Reimbursement Updates

"Homebound" Definition Does Not Exclude Adult Day Care

   Medicare's home health benefit provides intermittent skilled nursing and other services to "homebound " beneficiaries - that is, "those patients who are able to leave home only with great difficulty and for absences that are infrequent and of short duration."¹ Absences from home permitted under Medicare regulations include obtaining medical care (physician office visits) and treatment at a hospital, extended care facility, or rehabilitation center when the medical equipment needed for the treatment is too cumbersome to bring to the beneficiary's home.

   Based on this statutory requirement, the Department of Health and Human Services (HHS) had a long-standing policy that beneficiaries who regularly attended adult day care were not considered homebound, particularly if they were receiving nonmedical or custodial care at the adult day care center. This position created uncertainty about whether or not Medicare beneficiaries who received medical services at an adult day care center were eligible for home health services.

   In December 2000, Congress specified that Medicare beneficiaries would not be disqualified from being considered homebound simply because they attended an adult day care center if they still met the other homebound requirements. This change elicited new concerns that increased Medicare expenses could result from additional numbers of patients being able to access the home health benefit. This concern was further sustained by the fact that Medicare home health services require no out-of-pocket expenses for the beneficiary, making home health more financially attractive than adult day care that is not covered by Medicare.

   In order to determine whether these concerns were valid, the General Accounting Office (GAO) conducted an analysis based on data from the 1999 National Long-Term Care Survey (NLTCS). The analysis estimated that 0.2% of Medicare beneficiaries over the age of 65 (61,000 to 72,000 people) attended adult day care in 1999 and were potentially "homebound" due to mobility or cognitive impairments that also might have made them eligible for Medicare home health services. The agency concluded that clarification of the Medicare definition of "homebound" to allow beneficiaries to participate in adult day care would likely have no effect on overall program costs or access to services because the number of qualifying individuals is so small.

   In response to the GAO, the Centers for Medicare and Medicaid Services (CMS) has confirmed that the change in the "homebound" statute recognizes that a beneficiary's eligibility for home health is not affected by absences from the home to attend adult day care.

Medicare's Financial Condition Remains a Concern

   Recent estimates suggest that more than one-third of Medicare beneficiaries do not have prescription drug coverage. The remainder has at least some sort of drug coverage - most commonly through employer-sponsored health plans - although recent data show that even this coverage is beginning to erode. Immediately after the implementation of the Balanced Budget Act of 1997, Medicare spending growth slowed. However, in the last fiscal year, growth in Medicare spending was nearly 9%, with spending on certain services increasing much more rapidly (eg, home health grew about 30% and spending for skilled nursing facility care grew slightly more than 20%).²

   In testimony before the Committee on Ways and Means in the House of Representatives on April 17, 2002, the Comptroller General of the United States expressed his deep concerns about further eroding the Medicare program by adding prescription drug coverage because the program is already "unsustainable in its present form."² Assuming that 2001 tax reductions are made permanent and discretionary spending keeps pace with the economy, by mid-century, spending for the current Medicare program (without the addition of a drug benefit) will account for more than one-quarter of all federal revenues. Even more disconcerting is the fact that federal revenues may only be adequate to pay Social Security and interest on the federal debt. As a result, massive spending, tax increases, or some combination of the two would be necessary to obtain balance no matter how well designed such a new Medicare benefit might be.

   Prescription drugs account for a growing share of healthcare spending, rising from 6.1% in 1995 to 9.4% in 2000.² By 2011, prescription drug expenditures are expected to account for almost 15% of total health expenditures. Last year, the Congressional Budget Office (CBO) estimated that an average Medicare beneficiary used $1,756 of prescription drugs and that 10% of Medicare beneficiaries had needs for more than $4,000 in prescription drugs. With increased costs and needs, fewer payers (eg, Medicare HMOs) are offering a drug benefit or are charging higher premiums for it. Obviously, the lack of drug coverage creates barriers to healthcare.

   Without meaningful reform and the time needed to implement it, the long-term financial outlook for Medicare remains bleak, as relatively fewer potential workers will be available to shoulder Medicare's financial burden as the baby boomers retire. The current generation and healthcare professionals in general have a stewardship responsibility to tomorrow's generations to ensure that future commitments are adequate and affordable.

1. Allen KG. Medicare home health: clarifying the homebound definition is likely to have little effect on costs and access. United States General Accounting Office. GAO-02-555R, April 26, 2002.

2. Walker DM. Medicare: financial outlook poses challenges for sustaining program and adding drug coverage. United States General Accounting Office. GAO-02-643T. April 17, 2002.