Mr. RINALDO. Thank you. And now our final witness, Mrs. Livengood.

STATEMENT OF WINIFRED LIVENGOOD

Mrs. LIVENGOOD. I am Winifred Livengood, executive director of the Home Health Agency Assembly, which is located here in Princeton. This organization represents the 50 home health agencies licensed by New Jersey and certified to be medicare providers. They do have a long list of services which they give to patients in their home under the medicare program. They are also the only home health providers used by medicaid and Blue Cross of New Jersey. It is an honor for New Jersey to have this field hearing, Mr. Rinaldo and Mr. Smith, and we are pleased to be able to give this testimony.

Recognition of the value of home health care has been increasing in the past few years. Controlled expansion of home care can assist the Nation in its cost containment efforts and can help insure continued provision of quality care. Home care reinforces and supplements the care provided by family members and friends and encourages maximum independence of thought and functioning, as well as preservation of human dignity.

The prudent use of home care should be stimulated, not inhibited, by any steps taken in 1983 and the future, to meet the national deficits. Proper allocation of additional human and financial resources is imperative for essential expansion of home care services to meet the need. Expansion of home care raises a number of critical public policy issues. I will address some of these and the impediments towards the realization of a national policy in home care in the following remarks.

Prospective reimbursement. Reimbursement of hospital costs by DRG rates, as a method of controlling hospital costs, is the most important experiment in health care financing undertaken in the United States in recent years. With the probable use of DRG's as a rate-setting base for the medicare program, it is important to examine its effect in New Jersey. While recognizing the overriding importance of controlling hospital costs, it is also essential to keep in mind that hospital care is one part of a total health-care system and that changes in hospital cost reimbursements may effect parts of the health system in unanticipated ways.

The Home Health Assembly has observed that the DRG method of reimbursement has affected home health care in several important areas which should be considered in making a full evaluation of the benefits of the system.

In instituting the rate setting system in New Jersey, the State obtained a medicare waiver. Under this waiver, the HCFA cost limits on hospital-based home health agencies were removed. This permitted the hospital, under the chapter 83 regulations, to make allowance for the cost of indigent care and for the spread of hospital administrative costs onto the home health department.

This has produced allowable home health charges well above the HCFA medicare rate; $80 per nursing visit in one hospital home health agency as compared to the HCFA cap of $54. The average charge in New Jersey's freestanding agencies, which have a HCFA

medicare cap of $43, our average charge is $32. In effect, expenses incurred throughout the hospital setting have been spread onto home health costs.

For the home health providers as a whole, which is a mix of hospital based and freestanding home health agencies, the large differences in allowable charges creates a noncompetitive position for the hospital-based agency, and obviously it makes for more expensive home health care, if it is in a hospital-based agency.

We recommend that medicare not allow hospital administration costs to be spread onto the home health departments and hospitalbased home health agencies under the DRG or case mix reimbursement.

As the Federal proposal for DRG rate setting covers only medicare, there is no provision for nonreimbursible costs as there is in the New Jersey system. Thus costs for indigent or nonreimbursible care for both hospitals and home health agencies remains unresolved.

The DRG rate system, although the national program addresses only the medicare and that has its own set of problems, in New Jersey the all payers are under the DRG rates. This has operated as a disincentive to private insurers for home care coverage. Prior to the introduction of the DRG reimbursement, there was growing recognition among private insurers that home care should be encouraged as a cost-effective alternative to hospital care. Blue Cross and other private insurers were encouraging utilization by including home care coverage in their benefit packages and offering incentives such as 3-to-1 conversion for home care days versus hospital care days. For the DRG's, the incentive to reduce the hospital stay is gone, and home care becomes an add-on. The amount of reimbursement to the hospital for the DRG is the same, regardless of the length of stay, and any home care costs are an additional charge for the payor.

Spokesmen for the private insurance industry addressed this issue and despite their conviction that expanded use of home care can reduce the total cost of an episode of illness, the insurers said they were not interested in expanding the home health benefits with the DRG system in place.

The impact of this on both client and provider can mean reduced or no home care insurance, and it is imperative to have home health coverage if a prospective rate is used for hospitals.

Effect on the patient, there has been some previous testimony on this today. I hope to be able to clarify for you some of the things that have been said in the paper.

At the same time hospital administrators were quick to perceive that under DRG's, early discharge produces financial benefits for the hospital. There has been broad-based and dramatic testimony from home health agency directors that patients are being discharged from the hospital to home care in a more acutely ill condition. There is currently no data to document to the extent of this, but our agencies have cited some cases where the problem of the "revolving door syndrome", that is, early hospital readmission has taken place.

Home health perceives that as long as a patient is in a medically stable position, the care of the more acutely ill patient is not a

problem for home health agencies and is accepted as a rational and cost-effective plan of care. It is the precipitous discharge, inadequate discharge planning and frequent readmission to the hospital that caused us concern as to the quality of care.

