[Congressional Record Volume 144, Number 49 (Tuesday, April 28, 1998)]
[Senate]
[Pages S3709-S3715]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself, Mr. Chafee, Mr. Leahy, Mr. Jeffords, 
        Mr. Feingold, Mr. Durbin, Mr. Harkin, Ms. Snowe, Mr. Reed, Mr. 
        Santorum, Mr. Torricelli, Mr. Levin, Mr, Daschle, and Mr. 
        Specter):
  S. 1993. A bill to amend title XVIII of the Social Security Act to 
adjust the formula used to determine costs limits for home health 
agencies under medicare program, and for other purposes; to the 
Committee on Finance.


              THE MEDICARE HOME HEALTH EQUITY ACT OF 1998

  Ms. COLLINS. Mr. President, America's home health agencies provide 
invaluable services that have enabled a growing number of our most 
frail and vulnerable senior citizens to avoid hospitals and nursing 
homes and stay just where they want to be--in their own homes. Today, 
home health is the fastest growing component of Medicare spending, and 
the program grew at an astounding average annual rate of more than 25 
percent from 1990 to 1997. As a consequence, the number of Medicare 
home health beneficiaries has more than doubled, and Medicare home 
health spending has soared from $2.7 billion in 1989 to $17.1 billion 
in 1996.
  This rapid growth in home health spending understandably prompted 
Congress and the Health Care Financing Administration, as part of the 
Balanced Budget Act of 1997, to initiate changes that were intended to 
make the program more cost-effective and efficient and protect it from 
fraud and abuse. However, in trying to get a handle on costs, we in 
Congress and the administration have unintentionally created problems 
that may restrict some elderly citizens' access to vitally needed home 
health care.
  Critics have long pointed out that Medicare's cost-based payment 
method for home health care has inherent incentives for home care 
agencies to provide more services, which has driven up costs. 
Therefore, the Balanced Budget Act called for the implementation of a 
prospective payment system for home care by October 1, 1999. Until 
then, home health agencies will be paid according to what is known as 
an Interim Payment System.
  Under the new IPS, home health agencies will be paid the lesser of: 
their actual costs; a per-visit cost limit; or a new blended agency-
specific per beneficiary annual limit based 75 percent on an agency's 
own costs per beneficiary and 25 percent on the average cost per 
beneficiary for agencies in the same region. These costs are to be 
calculated from cost reports for reporting periods ending in 1994.
  I spent some time going over the formula because it is important to 
understand what the importance of that very

[[Page S3710]]

complicated formula is for many of our home health agencies.
  At a recent hearing of the Senate Special Committee on Aging, on 
which I serve, we heard testimony from a number of witnesses who 
expressed concern that the new Interim Payment System inadvertently 
penalizes cost-efficient home health agencies by basing 75 percent of 
the agencies' per patient payment limits on their FY 1994 average cost 
per patient. This system effectively rewards agencies that provided the 
most visits and spent the most Medicare dollars in 1994, while it 
penalizes low-cost, more efficient providers. Let me repeat that point, 
Mr. President. The agencies, usually the non-profits, that have 
provided services at the lowest cost, are penalized by the new payment 
system.
  Home health agencies in the Northeast are among those that have been 
particularly hard-hit by the formula change. As the Wall Street Journal 
recently observed,

       If New England had been just a little greedier, its home-
     health industry would be a lot better off now . . . 
     Ironically, . . . [the region] is getting clobbered by the 
     system because of its tradition of non-profit community 
     service and efficiency.

  Moreover, there is no logic to the variance in payment levels. As the 
same article goes on to point out, the average patient cap in Tennessee 
is expected to be $2,200 higher than Connecticut's, and the cap for 
Mississippi is expected to be $2,000 more than Maine's, without any 
evidence that patients in the Southern states are sicker or that nurses 
and other home health personnel in this region cost more. Mr. 
President, I ask unanimous consent that the entire text of this article 
be printed in the Record.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Ms. COLLINS. Mr. President, this system also gives a competitive 
advantage to high-cost agencies over their lower cost neighbors, since 
agencies in a particular region may have dramatically different 
reimbursement levels regardless of any differences among their patient 
populations. And finally, this system may force low-cost agencies to 
stop accepting patients with more serious health care needs.
  That is exactly the opposite of what we should want. I simply do not 
think that this is what Congress intended. To rectify this problem, 
today I am pleased to introduce legislation along with Senators Chafee, 
Jeffords, Leahy, Feingold, Snowe, Durbin, Harkin, Reed and Santorum. 
The Medicare Home Health Equity Act will level the playing field and 
make certain that home health agencies that have been prudent in their 
use of Medicare resources are not unfairly penalized. The legislation 
will also ensure that home health agencies in the same region are 
reimbursed similarly for treating similar patients.
  Instead of allowing the experience of high-cost agencies to serve as 
the basis for the new cost limits, the bill we are introducing today 
sets a new per beneficiary cost limit based on a blend of national and 
regional average costs per patient. This new formula will be based 75 
percent on the national average cost per patient and 25 percent on the 
regional average cost per patient. Moreover, by eliminating the agency-
specific data from the formula, the Medicare Home Health Equity Act 
will move us more quickly to the national and regional rates which will 
be the cornerstones of the future prospective payment system, and it 
will do so in a way that is budget neutral. This is a matter of common 
sense and fairness. It is also a matter of ensuring that there is a 
fair system for reimbursing these vitally needed home health agencies 
that are providing services that are so important to so many of our 
senior citizens. I urge all of my colleagues to join as cosponsors of 
the Medicare Home Health Equity Act, and I ask unanimous consent that 
the text of the bill as well as a section by section summary be printed 
in the Record.

  The ACTING PRESIDENT pro tempore. Without objection, the items were 
ordered printed in the Record, as follows:

                                S. 1993

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Home Health Equity 
     Act of 1998''.

