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First, I would like to introduce the individuals accompanying me -representatives of the Department. On my right, Mr. Peter Franklin, Special Assistant to the Secretary; on my left, Dr. Claire Ryder, Director, Division of Policy Development, Office of Nursing Home Affairs; to the left of her, Mr. Gerald Sheinbach, Assistant Bureau Director, Division of State Operations, Bureau of Health Insurance, Social Security Administration.

STATEMENT OF DR. KEITH WEIKEL, COMMISSIONER, MEDICAL SERVICES ADMINISTRATION, DEPARTMENT OF HEALTH, EDU. CATION, AND WELFARE; ACCOMPANIED BY PETER FRANKLIN, SPECIAL ASSISTANT TO THE SECRETARY; DR. CLAIRE RYDER, DIRECTOR, DIVISION OF POLICY DEVELOPMENT, OFFICE OF NURSING HOME AFFAIRS; AND GERALD SHEINBACH, ASSISTANT BUREAU DIRECTOR, DIVISION OF STATE OPERATIONS, BUREAU OF HEALTH INSURANCE, SOCIAL SECURITY ADMINISTRATION

Senator Moss. We welcome you all to the subcommittees.

Dr. WEIKEL. Mr. Chairman, I am pleased to appear before these two distinguished committees to testify on HEW's proposed home health care regulations, which would permit proprietary agencies to participate in the medicaid program. I am looking forward to discussing these regulations with you and to hearing your views, for the Department is vitally interested in considering a variety of opinions before the revised final regulations are published. As you know, the proposed regulations were published for comment in the Federal Register on August 21. While the 30-day comment period was scheduled to close September 20, because of the quantity and quality of comments we were receiving, the period was extended to October 7, to give as many different individuals and organizations as possible a chance to comment. So far, we have received over 1,000 comments, which we are analyzing at the present time.

In addition, I have issued invitations to a wide variety of representative national and State professional and provider organizations and consumer groups, to discuss first hand all of the issues and questions related to the proposed amendments to these regulations, in order to achieve the most effective development of the final regulations.

I also welcome this hearing as an opportunity to discuss the proposed regulations with you and perhaps to clear up some misconceptions as to how they would work in practice.

LONG-TERM CARE-38 PERCENT OF EXPENDITURES

The medicaid program devotes over $5 billion-or 38 percent of its expenditures-to the area of long-term care. Almost all of these funds are for institutional care. Over 1 million medicaid recipients spent some time this year in a nursing home, mental or tuberculosis hospital as a long-term care patient.

Many studies, including the GAO report to the Congress on home health care benefits under medicare and medicaid in July 1974, have

pointed to the underutilization of noninstitutional services. While acknowledging that hospital and nursing home care are necessary and essential elements of a continuum of care, so, too, are noninstitutional services for those individuals who no longer require institutional care or, more importantly, for those who can be maintained in their own homes, thus delaying or averting the need for institutional care in the future.

The excessive utilization of institutional care has been partly attributed, as well, to the fact that medicare and medicaid reimbursement has been more readily available for institutional services than for home health care. In addition, alternatives to institutional care did not exist in sufficient quantity or comprehensiveness, and when they did, their Federal reimbursement was restricted to skilled care over a limited period of time.

One alternative to institutionalization is a viable home care program. However, for some time it has been recognized that a clarification of existing medicaid home health regulations was necessary if the legislative intent of home health services under medicaid is to be achieved. Although home health care is a mandatory service, there are indications that many States have not adequately implemented it as a mechanism of noninstitutional care. For instance, reports from 45 States show that 7 had fewer than 100 recipients of such services during fiscal year 1974, and 3 had fewer than 10. This is obviously inadequate in our opinion.

BASIC ISSUES MISINTERPRETED

Before going into the details of the proposed regulatory changes, I would like to address two general, but basic, issues which are readily misinterpreted.

