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Health Care Costs and Financing

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State shifting of Medicaid home care costs to Medicare greatly increases Medicare expenditures for home care

Home care services funded by Medicare and Medicaid grew rapidly throughout most of the 1990s. In fact, Medicare home health expenditures were the fastest growing component of the Medicare program for most of the 1990s, growing from $5.4 billion in 1991 to $14.9 billion in 1998. A policy adopted by some States to shift home care costs of patients eligible for Medicaid and Medicare (dual eligibles) from Medicaid to Medicare may explain some of the increase in Medicare expenditures during this period, according to two studies supported by the Agency for Healthcare Research and Quality (HS11262 and T32 HS00032). In these cases, State Medicaid home care programs pay home care claims and then retrospectively pursue Medicare reimbursement.

These Medicare maximization billing practices for home care services may aid States in reducing Medicaid outlays and potentially help dual eligibles gain coverage for their home care claims. On the other hand, they increase Medicare expenditures for home care at a time of concern for the long-term financial viability of Medicare and illustrate the need for reforming the Nation's long-term care financing policy, according to Wayne L. Anderson, Ph.D., of the University of North Carolina at Chapel Hill.

Dr. Anderson and his colleagues collected data from all 49 States with Medicaid programs, case studies of three States with retrospective billing practices, and information from officials of the Centers for Medicare & Medicaid Services to determine which States used retrospective Medicare billing practices and the amounts recovered from Medicare. Their analysis indicated that seven States recovered as much as $265 million from Medicare in State and Federal dollars during the 1990s. The three case study States recovered expenditures five to seven times over the costs incurred for retrospective billing practices. The second study by Dr. Anderson's group analyzed data collected from 47 State Medicaid offices supplemented with Medicare Current Beneficiary Survey data from 1992-1997. They projected that State retrospective Medicare maximization billing practices would increase Medicare home health care expenditures by $73.8 million over 6 years, although this was not statistically significant.

In conclusion, the researchers note that as a result of retrospective billing practices, claims could be skipped over in the screening process that potentially might be reimbursable by Medicare. Most States' screening processes employ a dollar threshold below which no claim is submitted, or if a claim is submitted, it is not appealed if denied. It is not possible to measure the magnitude of these implicit costs or to tell whether they might make retrospective billing practices less attractive for States. A State's success with this innovation may vary depending on the net gains and efficiency realized with retrospective practices compared with its current prospective billing practices. Further, the authors note that the existence of retrospective billing practices attests to the need for a centralized payer policy in which social benefit can be determined without losses in efficiency to the Government agencies responsible for implementing the policy.

See "Adoption of retrospective Medicare maximization billing practices by State Medicaid home care programs," by Dr. Anderson, Genevieve S. Kenney, Ph.D., and Donna J. Rabiner in the October 2003 Journal of Health Politics, Policy and Law 28(5), pp. 859-881; and "Effects of State Medicaid home care Medicare maximization programs on Medicare expenditures," by Dr. Anderson, Edward C. Norton, Ph.D., and Dr. Kenney, in the Home Health Services Quarterly 22(3), pp. 19-40, 2003.

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