     SEC. 2. REVISION OF HOME HEALTH INTERIM PAYMENT FORMULA.

       (a) Restoration of Cost Limits.--Section 
     1861(v)(1)(L)(i)(IV) of the Social Security Act (42 U.S.C. 
     1395x(v)(1)(L)(i)(IV)) (as added by section 4602 of the 
     Balanced Budget Act of 1997) is amended--
       (1) by striking ``105 percent'' and inserting ``112 
     percent''; and
       (2) by striking ``median'' and inserting ``mean''.
       (b) Change in Additions to Cost Limits.--Section 
     1861(v)(1)(L)(v) of the Social Security Act (42 U.S.C. 
     1395x(v)(1)(L)(v)) (as added by section 4602 of the Balanced 
     Budget Act of 1997) is amended to read as follows:
       ``(v)(I) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1997, 
     the Secretary shall provide for an interim system of limits. 
     Payment shall not exceed the costs determined under the 
     preceding provisions of this subparagraph or, if lower, the 
     product of--
       ``(aa) an agency-specific per beneficiary annual limitation 
     calculated based 75 percent on the reasonable costs 
     (including nonroutine medical supplies) of the standardized 
     national average cost per patient in calendar year 1994, or 
     best estimate thereof, (as published in the Health Care 
     Financing Review Medicare and Medicaid 1997 Statistical 
     Supplement) and based 25 percent on the reasonable costs 
     (including nonroutine medical supplies) of the standardized 
     regional average cost per patient for the agency's census 
     division in calendar year 1995 (as so published), such 
     national and regional costs updated by the home health market 
     basket index and adjusted pursuant to clause (II); and
       ``(bb) the agency's unduplicated census count of patients 
     (entitled to benefits under this title) for the cost 
     reporting period subject to the limitation.
       ``(II) The labor-related portion of the updated national 
     and regional costs described in subclause (I)(aa) shall be 
     adjusted by the area wage index applicable under section 
     1886(d)(3)(E) for the area in which the agency is located (as 
     determined without regard to any reclassification of the area 
     under section 1886(d)(8)(B) or a decision of the Medicare 
     Geographic Classification Review Board or the Secretary under 
     section 1886(d)(10) for cost reporting periods beginning 
     after October 1, 1995).''.
       (c) Conforming Amendments.--
       (1) Section 1861(v)(1)(L)(vi) of the Social Security Act 
     (42 U.S.C. 1395x(v)(1)(L)(vi)) (as added by section 4602 of 
     the Balanced Budget Act of 1997) is amended to read as 
     follows:
       ``(vi) In any case in which the Secretary determines that 
     beneficiaries use services furnished by more than 1 home 
     health agency for purposes of circumventing the per 
     beneficiary annual limitation in clause (v), the per 
     beneficiary limitations shall be prorated among the 
     agencies.''.
       (2) Section 1861(v)(1)(L)(vii)(I) of the Social Security 
     Act (42 U.S.C. 1395x(v)(1)(L)(vii)(I)) (as added by section 
     4602 of the Balanced Budget Act of 1997) is amended by 
     striking ``clause (v)(I)'' and inserting ``clause 
     (v)(I)(aa)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply as if included in the enactment of the Balanced 
     Budget Act of 1997.

     SEC. 3. CBO ESTIMATE OF HOME HEALTH PAYMENT SAVINGS.

       (a) Estimate.--Not later than 60 days after the date of 
     enactment of this Act, and annually thereafter until the 
     prospective payment system for home health agencies 
     established by section 1895 of the Social Security Act (42 
     U.S.C. 1395fff) is in effect, the Director of the 
     Congressional Budget Office (referred to in this section as 
     the ``Director'') shall estimate the amount of savings to the 
     medicare program under title XVIII of such Act (42 U.S.C. 
     1395 et seq.) resulting from the interim payment system for 
     home health services established by the amendments to section 
     1861 of such Act (42 U.S.C. 1395x) made by section 4602 of 
     the Balanced Budget Act of 1997.
       (b) Certification.--If the Director determines that the 
     amount estimated under subsection (a) exceeds the amount of 
     savings to the medicare program that the Director estimated 
     immediately prior to the enactment of the Balanced Budget Act 
     of 1997 by reason of such interim payment system, then the 
     Director shall certify such excess to the Secretary of Health 
     and Human Services (referred to in this subsection as the 
     ``Secretary'').
       (c) Adjustment.--
       (1) In general.--If the Director certifies an amount to the 
     Secretary pursuant to subsection (b), the Secretary shall 
     prescribe rules under which appropriate adjustments are made 
     to the amount of payments to home health agencies otherwise 
     made under subparagraph (L) of section 1861(v)(1) of the 
     Social Security Act (42 U.S.C. 1395x(v)(1)(L)) (as amended by 
     section 4602 of the Balanced Budget Act of 1997) in the case 
     of outliers--
       (A) where events beyond the home health agency's control or 
     extraordinary circumstances, including the case mix of such 
     agency, create reasonable costs for a payment year which 
     exceed the applicable payment limits; or
       (B) in any case not described in subparagraph (A) where the 
     Secretary deems such an adjustment appropriate.
       (2) Amount.--The total amount of adjustments made under 
     paragraph (2) for a year may not exceed the amount certified 
     to the Secretary pursuant to subsection (b) for such year. To 
     the extent that such adjustments in

[[Page S3711]]

     a year would otherwise exceed the amount certified to the 
     Secretary pursuant to subsection (b) for such year, the 
     Secretary shall reduce the payments to home health agencies 
     in a pro rata manner so that the adjustments do not exceed 
     such amount.
                                  ____


