The last four years have seen the greatest turmoil and disarray in the history of the American home health industry, and while it is possible that a new short-term equilibrium may be emerging, it is also clear that the issues underlying the recent crisis are far from being resolved, and that a permanent sense of direction and stability is still off somewhere in the indistinct future. Things may quiet down for a while, but until there is a much broader consensus on the underlying issues among providers, policymakers, academic experts, and the general public, the home health community can continue to expect periodic reversals, upheavals, and confusion.
The Balanced Budget Act of 1997 (BBA) and its associated sequelae produced unprecedented economic disruption in the home care community, but that legislation represented a short-term, and indeed somewhat improvisational, response to serious and urgent problems, which have still not gone away. And subsequent efforts to ameliorate some of the effects of the BBA, while bringing relief to some home health care providers, have not addressed the longer-term problems either. We thus find ourselves in a situation in which we know that the current state of affairs is largely unsatisfactory, but we don't have a very clear sense of how to get out of it without recreating the same problems that got us into our present circumstances. Only some creative thinking and some new ideas about where home health care should fit in the health system as a whole, and in the Medicare program in particular, can provide a way out of our current box.
I propose to briefly review the background to enactment of the BBA, identifying in the process some of the more basic issues that fueled the problems the BBA sought to address. I will then summarize some of the effects of the BBA and the new policies it contains, or that were associated with it, and then conclude with a more general discussion of the current intellectual crisis in home care, and how we might begin to resolve it.
HOW WE GOT TO THE BBA
Defining home care as organized, non-physician, professional health services provided to patients in their homes, home care has been a part of the American health care delivery system for more than a century. Its role in that system, however, was relatively limited before the enactment of Medicare in 1965, and ever since, its evolution has been inextricably bound up in the development of Medicare policy, in a kind of push-me/pull-you relationship that has been optimal neither for Medicare nor for the home health community.
Home health care for the elderly was a relatively limited and novel idea in 1965, but the case was made then, as it has been ever since, that organized home care services could reduce the length of inpatient hospital stays-the primary service for which the original Medicare program was designed to pay-and improve patient outcomes (although that terminology was not generally used at the time). The notion of a brief, time-limited intervention integrally connected to a preceding hospitalization was thus built into the Medicare home care benefit at the outset and has remained there ever since, even as the role of hospitalization in the spectrum of services needed by the elderly has shrunk, at least in proportional terms.
For the first 15 years of the Medicare program, the primary perception about home care services was that there wasn't enough of them, although the Congress tinkered with the home care benefit periodically during that period. Finally, responding to the arguments of home care advocates that expansion of home care services would save money, in an era in which cost pressures were predominant and all sorts of measures were being tried to reduce Medicare hospital expenses, the Congress made major changes in 1980. On the supply side, it heeded the argument that the expansion of home care had been constrained by the dominance in the industry of public and not-for-profit agencies incapable of expanding to meet the growing need among Medicare beneficiaries, and opened the program up, for the first time, to fullfledged participation by for-profit providers. On the demand side, it eliminated the requirement for prior hospitalization as a condition for receiving benefits, and removed the limit on the number of visits per episode.
To a greater extent than perhaps anyone had anticipated, these measures worked to produce a rapid expansion in the utilization of Medicare home health benefits. The Reagan Administration, which had come into office in 1981 with a determination to reduce all forms of government spending, especially Medicare, then undertook a number of administrative actions to stem this growth. They were largely successful; Medicare expenditures for home health services, which grew by 111% from 1980 to 1983, grew only 10% between 1985 and 1988 (Health Care Financing Review, 1998, Table 46). Finally, in 1988, Federal District Court Judge Stanley Sporkin ruled, in a case entitled Duggan v. Bowen, that the Health Care Financing Administration (HCFA) had significantly abused its authority and acted counter to Congressional intent in its administration of the home care benefit. HCFA shortly after entered into a consent decree to conclude the litigation, in which it agreed to largely abandon the administrative controls it had developed in the earlier part of that decade (Stone, 2000).
