Year of Reform Year of Risk

Business on Capitol Hill has a way of slowing down in presidential election years. As partisan feeling rises, the big issues tend to get put on hold. Neither party is in a mood for compromising nor cutting deals. Everyone is waiting to see who will be in charge the next year in Congress and, of course, the White House.

Now the waiting is over. It’s a far different kind of year.

There’s a new Congress in 2005, along with a second-term president who now can claim the prize that eluded him before — a clear victory at the polls. George W. Bush has ambitious plans to reform Social Security, the tax code and health care, and he is in a hurry to get his agenda accomplished.

Members of Congress know, whether or not they admit it publicly, that huge federal programs are unsustainable without serious structural reform. Social Security, Medicare and Medicaid together account for about $1 trillion in outlays. All are operating beyond their means. Bush wants action on Social Security this year, but Medicare and Medicaid (especially the latter) are closer to fiscal crisis. Something has to be done about them soon, with or without a push from the White House.

These factors could add up to an eventful year for the home health care industry, which has a major stake in federal and state health care spending. The risks are familiar: Congress might do what it has done before and squeeze DME and home care to fix fiscal imbalances and free up money to please more powerful interest groups. But home care may also have a better chance than ever to make its case as a cost-cutter, and even to win an expanded role.

This is shaping up to be a year of reform, risk and, perhaps, opportunity.

Home care businesses will need to keep an eye on several programs and reform drives, including those not directly connected to health or medicine. The need for action is most obvious with Medicaid, the state-federal program of health care for the poor. The Bush administration wants to pare back federal Medicaid funding, while on their side, state governors are already starting to make cuts, some deep and potentially damaging to home care.

As for Medicare, the White House is not planning surgery on the program this year. It would prefer to see Medicare left alone while it rolls out the prescription drug benefit and other provisions of the 2003 Medicare Modernization Act. Bush has even pledged to veto any bill that would reduce the new drug benefit.

But Medicare may still be vulnerable to cuts in the new Congress. Among other things, doctors want relief from a planned reimbursement cut, and the drug benefit is busting its planned budget before it’s even off the ground.

Bush’s drive to reform both Social Security and the tax code could also affect home care, though exactly how may be impossible to predict until the fall, when the omnibus spending bills head for their final votes.

“You could see the mother of all reconciliation bills moving through Congress in October or November, having all kinds of parts including Medicaid reform, permanent tax cuts, Social Security reform and health care provisions,” says Ann Howard, the director of federal policy at the American Association for Homecare. With such bills come last-minute juggling of accounts, which Howard says present an opportunity to address home care issues, such as extension of the rural add-on and FEHBP (Federal Employees Health Benefits Plan)-based reimbursement.

Can Home Health Save Medicaid?

The news about Medicaid, the gargantuan program that provides health coverage for 53 million poor, aged and disabled Americans, is bad and keeps getting worse. During the downturn of the early 2000s, sharply rising Medicaid budgets were prime culprits in the states’ fiscal crunch, widely considered the worst since World War II.

Costs for Medicaid — which will spend $330 billion in fiscal 2005 and has surpassed Medicare to become the country’s largest health care program — have continued to soar, hobbling state governments as they try to work their way back to health. At its Winter Meeting, the National Governors Association reported that on the state level, Medicaid has overtaken K-12 education as the largest single portion of state budgets.

This year, the White House gave states one more thing to worry about when it proposed reducing the federal share of Medicaid by as much as $60 billion over the next decade. Both houses of Congress were set to begin the plan. The Senate’s original FY 2006 budget called for trimming $14 billion from the program over the next five years, while the House plan recommended cuts of $15.1 billion over the same time frame to Medicaid and the State Children’s Health Insurance Program (SCHIP).

A last-minute amendment to the Senate resolution, however, offered up by Sen. Gordon Smith, R-Ore., would take the proposed cuts off the table for now. It passed by a narrow vote of 52-48, but the House budget remained intact. At press time, both measures were headed toward conference committee.

Governors are protesting any cuts, but they may be hard to ward off because of the program’s shared funding responsibility. Congress and the administration might offer the states a deal: less federal money but more flexibility in what services to offer and to whom. The governors would prefer more money and flexibility, but it is unlikely that they would get both.