      Medicare Home Health Equity Act--Section-by-Section Summary


                              CURRENT LAW

       The cost-based payment method that has historically been 
     used for Medicare home health services has inherent 
     incentives for home care agencies to provide a higher volume 
     of services. Therefore, the Balanced Budget Act of 1997 (BBA) 
     called for the implementation of a prospective payment system 
     (PPS) for home care by October 1, 1999. In the interim (FYs 
     1998 and 1999), home health agencies will be paid according 
     to an Interim Payment System (IPS) established by the BBA.
       The IPS reimburses home health agencies using the lowest of 
     three cost limits: 1) an agency's actual costs; 2) a per 
     visit cost limit applied to each skilled nursing, physical 
     therapy, or other type of home health visit provided; or 3) 
     an agency-specific aggregate per patient cost limit that is 
     based 75 percent on an agency's average cost per patient in 
     1994 and 25 percent on a regional average cost per patient in 
     1994.
       The Interim Payment System penalizes cost-efficient home 
     health agencies by basing 75 percent of the agencies' per 
     patient payment limits on their FY 1994 average cost per 
     patient. Giving such a heavy weight to the agency-specific 
     costs per beneficiary effectively rewards agencies that 
     provided the most visits and spent the most Medicare dollars 
     in 1994, while it penalizes low-cost, more efficient 
     providers. As a result, high-cost and inefficient agencies 
     will continue to receive a disproportionate share of Medicare 
     home health dollars.


                  The Medicare Home Health Equity Act

         Formula change for setting per beneficiary cost limits

       The Medicare Home Health Equity Act will level the playing 
     field and make certain that those home health agencies that 
     have been prudent in their use of Medicare resources are not 
     unfairly penalized. Moreover, it will ensure that home health 
     agencies in the same region are reimbursed similarly for 
     treating similar patients. Instead of allowing the experience 
     of high cost agencies to serve as the basis for the cost 
     limits, the bill sets a new per beneficiary cost limit based 
     on a blend of national and regional average costs per 
     patient. This new formula would be based 75 percent on the 
     national average cost per patient in calendar year 1994 
     ($3,987) and 25 percent on the regional average cost per 
     patient in calendar year 1995.

Restoration of the per-visit cost limit to 112 percent of the national 
                                  mean

       The per visit cost limits essentially place a cap on the 
     amount of costs that can be reimbursed by Medicare for each 
     home health care visit provided. The BBA reduced these cost 
     limits from 112 percent of the mean to 105 percent of the 
     median. This was done to provide additional savings. However, 
     most of the BBA savings (at least 80 percent) came from the 
     per-beneficiary cost limits. According to Price-Waterhouse, 
     changing the formula from an agency-specific to a national/
     regional average cost per patient blend achieves an 
     additional $5.5 billion in savings. The Medicare Home Health 
     Equity Act of 1998 uses these savings to restore the per-
     visit cost limit to 112 percent of the national mean.
       Most analysts agree that the growth in Medicare home health 
     expenditures is due to the high number of visits provided to 
     patients, not by the cost per visit. In fact, the cost per 
     visit has remained relatively stable in recent years, and CBO 
     confirms that controlling use, not price, is the key to 
     Medicare home health cost containment. It is appropriate to 
     use the savings achieved by rewarding rather than penalizing 
     cost-efficient agencies to re-establish the cost limits that 
     enabled many of those agencies to provide more efficient care 
     over the entire episode of care. The average cost per visit 
     tends to be higher for lower-overall cost, non-profit HHAs 
     which tend to provide care in fewer visits. By keeping visits 
     to the number that are medically necessary, costs per visit 
     may increase slightly, but overall costs per patient 
     decrease.

 Modifies Application of Proration of Per Beneficiary Limits Provision

       The BBA contained a provision which requires proration of 
     the per beneficiary annual limit where the patient is served 
     by more than one home health agency. The Medicare Home Health 
     Equity Act modifies this provision to clarify that proration 
     only applies where it can be demonstrated that a home health 
     agency is attempting to circumvent the limits by shifting 
     care between agencies.

                    Establishes an Outlier Provision

       The bill instructs the Secretary of HHS to prescribe rules 
     under which adjustments can be made in payments to home 
     health agencies that are ``outliers'' where events beyond 
     their control or extraordinary circumstances, including their 
     case mix, create ``reasonable costs'' that exceed what 
     otherwise would be their payment limits. This is included so 
     that there is some provision for higher payments for home 
     health agencies that treat the sickest Medicare home care 
     patients and does so in a way that is budget neutral.
                                  ____


                     [From the Wall Street Journal]

   Region's Home-Care Firms Face Being Punished for Their Efficiency

                           (By Carol Gentry)

       If New England had been just a little greedier, its home-
     health industry would be a lot better off now.
       In a rush to cut Medicare spending, Congress has set up a 
     home-health payment system that punishes low-cost agencies 
     and states, while it rewards big spenders and regions where 
     audits have found widespread fraud and abuse. Ironically, New 
     England is getting clobbered by the system because of its 
     tradition of non-profit community service and efficiency.
       And patients are feeling the effects. In the past two 
     weeks, about 30 complaints have come into the Boston office 
     of the federal agency that must implement the change, the 
     Health Care Financing Administration. The agency says the 
     complaints are coming from patients who need frequent, long-
     term nursing visits, but say they are being turned away or 
     cut off.
       ``I fear we're now looking at home health agencies dumping 
     (expensive) patients,'' says Margaret Leoni-Lugo, chief of 
     the HCFA quality-improvement branch for New England. Such 
     discrimination violates state and federal regulations.
       Ms. Leoni-Lugo says she sympathizes with the difficult 
     situation confronting New England agencies, but cannot 
     condone patient dumping. Today she is expected to hold a 
     telephone conference with health-department officials in the 
     six New England states, warning them to watch for evidence 
     that agencies are cutting care too much.
       ``We want to keep the beneficiaries safe,'' says Ms. Leoni-
     Lugo.


