[Congressional Record Volume 143, Number 89 (Monday, June 23, 1997)]
[Senate]
[Page S6094]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


            HOME HEALTH CARE PROSPECTIVE PAYMENT ACT OF 1997

  Mr. HATCH. Mr. President, over the past several months, I have been 
developing legislation to dramatically reform the way Medicare pays for 
home health services. This effort builds on my work in the Finance 
Committee during 1995 where I strove to see a prospective payment 
system for home health services included in the Balanced Budget Act 
agreement.
  The culmination of this year's efforts is a bill I introduced on June 
16, the Home Health Care Prospective Payment Act of 1997 (S. 913). The 
Home Health Care Prospective Payment Act is intended to achieve three 
primary goals:
  First, the bill will create incentives for providers to behave in a 
more cost effective manner.
  Second, it will help assure that the federal government achieves the 
necessary savings it seeks in order to ensure the solvency of the 
Medicare program well into the next century.
  And third, perhaps most importantly, my bill accomplishes these first 
two goals while protecting the quality and continuity of home health 
care services for beneficiaries.
  As my colleagues are aware, I have been a strong supporter of home 
health care services ever since I came to this body. I have applauded 
changes that have made it easier to treat Medicare patients in the most 
cost-effective setting. The changes we have made to the system have 
benefited many patients who would otherwise have not received care. In 
other cases, these individuals would have had to wait until their 
health deteriorated to the point of having to be admitted to a 
hospital. This outcome was neither cost effective nor good health care 
policy.
  We have learned a great deal about Medicare reimbursement since we 
passed the prospective payment system [PPS] for hospitals in 1983. We 
now know the value of a proper transition period so that providers will 
be able to manage their operations toward a permanent system.
  We also know that we can model a payment system that encourages 
providers to manage costs and utilization better. We realize that 
moving to a new reimbursement system is a massive undertaking. The 
amount of data, time, and expense is enormous. It is especially 
important not to unnecessarily burden health care providers, 
Government, or patients with administrative requests.
  My legislation proposes to begin a transition to a home health care 
PPS immediately, rather than waiting until fiscal year 2000. Instead of 
relying on cost limits, we can begin using predetermined rates in an 
initial PPS system during fiscal years 1998 and 1999.
  The principle behind prospective payment is to shift the risk from 
the Government to providers. This is done by rewarding providers for 
keeping their costs below the rates--or having them absorb the loss if 
their costs are over the rates. Therefore, I propose we incorporate a 
limited shared savings plan during the initial 2 years of the PPS to 
encourage more cost effective behavior by health care providers.
  In addition, there needs to be greater sensitivity to the data 
demands and consequences in our proposal. For example, there needs to 
be some discretion for the Secretary of the Department of Health and 
Human Services to designate a different base year for extraordinary 
situations that may arise in a particular case. There are other 
proposals that may be considered that might be good ideas in and of 
themselves. Some proposals, however, may impose data, time, or cost 
demands that are unnecessarily burdensome to providers, patients, or 
the Government--but may not be necessary for PPS implementation.
  The changes I am proposing in my legislation are not new to the 
Senate, but merely reflect the information and legislative history we 
have gained through our consideration of Medicare payment reforms. My 
legislation will make home health care reform consistent with that 
history.
  Mr. President, for the benefit of my colleagues I ask unanimous 
consent that a section-by-section analysis of S. 913 be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                      Section-by-Section Analysis

       Section 1. Provides a short title and a table of contents.
       Section 2. Provides that amendments made by the Act are to 
     the Social Security Act.
       Section 3. Provides for the recapture of savings from the 
     temporary freeze on payments for home health payments from 
     1994 to 1996 in updating home health costs limits for FY 1998 
     and subsequent years.
       Section 4. Provides for the establishment of an initial 
     prospective payment system for home health services beginning 
     in FY 1998. Payments would be based on rates equal to the 
     lower of--
       Costs determined under the current reimbursement system 
     (revised to limit costs to 105 percent of the median of visit 
     costs for freestanding home health agencies and eliminating 
     annual rate updates); or
       An agency-specific per-beneficiary annual limit based on 
     1993 cost reports, multiplied by the agency's unduplicated 
     patient census.

     Annual limits for new providers would be based on an average 
     of limits applied to other home health agencies. Incentive 
     payments would be available to agencies equal to 50 percent 
     of the amount by which its year end reasonable costs are 
     below its per-beneficiary annual limit.
       Section 5. Provides for the establishment of a permanent 
     prospective payment system for home health services beginning 
     in FY 2000. Payments would cover all services included in the 
     Medicare home health benefit, including medical supplies. In 
     determining payment amounts, the Secretary of Health and 
     Human Services would be required to determine an appropriate 
     unit of home health service, to provide for adjustments based 
     on variations in the mix of services provided, and to assure 
     continued access to quality services. Payments would be 
     subject to annual adjustments based on the home health market 
     basket index. The Secretary would be authorized to develop a 
     payment provision for outliers based on unusual variations in 
     the type or amount of medically necessary services.
       Initial payment rates for a permanent prospective payment 
     system would be required to be developed in a manner that 
     would assure the achievement of the scorable savings of the 
     act.
       Section 6. Provides for home health services to be 
     reimbursed on the basis of the geographic location where the 
     service is furnished.
       Section 7. Provides for the elimination of periodic interim 
     payments for home health services upon implementation of a 
     permanent prospective payment system.
       Section 8. Provides for limiting Part A coverage of home 
     health services to the first 100 visits following a hospital 
     stay. Clarifies coverage of intermittent and part-time 
     nursing care. Provides for the exclusion of the costs of home 
     health services from the calculation of Part B monthly 
     premiums. Provides a new definition of the term 
     ``homebound''. Authorizes the Secretary to deny coverage of 
     home health services which are in excess of normative 
     standards for the frequency and duration of care.

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