Beginning in October 2000, HHAs will be paid under the PPS. An agency will receive a single payment for each 60-day episode of care for a Medicare beneficiary, regardless of the services actually delivered during the period.There is no limit on the number of episodes a beneficiary may receive. The drop in spending reflected a decrease in home health service use, both in the number of beneficiaries using home health care and the number of visits provided to each user. The average number of visits per user decreased for all visit types, although the amount of the decline varied significantly. 2). In our previous work on agency closures, we found that the caseload of agencies that had stopped serving Medicare beneficiaries included patients who were ineligible for Medicare home health care.In a study of four states, HHS’ Office of Inspector General found that improper or highly questionable home health services dropped from 40 percent of the total in 1995 to 19 percent of services in 1998.In the MedPAC survey, 77 percent of agencies reported an increased reluctance on the part of physicians to refer Medicare patients for services. Beneficiaries, Providers, and Areas With Highest Service Use Experienced Largest Declines

The historically wide variation in home health service use across beneficiaries, types of providers, and geographic areas has narrowed substantially because of disproportionate declines in utilization among the highest users in these categories. 3). We found similar patterns of changes in utilization across agency ownership categories (see fig. Despite Larger Declines in High-Use States, Wide Variation Among States Persists

The wide range of utilization among HHAs is likewise seen across states, as are the substantial changes in use over time. Fewer Rural Home Health Users, but Visits per Patient Remained Higher Than for Urban Users

In 1999, 75 out of 1,000 Medicare beneficiaries in rural areas received home health services, compared with 82 beneficiaries per 1,000 who lived in urban areas.The number of home health users in rural areas declined more than in urban areas between 1996 and 1999, although the number of visits rural users received remained higher (see table 4). HHA Response to PPS May Cause Some Providers to be Overpaid and Increase Program Spending

In the past, home health service provision has fluctuated in response to changes in Medicare’s payment and coverage policies. HHA behavior could result in substantial overpayments relative to the level of services actually delivered and huge increases in Medicare home health spending. PPS Payment Rates May Allow Some Agencies to Increase Visits and May Be Excessive for Others

The PPS will use payment rates based on 1998 home health spending and utilization data.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on Medicare home health care's recent declines in spending, focusing on: (1) the declines in service use underlying the changes in spending; (2) the extent of the changes in use across beneficiaries, home health agencies (HHA), and locations; and (3) identify any implications these new patterns of home health use have for the impact of the prospective payment system (PPS).

What GAO Found

GAO noted that: (1) the 48-percent reduction in Medicare home health care spending following the Balanced Budget Act (BBA) of 1997 was due to sharp declines in both the numbers of users and services used; (2) the number of Medicare beneficiaries receiving home health services fell by 22 percent; (3) during the same period, the average number of home health visits received by each user went down 44 percent; (4) changes in home health care varied across agencies and types of users as well; (5) in nearly all instances, declines were greatest for the types of agencies that had provided and the patients who had used the most services in 1996; (6) there was a similar pattern in the drop in usage across states; (7) states that had the highest levels of service use in 1996 had larger declines than states where beneficiaries received fewer service; (8) declines in rural areas were larger than in urban areas ewer; (9) the recent changes in home health utilization occurred at least in part in response to changes in Medicare's payment policies mandated by the BBA; (10) because the new PPS payment rates are based on the historically high utilization in 1998, even after adjusting for projected declines in utilization, they likely will be generous compared with current use patterns; (11) for this reason, home health agency responses to the PPS could result in overpayments relative to services provided while simultaneously raising Medicare spending; (12) under the PPS, Medicare will make a single payment for each 60-day episode of home health care; (13) the PPS will give agencies an incentive to increase the episodes of care they provide; and (14) this, in turn, could cause total Medicare home health spending to rise.