Medicare Home Health Benefit Primer: Benefit Basics and Issues

Scott R. Talaga
Analyst in Health Care Financing

The Medicare home health benefit provides coverage for home visits by skilled health care professionals. To be eligible for the home health benefit, a beneficiary must meet three different criteria. The beneficiary must (1) be homebound, (2) require intermittent skilled nursing care and/or skilled rehabilitation services, and (3) be under the care of a physician who has established that the home health visits are medically necessary in a 60-day plan of care. A beneficiary who meets these requirements is entitled to a 60-day episode of Medicare coverage for home health visits, and is then entitled to an unlimited number of 60-day episodes so long as he or she continues to meet the eligibility requirements. There is no cost-sharing requirement for home health services. Roughly 9.6% of Medicare fee-for-service (FFS) beneficiaries (or 3.4 million individuals) used home health services in 2010.

Home health services are provided through home health agencies (HHAs), most of which are (90%) freestanding—HHAs not affiliated with an institution such as a hospital or a nursing facility. The number of HHAs participating in Medicare grew by 57% between 2000 and 2010 (from 7,528 to roughly 11,800), with a vast majority of the increase in for-profit freestanding HHAs.

Similar to most Medicare payment methods, Medicare reimburses HHAs using a prospective payment system (PPS). A PPS reimburses providers with payments that are predetermined by a formula that adjusts payments for beneficiaries’ expected care needs and location, among other factors. The home health PPS (HH PPS) was implemented for services beginning on or after October 1, 2000. Generally, the HH PPS provides a single payment for a 60-day episode to HHAs for the estimated costs of home health services. The 60-day episode payment is in contrast to the prior home health payment system that reimbursed HHAs retrospectively on a per visit basis.

While total Medicare FFS expenditures have grown at an average annual rate of 5.9% between 2001 and 2011, Medicare FFS expenditures on home health services have increased at an average annual rate of 8.0% over the same time period. In 2011, Medicare FFS expenditures on covered home health services totaled $18.4 billion. In addition to the high growth rate in Medicare home health payments, the home health benefit has drawn attention due to the consistently high Medicare margins (percentage of Medicare revenue that exceeds costs of services) of participating HHAs. Between 2003 and 2010, aggregate Medicare margins for freestanding HHAs steadily increased from 13.6% to 19.4%.

As deficit reduction pressures increase, the 113th Congress may debate whether to include beneficiary cost-sharing for home health services (a proposal recommended by the Medicare Payment Advisory Commission and various other groups). Congress may also consider proposals to implement a value-based purchasing program for HHAs that would adjust Medicare payments based upon certain HHA quality measures. Similar proposals are currently being implemented in other Medicare payment systems. Congress may also choose to monitor the implementation of the settlement agreement of a recent class-action lawsuit between the Department of Health and Human Services (HHS) and the Center for Medicare Advocacy regarding the so-called “improvement standard”—a sub-regulatory rule-of-thumb used by some Medicare claims contractors which required that beneficiaries show a likelihood of medical or functional improvement before Medicare provided payment for services in a home or institutional setting.


Date of Report: March 14, 2013
Number of Pages: 33
Order Number: R42998
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Medicare Trigger

Patricia A. Davis
Specialist in Health Care Financing

Todd Garvey
Legislative Attorney

Christopher M. Davis
Analyst on Congress and the Legislative Process

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108- 173) requires the Medicare Board of Trustees to provide in its annual reports an expanded analysis of Medicare expenditures and revenues (§801 of MMA). Specifically, if the trustees determine that general revenue funding for Medicare is expected to exceed 45% of Medicare outlays for the current fiscal year or any of the next six fiscal years, a determination of excess general funding is made. If the determination is issued for two consecutive years, a funding warning is issued, which triggers certain presidential and congressional actions (§802-§804 of MMA).

Because such a determination was issued in both the 2006 and 2007 Medicare Trustee’s reports, the President was required to submit a legislative proposal to Congress within 15 days of submitting his budget in 2008 that would lower the ratio to the 45% level. Similarly, each of the subsequent Annual Reports of the Boards of Trustees through 2012 has included an estimate that general revenue funding would exceed 45% at some point during the current or six subsequent fiscal years, thus “triggering” a response from the President and Congress. While such a proposal was submitted by President George W. Bush in 2008, no such legislative proposals have been submitted since that time. The House approved rules changes for a portion of the 110th Congress (H.Res. 1368) and for all of the 111th Congress (H.Res. 5) that waived the parliamentary procedures for the House contained in Section 803 of the MMA. The 112th Congress did not pass a similar measure, nor has the 113th Congress, and the trigger provision has gone back into effect in the House.