                            the new formula

       The new system rolls back payments to 1993-94 levels minus 
     2%, regardless of whether an agency's budget was low or 
     grossly inflated during those years. Under the system, home-
     health agencies' Medicare payments will be affected not only 
     by their own budget history, but also by their location. If a 
     company is in a penny-pinching region, its payments will be 
     lower than if it comes from an area of big spenders. The 
     agencies that come out best under this formula are those that 
     spent money willy-nilly five years ago and were surrounded by 
     companies that did the same thing. The biggest winners will 
     be states in the South.
       Meanwhile, frugal agencies in regions with moderate costs--
     especially New England, the Midwest and the Mountain states--
     are reeling. Vermont, New Hampshire and Maine will be among 
     the hardest-hit states in the nation. Massachusetts, 
     Connecticut and Rhode Island fare only marginally better.
       Advocates for the elderly and the region's home-health 
     agencies say such a system gives a competitive advantage to 
     the worst players in the industry. ``This is not in the best 
     interest of taxpayers,'' says Susan Young, executive director 
     of the Home Care Association of New Hampshire.
       Adds Margaret Gilmour, president and chief executive 
     officer of Home Health & Hospice Care, a home-care agency in 
     Nashua, N.H.: ``This is going to be a tidal wave of disaster 
     for elder care.''
       Layoffs are already under way in New Hampshire, Ms. Young 
     says, where the industry is among the leanest in the nation.
       The congressional delegation from Massachusetts hopes to 
     derail the new system before it can do massive damage. ``This 
     defies common sense.'' says Rep. James P. McGovern, a 
     Democrat from Worcester. ``This is a big, fat mistake.''


                      Taking Care of the Homebound

       In late November, Rep. McGovern and 11 other members of the 
     state's congressional delegation sent a letter of concern to 
     HCFA. The group hopes to meet with top agency officials in 
     Washington soon.
       Home-health agencies send nurses, aides, and physical and 
     speech therapists to the homes of patients who are so 
     physically or mentally disabled that they cannot easily go or 
     be taken to a medical clinic.
       While most private insurers and health-maintenance 
     organizations cover home health care, the main money pipeline 
     is Medicare. All homebound elderly and disabled beneficiaries 
     of the program are eligible for free unlimited visits, as 
     long as the visits are part of a treatment plan that is 
     authorized by a physician and is updated every two months.
       There are several types of home-health agencies, including 
     the community-based nonprofits, such as the Visiting Nurses 
     Associations of America; the newer for-profit companies; and 
     hospital-affiliated agencies. Medicare's costs have been 
     higher for patients who go through one of the hospital or 
     for-profit companies.
       Hospital-affiliated agencies tend to have higher per-visit 
     costs than independent ones because they can legally transfer 
     some of the hospital's overhead to the home-health books and 
     have Medicare pay for it. For-profit agencies tend to 
     generate higher Medicare payments by billing for a greater 
     number of visits per patient.
       Patients recuperating from surgery or a short-term illness 
     may need only a few visits, but home-health agencies are a 
     lifeline for patients with long-term conditions--multiple 
     sclerosis. Alzheimer's disease, heart failure, severe 
     diabetes--who are trying to stay out of nursing homes.

[[Page S3712]]

       The new system sets an annual limit on the amount that 
     Medicare will spend on any given patient. While that cap is 
     different for every agency, it averages out to 75 visits a 
     year in Massachusetts. Patient advocates say this gives 
     agencies an incentive to take only those clients who are 
     going to get better or die in a short time.
       To make matters worse, agencies must reduce expenses 
     without knowing just how deep the cuts will be. The details 
     of the payments formula won't be determined until April 1, 
     but will be retroactive to Oct. 1.


                         seeking formula change

       In the letter to HCFA, the Massachusetts delegation asked 
     administrators to alter the new formula to ``lessen the 
     blow'' to low-cost, efficient home-health agencies. The 
     letter says it is unfair to tag payments to a 1994 average 
     per-patient cost of $4,328 in Massachusetts, when Tennessee 
     was getting $6,508 and Louisiana $6,700.
       Rep. McGovern says he hopes to repeal the payment-system 
     provision when Congress convenes later this month, but he 
     knows that may not be easy. Many of the leaders of Congress 
     are from the South, where payment rates are projected to be 
     double those in much of New England.
       Massachusetts has a lot at stake. In 1995, the last year 
     for which Medicare has complete data, the program spent more 
     than $1 billion in New England to provide home health to 
     246,000 beneficiaries. Of that money, Massachusetts absorbed 
     more than half for 119,000 homebound patients. More than 14% 
     of the state's Medicare beneficiaries were served by home 
     care, while the rate was about 10% nationwide.
       Under the new payment system, members of the Massachusetts 
     delegation say, their state stands to lose $95 million and at 
     least 1.5 million patient visits in the first year.
       Why will the system affect Massachusetts so much? The 
     state's home-health agencies deliver care at a more moderate 
     cost per visit than most other states, federal data show, but 
     also perform more visits per patient, on average. Pat 
     Kelleher. executive director of the Home Health Care 
     Association of Massachusetts, says one reason is that the 
     state has deliberately pushed home care to save state tax 
     money. Federally paid Medicare home-health visits keep 
     patients out of nursing homes, which draw most of their 
     revenue from the state Medicaid program.


