Impact of Medicare payment policy on home health resources utilization

Health Care Financing Review, Wntr, 1991 by Audrey Irvine, Elayne Kornblatt Phillips, Patricia Cloonan, James C. Torner, Mary E. Fisher, Gary A. Chase

Introduction

Since 1965, Medicare has wrestled with the challenge of providing the elderly with a regular source of mainstream medical care. The focal point of this massive social intervention has been the hospital, resulting in a relationship between Medicare policy and hospitals that has benefited both and worked effectively until recently (Balinsky and Starkman, 1987; Evans, 1983). However, in the last 10 years, changes in the health care environment have made the traditional fiscal relationship between hospital and Medicare increasingly unmanageable. These changes have included the increasing number of elderly in the general population, longer hospital stays, the shift away from acute to chronic illness needs, rapidly increasing medical costs, increased life expectancy, and an increasingly complex array of expensive and sophisticated medical technologies (Evans, 1983; Vladeck, 1984).

Together these factors have brought about a crisis in the allocation of medical resource dollars that was addressed in part through the implementation of prospective payment by diagnosis-related groups (DRGs) (Goldberg, 1984; Vladeck, 1984). This payment strategy has curbed costs and improved hospital efficiency as anticipated (Vladeck, 1984) by curtailing hospital length of stay. However, once patients began returning to the community, a mechanism was needed for providing care in cases where it was still required. The Omnibus Reconciliation Act of 1980 eased restrictions on payment for home care (Health Care Financing Administration, 1985). The greater availability of financing and the increased patient demand resulted in a dramatic increase in the number of Medicare certified home care agencies (Reif, 1984; Wood and Estes, 1984). In Virginia alone, the number of agencies increased by two-thirds since 1982.

By the mid-1980s, rising costs in home health were becoming an issue much as they had previously in the hospital setting. Cost-containment efforts by the Health Care Financing Administration (Reif, 1984) focused on stricter interpretation of Medicare guidelines. This policy increased the denial rate for Medicare payment (Taylor, 1986) and shortened lengths of stay in home care. Further cost containment is currently being suggested through the implementation of a prospective payment system in public home health, yet little researcy has examined resource utilization for the elderly in home health.

As part of a study on the impact of hospital prospective payment on public home health services (Phillips et al., 1989), changes were compared in home health resource utilization for the years 1983-85 for Medicare and non-Medicare samples. During the data analysis, we identified a group of patients 65 years of age or over who were not receiving Medicare. One-third of this group had Medicaid; two-thirds of the sample received free care. Recent research on the number of uninsured Americans (Short, Moheit, and Beaureguard, 1988) suggested that about 1 percent of those 65 years of age or over are without Medicare coverage. By identifying this group, we could examine two related issues. The first concerns the relationship of Medicare policy to public home health care provision to the elderly. Comparisons of the Medicare and the 65 years or over non-Medicare samples permitted us to investigate differential needs for services on entering home health care and the degree to which Medicare policy is associated with delivery of care and patient outcomes.

Second, we were able to describe public home health care resource utilization patients by age group. To do this, the two groups of 65 years or over public home health patients were compared with the younger non-Medicare group on requests for care, services provided, length of stay in home health, referral source, prognosis, and patient outcome.

Methods

Sample

Home health patient referral logs for all city and county health departments in Virginia were obtained for a 2-year period from 1983-85. These logs contain a chronological record of all referrals for home health services, including record number and start-of-care date. Only cases opened to care were included in the sample.

As the referral logs arrived from the agencies, sampling began by randomly selecting 1 of the first 10 cases. After this case was identified, every fifth case was selected from the logs. The selection process did not begin afresh with each log but continued from the previous log until all logs had been sampled from. This process yielded a 20-percent sample of all cases. Because logs contained patients as they were referred, it was possible to select the same patient on multiple episodes of care, although this occurred in less than 1 percent of the sample. An episode was defined from the start of care to the date of discharge. This process yielded a sample of 2,200 episodes.

Examination of the age distribution for the Medicare and non-Medicare samples revealed the expected age differences (Table 1). The degree of overlap in the two distributions, however, was unexpected. One-fifth of the non-Medicare sample was 65 years or over. This represented approximately 10 percent of the patients 65 years or over being seen in public home health or about 10 times the proportion of older individuals without Medicare coverage in the general population. Additionally, only 37.5 percent of this sample of older non-Medicare patients had private insurance compared with 74.5 percent found in previous research (Short, Moheit, and Beaureguard, 1988). Sixty-three percent of this sample was defined as indigent. In subsequent analyses, this older non-Medicare group was compared with the Medicare and under 65 non-Medicare samples on the main dependent variables.