedPAC’s cal­cu­la­tion is they av­er­age over 17%,” he says, adding that this is prob­a­bly the “No. 1 rea­son” for the cuts. But Dombi’s group doesn’t agree with the ad­vi­sory com­mis­sion’s cal­cu­la­tion method­ol­ogy, say­ing the anal­y­sis does not ac­count for all costs of ser­vices in the seg­ment, such as tele­health.

For­mer U.S. Rep. Billy Tauzin (R-La.), who served as chair­man of the House En­ergy and Com­merce Com­mit­tee from 2001 to 2004, cur­rently serves as spe­cial coun­sel to the Part­ner­ship for Qual­ity Home Health­care, a lob­by­ing group es­tab­lished last year that rep­re­sents more than 1,800 home health agen­cies na­tion­wide. Af­ter re­tir­ing from Congress, Tauzin served as head of the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica from Jan­uary 2005 un­til June of


In home health­care, the use of skilled-nurs­ing ser­vices has in­creased while vis­its by home health aides have de­clined.

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