Medicare

A well-designed prospective payment system is the best way for Medicare to rationally control home health spending. Until such a system is implemented, however, the interim payment system will help constrain the growth in outlays. Yet concerns have been raised about the interim payment system. Specifically, the industry doubts whether payments will be adequate and whether the payment limits will adequately account for differences in patient mix and treatment patterns across agencies. Another concern is that inefficient providers will have unduly high limits because the limits are based on historic payments that reflect inappropriate practices. GAO and the Department of Health and Human Services' Office of Inspector General have previously reported that Medicare has been billed for home health visits that may not have been needed, were inconsistent with Medicare policies, or were not even delivered. Thus, concerns about the overall adequacy of payments under the interim system may be unwarranted because the limits were based on historic costs, a portion of which were unreliable. Whether the payments to individual agencies will reflect legitimate differences across agencies is more difficult to determine.

GAO noted that: (1) a well-designed prospective payment system will provide the Medicare program with the best means to rationally control home health spending; (2) until such a system is implemented, the interim payment system will help constrain the growth in outlays; (3) however, concerns have been raised about the interim payment system; (4) specifically, the industry has expressed doubts about whether payments will be adequate and whether the payment limits will appropriately account for differences in patient mix and treatment patterns across agencies; (5) another concern is that inefficient providers will have unduly high limits because the limits are based on historic payments that reflect inappropriate practices; (6) previous analyses by GAO and the Department of Health and Human Services' Office of the Inspector General have demonstrated that Medicare has been billed for home health visits that may not have been needed, were not consistent with Medicare policies, or were not even delivered; (7) concerns about the overall adequacy of payments under the interim system may be unwarranted, since the limits were based on historic costs, a portion of which were inappropriate; (8) whether the payments to individual agencies will reflect legitimate differences across agencies is more difficult to determine; (9) costs vary widely across agencies, which reflects differences in patient mix and levels of efficiency; (10) in protecting legitimate cost differences across agencies, the interim system may also be too restrictive for agencies with costs that legitimately increase more rapidly over time; and (11) because the interim system will be used for a longer period than originally intended, GAO believes it is even more important to better take account of appropriate variation in agency costs.