                      Rough Time Ahead for Vermont

       If the other New England states affected, Vermont, the only 
     state that legally requires home-health companies to be non-
     profit, especially faces troubled times. After consistently 
     providing home care at the lowest cost per patient in the 
     nation. Vermont's 13 agencies stand to lose more than $2 
     million this year and estimate they will have to reduce 
     service by 10%.
       The Vermont Assembly of Home Health Agencies estimates the 
     average per person payments in the state this year will be 
     $2,600 a year, less than half what they payout is expected to 
     be in, say, Alabama.
       ``The system was supposed to limit the high rollers'' says 
     the association's director, Peter Cobb but instead ``Congress 
     rewarded excess.''
       The rule changes stem from the passage last August of the 
     Balanced Budget Act, which cuts $115 billion from Medicare by 
     2002. The home-care portion of the act slices $16.2 billion 
     from the budget.
       Home care seemed a logical place to look for cuts, since 
     it's the fastest-growing segment of the health industry. 
     Between 1990 and 1995, while the number of Medicare 
     beneficiaries rose 10%, the number of home-health visits grew 
     255% and spending went up 316%.
       Some of that increase accompanied the rise of managed-care 
     companies that try to keep patients out of the hospital to 
     save money and, if they must go, keep the visits as brief as 
     possible. However, much of the inflation in home care was a 
     predictable response to a payment system that offered no 
     incentive to be frugal.


                        probe finds waste, fraud

       Massive fraud, waste and ineptitude in Medicare billings 
     were reported last summer by the Office of the Inspector 
     General of the U.S. Department of Health and Human Services 
     following a two-year investigation called Operation Restore 
     Trust. The study covered five states that account for 40% of 
     Medicare payments: California, New York, Florida, Texas and 
     Illinois.
       The report said one-fourth of home-health agencies in those 
     states received nearly half the Medicare dollars spent on 
     home-health care. According to the report, the ``problem'' 
     agencies tended to be for-profit, closely held corporations 
     with owners that were involved in a tangle of interlocking, 
     self-referring businesses. Texas was cited as the biggest 
     home-health spender of the states studied. (An HCFA audit 
     conducted in Massachusetts and Connecticut last year found a 
     few overpayments, but no cases of fraud.)
       It just so happened that the revelations of Operation 
     Restore Trust occurred at the same time that Congress was 
     looking for ways to cut Medicare spending.
       Congress wanted to change the home-health payment system so 
     that it would reward efficiency, by switching to a flat rate 
     by diagnosis. This ``prospective payment system'' would be 
     similar to the one that Medicare uses to pay hospitals.
       But HCFA said it needed more time to develop the complex 
     formula to set prospective payment in motion. So Congress 
     created an interim system that will run until Oct. 1, 1999. 
     It freezes spending at the rates there were in place in 1993-
     94--before Operation Restore Trust began.


                            varying payments

       Now payments vary illogically. The average patient cap in 
     Tennessee is expected to be $2,200 higher than that in 
     Connecticut, and the cap for Mississippi $2,000 more than 
     Maine, without any evidence that patients in the Southern 
     states are sicker or that nurses cost more there.
       But those who think the Southern states are pleased at 
     getting a patient cap double that of New England are 
     mistaken. Officials at the Texas Association for Home Care 
     say they need bigger payment rates because they have a high 
     rate of poor elderly who have never had proper health care, 
     and the state Medicaid program hasn't taken care of them 
     because it's stingy.
       ``Congress has cut into the bone,'' says Sara Speights, 
     director of government and public relations for the Texas 
     group.
       Inequities exist even within the same region. Ms. Gilmour 
     of the Nashua, N.H., home-care agency says a competitor in 
     northern Massachusetts could end up with a payment cap twice 
     as high as her own as a result of her staff's efforts to keep 
     costs down. Because patients are free to choose either 
     agency, she worries they will gravitate to the one that has a 
     bigger budget.
       Joan Hull, chief executive of the nearby competitor, the 
     Home Health Visiting Nurses Association of Haverhill, Mass., 
     says her agency is a product of a merger between agencies 
     that had different payment rates, so she doesn't know whether 
     the Medicare cap will be $3,400 or $4,600 per patient. 
     Unfortunately for her agency, services it has delivered since 
     the beginning of its fiscal year in October will be on the 
     new payment rate, but the agency won't know what the rate is 
     until April.
       ``It's crazy, isn't it?'' Ms. Hull says with a laugh.


                             yankee thrift

       Home health agencies in the New England states have 
     delivered care for less money than the national average, both 
     in Medicare payments per visit and per patient. (Data shown 
     here are from 1995.)

----------------------------------------------------------------------------------------------------------------
                                                                                       Pct.               Pct.  
                                                                  No. of      Avg.   above or    Avg.   above or
                                                                 patients   payment    below   payment    below 
                                                                    (in       per    national    per    national
                                                                thousands)   visit     avg.    patient    avg.  
----------------------------------------------------------------------------------------------------------------
Connecticut...................................................         57       $60       -30   $4,770       6.6
Massachusetts.................................................        119        50     -19.0    4,730      -5.7
Rhode Island..................................................         19        64       3.0    4,037      -9.7
Maine.........................................................         22        53     -15.0    3,717     -16.9
New Hampshire.................................................         17        50     -19.0    3.057     -31.7
Vermont.......................................................         12        45     -28.0    3,030     -32.3
New England...................................................        246        53     -15.0    4,400      -1.6
U.S...........................................................      3,430        62  ........    4,473  ........
----------------------------------------------------------------------------------------------------------------
Sources: Health Care Financing Administration and The Wall Street Journal                                       

                              big spenders

       While Medicare costs for home health services have gone up 
     nationwide, Sunbelt states led the spending spree. The new 
     payment system rewards states where payments were far above 
     average, as shown below (Data are for 1995.)

