Industry Likes Medicare Home Care Expansion, But Cost Is Unknown

Patient advocacy and industry groups are cheering Medicare’s move to start paying nursing home, home care and physical therapy bills for some patients who were previously denied coverage. But how much extra it will cost the government is far from clear.

The change “is expected to affect the lives of tens of thousands of Americans, perhaps hundreds of thousands” with chronic conditions, Gill Deford, a lawyer with the Center for Medicare Advocacy, told reporters on a conference call. “Far too many American families have had to pay for vital services out of pocket” or forgo care they couldn’t afford, he said.

For decades Medicare’s guidelines cut off coverage of “skilled” nursing and home care services if patients weren’t shown to be improving. The care in question might have been physical therapy for stroke victims, home nurse visits for those with Alzheimer’s or post-hospital nursing home care for diabetics. Once their conditions plateaued or started deteriorating, Medicare would stop paying.

In a case filed in U.S. District Court in Vermont, patient advocates argued that the requirement for improvement was unsupported by law or regulation. This month the Obama administration and the Center for Medicare Advocacy agreed to a settlement that would change the rules. U.S. District Judge Christina C. Reiss must approve the deal, which was first reported by the New York Times.

The change doesn’t affect reimbursement for personal care, physical assistance and other “non-skilled” care that accounts for a large portion of home health and nursing home spending. Even so, industry groups standing to benefit from new spending welcomed the news.

“It takes away an unnecessary hurdle from those who need skilled care,” said Greg Crist, a spokesman for the American Health Care Association, a trade group of nursing homes.

“Medicare beneficiaries are entitled to home health services that provide them with the skilled care that can improve their condition but also care that prevents or slows a decline in function,” Val J. Halamandaris, president of the National Association for Home Care & Hospice, said in a prepared statement.

How much new spending the deal will generate at a time of large federal deficits is unknown. In 2010 out-of-pocket spending for home health services came to $5 billion, according to CMS. The change is also expected to bring care to those who didn’t receive it previously because they couldn’t afford it.

Medicare spends about $20 billion a year on skilled home care, said Bill Dombi, vice president for law at the home care association. For non-skilled home care, Medicaid and private payers spend roughly $60 billion annually, he said.

“I am confident that over time this will not result in any added cost to Medicare,” Rep. Joe Courtney, D-Conn., told reporters. By paying for people to be treated less expensively at home rather than in high-cost hospitals or nursing homes, the added skilled-care coverage will pay for itself, Courtney suggested.

The administration took the same line. “This settlement clarifies existing Medicare policy,” said Erin Shields Britt, spokeswoman for the Department of Health and Human Services. “We expect no changes in access to services or costs.”

The deal also may bring some relief to the state and federal Medicaid program, which pays for large amounts of nursing home care and which has been straining state budgets.

“Medicaid is in most respects the payer of last resort,” said Matt Salo, executive director of the National Association of Medicaid Directors. “Medicaid steps in when Medicare stops. So if Medicare is doing more, Medicaid by definition will probably do a a little less.”