What they may get, though, is some breathing room while Washington works on reform. Medicaid is clearly on an unsupportable path. Its eligibility and reimbursement rules need to be changed to bring its growth back into line with tax revenues.

Toward that end, Smith’s amendment calls for backing legislation that would create a Medicaid reform commission charged with review of the program’s long-term goals and financial sustainability. Working with the administration and governors, the 23-member bipartisan panel would have to come up with recommendations for wholesale changes, including a cost-effective financing plan, by fiscal 2007.

In the meantime, states are scrambling to cut their Medicaid costs. The HME industry — which gets as much as 16 percent of its revenue from Medicaid, according to HomeCare’s 2005 Forecast Survey of providers — is feeling some of the pain.

The worst cuts proposed so far are probably those in Missouri, where Gov. Matt Blunt wants to eliminate most adult DME funding in that state’s Medicaid program. As of press time, the state’s House was backing a plan to restore some of the funds — including $82 million for some services and wheelchairs — but to pay for it, legislators pared almost $24 million from Missouri’s MC+ for Kids program, which provides health care for families who don’t have health insurance but don’t meet the financial requirements for Medicaid.

At the federal level, however, officials seem to have different ideas about how to save Medicaid money. New Health and Human Services Secretary Mike Leavitt, a former Utah governor, put in a good word for home care in a Feb. 1 speech on Medicaid reform. “Providing the care that lets people live at home if they want is less expensive than providing nursing home care,” he said, and he pointed to Vermont as an example of a state doing things right. Eighty-five percent of that state’s Medicaid population over 65 lives at home, he said, thanks to a “highly developed home and community-based health care system.” In contrast, he noted, only half the elderly on Medicaid live at home in New Hampshire, which “continues to rely on institutional care.”

In Utah, a model program called Primary Care Network, begun while Leavitt was governor, provides coverage for more low-income people but with reduced benefits: emergency room visits, inpatient hospitalization and specialty physician services are not covered. Neither is nursing home care.

In Leavitt’s view, at least, home care could help save Medicaid. But will governors listen? And will Congress follow his lead in any reform plan it enacts?

Or to put it another way, does the Medicaid crisis spell hard times or opportunity for HME? Asela Cuervo, a Washington, D.C.-based attorney with an HME-industry background, says states will be scrambling for “additional pockets of money” in the short term and may not be interested in longer-term solutions such as cost-cutting through home care. But, she adds, “All challenges present opportunities as well. Certainly there will be more emphasis on lower-cost settings.”

Shifting Medicaid nursing home patients to home care would create more demand for HME services, Cuervo notes. “When you’re talking about the skilled nursing-facility population, you’re talking about a lot of people who need skilled care in the home, and they will not be getting that care without the proper equipment.”

So HME may have more points in its favor than the grim news about Medicaid would suggest. Pressure to cut costs is intense, and DME is vulnerable as usual to short-term thinking.

But the Bush administration seems to endorse the industry’s core argument — that home care costs less than the alternatives and is preferred by patients — and both the administration and Congress are leaning toward real reform of Medicaid, not just budget cuts.

If Congress names a panel and gives it time to do its work, HME should get its chance to be heard.

Medicare’s Latest Surprise

If Medicaid is about to hit the wall, Medicare is following not very far behind. The federal health plan for America’s elderly, accounting for a mean 37 percent of providers’ reimbursements in HomeCare’s survey, is caught in a demographic squeeze like that of Social Security. The number of beneficiaries is growing much faster than the number of taxpayers to support them.

The difference is that Medicare is on a faster track to insolvency. Part A, which covers hospital bills and is funded by payroll taxes, is expected to fall into the red in about five years and run through its reserves before 2020. Part B, supported in part by premiums but mainly by tax funds, is growing faster than Part A but not as fast as the new drug benefit, added in 2003 by the MMA and due to go into effect next year.

The drug benefit, known as Part D, was originally supposed to cost $400 billion in its first 10 years. The administration hiked that estimate to $534 billion shortly after MMA passed. Early in 2005, it announced a new estimate of more than $720 billion. A recent Congressional Budget Office estimate, which includes program costs through 2015, projects the tab at $851 billion.