The Medicare funding warning focuses attention on the impact of program spending on the federal budget, and provides one measure of the financial health of the program. However, some options for reducing general revenue spending below the 45% level would have a greater impact than others. Proponents of the trigger maintain that it forces fiscal responsibility, while critics of the trigger suggest that other measures of Medicare spending, such as total Medicare spending as a portion of federal spending, would be more useful indicators.


Date of Report: March 4, 2013
Number of Pages: 13
Order Number: RS22796
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Funding for the Older Americans Act and Other Aging Services Programs

Angela Napili
Information Research Specialist

Kirsten J. Colello
Specialist in Health and Aging Policy

The Older Americans Act (OAA) is the major federal vehicle for the delivery of social and nutrition services for older persons. These include supportive services, congregate nutrition services (meals served at group sites such as senior centers, schools, churches, or senior housing complexes), home-delivered nutrition services, family caregiver support, community service employment, the long-term care ombudsman program, and services to prevent the abuse, neglect, and exploitation of older persons. The OAA also supports grants to older Native Americans and research, training, and demonstration activities. The Administration on Aging (AOA) in the newly established Administration for Community Living (ACL), within the U.S. Department of Health and Human Services (HHS) administers most OAA programs. The exception is the Community Service Employment for Older Americans (CSEOA) program, which is administered by the U.S. Department of Labor (DOL). The ACL also administers several aging services programs authorized under the Public Health Service Act, such as the Alzheimer’s Disease Supportive Services Program and the Lifespan Respite Care Program. Funding for OAA programs and other aging services is provided through appropriations legislation for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (Labor-HHS-Education).

FY2012 funding for OAA programs totals $1.913 billion, 1% less than in FY2011. The President’s FY2013 budget request proposes $1.907 billion for OAA programs, 0.3% less than the FY2012 level. The President’s budget proposal would eliminate $6.5 million in discretionary OAA funding for Aging and Disability Resource Centers (ADRCs) also funded by the Patient Protection and Affordable Care Act (P.L. 111-148, as amended). The Continuing Appropriations Resolution, 2013 (CR; P.L. 112-175) became law on September 28, 2012. For most discretionary programs, including OAA programs, the CR continues funding at close to FY2012 levels. The CR provides funding for October 1, 2012, through March 27, 2013, although amounts may change depending on whether certain actions, such as sequestration, are taken pursuant to the Budget Control Act (P.L. 112-25) and the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240).

Since the enactment of OAA, Congress has reauthorized and amended the act numerous times. In the past, OAA reauthorization has included extending the act’s authorization of appropriations for a five-year period. The last OAA reauthorization occurred in 2006, when Congress enacted the Older Americans Act Amendments of 2006 (P.L. 109-365), which extended the act’s authorization of appropriations for FY2007 through FY2011. The authorization of appropriations for most OAA programs expired at the end of FY2011. However, Congress has continued to appropriate funding for OAA authorized activities. In the 112th Congress, comprehensive OAA reauthorization legislation was introduced which would extend the authorization of appropriations for most OAA programs through FY2017 and would make various amendments to existing OAA authorities.

This report provides details of FY2011, FY2012, and FY2013 funding for OAA authorized activities, as well as for other aging services programs administered by ACL under other statutory authorities.


Date of Report: February 20, 2013
Number of Pages: 44
Order Number: RL33880
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Medicare Primer

Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Scott R. Talaga, Coordinator
Analyst in Health Care Financing

Cliff Binder
Analyst in Health Care Financing

Jim Hahn
Specialist in Health Care Financing

Suzanne M. Kirchhoff
Analyst in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing

Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services.

Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person with a permanent disability, have End-Stage Renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, Lou Gehrig’s disease). The program is administered by the Centers for Medicare & Medicaid Services (CMS), and by private entities that contract with CMS to provide claims processing, auditing, and quality oversight services.

In FY2013, the program will cover approximately 52 million persons (43 million aged and 9 million disabled) at a total cost of about $598 billion. Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the appropriations process. Services provided under Parts A and B (also referred to as “traditional Medicare”) are generally paid directly by the government on a “fee-for-service” basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly “capitated” amount to provide enrollees with at least a minimum standard benefit. Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met.

