NCPA - National Center for Policy Analysis

Budget Proposal Seeks Home Health Care Copay

April 23, 2013

President Obama's 2014 budget contains a $1.4 billion increase in discretionary spending for administrative expenses related to the implementation of ObamaCare. A large portion of the proposed budgetary increase is supposed to come from instituting $100 Medicare copayments for Medicare patients who use home health care. The primary goal of the copay is, in the words of the Medicare Payment Advisory Commission (MedPAC), "ensuring appropriate use of home health care." Levying the copayment, however, will do little to reduce fraud, says Robert Book, senior research director of Health System Innovation Network LLC, and Douglas Holtz-Eakin, president of the American Action Forum.

  • The $100 copayment is supposed to produce $730 million from patients who currently use home health care but do not pay for the services they receive.
  • Patients who require the attention of a physical, occupational or speech therapist at home are the target of the proposed copayment.
  • Home health care is an important fact that keeps patients out of the hospital.

The proposed copayment would apply to episodes of care requiring five or more visits over a period of 60 days or less, which in 2008 would have applied to 63 percent of episodes.

  • The $100 amount is roughly 3 percent of the average cost of a home health episode, which averages $3,000.
  • The $730 million increase in spending is to be funded by an expected reduction in the number of patients that use home health care after the institution of the copayment.
  • The problem with the assumption that many people are using home health care that could instead seek outpatient care is that home health care prevents a lot of inpatient hospital stays.

As home health care expenditures have risen, hospital inpatient spending has fallen by a greater amount. Studies suggest that seniors who pay higher copays visit the doctor's office less frequently but have longer hospitalizations.

  • Many Medicare beneficiaries have supplemental coverage that covers the costs of their hospital copayments, meaning that hospital care is as free to a patient as home health care is.
  • The copayment is also targeted at the high rate of suspected fraud within publicly provided home health care.

The proposed copay is not an antifraud measure and as such should be implemented only after fraud is eliminated from the home health care Medicare provides.

Source: Robert Book and Douglas Holtz-Eakin, "Home Health Medicare Co-Pay: A Study in Unintended Consequences," Forbes, April 19, 2013.


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