Home Health & Hospice Week

CBO offers Congress cost-cutting options.

The odds appear to be stacking up against home health agencies in this year's budget negotiations.
 
First the Medicare Payment Advisory Commission voted to recommend a one-year home health agency rate freeze to Congress (see Eli's HCW, Vol. XIV, No. 2, p. 10). Now the Congressional Budget Office has offered up a four-year rate freeze as a cost-cutting option for the 2006 budget. The National Association for Home Care & Hospice expects the report to influence budget deliberations, it says.
 
The CBO report "presents options for altering federal spending" and "aims to help policymakers in their annual tasks of making budgetary choices," it says.
 
CBO justifies the rate freeze by noting HHAs' average Medicare profit margin of 17 percent in 2004. The freeze would bring that margin closer to 10 percent by 2009, CBO claims.
 
The freeze would cut $240 million from home care spending in 2006 and $6.3 billion over five years, the office estimates.

Copay Turns Up Like Bad Penny

CBO also proposes a home health services copayment equal to 10 percent of each episode's cost. Even though Medicare home health spending dropped in the late 1990s, CBO projects home health costs to grow rapidly over the next 10 years. A copay would curb that growth by encouraging beneficiaries to be "cost-conscious" in using home care services, the agency maintains.
 
A 10 percent copay would cut home health spending by $1.5 billion in 2006 and $11.8 billion over five years, the office estimates.

Proposals Carry Serious Drawbacks

"The threat of a freeze and/or copays is real, given the overall budget picture," warns William Dombi, vice president for law with NAHC's Center for Health Care Law.
 
But there are a host of problems with these proposals, NAHC argues. For one, the savings are inflated because CBO has used outdated profit margin calculations for future year, the association maintains.
 
Even CBO admits there are flaws with the options. A rate freeze could reduce beneficiaries' access to care by forcing HHA closures, and could force agencies to reduce the level or quality of care provided, the office acknowledges.
 
And a copay could decrease services to beneficiaries, increase Medicaid home care costs, discourage beneficiaries from electing cost-effective care settings (i.e., home care versus nursing home or hospital), and could increase HHA administrative costs, the CBO report admits.

Will Congress Consider a Medicare Bill?

Industry reps hope lawmakers never even get as far as weighing the pros and cons. "We hope the Congress has no appetite to deal with Medicare," Dombi tells Eli. A Medicare bill could invite all sorts of proposals, including tinkering with the upcoming prescription drug benefit.
 
Even if Congress does take up the issue, the CBO suggested similar measures two years ago and the industry defeated them, NAHC notes.
 
Wait, there's more: Other CBO proposals that could affect home care providers include raising the Medicare eligibility age to 67 and imposing a $500 copayment and 20 percent coinsurance on all Medicare services, including Parts A and B. 
 
Editor's Note: The CBO report is at www.cbo.gov/showdoc.cfm?index=6075&sequence=0.