Before considering the effects of Duggan on the evolution of Medicare home care, two important points need to be considered. First, the environment in which home care was delivered changed dramatically in the 1980s. The introduction of the Prospective Payment System for inpatient hospital care under Medicare in 1983 substantially altered the incentives for hospitals concerning timely discharge of inpatients, and substantially increased the demand for home care services to facilitate shorter, and therefore presumably more profitable, lengths of stay. At the same time, the federal government and the states both began backing away from the massive, open-ended commitments they had made in the previous decade to expanding Medicaid-financed home and community-based services for the frail elderly as an alternative to nursing home care, but the states continued, through Certificate-of-Need laws and other measures, to tightly constrain the supply of nursing home beds. As a result, the continuing growth in the population of frail elderly people with limited financial means in need of longterm- care services left a considerable reservoir of unmet need in many communities. Thus, during the years in which HCFA was attempting to rein in the effects of the legislative loosening of requirements for Medicare home care, demand for such services was growing rapidly, creating a backlog of need which Duggan would unleash.
Second, the very efforts which HCFA made to limit home care utilization, and which were overturned by Duggan, involved three fundamental concepts in the Medicare home care benefit which continue to bedevil the program to this day. In order to be eligible for Medicare-covered home care services, beneficiaries must be "homebound," and must require "skilled" services provided on an "intermittent" basis. These terms, which date back to the early days of the Medicare home care benefit-from a period, in other words, in which the practice of sophisticated home care for the elderly was very limited and at an early developmental stage-turn out to have limited utility in capturing either the clinical needs of contemporary beneficiaries or the circumstances under which home care is most effectively provided. But they remain in force because of the unavailability of alternatives.
In other words, despite the enormous growth and increased sophistication of home care for the elderly over the last three decades, we still lack broadly-accepted professional consensus about the criteria to determine who should receive formal home care services, what services they should receive, and how long they should receive them, in a form that could be readily used by a large health insurance program trying to rationally administer an insurance benefit. In the absence of an information base that could permit HCFA and the Congress to draw a line around a specific set of beneficiaries in need of a specific set of services, public policy on such issues as coverage and service definition will continue to oscillate.
Once Duggan took effect, the growth in Medicare home health services was explosive. Medicare spending on home health care, which amounted to less than $3 billion in 1986, grew to more than $18 billion in 1996, a compound annual growth rate in excess of 25% per year. Increases in per-visit costs accounted for a relatively small proportion of this growth. Instead, the number of beneficiaries receiving services each year more than doubled, while the number of visits per beneficiary receiving services more than tripled. The program was transformed, in effect, from one focussed on a limited post-acute recuperative service to one that provided longer-term treatment of chronic illnesses (Prospective Payment Assessment Commission, 1997).
At the same time that the use of Medicare home health care was growing so rapidly, the number of suppliers also increased. The number of agencies certified to provide Medicare home health services also roughly tripled during the decade after Duggan, although much of this growth occurred in a relatively few areas in the country, notably the Southeast and, especially, the South Central region of Arkansas, Oklahoma, and Texas. In implementing the legal changes involving agency characteristics enacted in 1980, HCFA had never established very stringent thresholds for agency participation, and it was true that as late as 1997 a single nurse with no home care experience but with access to the right managerial and financial consultants could start a Medicare-certified agency, providing all services through contract and part-time employees.
Many of these new agencies could not meet even minimal regulatory expectations once they began operating. The problems of those agencies, combined with the continued confusion over just what the standards for provision of appropriate Medicare home care services were, were reflected in a series of reports issued by the Inspector General of the Department of Health and Human Services in 1996 and thereafter, which repeatedly found that 25%-40% of all Medicare-paid home health visits provided in certain communities, or by certain providers, failed to meet the basic test of qualifying for Medicare coverage (Office of the Inspector General, 1997). These reports were roundly, and often justifiably, criticized in the home health community and elsewhere, but the figures they reported proved remarkably prescient in the ensuing years, as will be seen below.
In short, by 1997 the Medicare home health benefit appeared to be totally out of control in fiscal and operational terms. But that was just one part of a broader problem.
