The combination of these changes has had a dramatic effect on utilization of the home health benefit in the 1990s, both in terms of the number of beneficiaries receiving services and in the extent of these services. (The appendix contains a figure that shows growth in home health expenditures in relation to the legislative and policy changes.) The number of beneficiaries receiving home health care has more than doubled in recent years, from 1.7 million in 1989 to about 3.9 million in 1996. Interim Changes to Cost Reimbursement

To gain some measure of control over payments immediately, the BBA made some significant changes to the cost-based reimbursement system used for home health care while HCFA is developing a PPS for the longer term. In addition, the BBA added a limit on the average per-beneficiary payment received during a year. Such a system also gives agencies an incentive to increase their caseloads, perhaps with patients who do not meet Medicare’s requirements for the benefit. Safeguards Against Fraud and Abuse Still Needed

A PPS for home health should enable Medicare to give agencies increased incentives to control costs and to slow the growth in program payments. New Anti-Fraud-And-Abuse Provisions and Initiatives

The Congress and the administration recently have taken actions to combat fraud and abuse in the provision of and payment for Medicare home health services. Finally, BBA authorizes HCFA to establish normative guidelines for the frequency and duration of home health services and to deny payment in cases exceeding those guidelines. For home health care, the home health agency usually develops the plan of care and is responsible for monitoring the care provided and ensuring that care is necessary and of adequate quality. HHS is expected to implement the program safeguards mandated by the BBA, such as implementing the requirement for home health agencies to post at least a $50,000 surety bond before they are certified and promulgating a rule requiring new agencies to have enough funds on hand to operate for the first 3 to 6 months. Medicare: Home Health Cost Growth and Administration’s Proposal for Prospective Payment (GAO/T-HEHS-97-92, Mar. 4, 1997).
Why GAO Did This Study

GAO discussed how the Balanced Budget Act of 1997 (BBA) addressed the issues of rapid cost growth in Medicare's home health benefit, focusing on: (1) the reasons for the rapid growth of Medicare home health care costs in the 1990s; (2) the interim changes in the BBA to Medicare's current payment system; (3) issues related to implementing the BBA's requirement to establish a prospective payment system (PPS) for home health care; and (4) the status of efforts by Congress and the administration to strengthen program safeguards to combat fraud and abuse in home health services.

What GAO Found

GAO noted that: (1) changes in law and program guidelines have led to rapid growth in the number of beneficiaries using home health care and in the average number of visits per user; (2) in addition, more patients now receive home health services for longer periods of time; (3) these changes have not only resulted in accelerating cost but also marked a shift from an acute-care, short-term benefit toward a more chronic-care, longer-benefit; (4) the recently enacted BBA included a number of provisions designed to slow the growth in home health expenditures; (5) these include tightening payment limits immediately, requiring a PPS beginning in fiscal year 2000, prohibiting certain abusive billing practices, strengthening participation requirements for home health agencies, and authorizing the Secretary of Health and Human Services to develop normative guidelines for the frequency and duration of home health services; (6) all of these provisions should help control Medicare costs; (7) however, the Health Care Financing Administration (HCFA), the agency responsible for administering Medicare, has considerable discretion in implementing the law which, in turn, means the agency has much work to do within a limited time period; and (8) HCFA's actions, both in designing a PPS and in implementing enhanced program controls to assure that unscrupulous providers cannot readily game the system, will determine to large extent how successful the legislation will be in curbing past abusive billing practices and slowing the rapid growth in spending for this benefit.