GAO Report Finds Medicare Overpaid Home Health Providers in 2001; Urges Congress Keep Planned Payment Cuts
Congress should consider allowing a scheduled 15% cut in Medicare payments to home health providers to proceed because the federal government is overpaying the industry, according to a report released yesterday by the General Accounting Office. The report comes as House Republicans are drafting a Medicare reform package that calls for eliminating the cut, scheduled to take effect in October, the AP/Las Vegas Sun reports. The study found that in the first six months of 2001, Medicare payments to home health providers on average exceeded the estimated cost of care provided by about 35% (AP/Las Vegas Sun, 5/7). The GAO also recommended that Medicare implement a risk-sharing program of financial gains and losses between Medicare and home health agencies. Under the current prospective payment system, implemented in October 2000 and designed to make home health agencies operate more efficiently, agencies are paid a fixed amount of money for providing 60 days of care to a beneficiary. The report states that a "single payment to cover all services provided during a 60-day episode of care, combined with the lack of standards for what constitutes necessary or appropriate home health care, leaves beneficiaries vulnerable to underservice, Medicare vulnerable to future overpayments and [home health agencies] with a disproportionate number of beneficiaries with extensive needs vulnerable to underpayments" (GAO, "Medicare Health Care: Payments to Home Health Agencies Are Considerably Higher than Costs," May 2002).
CMS Administrator Tom Scully said that his agency needs more data before making a recommendation on the payment cut. "Without that data, it cannot be known with certainty what it costs home health agencies to render the services provided," he wrote in response to the GAO report. The American Association for Homecare issued a statement saying that the GAO used cost data from 1997 to come to its conclusions. "We are disappointed that GAO would issue a report that does not reflect the industry's true current financial standing and that it uses data that do not reflect the true current costs of Medicare home health," Tom Connaughton, the association's president, said (AP/Las Vegas Sun, 5/7). The full GAO report, along with Scully's response, is available online. Note: You will need Adobe Acrobat to view the report.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.