In April 1997, the Trustees of the Hospital Insurance Trust Fund, which encompasses Part A of Medicare (covering inpatient hospital care, skilled nursing facilities, hospice, and home health) reported that, in the absence of legislative action, the Fund would be insolvent by sometime in 2001. The explosive growth in home health expenses was clearly a major part of the problem; home health care, which had accounted for barely 2.5% of all Part A expenditures as recently as 1989, now exceeded 15% of the total, and was growing rapidly (Trustees of the Hospital Insurance Trust Fund, 1997). Insuring the solvency of the Trust Fund all but required doing something about home health care.
The Balanced Budget Act of 1997 was the culmination of a protracted and remarkably intense political process, beginning with the surprise capture of a Congressional majority by the Republican Party in the 1994 elections; their enactment of an extraordinary, comprehensive, and radical budget bill in the summer of 1995; the veto of that legislation by President Clinton; the ensuing stalemate that led to the unprecedented government shutdown in late 1995 and early 1996; the President's comfortable reelection in 1996; and a transient period of relative bipartisan cooperation in 1997. But it must be emphasized that throughout the more than two-year long process that resulted in the enactment of the BBA, in the context of heated struggles over Medicare beneficiary liabilities, Medicare managed care, the entitlement status of Medicaid, and a host of other significant issues, only one provision affecting Medicare home health care attracted very much attention. That was the proposal to restore the distinction between the Medicare Part A and Part B home care benefits that had been largely obliterated by the 1980 Amendments. Doing so, it was argued, would provide the basis for separating the posthospital, limited visits services (which would remain in Part A) from those involving longer-term, communitybased care. Not incidentally, it would also move roughly half the costs of home care from the Part A Trust Fund, which was going broke, to Part B, which can't go broke because it is largely supported by the general revenues of the federal government. Ironically-but perhaps in keeping with the entire process that produced the BBA-this "transfer" of some home health costs from Part A to Part B had been proposed by the Republican leadership in 1995 and 1996, but was opposed by them in 1997.
The provisions that have caused the most concern in the home care community since the BBA was enacted, on the other hand, were largely uncontroversial within the legislative process, and indeed emerged to a considerable degree from a cooperative partnership between legislative staff of both parties, representatives of the executive branch, and representatives of the industry itself. The Interim Payment System, the rapid movement to prospective payment, the tightening of requirements for agencies, and the disincentives for hospital ownership of home care agencies were all the result of protracted discussion, interchange, and even some agreement.
THE BBA AND ITS EFFECTS
It is thus fair to say that while everyone involved in the process expected the BBA to have a major impact on home health care, no one anticipated how dramatic those effects would be. Indeed, to this day the magnitude of some of the effects remains less than fully explained.
In the first year after the enactment of the BBA, Medicare home care utilization actually fell, by roughly one-third, an extraordinary and unanticipated effect (although, as has been noted by the Medicare Payment Advisory Commission and others, total use in 1998 still exceeded, on a per-beneficiary basis, total utilization in 1994; Medicare Payment Advisory Commission, 2000). Consistent with the components of the previous increases, about half this reduction was attributed to a decrease in the number of beneficiaries served, and half to a decline in the number of visits per case. The Interim Payment System created by the BBA, which established a partial per-case cap on payments to home health agencies (and, in so doing, anticipated the per-case payment approach of the Prospective Payment System that was implemented two years after the BBA), presumably providing a disincentive for agencies to accept more complex, potentially longer-stay cases.
The reduction in the volume of Medicare-paid home health services after the enactment of the BBA was accompanied by a striking reduction in the number of agencies participating in the program. Between August 1997, when the BBA was signed into law, and the end of 1998, almost 15% of Medicare home health agencies closed-almost 1,500 agencies. Overwhelmingly, these providers were small, for-profit, recently established organizations, which collectively had provided only a tiny fraction of all Medicare home care services (General Accounting Office, 1999). But the effects of the closings exceeded their actual impact on the delivery of services, as the trade associations representing the home health agencies, eager to make their case for financial relief from some of the BBA provisions, publicized the closings aggressively, thus no doubt contributing to the atmosphere of crisis and anxiety experienced even by those in perfectly stable, successful agencies. These fears were further fueled by the highly visible bankruptcies of a number of publicly traded corporations in the long-term-care business (which, with a few exceptions, had limited investments in home care itself), which were affected by parallel BBA reductions in payments for skilled nursing facilities to which highly leveraged firms were unable to adequately adjust. And finally, the aggressive antifraud and abuse efforts of the Department of Health and Human Services Inspector General and the Department of Justice, which gave highest prioirty to home care in 1997 and 1998, culminated in several large and highly visible prosecutions in 1998 and 1999-although the amount of actual fraud ever uncovered in the Medicare home care program remains relatively small when compared to the amount of investigative resources devoted to the area (Stone).
