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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 tbe 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

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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

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care. An estimated 3 million people are going without needed home health services because few can qualify for "skilled nursing” care.

4. Individuals as providers: The HHAA opposes subcontracting by either Federal or State governments with individuals for the direct provision of home care services instead of contracting with agencies. The failure to train and supervise such individuals will result in poor care and abuse.

5. Right to choose intermediaries: The HHAA supports the right of providers to choose between having their claims processed by their designated intermediary or directly by the government through the Office of Direct Reimbursement (ODR). We strongly support legislation which will settle any remaining questions as to the right of providers to a choice and which will preserve ODR.

6. October 26 regulations on physicians serving on home health agency boards: The HHAA objects to the October 26 regulations published in the Federal Register which would bar physicians from certifying patients for Medicare when they have a substantial interest in a home health agency because the regulations appear to extend to physicians who serve on the board of directors of non-profit home health agencies and receive no compensation. This regulation is overboard and Congress should intervene with the Department of Health and Human

Services. 7. Removal of medicare waiver of liability provision: The President's January 31, 1983 budget proposal contains a recommendation that the Congress eliminate the waiver of provider liability provision which serves to protect hospitals, nursing homes and home health agencies who have, in good faith, provided Medicare services to individuals who, it is later learned, are ineligible. The Administration claims that $10 million can be saved in fiscal 1984 if this change is made in the law.

This proposal was advanced by the Administration last year and rejected by the Congress. Its enactment would serve to further undermine both public and provider confidence in the Medicare program. It would make accepting Medicare patients a kind of “Russian Roulette” at a time when more rather than less certainty and predictability is required. Given the vague application of constantly changing regulations, it is difficult for home health agencies to be 97.5 percent perfect in their de termination of eligibility. Removing this requirement would demand that they be 100 percent perfect in their determinations or suffer accordingly.

Mr. RINALDO. I would like to start out by asking Ms. Goldschmidt a question. You stated, and I would like to quote, that “there also is need for an independent monitoring system to insure that quality of care does not deteriorate because of the incentives to reduce expenditures. There is no evidence in New Jersey that the DRG system has had any negative impact on the quality of care.”

I am very concerned about the earlier discussion of yesterday's Star Ledger's story to the effect that New Jerseys hospitals are discharging patients prematurely. And what I would like to ask is a series of questions on that article. First of all, is the Department of Health aware of this particular problem? Second, have you studied the frequency of such premature discharges under the State DRG program? And maybe you had better answer those two first, and then I will move on.

Ms. GOLDSCHMIDT. To the first part of that, the Department of Health has heard anecdotal stories. We do not have any hard evidence to support those stories. As such, I have no way of knowing what the frequency of "early discharges” is.

I would like to make a comment about that article. First of all, these three examples that were cited in the article lead me to wonder if perhaps the discharge planning and practices of the hospital itself were not at fault.

Second, since I do not know the hospitals involved, I do not know if they were on DRG's at the time. Not all our hospitals were on last summer.

Third, we would certainly like hard evidence that this is occurring.

And fourth, we have utilization review organizations which are supposed to be monitoring us just to insure that detrimental discharge does not occur.

Mr. RINALDO. You do have that in place now?
Ms. GOLDSCHMIDT. Utilization review, yes.

Mr. RINALDO. And have they come up with any evidence whatsoever of premature discharges?

Ms. GOLDSCHMIDT. I have not seen any hard evidence.

Mr. RINALDO. Mrs. Livengood, since it was your agency that made these charges, the New Jersey Home Health Agency Assembly, would you care to comment on them? And if you could document them to the greatest extent possible.

Mrs. LIVENGOOD. The headline does not represent the context of the article, I do not think, because when I read ”Nurse organization accuses," I said, “What crazy group is that?” Then I read it and found out it was myself.

Within the body of the article it says that we are currently doing a survey to document whether or not these cases are frequent and extreme.

It very often happens, as in anything, that one or two extreme cases make it seem statewide. Therefore, we brought any kind of thing forward to the DRG system, we have a survey out now and are getting material in, case histories as well as numbers.

And I am not free to comment on that survey. It is far from complete. And I think the article does point that out. And I agree with Faith that there is not enough documentation to make the accusation.

In my testimony, however, I do say we have early discharge and too early discharge. I think that distinction has to be made. An early discharge is not something we are opposed to provided it is done in an orderly fashion with good discharge planning and all the equipment in place, and that there is a safe habitation to refer to. I think that is the difference. And the article talks about a lot of patients who were able to be taken care of. That is early. But it is the too early that we are documenting. We take care of very, very sick patients at home, much sicker than we did before cost containment.

Mr. RINALDO. Would you please submit for the record a copy of the survey when it is completed, so that our committee can look into this matter?

Mrs. LIVENGOOD. I would be very happy to. Mr. RINALDO. Thank you. Mrs. Somers, you mentioned that the 17 year history of medicare is positive. I want to quote what the 1981 trustees said. They said that "since its inception in 1965, the financial experience of the HI program has been unfavorable, in that the estimates of costs have repeatedly fallen short of projected actual experience." The trustees of the trust fund have reported that "on a long range basis, the program has been in deficit condition during 13 of the last 14 years." Do you agree with that assessment? It seems to be the facts.

Mrs. SOMERS. Yes. I have no quarrel with that. I am not familiar with the precise financial details but I agree on the unacceptable cost increases and the precarious position of the part A fund. But you have to set those negatives over against the positives—the in

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