Before that surprise jump in the Part D projections, 2005 was not expected to see significant legislative action on the Medicare front. It may still be a quiet year, but the pressure to tighten the overall Medicare budget, home care and DME included, has been ratcheted up at least a notch or two.

One Republican member of Congress, Gil Gutknecht of Minnesota, told the Los Angeles Times that lawmakers will work to squeeze money out of Medicare in spite of Bush’s threat to veto any bill that would cut Part D. “I think every member looked at this price tag and said, ‘Oh my God, what have we done?’” Of Bush’s veto threat, he said, “In many respects, that kind of language is like waving a red flag in front of a bull. On issues like prescription drugs and the budget, the bulls are running.”

If nothing else, this new cost-consciousness complicates the HME industry’s efforts to ease the pain of MMA. If Congress was already reluctant to roll back competitive bidding or the ASP+6 rule, it will be even balkier now. Another hint that HME may be back on the cutting board came in February when House Ways and Means Committee Chairman Bill Thomas, R-Calif., announced that the Ways and Means health care panel would hold hearings on the appropriateness of payments to home health agencies, DME suppliers and end-stage renal disease providers.

AAHomecare’s Howard points to another source of pressure on the Medicare budget: physicians who face a 5 percent reimbursement cut next year unless Congress acts. If the doctors win their battle, the pressure will be that much stronger to pare the budget somewhere else to make up the difference.

HME has faced this type of legislative environment before. To some degree, every year is like this, because the big federal health programs are perennially being pushed to spend beyond their means. And as before, HME can expect to come out ahead only if the industry can persuade Congress to view it as part of the solution rather than part of the problem.

Jim Walsh, president of VGM Management Ltd., says the home care case is compelling, especially in a Medicaid system overwhelmed with nursing home patients, but the industry can’t sit around waiting for Congress or states to get the point. If home care doesn’t make itself heard, he says, “the first they’ll do is cut the payments to providers … it’s easier for politicians to pick on providers than to pick on beneficiaries.”

Don’t fight the legislative battle alone. Turn the page to find contact information for state HME associations.

AAHomecare’s Hot List

The American Association for Homecare has issued a list of its advocacy priorities for 2005:

• Protect home medical equipment and home health from further cuts in any legislation passed during 2005.
• Counter competitive bidding in light of recent reimbursement cuts and expand focus on the CMS Program Advisory and Oversight Committee (PAOC) on competitive bidding.
• Protect the dispensing fee amount of $57 for inhalation drug therapies that was secured in 2004.
• Maintain the market basket increase and rural add-on for home health services and oppose copayments for home health. (In a March Report to Congress, MedPAC recommended no market update for 2006 home health reimbursement.)
• Preserve current reimbursement for stationary oxygen systems in light of efforts to move to a modality-specific payment model.
• Change the exclusionary rule, which compares Medicare and private charges and, the association says, could exclude Medicare providers whose charges are considered excessive based on that comparison.

According to the association, participation from providers is critical in letting Congress know about the benefits that home care offers in solving the country’s health care crisis. “Home care providers provide vital services to millions of patients and have tremendous credibility with members of Congress,” says Kay Cox, AAHomecare president and CEO. “That’s why broad support and participation will be a key factor in the success of home care this year.”

For more information, contact AAHomecare at 703/836-6263, or visit www.aahomecare.org.

NCART’s Legislative Priorities

According to Executive Director Sharon Hildebrandt, the National Coalition for Assistive and Rehab Technology has three main legislative priorities for this session of Congress. But, she says, if necessary the coalition could change or add to the list because “as you know, when Congress is in session, anything can happen.”

1. Carve-out from national competitive bidding for high-tech rehab and assistive technology products and services.
2. Remove the restrictive interpretation of the “in the home” language, either through encouraging Congress to contact CMS to modify its interpretation, or to seek a legislative change in the language to clarify that “in the home” does not mean within the four walls of the home.
3. Oppose any reductions in the Medicaid program.

For more information, call NCART at 202/776-0652 or visit www.ncart.us.

This Session’s HME VIPs

The home medical equipment industry seems to find friends and foes on Capitol Hill every year. As the congressional debate heats up on Medicaid reform and other issues central to health care, 2005 is no different. The nation’s lawmakers could, once again, take actions that impact the ability of home care companies to provide products and services for Medicare and Medicaid beneficiaries. Following is a list of legislators pegged as HME players in the 109th Congress.

