Where Do We Draw the Line on Paying for Home Health Care?

A relatively modest Medicare proposal put forward by President Obama in his 2014 budget may help to rekindle the debate about how we pay for long term care services in the coming years.  But where will we draw the line about our own responsibilities and those of the government?

This is because the President’s proposal is simple and easy to understand, and it will affect nearly all of us sooner or later.

He has asked for a $100 Medicare co-pay, starting in 2017, for five or more home care visits that are not preceded by a stay in an institution, according to a story this week in Kaiser Health News.  KHN added that “home care is one of the few areas in Medicare that does not have cost sharing.”

So should it?

While there is cost-sharing throughout most of the Medicare program – hospital deductibles, nursing home benefits, drug payments, and physician co-pays, for example – home health care has always been something of a special case.

A century ago, home care was pretty much all there was.

But as American medicine transformed itself during the first half of the 20^th century, home health care nearly disappeared.   According to Centers for Medicare and Medicaid (CMS) historical data, by 1960 the total amount we spent as a nation on home health care was only $57 million, barely a blip in national health care spending. 

CMS also notes that home health care spending still represents a very small share of national health care spending – around 2.7 percent.  In 2011, we spent $74 billion on home care – more than one thousand times what we spent on it fifty years earlier, but still not much in relative terms.  We spent more than ten times that, or $850 billion, on hospital care, and two times that, or $149 billion for nursing home and other residential care.

Hospital spending represents one third of our nation’s health care bill.  And nursing homes have been at the center of our long term care delivery system for at least forty years now.

But things have been quietly changing for Medicare recipients over the last thirty years.  The average inpatient length of stay in hospitals for people over the age of 65 was cut in half between 1980 and 2004.  Nursing homes picked up part of the slack, offering new short-term rehabilitation services in addition to long term care. 

But we gradually turned back to home care to meet many of our care needs.

By 2007, 1.5 million people were using home care health services, and not just for short-term recovery and rehabilitation.  The average length of stay in home care services was 315 days. 

And according to the Bureau of Labor Statistics, the home health care industry grew rapidly.  Over 839,000 people worked as home health aides in 2012.  This represented an industry growth rate of more than 400% over a quarter of a century.    

The problem isn’t the numbers.  It’s the trend.

An industry that represented a near zero share of our nation’s health care spending as recently as 1971 has tripled its share of our national health care bill since 1981.  It was one-sixth the level of nursing home spending in 1981.  Now it is half.  And that share will represent nearly $150 billion in spending by 2021 – almost 3,000 times what we spent on it in 1961.

That’s enough to get the attention of policy leaders, who don’t want to foot the bill by themselves. 

Some of us think they should not have to do so – we assume we may need long term care some day, and we’ve purchased long term care insurance to cover some of those down-the-road nursing and home care costs.  More of us seem to take the position that we will never need health care – that we will remain healthy and active up to the moment we die.

But the President’s proposal takes the middle ground.  It recognizes that most of us will need and want home health care some day, and that we will be willing to share the responsibility with our government to pay for this.

The President is not alone in seeking cost-sharing for home care.  Greater cost-sharing is a part of every Medicare reform proposal being floated today.  The only question is: where will we draw the line? 

To reach Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/