Doctors, nurses, therapists, and healthcare administrators want to help people as much as possible.  To do so, they must stay in business.  Recent Medicare changes make survival increasingly difficult for "home health" agencies, which send visiting nurses, therapists (physical, occupational, or speech therapists), social workers, and home health aides to work with homebound seniors.
         Typical hospital stays are much shorter than they were 20 years ago.  In 1983, Medicare drastically changed payment procedures for hospitals.  Instead of paying per day, Medicare started paying a fixed sum for each case, the specific amount based on the diagnosis.  This system is called "Diagnostic Related Groups" (DRGs); the hospital is paid the same, whether the person stays 3 days or 2 weeks--which provides an overwhelming incentive to cut costs by shortening hospital stays.  Home is often the best place to recuperate, anyway--but since 1983 patients go home "sicker," weaker, and with more complex needs than before.
         Home health agencies filled this "care gap," and rapidly grew to become a major component of health care for seniors.  The number of Medicare-certified agencies grew from 5700 in 1989 to over 10,000 in 1997.  Medicare expenditures for home health grew dramatically during this period.
         DRGs did not apply to home health; agencies were paid per visit, provided that the patient was homebound, the care ordered by a doctor, and that the visits were "reasonable and necessary."  Nurses and others all wrote voluminous "documentation" to justify each case, and Medicare reviewers would periodically "drop in" unannounced for a few days to check on things.  Agencies were not allowed to profit, but were reimbursed based on their specific costs.  Nevertheless, incentives to maximize visits were inherent in the system, so services were sometimes "overutilized."  This problem was ignored for years, because the
whole arrangement kept people out of the hospital and thus reduced expenses overall.  As home health took a progressively larger slice of the Medicare pie, however, people began noticing; in 1997 the cost-cutting axe fell.
         In the Balanced Budget Act of 1997, Congress required transition to a
"Prospective Payment System" (PPS), which will be similar to the hospital DRG system.  Details are currently being hammered out.  The switchover is required by next October, and an "Interim Payment System" (IPS) is now operating.  The IPS has serious flaws, especially in that it inadvertently penalizes economical agencies and rewards less efficient ones, because payment is based on an agency's historical costs.
         The bottom line is that payments for home health care have dropped precipitously, and another 15% reduction is slated for next October if PPS is not inaugurated by then.  Over 1200 agencies have folded in the past year.  To cut costs, agencies are reducing their visits, "discharging" patients earlier, and may in some cases avoid even admitting complex (and costly) patients.
         When this happened in hospitals, home health filled the gap.  Who will now?
Current changes may result in many more people being admitted to nursing homes, and may ironically cost more in the long run, although the funding source will be different:  Medicare doesn't cover long-term placement--after a person "spends down" their assets, they become a ward of the state in a nursing home.
         The current system is a bureaucratic nightmare that distracts nurses, therapists, and social workers from doing their best work with clients.  Hopefully this will improve when PPS is implemented and the rules become more clear.  Legislation is currently moving through Congress which would mitigate some of the problems caused by the IPS, would defer the 15% payment cut scheduled for next October, and would allow until October 2000 for final implementation of PPS.
         In any case, the trend is clear:  services are being cut.  It is thus more crucial than ever to do all we can to maintain and improve our health.