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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