Funding Obamacare by Home Health Medicare Co-Pay: A Study in Unintended Consequences

The budget that President Obama submitted to Congress last month contains a call for, among other things, an increase of $1.4 billion in discretionary spending for the administrative expenses related to implementation of the Affordable Care Act (Obamacare). In a budget that claims to reduce the deficit, where is all this money coming from?

Some of it – $730 million –will come from instituting $100 co-payments for Medicare patients who use home health care. Home health care is primarily for patients who need frequent care that requires the attention of a physical, occupational, or speech therapist, or a nurse on a part-time basis, but does not require the patient to be hospitalized. The patients are homebound, and have difficulty accessing outpatient care in the usual settings. In fact, home health care is a significant factor in keeping patients out of the hospital.

Always There Home Care is a non-Medicare agency but we collaborate with Medicare Home Health agencies frequently.  Most of our clients require short term Medicare skilled home care at some point in order to remain safe at home and avoid hospitalization.

The co-payment would apply to “episodes of care” requiring five or more visits over a period of 60 days or less, and is not immediately preceded by a hospital stay. In 2008, this would have applied to about 63 percent of episodes. One might think the goal was to save tax dollars by replacing government spending with patient spending. But that’s not the case, as the average spending in a home health “episode” is $3,000, so the co-payment would represent only about 3 percent of total spending.  The main problem with this, however is that Medicare home health is traditional a “free service”.  Requiring a $100 co payment every 60 days of care may be a financial burden for many seniors.  These “savings” from those unable or unwilling to pay the $100 will result in the non-use of home health services which will add up to $730 million annually.   This is exactly what the federal regulators responsibility for Medicare administration are hoping will occur, since they believe home health services are in fact “over used.”

The problem is that forgoing Medicare home health will in many cases, lead to more hospitalizations. In fact, data since 2002 shows that as home health has grown as a percentage of total per-beneficiary spending, hospital inpatient spending has fallen, and by a greater amount. Apparently, spending more on home health saves money overall.

There may be a time and place for a debate over the desirability and consequences of a home health co-pay. Such an additional out of pocket cost for seniors in order to access Medicare home health benefit would reduce legitimate use of home health care, increase overall costs to the Medicare system and likely cause a decline in quality of life for those seniors who refuse to pay these co payments. Seniors would be wise to “follow the trail of money” to learn how the implementation of Obamacare will in fact negatively affect their own Medicare coverage.

Excerpt of an article by By Robert A. Book and Doug Holtz-Eakin Robert A. Book, Ph.D., is Senior Research Director of Health System Innovation Network LLC. Douglas Holtz-Eakin, the co-author of this article, is President of the American Action Forum. He served as director of the Congressional Budget Office from 2003 to 2005, and as chief economic policy adviser to John McCain in 2008 ■