In August 1997, Congress enacted the Balanced Budget Act, which included major changes affecting the way Medicare pays for home health services. In brief, the Balanced Budget Act mandated a prospective payment system to replace a cost-based reimbursement methodology for home health. The new system would take effect October 1999, following a two-year period during which an interim payment system would be in place.
Based on 1997 data, some three million beneficiaries, or about one in 13, receive home health services reimbursed by Medicare. The Health Care Financing Administration estimates that these beneficiaries received an average of 80 home health visits each in 1997. Current information about home health users is key to evaluating any additional action by Congress or the Administration affecting the home health benefit. As shown in this FYI, the "typical" Medicare home health user differs from the typical Medicare beneficiary in several respects, especially in their daily living circumstances and resources for meeting health care needs. The home health user is typically older, more limited in activities of daily living (ADLs), more likely to use Medicaid, and more burdened with out-of-pocket health expenses.
Living Arrangements - Seventy-one percent of home health users live without a spouse, dwelling either alone or with others. Among beneficiaries generally, 58 percent live without a spouse, whether alone or with others.
Functional Limitations - Forty-three percent of home health users have at least one limitation in their activities of daily living (ADLs). In the general Medicare population, only 10 percent have one or more limitations in ADLs.
Age - Sixty-six percent of Medicare home health users are aged 75 and older, compared to 40 percent of Medicare beneficiaries generally. Twenty-five percent of Medicare home health users are aged 85 and older, compared to 10 percent of beneficiaries generally.
Gender - Sixty-three percent of home health users are women, compared to 55 percent of beneficiaries generally.
Income - Home health users typically have lower incomes than beneficiaries generally. There is a substantially higher proportion of home health users with annual household incomes below 200 percent of the poverty level than among the general beneficiary population.
Health Insurance Coverage - Twenty-nine percent of home health users receive Medicaid, compared to 15 percent in the Medicare population overall. Medicare home health users are slightly more likely (29 percent versus 26 percent) to have Medigap insurance than beneficiaries overall. Home health users are less likely to have employer-sponsored insurance (27 percent for home health users, compared to 32 percent overall). Like the general beneficiary population, 15 percent of home health users lack any health care coverage other than Medicare. While 12 percent of all beneficiaries are enrolled in Medicare health maintenance organizations, the number of home health users in HMOs is very small.
Out-of-Pocket Spending - Average out-of-pocket health expenditures for home health users are substantially higher than average out-of-pocket health expenditures for Medicare beneficiaries generally. For home health users, out-of-pocket expenditures are, on average, $2,879 annually, or 27 percent of income. Among Medicare beneficiaries generally, out-of-pocket expenditures are $2,076 or 18 percent of income. Figure 3
- "Home health user" refers to all Medicare beneficiaries, including disabled beneficiaries, who received covered home health services in 1997.
- Poverty level for persons age 65 or older in 1997 was estimated to be $7,755 for individuals and $9,780 for couples.
Source: AARP/PPI analysis using the Medicare Benefits Simulation Model
Prepared by Lisa A. Foley, Normandy Brangan and Alison Jaffe-Doty, AARP Public Policy Institute
May be copied only for noncommercial purposes and with attribution; permission required for all other purposes.
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