Earlier this month the Centers for Medicare and Medicaid Services announced that growth in U.S. health spending in 2013 remained at a historic low, or under four percent. Part of this trend is attributable to the Medicare program itself as costs were $80.5 billion less than projected. But the respite in Medicare spending should be viewed with caution as planned reductions in home health spending, likely unsustainable, contributed to its decline.
Home health is a relatively small benefit used by 10 percent of beneficiaries at a cost to CMS of $19.5 billion annually. The Affordable Care Act specifically reduced provider reimbursement by five percent in 2011 and mandated an additional 17 percent reduction by 2017 to generate upwards of $14 billion in savings. With little fanfare, however, anticipated home health savings have likely vanished. Medicare is facing a surge in demand, courtesy of a court ruling last year that paved the way for a massive expansion in service coverage and essentially transformed Medicare into a long-term care benefit.
The ruling focused on the seemingly innocuous notion of ability to improve and forbade its consideration as a criterion for coverage, even informally. In practice, the improvement standard, as it is known in the industry, has been pivotal in determining who receives services; Medicare has used it for decades to control home health utilization.
At an average cost of $3,000 per episode, the price tag on a massive home health expansion is unknown, but arguably sizable.
Established in 1965 as part of the original Medicare statute, the home health benefit was designed to reduce hospital admissions and nursing home placements by providing skilled nursing and therapy services to the homebound elderly and disabled at risk of either event. The aim was for the program to be cost neutral or cost saving due to spending offsets.
Beneficiaries are eligible for services after an acute stay or through community referral. All must require less intensive care than a skilled nursing facility would provide, though the services are similar. A physician must certify need and determine a plan of care. The concept of ability to improve, the focus of the recent court battle, has been key to the program as physicians generally ordered services to make patients better.
Consider a typical patient recovering from a stroke with impaired mobility and, hence, a home health candidate. He or she would likely be discharged with an order for physical therapy to help regain strength and the ability to walk safely at home, at which point services would end. Note the implicit role of improvement: The potential to improve prompted the service order and goal achievement was the basis for service termination—a simple formula. No more.
In 2013, after decades of legal challenges, a coalition of six beneficiaries and seven national organizations won a class action lawsuit against CMS regarding use of the improvement standard. Jimmo v. Sebelius made clear that need alone is sufficient for coverage if skilled services are required to maintain function and/or to prevent decline. The clarification is not pin-head dancing.
CMS has not only lost a critical lever by which to control who gets services, but also for how long. Regardless of prognosis, beneficiaries are now eligible for services to maintain their health status, implying an open-ended commitment. To terminate services, Medicare faces a tough sell. They must convince patients that withdrawing care will not negatively affect their health. Good luck with that.
Parties to the suit included the Center for Medicare Advocacy, Paralyzed Veterans of America, and the Alzheimer's Association, and they are poised to help consumers contest such attempts. Post Jimmo, with no cost-sharing component or episode limits, home health is, for all practical purposes, a free, long-term care benefit.
While supply-side factors will affect future growth, demand pressure suggests a startling liability. At present, close to 30 percent of Americans age 65-plus who live in non-institutional settings need assistance with one or more activities of daily living. While clearly not all are homebound and need skilled services, pent-up demand seems likely with benefit usage at 10 percent. As baby boomers age, they will swell these ranks.
Hospitals are also likely to propel home health use. The ACA unleashed re-admission penalties for select conditions, such as congestive heart failure. Many of these patients qualify for home health, yet research indicates that anywhere from 40 percent to 80 percent do not receive a referral. Hospitals may find use of home health far more cost effective than creating their own post-discharge patient management programs.
Other parties will likely make a similar discovery. Family members may prefer to substitute home health for their own time, and assisted living providers may seek maintenance services to secure their client base. Medicaid agencies also have an incentive to increase use of home health to avoid nursing home bills.
The most immediate and intense pressure, however, may come from disabled beneficiaries who constitute 17 percent of the Medicare population. This group contends that, for decades, they have been denied coverage for lack of improvement potential. Glenda Jimmo herself, the lead plaintiff in the 2013 case, is wheelchair-bound and blind.
At an average cost of $3,000 per episode, the price tag on a massive home health expansion is unknown, but arguably sizable. CMS should fight the impulse to obfuscate and panic and instead leverage the opportunity to maximize the benefit of having a health care agent in the home.
It should also address the thorny issue of when and how to terminate services. Sound objectives would be cost neutral, as originally intended, in the medium run, and we would see healthier, happier beneficiaries immediately, a reasonable result for all in light of the court decision.