Medicare Post-Acute Care:

Home Health and Skilled Nursing Facility Cost Growth and Proposals for Prospective Payment

T-HEHS-97-90: Published: Mar 4, 1997. Publicly Released: Mar 4, 1997.

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William J. Scanlon
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GAO discussed Medicare's skilled nursing facility (SNF) and home health care benefits and the administration's forthcoming legislative proposals related to them.

GAO noted that: (1) Medicare's SNF costs have grown primarily because a larger portion of beneficiaries use SNFs than in the past and because of a large increase in the provision of ancillary services; (2) for home health care costs, both the number of beneficiaries and the number of services used by each beneficiary have more than doubled; (3) a combination of factors led to the increased use of both benefits: (a) legislation and coverage policy changes in response to court decisions liberalized coverage criteria for the benefits, enabling more beneficiaries to qualify for care; (b) these changes also transformed the nature of home health care from primarily posthospital care to more long-term care for chronic conditions; (c) earlier discharges from hospitals led to the substitution of days spent in SNFs for what in the past would have been the last few days of hospital care, and increased use of ancillary services, such as physical therapy, in SNFs; and (d) a diminution of administrative controls over the benefits, resulting at least in part from fewer resources being available for such controls, reduced the likelihood of inappropriately submitted claims being denied; (4) the major proposals by the administration for both SNFs and home health care are designed to give the providers of these services increased incentives to operate efficiently by moving them from a cost reimbursement to a prospective payment system; (5) however, what remains unclear about these proposals is whether an appropriate unit of service can be defined for calculating prospective payments and whether the Health Care Financing Administration's databases are adequate for it to set reasonable rates; (6) the administration is also proposing that SNFs be required to bill for all services provided to their Medicare residents rather than allowing outside suppliers to bill; and (7) this latter proposal has merit, because it would make control over the use of ancillary services significantly easier.

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