Legislative Fallout from Balanced Budget Act: Fewer Visits by Home Health Aides

Study of the effects of changes in home health policy mandated by the Balanced Budget Act of 1997

From 1999 to 2002, researchers at Laguna Research Associates under the direction of Nelda McCall studied the initial impact of the Balanced Budget Act of 1997 (BBA) on Medicare beneficiaries, home health agencies and the health care system overall.

The project was part of the Robert Wood Johnson Foundation (RWJF) Home Care Research Initiative national program.

In the BBA, legislators mandated significant changes in the way Medicare home health would be reimbursed by requiring the implementation of a prospective payment system and, in the interim, instituting an interim payment system to constrain home health agency reimbursement.

Researchers compared data from before the BBA (fiscal years 1996 and 1997) with those for the period in which the interim payment system was in effect (fiscal years 1998 [phase in] and 1999 [full implementation]). They based their study primarily on analyses of Medicare data, along with surveys they conducted.

Key Findings

  • "Use of Medicare home health services fell dramatically after the BBA." There was a shift in the mix of visit types toward providing more skilled care (e.g., skilled nursing visits instead of aide visits). (Health Affairs, vol. 2, no. 3, 2001).

  • Post-BBA, the percentage of Medicare beneficiaries using home health services decreased 22 percent, and the number of visits per user decreased 39 percent (Health Services Research, vol. 38, no. 1, 2003).

  • From 1997 to 1999, there were significant increases in the percentage of home health users: (1) having a skilled nursing facility admission within 120 days of admission to home health (from 7.8 to 8.8%); (2) visiting an emergency room (from 17 to 19%) or visiting an emergency room for the same body system diagnoses as the home health care (from 7.2 to 8.2%); and (3) dying (from 9.0% in 1997 to 9.7% in 1999) (McCall N [et. al.], Health Care Financing Review, vol. 82, no. 2, 2002).

  • The interim payment system did not lower the quality of home health care. Satisfaction with home health care did not decrease, in general, for Medicare beneficiaries as a whole or for beneficiaries who are disabled. (Report to RWJF)

  • There was no cost shifting to Medicaid found and very little shifting from home health care to other Medicare post-acute care. (Report to RWJF)

Researchers published six articles about the project, including those in Health Affairs and Health Services Research.

Policy Implications

  • The researchers also identified policy implications, including:

    • The BBA appears to have moved the Medicare home health benefit away from the provision of long-term personal care services and returned it to nursing care and rehabilitation.
    • The interim payment system does not appear to have adversely affected Medicare beneficiaries or resulted in cost shifts to Medicaid.

Researchers from the Visiting Nurse Service of New York and Laguna Research Associates are working on a follow-up project funded by RWJF that examines trends in home health utilization after the implementation of the Medicare home health prospective payment system.

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