Since 1965, the Medicare program has undergone considerable change. For example, during the 111th Congress, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 and P.L. 111- 152) made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits. However, in the absence of further congressional action, the Medicare program is expected to be unsustainable in the long run. The Hospital Insurance (Part A) trust fund has been estimated to become insolvent in 2024. Additionally, although the Supplementary Medical Insurance (Parts B and D) trust fund is financed in large part through federal general revenues and cannot become insolvent, associated spending growth is expected to put increasing strains on the country’s competing priorities. As such, Medicare is expected to be a high-priority issue in the 113th Congress, and Congress may consider a variety of Medicare reform options ranging from further modifications of provider payment mechanisms to redesigning the entire program.


Date of Report: February 28, 2013
Number of Pages: 37
Order Number: R40425
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Comparing Medicaid and Exchanges: Benefits and Costs for Individuals and Families

Evelyne P. Baumrucker
Analyst in Health Care Financing

Bernadette Fernandez
Specialist in Health Care Financing

The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) expands health insurance coverage primarily through two mechanisms: by expanding the existing Medicaid program and by establishing new health insurance exchanges where certain individuals and businesses can purchase private health insurance. Under ACA, Medicaid and exchanges are envisioned to work in tandem, with the potential to provide a continuous source of subsidized coverage for lower-income individuals and families, beginning in 2014.

On June 28, 2012, the U.S. Supreme Court issued a decision in National Federation of Independent Business v. Sebelius. The Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program, effectively making the ACA expansion “optional.” As a result, some states may choose not to expand their Medicaid program. Individuals who are eligible for Medicaid are not eligible for subsidies in exchange plans. Thus, some individuals in these states would not be eligible for Medicaid and could become eligible for subsidized exchange coverage, while others may remain uninsured.

Individuals who receive coverage through exchange plans will likely not receive the same benefits offered by the Medicaid program, and vice versa. For example, traditional Medicaid provides a wide range of benefits to certain beneficiaries that are not typically covered in major medical plans in the private market, such as non-emergency transportation services or Early Periodic Screening, Diagnosis, and Treatment (EPSDT). Exchange plans will reflect a “typical” private health insurance plan offered by employers, which generally includes a wide range of benefits, but not necessarily all, that are offered to various Medicaid groups of individuals. Exchange plans will be required to offer essential health benefits, which include preventive services with no cost-sharing, a benefit available to many, but not all, Medicaid beneficiaries. Thus there will likely be differences in available benefits for some individuals, depending on whether they are covered by Medicaid or exchange plans.

In lieu of traditional Medicaid benefits, states can choose to offer an alternative set of benefits (benchmark and benchmark-equivalent coverage) that will include the essential health benefits, but only to certain groups of Medicaid beneficiaries. This alternative set of benefits has the potential to more closely align the benefits under Medicaid and the exchange for certain individuals.

In addition to differences in benefits, there may also be differences with regard to the costs required of individuals. Currently, states may require certain Medicaid beneficiaries to share in the cost of services, but because of their lower income, such obligations are generally limited. Nonetheless, variation exists across the different categories of Medicaid eligibility groups with respect to costs. Similarly, ACA provides for premium and cost-sharing assistance for the purchase of exchange plans for certain lower-income individuals. However the only permissible variation across qualified individuals (or families) for these exchange subsidies is based on income.

Another group for whom the alignment between Medicaid and exchanges is important is composed of individuals who are covered by Medicaid today, but who may lose Medicaid coverage when states are allowed to scale back their Medicaid program. This state “maintenance of effort” requirement for covering certain adults will be lifted beginning in 2014 (and in 2019 for the coverage of children). Some of these individuals will qualify for subsidies through exchange plans, while others may become uninsured. Additionally, some individuals may “churn”; that is, they may go back and forth between Medicaid and exchange coverage, depending on their financial or other situation at the time. While some “churning” may be unavoidable, minimizing its effects may be critical to the health coverage of affected individuals and families.

The 113th and future Congresses will likely continue to play a significant role in shaping U.S. health care policy. This report provides an analysis of some of the key similarities and differences between Medicaid and insurance plan structure in plans offered through exchanges. Because Medicaid services vary by population covered and by state, and exchanges’ plans can also vary by state, this report provides insight into the complexities and issues when comparing beneficiary benefits and costs to individuals for Medicaid and the exchanges. The inherent variations in Medicaid and the uncertainty about exactly how the exchanges will operate are just two of the factors that complicate a comparison.


Date of Report: February 28, 2013
Number of Pages: 30
Order Number: R42978
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