At the present time we have no requirements for prospective reimbursement for home health agencies, although there are a few demonstration projects in the design stage in HCFA. Our agencies would welcome a demonstration in New Jersey to find a better way to reimburse our services. We need to use a yet to be designed system for cost control and for the fiscal health of the agencies.

Now, I will talk about public policy to encourage home health. Third party reimbursement policies have operated to discourage home health utilization from their inception. After 18 years, home health represents only 2 percent of the medicare budget. In a balanced health care system, home care should reflect a much larger share. We should reform the existing policies which limit reimbursement to acute skilled care only. A patient discharged from the hospital can receive reimbursement for nursing and other professional services only as long as he is home bound, literally cannot even go to the doctor's office in many instances, and the care is skilled, and the case usually lasts only 2 to 4 weeks.

There is no source of payment for continuing care after that 2 to 4 weeks or for monitoring the chronic condition. When home care is curtailed too soon, as is presently the case the patient's condition declines and he may well end up in a nursing home or back in a hospital.

Every Congress going back to the 92d has gone on record in favor of an adjustment in the priority of government funding which has favored placing medicare and medicaid patients in institutions. Despite the progress that has been made toward encouragement of home care, the primary impediment remains skilled nursing definitions and home bound definitions under the present law.

The bulk of the population have no insurance to pick up this discontinued medical and home health care. We recommend reimbursement for long term home care under medicare. We realize that the cost of such a program would require substantial sharing of costs on the part of the client. We would support an up-front deductible as the most straightforward and acceptable method of costsharing.

The time has come to consider longterm home health care as part of a health system. Nowhere is the fragmentation of the health care system more damaging and more counterproductive to national health goals than in medicare's artificial separation of chronic care from acute care.

Medical advances in recent decades make people live long. We have been through that. I will not repeat that now.

But a health care system which reimburses only for acute care passes up important opportunities to stabilize condition and introduce health promotion activities that would prevent decline and reappearance of the chronic condition.

Finally, I would like to put the last recommendation for health monitoring and maintenance. In addition to long term care for the severely disabled who are at home, we believe the health of those with less severe chronic disabilities could be maintained through

an organized program under medicare of health maintenance and monitoring.

The goals of such a program are the preservation of good health and the achievement of maximum functional independence. They provide early detection and early assessment, timely and appropriate medical intervention, self-care improvement and increased compliance with health and drug and prescriptions. And more effective use of community resources. Activities include health maintenance, monitoring our health assessment, screening, referral to the physician, greater utilization of other health providers besides the physician and greater use of community resources.

Observations made by providers of health maintenance programs which are currently being run in New Jersey indicate the clients remain independent longer. They have fewer incidents of acute illness and remain in their residences until the end. In housing sites in Union County where these programs have been carried out for 8 to 10 years, the turnover rate in the housing complex has been drastically reduced. There has been no institutionalization.

In summary, as we design a better system, we would, therefore, redirect the thrust of health funding, starting with health monitoring and maintenance, that is your primary entrance into the health system, as Anne said. By the way, we did not get together before this.

Through chronic care for known disabilities and finally to acute care when really needed, we are convinced that under such a balanced system, the health of the Nation's elderly would improve and the rate of growth of medical care costs would decline.

I will also attach my submission of some details of my feelings of what Ms. Davis said this morning on the proposals of the 19831984 budget. And I will make that a matter of record, but I will not take up the time this morning.

Mr. RINALDO. Yes. That will be included in the record.

Mrs. LIVENGOOD. They are quite detailed about waiver of liability and copayments and all of that.

Mr. RINALDO. Thank you, Mrs. Livengood.
[Material submitted by Mrs. Livengood follows:]

HHAA POSITIONS ON KEY Legislative/REGULATORY ISSUES

(By Winifred Livengood)

1. Medicare budget cuts: We oppose the proposed Medicare budget cuts which would require the elderly to pay greater amounts to participate in Medicare (Part B premiums) and to pay greater out-of-pocket costs (increased Part A and Part B coinsurance). We strongly oppose the proposed repeal of the waiver of provider liability provision which protects providers who, acting in good faith, render services to individuals they believe to be covered by Medicare when the facts turn out to be otherwise.

2. Coinsurance: We oppose the proposal requiring the elderly to pay a 20 percent coinsurance on durable medical equipment furnished by home health agencies under Part A of Medicare. Similarly, we oppose mandatory coinsurance in Medicaid. This will not save the government money but will actually result in increased costs. The State of Georgia recently abandoned Medicaid coinsurance, finding it cost them $1.10 for every $1.00 they collected.

3. Liberalizing medicare coverage: The HHAA believes the government should remove impediments which prevent greater utilization of home care. For example, we support the deletion or liberalization of the term "skilled nursing" which currently limits the number of beneficiaries who can qualify for home care under Medi