Simulations of a Medicare Prospective Payment System for Home Health Care

Pursuant to a congressional request, GAO simulated the probable prospective payment rates for home health care under the Medicaid program.

The system GAO modeled specified that: (1) rates should be nationwide, and no distinction should be made between the rates for freestanding and facility-based providers; (2) rates should be set at the 75th percentile instead of the 60th percentile; (3) costs should be weighed by visits; (4) there should be per-visit rates for skilled nursing, physical therapy, speech and occupational therapy, and home health aides; and (5) the system should provide separate rates for urban and rural providers. GAO found that: (1) implementing the basic methodology of the prospective payment system would probably result in increased total Medicare costs for home health services; (2) the basic methodology would have to be modified to set rates at the 45th percentile to achieve budget neutrality; (3) the expansion of medical audits, and the use of a prior-authorization system and preadmission assessments could be used to ensure that the program paid for only medically necessary services; and (4) there was no assurance that the proposed prospective payment system would result in lower Medicare program costs than the present retrospective reimbursement program.