A variety of studies have sought to document adverse impacts on Medicare beneficiaries as a result of the BBA policy changes and their effects on agencies; so far, no one has been able to demonstrate quantitatively significant effects, although the number of instances in which potential patients were turned away by agencies which would have taken them pre-BBA, or in which hospital discharge planners experienced greater difficulty finding an appropriate home care provider, or in which services to particular beneficiaries were discontinued prematurely, were obviously too numerous to qualify as merely anecdotal. But it is particularly hard to demonstrate significant adverse effects for beneficiaries because we still don't have generally agreed upon measures of who should be getting services, what services they should be getting, and what outcomes we can expect.
Most of the home health agencies that have closed since the enactment of the BBA relied heavily on per diem or contract professionals, and most were located in large metropolitan areas, so it is likely-especially in a period of tight labor markets for nurses and other health professionals-that not only are most Medicare beneficiaries who need home health care still receiving it, but they are receiving it from essentially the same professionals and paraprofessionals, if not the same agencies, who would have provided it prior to the BBA The extent to which the content of those services has changed remains, however, largely unknown.
SIDEWAYS TOWARD THE FUTURE
Underlying the new prospective payment system for Medicare home care services, which has been in effect now for just a few months, is a relatively coherent strategy that seeks to integrate systematic patient assessment, care planning, quality monitoring, reimbursement, and data collection. The hub of this strategy is a uniform patient assessment and data collection tool- OASIS. In principle, and in theory, the accumulation of OASIS information over time should permit not only the availability of far better and more timely information about what is actually going on throughout the country in the provision of Medicare home care services, but also about the development of statistically robust descriptions of who is actually receiving home care services, what services they are receiving (or at least what services they need), and how, in some limited ways, those services are contributing or not contributing to the outcomes of care.
Three things have to occur for this strategy to be successful over time. First, the exceedingly complex and resource- intensive mechanics of the whole OASIS system must be made to work as smoothly and cost effectively as possible, which will require not only further investments in automation, systems refinement, and staff training, but also continuing emphasis in HCFA, the fiscal intermediaries, and the agencies themselves on supporting and implementing system improvements and simplifications.
Second, government officials and the provider community will need to work together to create a climate which once existed but now appears to have largely disappeared, in which government agencies, provider organizations, the academic and professional communities, and beneficiary groups can work together in a truly collaborative and non-adversarial way to understand what the data are really saying about what's going on out there in the homes of Medicare beneficiaries throughout the country, what the unmet needs of clients really may be, and how those needs might be better met.
Perhaps most important, the home care community itself must mobilize-with support from the academic, educational, and philanthropic communities-to utilize newly available data and its own experience and professional expertise to codify, for the first time, a set of empirically based and intellectually coherent principles that can connect patient and family characteristics, clinical assessments, professional and paraprofessional competencies, and medical and nursing judgment in some fashion that could be described and monitored in the ways needed by large and distant public insurance programs. While there continues to be widespread public, and therefore political, support for providing services for frail, medically compromised older people in their homes, such support can produce, at best, another upturn in a perpetual cycle of boom and bust unless it is supported by a coherent and defensible intellectual infrastructure that can give public policymakers some comfort in that they know what they will be buying, from whom, and on whose behalf.
CONCLUSION: THE STORM BEFORE THE CALM BEFORE THE STORM
It undoubtedly comes as scant comfort to those who have experienced first-hand in recent years the confusion, uncertainty, anxiety, and financial stress triggered by the BBA changes to Medicare home care policy, and the simultaneous, parallel activities of the fraud and abuse police, but in a historical sense the halcyon days of the early 1990s were in fact the exceptional time in the evolution of home health services and Medicare policy, following directly the similarly confusing, stressful, and financially difficult 1980s. And while the relatively smooth implementation of the home care prospective payment system, along with the modest financial relief for home care agencies provided by the Balanced Budget Refinement Act of 1999 and the Budget Improvement Act of 2000, may promise a period of relative stability and tranquillity, if not yet of prosperity, it would be unwise to assume that such a period will last long. The underlying problems that generate periodic episodes of chaos and confusion have not been resolved. Indeed, like a great geological fault along which two massive tectonic plates collide, periodically triggering earthquakes when slippage occurs, the fundamental source of tension in home care policy remains and the periodic earthquakes and aftershocks portend still further upheaval.
