Medicare Home Health Care:

Payments to Home Health Agencies Are Considerably Higher than Costs

GAO-02-663: Published: May 6, 2002. Publicly Released: May 6, 2002.

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Alan Bruce Steinwald
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The Balanced Budget Act of 1997 significantly changed Medicare's home health care payments to home health agencies (HHAs). Under a prospective payment system (PPS), HHAs are paid a fixed amount, adjusted for beneficiary care needs, for providing up to 60 days of care---termed a "home health episode." The act also imposed new interim payment limits to moderate spending until the PPS could be implemented. Although PPS was designed to lower Medicare spending below what it was under the interim system, GAO found that Medicare's payments for full home health care episodes were 35 percent higher than estimated in the first six months of 2001. These disparities indicate that Medicare's PPS overpays for services actually provided, although some HHAs facing extraordinary costs not accounted for by the payment system may be financially disadvantaged.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress did not repeal the reduction in home health payments and CMS implemented the reduction for 2003.

    Matter: Congress may wish to consider making no change in the requirement for a reduction in Medicare home health payments. Further, Congress may wish to require the Centers for Medicare and Medicaid Services to incorporate risk sharing into the PPS design.


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