------------------------------------------------------------------------
                                           No. of      Avg.       Pct.  
                                           visits    payment     above  
                                            per        per      national
                                          patient    patient      avg.  
------------------------------------------------------------------------
Louisiana..............................        144     $7,867       75.9
Oklahoma...............................        127      7,358       64.5
Texas..................................        117      7,217       61.3
Tennessee..............................        121      6,886       53.9
Utah...................................        106      6,283       40.5
Mississippi............................        128      6,205       38.7
THE SOUTH..............................         95      5,488       22.7
U.S....................................         72      4,473  .........
------------------------------------------------------------------------
Sources: Health Care Financing Administration and The Wall Street       
  Journal                                                               

  Mr. FEINGOLD. Mr. President, I rise today to join my colleagues, 
Senators Collins, Chafee, Jeffords, Leahy, Reid and others in 
introducing the Home Health Medical Equity Act of 1998. I especially 
want to compliment the Senator from Maine, who has taken the lead on 
this issue. It is a matter of enormous concern in her State and also in 
mine. I think it is worth taking a moment just to acknowledge how 
useful the Senate Aging Committee is, to be able to highlight an issue 
like this. I wonder whether this issue would have gotten the attention 
it deserves had it not been for that forum, where we were able to have 
an excellent hearing and hear from Senators all over the country whose 
States are very negatively affected by the rules that were put into 
place. I congratulate the Senator from Maine for taking the initiative 
out of that hearing to introduce legislation.
  This legislation is a crucial step in ensuring that the Medicare Home 
Health Care program's Interim Payment System does not penalize regions 
of the country that have been providing home health services 
efficiently.
  Mr. President, I have been working to promote the availability of 
home care and other long-term care options for my entire public life 
because I believe strongly in the importance of enabling people to stay 
in their own homes. For seniors who are homebound and have skilled 
nursing needs, having access to home health services through

[[Page S3713]]

the Medicare program is the difference between staying in their own 
home and being moved into a nursing facility. Home care offers feelings 
of security, dignity and hope. Where there is a choice, we should do 
our best to allow patients to choose home health care.
  Mr. President, I recognize that there are situations when one's 
ability to conduct the activities of daily living are so limited, and 
the medical needs are so great, that the patient would be better 
served, in some cases, in a skilled nursing facility. I also want to 
recognize that my State of Wisconsin has a very, very good network of 
caring and high-quality nursing homes. Without a doubt, there is a need 
for these services. But, Mr. President, as I travel throughout 
Wisconsin's 72 counties every year, what seniors tell me again and 
again is that, to the extent possible, and as long as it is medically 
appropriate for them to do so, they would like to remain in their own 
homes. I think seniors need and deserve that choice.
  Mr. President, seniors clearly prefer to remain in their own homes 
rather than be moved to a nursing home. Their medical needs can often 
be met through home health services. Despite these facts, the 
implementation of the Medicare Home Health Interim Payment System as 
passed in last year's budget could create serious access problems for 
seniors in States like Wisconsin and Maine when they seek the home 
health benefit. The cuts to the Medicare Home Health program imposed by 
the Interim Payment System are so severe that home health agencies will 
have no choice but to reduce dramatically the amount of services 
provided. Some home care agencies may get out of the home care business 
altogether. But, Mr. President, the real impact of the Interim Payment 
System will not be simply to reduce payments to home care providers and 
force some out of business, what it will really do and what really 
concerns me is it will drastically reduce the options that homebound 
seniors now have today with respect to whether they will remain in 
their home in the community or whether they will be forced into a 
nursing home situation that is not necessarily the best place for them.
  As of right now, Mr. President, the Interim Payment System for 
Medicare home health care is a system that pays agencies the lowest of 
the following three measures: (1) actual costs; (2) a per visit limit 
of 105% of the national median; or (3) a per beneficiary annual limit, 
derived from a blend of 75% an agency's costs and 25% regional costs. 
Now, these measures are pretty technical and I will not go into any 
more of the specifics about them. But suffice it to say that the net 
effect of the Interim Payment System will be to penalize severely 
agencies who have been operating efficiently all these years. Since the 
Interim Payment System will pay the agency the lowest of the 
three measures that I mentioned, agencies in areas where costs have 
been kept lower will be disproportionately and unfairly affected.