First, these regulatory changes are, in a sense, clarification and definition of the services that were mandated by Congress in the Social Security Act Amendments of 1967. The law requiring States to provide home health care under medicaid does not limit either the source or type of home health services as in medicare. In fact, Congress made it clear that medicaid should direct its attention to providing reimbursement for long-term care. Because existing regulations are either not clear or were too closely patterned after medicare conditions of participation, we must now define more clearly what services medicaid programs can reimburse, if these services are to reach all individuals in need of home care. These proposed regulations, therefore, are considered to be necessary to fully implement the law which was passed by Congress.

A second general concern expressed is that through these regulations the Department is usurping States rights to establish the dimensions of their medicaid program. The example cited is that these regulations would require States to include proprietary agencies as medicaid providers. In fact, the States, or even the medicaid agencies themselves, may specify that such agencies are excluded from participation and at least one State has done so. In addition to meeting Federal criteria for reimbursement, States may also require such agencies to be licensed by the State. The licensing standards, which are entirely a State responsibility may, and have been, set at a higher

level than Federal regulations. This is in keeping with the medicaid statute a State-administered program which leaves medicaid participation itself up to the States, as well as many choices on extent and type of services.

It should also be noted that similar considerations have resulted in suggested legislative and regulatory changes in medicare. The proposed regulations, published in the Federal Register on June 9, 1975. would permit nonprofit and official agencies to contract to buy additional services from a proprietary agency. Comments, which generally are favorable to the proposal, are being analyzed at the present time as a final regulation is being prepared. In addition, à legislative change in medicare has been recommended by the Department which would repeal the requirement that proprietary agencies be licensed by the States before they can participate. These two changes would make the medicare home health agency requirements generally consistent with those proposed under medicaid.

As these changes develop, both medicare and medicaid authorities are carefully reviewing them to assure that Federal requirements for certification and reimbursement do not work at cross-purposes in the two programs and that the States and agencies avoid unnecessary duplication of effort and overlapping responsibilities.

REPORT IDENTIFIES MAJOR OBSTACLES

The GAO report identified three major obstacles in medicaid programs to full utilization and support of home health services: services covered varied from State to State; in some States, the patients' eligibility was more restrictive than the legislation intended; and the States payment rates were not adequate. The proposed regulations particularly address the first two deterrents, and while Social and Rehabilitation Service does not have the authority to require States to adopt a certain level of payment for home health care, it has emphasized to them the importance of realistic payment rates. A recent review of medicaid payment methods shows that nearly one-half of the States already pay for home health services on the same basis as medicare, that is, at reasonable costs or charges, whichever is the lesser.

With respect to the home care services to be covered, existing medicaid regulations have been interpreted by some States as requiring that they provide only one rather than all three mandatory components of home health care services: intermittent or part-time nursing care, services of a home health aide, or medical supplies and equipment. Because of this, States may not be providing the full extent of home health services which are available to eligible patients. Under present legislation, however, the scope and extent of home health care services is left to the States.

Another inhibiting factor affecting expansion of the medicaid home health benefit has been the use of the presently limited medicare definition of a home health agency. Under current medicaid regulations, a home health agency is defined as one which is a participating medicare provider, or, although not a participating medicare provider, is qualified to participate in medicare. Medicare legislation and regulations state that a home health agency is one which provides

skilled nursing services and at least one of the following services: Physical, speech, or occupational therapy, medical social services, or home health aide services. Agencies, such as visiting nurse associations and county public health nursing services, which do not provide a second service beyond nursing, have therefore not been able to participate. It is estimated that there are 500 to 700 such agencies throughout the Nation, primarily in rural areas, which provide the valuable service of nursing care of the sick at home. These agencies, now unable to receive Federal reimbursement under medicare or medicaid, could, with adequate support, be built upon and encouraged toward more comprehensive services through the proposed new regulations.