One force is the continuing, inexorable growth in demand for home care services, as the population continues to age, as developments in medical technology encourage ever shorter hospital stays and improve the capability to manage complex illnesses in the home, as family and other informal caregivers become ever more stressed, and as consumer preference plays an ever larger role in decision making about health care services. Pushing back from the other direction is the absolute requirement felt by custodians of public funds for predictability, transparency, and accountability in the services they provide, reinforced by the explicit anxiety that, in the absence of firm and well-supported rules and criteria, the potential demand for publicly funded home care services might be infinite.
The only thing that can prevent future earthquakes of ever escalating magnitude is a new conceptual and intellectual model that will put home care on a firmer empirical and professional footing, opening up the mysteries of what really occurs in interactions between home care clients and care providers in the best home care situations to external observation, measurement, and understanding. In short-although perhaps to put the matter a bit grandiosely-we need a science of home care around which we can wrap a sensible set of public policies.
One thing is certain: science will not be developed by or within the public sector, although public dollars and the participation of all sorts of public agencies could contribute mightily to the timely development of such a science. But only the home care community and its allies in the academic and professional communities can take the initiative and do the work that will eventually produce some longer-term clarity, direction, and sense of purpose. Only you can prevent future earthquakes.
[Sidebar]
. . . the continuing growth in the population of frail elderly people with limited financial means in need of long-term-care services left a considerable reservoir of unmet need in many communities.
[Sidebar]
. . . despite the enormous growth and increased sophistication of home care for the elderly over the last three decades, we still lack broadly-accepted professional consensus about the criteria to determine who should receive formal home care services, what services they should receive, and how long they should receive them . . .
[Sidebar]
The Balanced Budget Act of 1997 was the culmination of a protracted and remarkably intense political process . . .
[Sidebar]
. . . it is particularly hard to demonstrate significant adverse effects for beneficiaries because we still don't have generally agreed upon measures of who should be getting services, what services they should be getting, and what outcomes we can expect.
[Sidebar]
. . . we need a science of home care around which we can wrap a sensible set of public policies.
[Reference]
REFERENCES
Health care financing review. (1998). Statistical supplement.
Medicare Payment Advisory Committee. (2000, June). Report to the Congress: Selected Medicare issues. Washington, DC.
Office of the Inspector General, U.S. Department of Health and Human Services. (1997, July). Results of the Operation Restore Trust audit of Medicare home health services in California, Illinois, New York, and Texas. Washington, DC: Author.
Prospective Payment Assessment Commission. (1997, June). Medicare and the American health care system: Report to the Congress. Washington, DC.
Stone, D. (2000). Reframing Home Health Care Policy. Cambridge, MA: Radcliffe Public Policy Center.
U.S. Congress, General Accounting Office. (1999, May). Medicare home health agencies: Closures continue, with little evidence beneficiary access is impaired. Washington, DC: Author.
[Author Affiliation]
Bruce C. Vladeck, PhD
[Author Affiliation]
Bruce C. Vladeck, PhD, is Director of the Institute for Medicare Practice and Professor of Health Policy and Geriatrics at Mount Sinai School of Medicine, and Senior Vice President for Policy at Mount Sinai NYU Health, in New York, NY.
Acknowledgment. An earlier version of this paper was presented at the annual PRIDE Institute Conference in New York on October 19, 2000. The assistance of the PRIDE Institute and of Dr. Eliot Fishman of the Institute for Medicare Practice is gratefully acknowledged.
Offprints. Requests for offprints should be directed to:
Bruce C. Valadeck, PhD
Mount Sinai Hospital
1200 Fifth Avenue, Suite 2A, Box 1062
New York, NY 10029.
