Home Health Care Costs Higher than Expected

Published June 1, 2009

Home health care costs for the elderly have been far greater than projected in the federal budget, according to a report by the Medicare Payment Advisory Commission.

The report found home health care agencies were paid more than 16 percent above the expected cost of services between 2002 and 2007. It estimates the federal government will pay 12 percent more than the expected cost of providing services this year.

Government Driving Up Costs

“MedPac is always trying to reduce Medicare reimbursement for nursing homes and home health agencies,” noted Stephen Moses, president of the Center for Long-Term Care Reform. “The key issue is that both businesses depend on generous Medicare reimbursement to offset losses from Medicaid on the majority of their patients.”

The nonpartisan Government Accountability Office blames fraud and exploitation of the system by home health care facilities for some of the inflated costs.

“Medicare is rearranging the deck chairs on the proverbial Titanic,” warned Dr. Thomas W. LaGrelius of Skypark Preferred Family Care. “A huge catastrophe looms and seems unavoidable while the commission adjusts fund distribution and incentives on a playing surface that will soon be entirely submerged.”

“The government is once again at the drawing board trying to find a way to ‘move’ health care into another environment by taking profit away from a successful business,” said Marcy Zwelling-Aamot, MD, FACEP, of California-based Choice Care. “Where to next? A perch in a tree? Perhaps another universe where our patients might regain the liberty of calling the shots on their own life and death?”

‘Approaching Critical Mass’

“The LTC provider industry has fought off proposed cuts in the past,” noted Moses, “but with Medicare facing an $86 trillion infinite-horizon unfunded liability, it’s doubtful they’ll hold back MedPac’s recommended reductions much longer.

“The LTC delivery and financing system is approaching critical mass,” Moses warned. “I’m predicting big changes in three to five years, much sooner that I was saying even one year ago.”

That might not be such a bad thing, LaGrelius said. “A whole new approach is needed. We have made a fundamental mistake with insurance. Insurance is a method of spreading the risk of a rare and undesirable but very expensive and unlikely event over many people, most of whom will never suffer the event. Insurance works well in such a setting. It fails in any other setting.

“If Medicare is ever to recover from its present cost spiral into destruction it must stop insuring uninsurable events,” LaGrelius noted. “Primary care is an uninsurable event. Attempting to insure primary care is the root cause of our problem.”

The Obama administration’s budget calls for a $37 billion cut in total home health care expenditures over the next 10 years.

Aricka Flowers ([email protected]) writes from Chicago. Diane Bast, executive editor at The Heartland Institute, contributed to this report.

For more information …

“Report to the Congress: Medicare Payment Policy,” Medicare Payment Advisory Commission: http://www.medpac.gov/documents/Mar09_March%20report%20testimony_WM%20FINAL.pdf

Center for Long-Term Care Reform, Inc: http://www.centerltc.com/

Choice Care: http://www.z-doc.com/

Skypark Preferred Family Care: http://www.skyparkpfc.com/index.htm

Society for Innovative Medical Practice Design: http://www.simpd.org/