Medicare reform: All that’s left is the implementation

Home care’s future signed, sealed, and delivered

Last month, Hospital Home Health reported on some of the key home care issues of the Balanced Budget Act of 1997, which was signed into law by President Bill Clinton Aug. 5. The legislation will reduce Medicare spending by $115.1 billion over five years, according to a July 30 analysis by the Congressional Budget Office (CBO). Hospitals will be hit hard with a payment reduction of $39.8 billion over five years. Managed care plans will be hit with a reduction in Medicare payments of about $19 billion. Home health is next in spending cuts, with $16.2 billion trimmed from projected expenditures.

The new budget reduces spending for skilled-nursing facilities by $9.5 billion. Physician payments under the resource-based relative value scale will be cut by $5.3 billion over five years, according to CBO. It is widely believed that physicians came out of the budget process relatively unscathed because of a deal between congressional Republicans and the American Medical Association, which came out in favor of a ban on "partial birth abortions" earlier this year.

To pay for the shift of most of the Medicare home health benefit from Part A to Part B, beneficiaries will see their premiums rise to $105.40 a month by fiscal year 2007 — compared to an expected premium of $59.70 under the previous law. This huge increase in the premium might be the intentional result of an unspoken strategy behind the shift of the home health benefit to Part B of Medicare: Such a high premium will force many senior citizens into managed care plans. (A summary of all the Medicare provisions is inserted in this issue.)

Medicare managed care options

The Balanced Budget Act refines current Medicare managed care operations, creating a program called Medicare+Choice (pronounced "Medicare plus choice"). The legislation allows for three kinds of health plans to offer coverage to Medicare beneficiaries who choose to leave traditional fee-for-service Medicare. These are:

• coordinated care plans, like health maintenance organizations, preferred provider organizations, and provider-sponsored organizations;

• Medical Savings Account (MSA) plans, which combine required contributions into a Medicare+Choice MSA and purchase of a catastrophic illness insurance policy (the MSA option is limited to 390,000 people as part of a demonstration project);

• fee-for-service plans outside of traditional Medicare. Under this option, an insurance carrier could provide more services than the current Medicare program, and could charge more for them. Current limits against balance billing would apply to all of those services covered by traditional fee-for-service Medicare, however.

Commissions for Medicare’s future

The act establishes two commissions: the National Bipartisan Commission on the Future of Medicare, and the Medicare Payment Review Commission.

The Commission on the Future of Medicare (The "Baby Boom Commission") will consist of 17 members appointed by the President, the Speaker of the House, and the Senate Majority Leader, and will make recommendations by March 1, 1999, to Congress and the president on actions necessary to ensure the long-term fiscal health of the Medicare program.

The 15-member Medicare Payment Review Commission will replace the existing Physician Payment Review Commission and the Prospective Payment Review Commission (PROPAC). The new commission will submit an annual report to Congress on the status of Medicare reforms, and make recommendations on Medicare payment issues and related issues affecting the Medicare program. The members of this commission will be appointed by the Comptroller General of the United States.

Home health: No copays, but a lot else

Following is a complete summary of the home care provisions:

COST LIMITS — For cost reporting periods beginning on or after Oct. 1, 1997, home health agencies will be reimbursed the lower of reasonable costs up to:

(1) cost caps set at 105% of the median, down from 112% of the mean;

(2) an agency-specific cap calculated at 98% of a home health agency’s average per patient cost of providing services to beneficiaries in cost reporting periods ending in 1994, multiplied by the unduplicated number of patients in the current year. Payment rates will be further adjusted so that they are based 75% on a provider’s base year costs and 25% on the census area average.

At the same time, HCFA is not mandated to develop the revised limits until Jan. 1, 1998, and the per beneficiary caps until April 1, 1998.

PPS — A PPS system is to be developed by the Secretary of Health and Human Services by Oct. 1, 1999; rates will be based on some unspecified unit of payment, to which a case-mix adjuster will be applied. (See related cover story, p. 117.)

NORMATIVE STANDARDS — The BBA authorizes HCFA to develop, through regulation, "normative standards" on duration and frequency of home health services, for Oct. 1, 1997, implementation. The legislative language gives the Secretary discretion to develop such standards, but stipulates that if they are in fact developed, services that exceed the norms will be denied.

In addition, HCFA is authorized to inform physicians if home health services they order "significantly" exceed normative standards.

PART B TRANSFER — Part A will cover only the first 100 visits per spell of illness that begins within 14 days following: (1) a three-day stay in a hospital or rural primary care hospital, or (2) after a post-hospital SNF stay if home care begins within 14 days of SNF discharge. A spell of illness begins the first day of home health and ends when the patient has had no hospital, nursing home, or home health services for 60 days.

HOME HEALTH SPENDING TARGETS — By Oct. 1 of this year, HCFA must provide Congress with an estimate of home health expenditures through FY 2002, and thereafter provide an annual report on actual outlays. If outlays are greater than the October 1997 estimates, HCFA will be required to recommend measures to reduce expenditures to the target figure.

VENIPUNCTURE — A Medicare beneficiary who requires only venipuncture services will be ineligible for the home health benefit, beginning Feb. 5, 1998, six months after the president signed the Balanced Budget Act into law.