July 12, 2011

Home Healthcare Co-Payment Could Increase Medicare Expenditures for Post-Acute and Inpatient Care by as much as $16B Over Ten Years, Drive Up Medicaid Costs by $2.5B

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(WASHINGTON) — Members of the home healthcare community are calling on Congress to avoid instituting co-payments as part of deficit reduction measures, especially in light of a new analysis available today that shows co-payments for home healthcare services could increase Medicare spending for inpatient hospital and post-acute care (PAC) treatment by up to $16.7 billion over ten years. The analysis, conducted by Avalere Health, LLC, estimates that implementation of a home health co-payment could increase Medicare hospital inpatient spending by $6 to 13 billion over ten years, based on historical increases in hospital admissions for patients whose plans required co-payments and a calculation of total inpatient stays for beneficiaries potentially affected by a co-payment (non-dual eligible home health users without Medigap coverage). Based on this methodology, increased admissions to institutional post-acute settings could account for an additional $1.6 to $3.7 billion cost increase over ten years. ”Home health co-payments were tried before, and they simply did not work,” said Billy Tauzin, former chairman of the House Energy & Commerce Committee and senior advisor to the Partnership for Quality Home Healthcare. “It is important to remember that Congress repealed a similar co-pay requirement in 1972 because of the burden it placed on seniors and the services it shifted to costly settings.” Nearly four out of five non dual-eligible home health beneficiaries have no secondary Medigap coverage and, consequently, would be personally responsible for the full copayment. More than half of these beneficiaries have incomes below $21,780 per year and experience a 25 percent greater rate of poverty than the typical Medicare beneficiary. The proposed copayment — $300 per 60-day episode — would be roughly equivalent to a typical senior’s monthly groceries. In addition to the increased costs to Medicare, research conducted by Dobson DaVanzo & Associates, LLC projects that a home health copayment could drive up Medicaid costs by as much as $2.4 billion over ten years, as Medicaid would cover co-payments for a portion of dual eligible individuals. A portion of this cost would be incurred by the state, while a portion is covered by the federal government. The Congressional Budget Office acknowledged this fact in its March 2011 report to Congress, in which it noted that a home health copayment “would result in increased spending by Medicaid.” As deficit reduction talks have intensified on Capitol Hill and with the implications on state budgets, state lawmakers are also weighing in on this issue. Governor Nathan Deal (R-GA), a former chairman of the House Energy & Commerce Committee’s Subcommittee on Health, authored a letter to Speaker John Boehner citing his concerns. “”¦I am confident such a copayment requirement would only shift thousands of low-income seniors out of home-based care into much more costly nursing homes and impose billions of dollars in additional Medicaid costs onto the states,” Deal wrote. “With the forthcoming debt ceiling debate, I believe my former colleagues in Congress have [an] opportunity to reduce the federal deficit the right way — by reducing the prevalence of fraud in the Medicare and Medicaid programs, not by imposing burdensome copayment requirements on innocent seniors.” The home health community is advocating a savings plan that will reduce Medicare costs through program integrity improvements rather than increased fees on seniors who require home healthcare services. The community has proposed The Skilled Home Healthcare Integrity and Program Savings (SHHIPS) Act, which Dobson DaVanzo & Associates, LLC and former CBO Director Douglas Holtz-Eakin have projected will save Medicare $22.9 billion over 10 years.