Your March 15 article on Medicare cuts ("Who will take biggest payment hit?" p. 2) misses the biggest victims of Medicare payment reforms: home health agencies and their Medicare patients. Recently released HFCA data show that Medicare payments to home health agencies plummeted by 16.9% between federal fiscal 1997 and 1998. Reimbursements dropped to $14.8 bil-lion from about $17.8 billion in just one year.
The steep decline in Medicare payments is the result of an interim payment system (IPS) that essentially caps reimbursement at the average cost of providing home health services to Medicare beneficiaries in 1994. In 1997 the average Medicare home health beneficiary received $5,234 in services. For 1998 the IPS established reimbursement caps that average $3,987.
The Congressional Budget Office had initially estimated that Medicare payments for home health services in 1998 under the IPS would be
$20 billion, an increase of 5.3% from 1997 (compared with an increase of 11.1% without the IPS). The actual outlays for home health in 1998 are fully 26% less than the CBO and HCFA anticipated. In New England, Medicare home health payments processed by Associated Hospital Service of Maine-the Medicare fiscal intermediary for most home health agencies in the region-dropped a full 35% from the fourth quarter of 1997 to the fourth quarter of 1998.
Because the IPS has no mechanism to adjust the payment cap to reflect care complexity, the new system penalizes agencies that provide care to Medicare beneficiaries who have complex medical needs. Agencies have a financial incentive to avoid these patients and in fact often must avoid them to remain financially viable. As a result, hospital stays for these patients are often longer than necessary because home health agencies can no longer afford to accept them. Home health agencies that had developed specialty programs to care for these complex-care patients were hardest hit by the IPS.
In the 18 months that the IPS has been in place, more than 10% of all Medicare-certified home health agencies in the country have been forced out of business. The vast majority of the remaining agencies have been severely crippled financially.
The financial devastation is compounded by another provision of the federal Balanced Budget Act of 1997-one that dramatically increased the proportion of Medicare home health claims that are reviewed for medical necessity before they are paid. Payment on claims selected for medical review are delayed by about 75 days on average. In addition, claims for subsequent service to that specific Medicare beneficiary are held up. As a result, the budget act has created severe cash flow problems for home health agencies, which have contributed to the bankruptcies of hundreds of agencies.
And the worst may be yet to come: The budget act calls for an additional 15% cut to Medicare home health payments when HCFA implements a prospective payment system for home health in October 2000. The home health industry is lobbying fiercely for changes to the IPS and the elimination of the additional 15% cut. But the home health industry has nowhere near the financial or political clout of hospitals and physicians. The end result is that home health agencies cannot provide the level of care needed by many Medicare beneficiaries. The ripple effect of this care gap hurts hospitals, physicians and-most especially-Medicare beneficiaries.
Home & Health Care Association of Massachusetts