Posts Tagged ‘Balanced Budget Act of 1997’

Home Health Agency Declares Bankruptcy, Blames Medicare


Home health care benefits available through the Medicare program have been curtailed in recent years. The effect of the government’s crackdown on home health care costs has been felt not only by patients, but also by health care providers themselves.

Take, for example, the case of Idaho’s Community Home Health agency (CHH). The company had been serving about 500 patients. Then Congress passed the Balanced Budget Act of 1997, directing Medicare to set limits on the costs which could be paid through for home care.

CHH, like other Medicare providers, had been paid a monthly amount based on an estimate of the number of patients it would see. These “periodic interim payments” would then be adjusted for the amount actually due the agency, with a smaller amount either paid or withheld from future payments once the bookkeeping was completed.

With the new law, however, CHH decided that it would not be able to serve the same number of patients. The agency dramatically cut its Medicare caseload in an attempt to anticipate the new government regulations. Its income would be slashed, but its costs would also be contained—or at least that was the theory.

Unfortunately, the agency continued to receive and cash checks based on its prior caseload. By the time CHH figured out it had a problem it had received overpayments of more than one million dollars. The agency told Medicare it needed to set up a plan to repay the money over time; Medicare first denied that there had been any overpayment, then threatened to withhold all payments until the account was corrected.

Although Medicare relented and offered a two-year repayment plan, CHH closed its doors and declared bankruptcy. Agency owners Gary and Verlene Kaiser, who had personally guaranteed CHH’s debts, also filed for bankruptcy. Meanwhile, Medicare investigators were allegedly telling other providers about the Kaisers and CHH, making it difficult for them to do any future business.

The Kaisers sued the government and Blue Cross of California, the “fiscal intermediary” which had handled CHH’s Medicare reimbursements. The Ninth Circuit Court of Appeals threw the lawsuit out, ruling that CHH and the Kaisers had to make their claims through Medicare’s administrative channels. The part of their claim alleging defamation and invasion of privacy was simply dismissed, since the government must give its consent to be sued. Kaiser v. Blue Cross, October 28, 2003.

CHH’s story provides a cautionary example to other providers. While government programs may provide a reliable cash flow, changes in the benefits can have a huge and unpredictable effect on the provider.

Medicare HMOs Continue To Cut Programs Across Country


Three short years ago Congress was pushing for increased use of “managed care” plans as one way to stave off a looming financial crisis for the federal Medicare program. Today the promise of managed care continues to be unmet—largely because of Congress’ own actions.

The federal government picks up almost 40% of all health care costs in this country, with almost half of that amount (just under 19%) paid by the Medicare program. Medicare covers over 13% of all American citizens. The program offers hospitalization, out-patient care, hospice and home health care, together with a limited nursing home benefit, to most citizens over age 65, the totally disabled and a handful of other beneficiaries.

Medicare HMOs (Health Maintenance Organizations) first began to sign up significant numbers of participants in 1995, and by 1996 Tucson had more of its Medicare recipients enrolled in HMOs than nearly any other community in the country. The New York Times, in an article published in March, 1996, predicted that the Tucson experience would soon sweep the nation, and that Medicare HMOs would continue to grow as seniors learned they could save money and still get good care.

Then Congress derailed its own HMO plans. In passing the Balanced Budget Act of 1997, Congress made it much more difficult to operate a profitable Medicare HMO. The result: in the next year (1998), over 400,000 HMO members were dropped when their health plans curtailed coverage in particular areas, especially in rural communities.

HMOs did not end their flight away from Medicare programs in that year, either. In 1999 another 327,000 enrollees were dropped by their HMOs, and almost a million more will lose coverage in the year 2000.

None of those HMO participants will actually lose Medicare coverage, of course. As HMOs pull out of the Medicare market, individual plan members are free to switch to another HMO (assuming another HMO offers coverage in their area) or return to “traditional” Medicare. They may find the choice of doctors or the extent of coverage sharply curtailed, however.

The 1996 New York Times article cited strong HMO competition in Tucson, with four companies offering different programs. That competition has now shrunk to just two HMOs in the Tucson area: Intergroup of Arizona, Inc., and PacifiCare of Arizona, Inc. (PacifiCare actually offers three slightly different programs under its Secure Horizons name). One HMO (Intergroup) offers coverage in Nogales, and four are active in parts of Pinal County, but the rest of Southern Arizona has no Medicare HMO coverage available. That experience is mirrored across the country as HMOs pull out of Medicare, particularly in rural areas.

More On DHHS/HCFA Report Of Nursing Home Staff Shortages


Last week Elder Law Issues reported on a government study of nursing home staffing and safety. This week we continue that report. The full DHHS/HCFA report is now online.]

As described last week, the Department of Health and Human Services report recommends minimum staffing levels for nursing aides, Registered Nurses and Licensed Practical Nurses in nursing homes. It also suggests optimum levels. Almost two-thirds of U.S. nursing homes fall below those optimum staffing levels, and about half are below even the minimum levels for RNs and LPNs.