Sen. Charles “Chuck” Grassley, R-Iowa — Chairman of the Senate Finance Committee, which has jurisdiction over Medicare and Medicaid. In confirmation hearings for Michael Leavitt, Grassley grilled the new HHS Secretary on HME hot-buttons including fraud and abuse, power wheelchair issues, claims contractors and DME competitive bidding. Regarding possible Medicaid cuts, he has said the committee’s actions would be based more on agreements reached with the nation’s governors rather than on cuts outlined in the president’s FY 2006 budget proposal.

Rep. Bill Thomas, R-Calif. — Chairman of the House Ways and Means Committee, which has joint jurisdiction over Medicare with the Energy and Commerce Committee. As former chairman of the Medicare conference, Thomas was instrumental in passage of the Medicare Modernization Act of 2003, which includes mandates for DME competitive bidding and reimbursement cuts.

Rep. Joe Barton, R-Texas — Chairman of the House Energy and Commerce Committee, which has joint jurisdiction with the Ways and Means Committee on Medicare and sole jurisdiction over Medicaid. Barton is relatively new to the position.

Rep. Dave Hobson, R-Ohio — A strong supporter of the HME industry, Hobson was lead sponsor of last year’s H.R. 4491, a bill that would have repealed reimbursement cuts based on FEHBP. By the end of the 108th Congress, the bill had picked up 117 cosponsors.

Sen. Max Baucus, D-Mont. — Ranking member on the Senate Finance Committee, which has jurisdiction over Medicare and Medicaid policy issues.

Sen. George Voinovich, R-Ohio — A former governor, Voinovich has repeatedly been one of the strongest Senate advocates for the HME industry.

Sen. Bill Frist, R-Tenn. — Senate Majority Leader, and a member of the Senate Finance Committee. Formerly a heart-and-lung surgeon, Frist is very involved in moving health care policy through the Senate process.

Rep. Nathan Deal, R-Ga. — New Chairman of the House Energy and Commerce Subcommittee on Health, Deal has been supportive of industry positions in the past.

Rep. Mike Ross, D-Ark. — A new member of the House Energy and Commerce Committee. The only HME provider in Congress, Ross and his wife own Holly’s Health Mart, an independent pharmacy/HME in Prescott. With his new appointment, Ross said he will bring his experience and knowledge of health care issues as a small-town provider to the table.

Sen. Gordon Smith, R-Ore. — A member of the Senate Finance Committee, Smith introduced legislation in February (S. 338) that would create a 23-member bipartisan Medicaid reform commission to recommend cost-effective financing and other long-term program fixes forfiscal 2007.

Sen. Jim Nussle, R-Iowa — Chairman of the House Budget Committee, Nussle wants to cut non-defense spending for programs like Medicaid to keep them from growing “unchecked and out of control.”

The rest of the Senate Finance Committee members: Jeff Bingaman, D.-N.M.; Jim Bunning, R-Ky.; Kent Conrad, D-N.D.; Mike Crapo, R-Idaho; Orrin Hatch, R-Utah; James Jeffords, D.-Vt.; John Kerry, D-Mass.; Jon Kyl, R-Ariz.; Blanche Lincoln, D-Ark; Trent Lott, R-Miss.; John Rockefeller, D-W.V.; Rick Santorum, R-Pa.; Charles Schumer, D-N.Y.; Olympia Snowe, R-Maine; Craig Thomas, R-Wyo.; and Ron Wyden, D- Ore.

Pick Up the Phone …

And call your congressmen! Or fax, send an e-mail, write a letter or visit in person to let them know how you feel about the value of home care and the legislative issues they are considering. Your elected officials want to hear from you, so stand up and be counted.

To locate your members of Congress, visit the congressional Web portal at http://thomas.loc.gov.

Don’t just call once or only when you want something. Introduce yourself; explain what you do and how your home care company serves its community. Build a long-term relationship with Capitol Hill staffers so that you become a resource on home care issues for House or Senate members and their aides.

And for every issue you bring up, be sure to bring a solution.