  Mr. President, according to the Health Care Financing Administration, 
just in Wisconsin alone, there are currently 181 home health care 
agencies that participate in Medicare. Of these, two-thirds of them are 
operated as nonprofit entities. These nonprofit home health care 
providers are often county health departments and visiting nurse 
organizations; these are not entities out to make a fast buck on the 
backs of homebound seniors. According to administrators of Valley 
Visiting Nurse Association in Neenah, WI, the average, per patient 
Medicare home care cost in Wisconsin is $2,586, compared to $5,000 in 
other parts of the country. Let me repeat that, the statistics, because 
it is really quite striking. The average, per patient Medicare home 
care cost in Wisconsin is only $2,586, compared to often over $5,000 or 
more in other places in the country. These nonprofit providers in 
Wisconsin are already as lean as they can be. I am fairly convinced 
they don't have any ``fat'' to cut from their programs. The Visiting 
Nurse Association Home Health of Wausau showed me some figures 
demonstrating that, over the past 5 years, their services have averaged 
30 percent below limits imposed by the Health Care Financing 
Administration, with 36 percent fewer visits per beneficiary than the 
national average.
  Mr. President, the effect of the deep reductions imposed by the 
Interim Payment System will be, quite simply, a devastating blow to 
these types of agencies, and, in turn, will seriously impact the 
availability of home health care services to many people in Wisconsin. 
This devastating blow is dealt not because Wisconsin has been providing 
too many services too expensively. It is just to the contrary. States 
like Wisconsin and others are being penalized more precisely because 
they have always operated efficiently. Moreover, on a national level, 
with a reduced per-patient limit, home health agencies have a 
disincentive to take more seriously ill patients onto their rolls.
  Mr. President, the legislation my colleagues and I introduce today 
will change the Interim Payment System to bring about greater payment 
equity for Medicare home health providers in different parts of the 
country. The bill, as the Senator from Maine outlined, would create a 
new formula for the per-patient limit that reflects a higher percentage 
of national data rather than relying solely on regional and local data. 
The change in payment calculation would enable high-efficiency, low-
cost home health agencies to continue providing services efficiently 
and cost-effectively. But, Mr. President, the most important impact of 
the Medicare Home Health Equity Act will be to make sure that seniors 
who are homebound and have skilled nursing needs will retain for as 
long as possible the right to decide to stay in their own homes.
  Mr. President, I thank the Chair and yield the floor.
  Ms. COLLINS. Mr. President, I thank the Senator from Wisconsin for 
his cosponsorship of this important legislation and for his leadership 
in this issue.
  Mr. CHAFEE. Mr. President, I am pleased to sponsor the Medicare Home 
Health Equity Act of 1998 with my distinguished colleague from Maine. I 
want to applaud Senator Collins' efforts to correct a provision in the 
Balanced Budget Act (BBA) of 1997 which has had the effect of 
penalizing those home health agencies that have taken the lead in 
becoming more cost-efficient over the last several years.
  The Medicare Home Health Equity Act of 1998 will help avert the 
potentially devastating effect of the Interim Payment System (IPS), 
established by the Balanced Budget Act, on many home health agencies in 
Rhode Island, and throughout the country.
  The IPS for Medicare home health services that was established by the 
BBA bases its reimbursement in large part on agency-specific costs 
during fiscal year 1994. Consequently, home health agencies that had 
already been implementing cost-efficient practices at that time, like 
many agencies in Rhode Island were doing, are now finding their 
reimbursements greatly reduced.
  Home health agencies in my home state have told me that this 
decreased reimbursement, in addition to being unfair, might lead to 
reductions in critical health services that currently enable elderly 
patients to maintain their dignity and quality of life. These agencies 
also have pointed out that this interim payment system may well result 
in a loss of jobs in the home health industry.
  I am greatly troubled by the thought that the IPS now in effect may 
well put into financial jeopardy those Rhode Island home health 
agencies that have been working diligently to heed our appeal to 
deliver cost-efficient services. The impact of this payment system on 
one of Rhode Island's most vulnerable populations, the infirm elderly, 
is unpredictable and potentially devastating.
  The Medicare Home Health Equity Act of 1998 bases Medicare 
reimbursement for home health services primarily on national costs 
during the baseline year rather than agency-specific costs. 
Consequently, the most efficient home health agencies will not be 
placed at financial disadvantage. This is a matter of economic 
necessity--we will never be able to maintain the financial security of 
the Medicare program unless we encourage everyone involved in the 
system to help make it work.
  This bill is budget-neutral and will not increase overall Medicare 
expenditures. The legislation is a big step forward in our goal of a 
cost-efficient and reliable health care system for our older citizens.
  Mr. President, I encourage my colleagues to join me in supporting the

[[Page S3714]]