Why are staffing levels so low? Part of the problem, according to the government report, is the government itself. In recent years the federal Medicare and Medicaid programs have moved aggressively to cut medical costs, with particular emphasis on long-term care costs. Particularly notable was the Balanced Budget Act of 1997, which reduced government spending largely through reductions in Medicare and Medicaid financing, and with particular emphasis on long-term care, hospital care and drug costs. One result: many nursing homes can not afford adequate staffing.

A related problem in recent years has been the growing number of individual nursing homes, regional and national nursing home chains facing financial difficulties. A number of national chains have filed bankruptcy proceedings in the past eighteen months. Vencor, Sun Healthcare, Integrated Health Services and Mariner Post-Acute Network, four of the largest chains in the country, all filed for bankruptcy protection during that time period. Combined, these troubled organizations operated well over a thousand nursing homes.

The DHHS study looked at staffing ratios in those financially troubled nursing homes as compared to other chains and individual homes. Not surprisingly, staffing in the bankrupt chains decreased in the last four years—but so did staffing levels in the non-bankrupt chain facilities. Staffing levels in non-chain nursing homes, meanwhile, increased slightly during the same time period.

What will Congress and the Administration do about the decline in nursing home staffing? Republican Senator Chuck Grassley of Iowa, Chairman of the Senate’s Special Committee on Aging, provided one preview. In a press release issued days after the report was received, the Senator intoned that “the suffering of nursing home residents is intolerable. Bedsores and malnutrition turn the stomach and hurt the conscience. They beg for a solution, the sooner, the better.”

Senator Grassley “plans to look into options to encourage states to increase Medicaid rates for nursing homes if they agree to hire more staff with the increased rates.” In addition, the Senator promises to consider giving the nursing home industry back some of the money cut from Medicare budgets by the Republicans’ “Balanced Budget Act of 1997″—provided that the nursing home industry uses the money to hire more staff.

Will this solve the nursing home staffing problem? Perhaps. Direct government regulation may work better. In those states with minimum staffing requirements, the report indicates that staffing approaches the levels deemed acceptable by its analysis. But if staffing levels are increased by government order, but no new money is added to the system, those nursing homes already experiencing financial difficulties can hardly be expected to thrive.

Bipartisan Commission Fails To Propose Medicare Reforms

MAY 17, 1999 VOLUME 6, NUMBER 46

The National Bipartisan Commission on the Future of Medicare sounded like a good idea. Seventeen Commission members met for the first time in March of last year, and were scheduled to make a truly bipartisan recommendation on how to “save” the Medicare program by March of this year. On March 16, 1999, the Commission held its final meeting, and failed to make any recommendations at all.

The idea of a bipartisan approach to Medicare reform was written into the Balanced Budget Act of 1997. Its seventeen members included five U.S. Senators, four members of the House of Representatives, and a collection of doctors, nurses, health insurance industry leaders, lawyers and businesspersons. The final proposal was based on a concept of “premium support”–an idea that would require private providers and the existing Medicare program to bid for Medicare dollars, and guarantee Medicare recipients only so much coverage as the average bid would provide.

Although the final Commission report was not adopted, a majority of the Commission supported the premium support idea. Because Congress wanted to ensure that any recommendation was truly bipartisan, the Commission’s rules required eleven votes to adopt any proposal. Ten members supported the final report, so the idea of premium support might be expected to resurface in future Congressional actions. As Commission member Dr. Bruce Vladeck says: “In Washington, D.C., no bad idea ever truly dies.”

Critics of the premium support approach to Medicare reform sharply questioned projections of substantial savings from the proposed change to Medicare. Most economists challenged the assumptions on which the savings were based, and the Health Care Financing Administration (the government agency in charge of Medicare and Medicaid) estimated that the Commission’s approach would save no more than 2.5% of the future cost of Medicare–far short of what will be needed to avoid huge predicted shortfalls early in the next century.

Huge (and unanticipated) budget surpluses in the last two years have led some to question whether Medicare reform is such a pressing need. Nonetheless, the evidence indicates that legitimate concerns about Medicare’s future arise from expected demographic and financial changes, including:

Medicare’s Part A fund (which pays for beneficiaries’ hospitalization costs) is projected to “go broke” in 2008.
Annual Medicare spending, now at just over $200 billion, will rise to between $2 and $3 trillion by 2030.
Medicare beneficiaries are now paying just under one-third of the cost of their medical care. In 1995, that amounted to an annual average of $2,563 per beneficiary. That figure is expected to rise dramatically over the next few decades, and to rise more quickly than increases in the general cost of living. Incidentally, private employers and so-called “Medigap” insurance policies are currently paying about one-tenth of the beneficiaries’ share.
77 million “Baby Boomers” (those born between 1946 and 1964) will begin to qualify for Medicare in 2011. The total number of Medicare recipients will double, to over 80 million in 2040.
If no other action is taken, the Medicare payroll tax will have to increase from its current 2.9% to 5.6% by 2030.
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