Post-acute care adds to the Medicare financial burden

Post-acute care, including access to home health care without an initial hospital stay, is adding to the financial burden of an already stressed Medicare system.

“Medicare provides health insurance coverage for 66 million elderly and disabled Americans but faces serious short- and long-term financial pressures,” according to a new report from The Urban Institute. “To address these pressures, policymakers need to consider options that involve raising additional revenues, finding ways to generate program savings or likely both.”

The report looked at spending trends and policy proposals, while analyzing users of post-acute care services. Among the key takeaways:

• Medicare payments for skilled nursing facilities, home health and inpatient rehabilitation facilities have long been considered excessive. Reducing these payments may be an easy choice to help put Medicare’s financing on a more sustainable path, although more comprehensive solutions eventually will require harder choices.
• Moving Part A payments for home health services to Part B would be an expedient way to deal with the hospital insurance deficit, but it would do nothing to address Medicare spending as a whole and could lead to increased Part B premiums.
• Traditional Medicare enrollees who use skilled nursing facilities and home health are older and need costlier health services. Spending for enrollees with skilled nursing facilities stays is 10 times higher and home health care is seven times higher than spending for enrollees who use neither service. Thus, managing the overall care of post-acute users in traditional Medicare offers substantial opportunities for savings and quality improvement. Bundled payment policies that encourage coordination between the acute care hospital and post-acute care providers are one approach that could generate savings and improvement in care for the patient.
• Policies that would aim to generate program savings by increasing cost-sharing obligations for users of post-acute care would add to already high financial burdens for beneficiaries lacking supplemental or Medicaid coverage unless increased cost sharing for post-acute care were accompanied by policies that would reduce beneficiaries’ overall exposure to high out-of-pocket costs.
• The exact date of Medicare insolvency is uncertain, and the expected date being pushed to around 2031 provides more opportunity to spread necessary spending reductions or revenue increases over time. Making reasonable payment adjustments now could further postpone the date of insolvency.

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“Given the impending insolvency of the Medicare health insurance trust fund, Congress will likely be forced to shore up Medicare finances through payment cuts, additional revenues or both,” the report concluded. “Though the expected timing of health insurance insolvency has shifted and remains uncertain, the sooner Congress acts, the better it can distribute changes to spending and revenue over time and avoid more difficult choices.”