White House budget sets stage for lengthy battle with Congress

By MATTHEW HAY

HHBR Washington Correspondent

WASHINGTON – President Clinton sent his final budget to Congress last week where it received less than a warm welcome by Republican majorities in both chambers. The administration’s Medicare proposal includes a prescription drug benefit that would cost an estimated $29 billion over five years, as well as significant cuts in other parts of the program that have already caused alarm within the home health industry.

While it is early in the budget process, American Association for Homecare (AAH; Alexandria, VA) Vice President, Government Relations for Home Health Mara Benner said several concerns have already surfaced. She noted that the administration’s plan proposes to competitively bid on voluntary disease management services, including home nursing visits. "To some extent, we need the language to be able to clearly understand whether or not that will have an impact," said Benner.

In addition, she said AAH is also concerned about the administration’s proposal to prohibit providers from furnishing partial hospitalization services in homes or other residential settings. "Again, it depends what they mean by that and how they are defining partial hospital services," she asserted. "But those are two red flags for home health that we will need further clarification about.

House Ways and Means Health Subcommittee Chairman Rep. Bill Thomas (R-CA) wasted no time blasting the administration’s proposal. "Last year, this Congress rejected the President’s $72 billion in Medicare cuts, which is why I can’t understand why he would again propose cuts in Medicare to the tune of nearly $70 billion," said Thomas. He added that Republicans are crafting their own plan that also includes a prescription drug plan for "the neediest seniors."

The administration’s plan would also authorize competitive bidding and price negotiations to set payment rates for non-physician Part B services and save an estimated $250 million over five years by implementing a consumer price index minus 1% update for durable medical equipment, prosthetics, orthotics, and supplies.

Just as the budget battle unfolded, another battle was brewing. The Health Care Financing Administration’s (HCFA; Baltimore) Office of the Actuary has given its estimate of total Medicare expenditures for FY99, and the agency reportedly estimates that the home health benefit was $9.5 billion. "That means that since expenditures in FY97 were close to $18 billion, the benefit has almost been cut in half," said Jim Pyles of Powers Pyles Sutter and Verville (Washington).

The rate that was included in the proposed regulation is a rate that included a 15% cut going into effect Oct. 1, 2000. Now that Congress postponed the 15% cut, that can not be the right rate, said Pyles.

Now, Pyles said, there is a question about whether HCFA will use more current information to recalculate the rate again before they issue the final rule.

If the agency opted to include the data from FY98 or FY99, the impact could be dramatic, according to Pyles.

"We know that home health spending dropped about 15% in FY98 and another 35% in FY99 for a total of almost 50% in two years," he said. "If they were to include that data in their PPS calculation, then the rates would go down drastically even with the 15% reduction delayed.

"The question right now is, What is the rate?," said Pyles. "That is the big bird in question." In the interim, he said, home health agencies can not do budget planning or other preparation for PPS in an educated fashion until they have that data.

"They certainly should begin trying to do what they can," he added. "But you don’t know what patients you can treat, what people you can hire, equipment you can buy, or anything.

"We know one thing about the rate for sure and that is that it appears it is not going to be what was proposed," concluded Pyles. "HCFA needs to get the rate out soon so we can determine if this emerging crises is going to be alleviated."