Summary: Until last year, home health care was one of Medicare's fastest growing benefits. In response to concerns about rising costs, fraud and abuse, and inadequate oversight, an interim payment system has been introduced that limits Medicare payments for home health care. Industry representatives claim that the cost limits are too stringent, causing some home health agencies to close. GAO found that prior to the widely publicized closures of agencies, both the number of agencies and the use of home health services had grown considerably. Although 14 percent of agencies closed between October 1997 and January 1999, beneficiaries are still served by more than 9,000 agencies--about the same number that were in business in 1996. Forty percent of the closures were concentrated in three states with considerable growth in the number of agencies and had utilization rates (visits per user as well as users per thousand fee-for-service beneficiaries) well above the national average. In addition, most closures occurred in urban areas that still have a large number of agencies offering services. The pattern of agency closures suggests a response to the interim payment system. Attention has focused on the number of Medicare-certified home health agencies available to provide care, but GAO believes that the more important question is whether beneficiaries continue to have access to Medicare-covered home health services. Overall home health utilization in the first quarter of 1998 had declined since 1996, but it was about the same as a comparable period in 1994--the year that serves at the base for interim payment system limits. Moreover, the sizeable variation in utilization between counties with high and low use has narrowed. These changes are consistent with interim payment system incentives to control utilization. GAO interviews in 34 primarily rural counties with substantial closures indicate that beneficiaries continue to have access to services.