Medicare Home Health Equity Act of 1998.
  Mr. JEFFORDS. Mr. President, Vermont's home health agencies are a 
model of efficiency for the nation. For the past seven consecutive 
years, the average Medicare expenditure for home health care in Vermont 
has been the lowest in the nation. This efficiency was achieved by 
exclusive reliance on 13 nonprofit agencies which provide care without 
sacrificing quality, and which adhere strictly to Medicare requirements 
and guidelines. Today, I am cosponsoring The Medicare Home Health 
Equity Act of 1998, with my good friend Senator Collins, in order to 
preserve this high-quality, low-cost home health system from possible 
insolvency.
  At this moment, Vermont is facing an unprecedented crisis in its home 
health care system. This is not a crisis of their own making, and the 
home health agencies had little, if any, advance warning that disaster 
was imminent. The crisis that befalls Vermont's home health care 
agencies, and many others throughout the country, arose from the 
decision made by Congress, as a part of the Balanced Budget Act of 1997 
(BBA), to adopt a Medicare prospective payment system for home health 
care.
  There is compelling rationale and general agreement for moving 
Medicare to a prospective payment system (PPS) in the home health care 
sector. Under a national, prospective payment system, low-cost agencies 
will fare well, as they have already learned how to manage their 
resources wisely. However, the interim system created by the BBA for 
the transition to a PPS is fundamentally flawed and rewards high-cost 
agencies. Under the Interim Payment System, reimbursement limits for 
home health care are heavily weighted toward an agency's historical 
costs. This means that until a prospective payment system can be 
designed and implemented, the lowest cost agencies will face the most 
significant caps on their Medicare payments.
  Where a prospective payment system aims to level the playing field 
for agencies that care for similarly situated patients, the interim 
system preserves and reinforces significant disparities across 
agencies. Although high-cost agencies will face reductions in payments 
under the interim system, these will be the agencies in the best 
position to make those cuts. Low-cost agencies with budgets that are 
already lean have no place to turn. It would be a national tragedy if 
those low-cost agencies cannot survive the transition to a prospective 
system.
  I commend the efforts of my good friend Senator Collins for bringing 
this bill forward. it was a difficult task to craft a remedy that 
allows committed and responsible home health agencies to survive and 
also maintain budget neutrality. The Medicare Home Health Equity Act of 
1998 would alter the interim payment formula by basing payment caps on 
a blend of national and regional averages. In this way, we can move 
toward a more uniform level of reimbursement and allow home health care 
agencies in the same locale to operate under the same constraints. 
Furthermore, this legislation can be implemented quickly. This is 
important, because the regulations defining the interim payment system 
were not published until January of this year--nearly four months after 
the payment system was in force.
  The situation is serious. We must provide relief to home health 
agencies and peace of mind to the clients who are under their care. 
Last August, I voted in support of the Balanced Budget Act of 1997. I 
was proud of the changes we made to preserve Medicare benefits for the 
present and for future generations. Today, I urge my colleagues to 
enact The Medicare Home Health Equity Act of 1998 and correct the 
unintended consequences of the BBA's interim payment system 
reimbursement limits on low-cost home health agencies.
  Mr. HARKIN. Mr. President, I am pleased to join today with my 
distinguished colleague, Senator Susan Collins, in the introduction of 
the ``Medicare Home Health Equity Act of 1998.'' This bill tries to fix 
what we believe to be an unintended injustice in the Balanced Budget 
Act of 1997.
  As many of you know, home health agencies have historically been 
reimbursed on the basis of costs. The Health Care Financing 
Administration paid each agency to cover the cost of providing care. 
This arrangement has been widely criticized because of offers no 
incentive for agencies to control their costs.
  In order to correct this, we in Congress agreed that Medicare should 
move to a prospective payment system to control costs and ensure 
quality and access to care. The Balanced Budget Act establishes this 
system for home health, effective as of October 1, 1999. In the mean 
time, an interim payment system has been put in place. These changes 
were needed in order to rein in the incredible growth--some due to 
inappropriate payments--in the industry in the last seven years. In 
1990, Medicare spent $3.7 billion on home health care. In 1996, $16.7 
billion was spent. In addition, the average number of visits per 
beneficiary soared from 26 in 1990 to 76 in 1996.
  I believe the change to the prospective payment system had to be 
done. However, the interim payment system will reward high-cost, 
inefficient home health provides at the expense of those home health 
agencies that have historically kept their costs low. I don't believe 
this was the intent of Congress, and that is why I am cosponsoring 
Senator Collins' bill to correct this injustice.
  As co-chair of the Senate Rural Health Caucus, I've been working for 
a long time to change the big city, urban bias in Medicare's 
reimbursement payments. It penalizes more conservative cost-effective 
approaches to health care, and that hurts rural areas like Iowa. We 
went a long way towards fixing that bias in Balanced Budget Act by 
equalizing Medicare's reimbursement payments for managed care services.
  But unbeknownst to me and, I believe, most of my colleagues, while we 
provided rural equity in one area, we took it away in another. It is 
just common sense that we should reward those who provide quality care 
in a cost-effective, efficient manner. We did this when we changed the 
Medicare managed care rates. It doesn't seem right that in the same 
Act, we created an interim payment system for home health services that 
rewards the high cost, wasteful agencies and leaves those that have 
successfully kept their costs low struggling to survive.
  The system's reliance on a provider's historical costs in determining 
their reimbursement amounts has produced an uneven playing field. Many 
of the newer agencies, who got started during a period of high growth, 
now have a competitive advantage. They will now be reimbursed at a 
higher rate than their lower cost competitors.
  Senator Collins' bill does the right thing--it rewards those agencies 
who have done the most to save Medicare money. These include many 
visiting nurse associations, non-profit free standing agencies and most 
non-profit hospital based programs.
  The Home Health Equity Act will revise the current system of 
reimbursement based on 75 percent of agency cost blended with 25 
percent of national costs. The legislation would create a 75 percent 
national rate blended with 25 percent regional rate to level payments 
to providers in a given geographic area. In addition, this bill 
continues the cost savings that the interim payment system was intended 
to achieve. Price Waterhouse has analyzed the bill and found it to be 
budget neutral.
  If we don't fix the interim payment system, I am afraid we risk a 
reduction in access to and quality of health care for Iowa seniors. 
Iowa home health care agencies have historically provided efficient, 
quality service and they ought to be rewarded, not punished for this. 
Most importantly, rural patients and their families deserve continued 
access to the best possible care.
  Mr. DASCHLE. Mr. President, today I join my colleagues in introducing 
the Medicare Home Health Equity Act of 1998.
  The Balanced Budget Act (BBA) included numerous changes to Medicare 
that were necessary to extend the solvency of the trust fund and 
increase the program's integrity. It was extremely important 
legislation that I strongly supported, but there was no way to know the 
impact of every provision it included.
  One provision of the BBA in particular, the interim payment system 
for

[[Page S3715]]

home health care, locks in place inequities between regions of the 
country, efficient and inefficient providers, and new and older 
agencies. I am concerned about the impact of that provision on my state 
of South Dakota.
  In South Dakota, the interim payment system has raised significant 
concern. The interim payment system bases each agency's per patient 
cost limit largely on its per beneficiary cost in 1994. My concern is 
that South Dakota's cost per beneficiary and number of visits per 
patient were well below the national average in 1994. Many of the home 
health agencies in the state have expanded the geographic area they 
serve since 1994 and have added services that formerly were not 
available in the more rural parts of the state. Some of these agencies 
are the sole providers in our most rural counties.
  I have heard from Hand County Home Health Agency which primarily 
serves women, age 85 and older, with little family nearby and with 
difficult health conditions. Since 1994, the Hand County Home Health 
Agency has kept its costs down, but has added new services such as 
physical therapy and has expanded the geographic area to serve areas 
that no other provider covers. The agency has told me that they have to 
consider discontinuing the new services they cover or decreasing the 
geographic area they serve. Neither of these options seems acceptable 
to me.
  The interim payment system also creates problems between new and 
older agencies. In the same geographic area, where there is a new 
provider and an old agency, the new provider's limit will be based on 
the national median reimbursement. This results in significant 
discrepancies in reimbursement and ultimately the services that 
agencies can afford to deliver within the same area and market.
  Ultimately the impact of this payment system falls on beneficiaries, 
and this must be foremost in our minds. Senator Collins' bill would go 
a long way to addressing the access, quality, and equity issues that 
have been raised by the interim payment system in South Dakota. I am 
pleased to join her in beginning the dialogue on this issue that I hope 
will lead to construction changes for home health care patients in 
South Dakota and across the nation.
                                 ______