The new regulations also address the limitation that has resulted because medicaid adopted the medicare restriction on participation of proprietary agencies, unless licensed by State law. There is no comparable restriction against proprietary agencies in present Federal regulations with respect to other medicaid services. Thus, the proposed regulation would remove the discrimination in this field which is based on the motive for existence of a class of providers. Extension of accessibility to profitmaking agencies may improve the possibility of restraining costs of home health care services, both through their economic incentives to be efficient and through the competition engendered by the increased number of participants.

ONLY 11 STATES HAVE LICENSURE LAWS

Although 11 States have licensure laws, and therefore proprietary agencies are eligible for medicare certification once licensed in these States, only 43 such agencies are thus certified, principally in two States, each with 20 agencies-California and Louisiana.

This small number of proprietary home health agencies is, at present, the extent to which participation in medicaid can be measured. Other proprietary agencies, already providing needed services in communities to private paying patients, have been precluded from reimbursement by medicare and medicaid. Although precluded also from even selling their services to the nonprofit or official agency, until recently many have good existing relationships with voluntary nonprofit agencies. Even large voluntary and official home health agencies readily admit they are not meeting the total needs for home care in their urban communities. One visiting nurses association recently reported that it estimated it was reaching between onefourth and one-fifth of the patients discharged from the hospital needing home health care services. The same agency had no estimate of how well it was meeting the needs of those still in their own homes.

Expansion of existing home health agencies is, of course, highly desirable to meet these untouched needs. It is equally desirable to attract additional resources to the community, provided that these resources are not overlapping, provide quality care, and work in concert with other related agencies.

This, obviously, is easier said than done; but the Department is even now considering how overdevelopment of home health agencies can be avoided. One method being explored is the desirability of

including home health agencies under certificate-of-need requirements. We understand States such as Florida already have passed certificate-of-need legislation to cover home health agencies.

In the States without licensure laws for home health agencies, an unknown number of proprietary agencies, in order to participate in medicare, have incorporated and have been declared by the Internal Revenue Service to have a tax-exempt status. These agencies are often franchises of large, sometimes nationwide, organizations and are established specifically to avoid the restriction on participation in medicare. The agencies show no profits, however. Such agencies show no profit at the end of the year, often sometimes because of their higher administrative salaries, and more spacious, luxurious quarters, and this, in turn, is reflected in their cost data. If the proprietary agency has not chosen this route, they then operate within the community without the quality controls of State survey, certification and monitoring of services, which can be provided through the medicaid and medicare programs.

The legislative intent of title XVIII has resulted in the specification that patients require skilled services such as nursing, physical, or speech therapy, in order to be eligible for home health coverage. Medicaid, by contrast, was never intended to be restricted to home health services for patients who only require skilled care.

The absence of a secure source of reimbursement for such patients has affected the development and expansion of agencies which could serve these kinds of personal care needs at significantly less cost than institutional care. Obviously, there is need to clarify and improve the Federal regulations governing this service.

In recognition of these several needs, a revision of the medicaid regulation was drafted and published for the purpose of increasing the use of home care where such care is appropriate and determined by a physician to be necessary.

In summary, the proposed regulations:

PROPOSED REGULATIONS

First, clarify which home health services are required and which are optional with States. The States must provide nursing servicesRN or LPN as appropriate-home health aide services, and medical supplies, equipment, and appliances suitable for home use. The States may, at their option, provide physical, occupational, or speech therapy. Any service, whether required or optional, must first be found necessary by the patient's physician and must be included in a written plan of care developed by the physician and home health agency personnel, and reviewed by him as the patient's condition requires. This revision will assure that all States will reimburse a basic package, and at the same time encourage expansion of coverage of other optional services.

Second, clarify which recipients are eligible for services. Some States have limited home health care to those who need skilled care or those either leaving or about to enter institutions. No such limitation appears either in statute or regulation, and it should not, since many persons need some home care to maintain or recover their health in order to avoid institutionalization. They should receive home care before they reach the crisis point of institutionalization.

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