Medicares Home Health Benefit: Cost Sharing Issues and Options

Report for Congress
Medicare’s Home Health Benefit:
Cost Sharing Issues and Options
October 30, 2002
Carolyn L. Merck
Specialist in Social Legislation
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Medicare’s Home Health Benefit:
Cost Sharing Issues and Options
Summary
Cost sharing is a key element in the design of any health insurance plan and is
used primarily to control utilization by making covered individuals aware of the cost
of care. In addition, patients’ cost sharing payments offset plan costs. Currently,
home health care is the only Medicare-covered service, except for clinical laboratory
tests, for which beneficiaries have no cost sharing.
Medicare’s home health benefit has been subject to criticisms of inappropriate
and over-utilization, particularly since home health spending began to rise rapidly in
the late 1980s. Moreover, some questioned if rising utilization was due to the
program’s financing a substantial amount of long-term personal care by home health
aides rather than medically necessary care by skilled practitioners as the law intends.
Utilization and spending dropped dramatically as a result of a 1997 change to
Medicare’s home health payment system, but volatility in the program has evoked the
suggestion that beneficiary cost sharing should be implemented as an additional tool
for controlling program utilization.
Utilization control through implementation of cost sharing for Medicare home
health services may be stymied by two factors: third party insurance that would
insulate some beneficiaries from actually having to pay cost sharing (arguably those
who are financially better off), and implementation in FY2001 of a home health
prospective payment system (PPS), one objective of which was to curtail provision
of unnecessary services by home health aides. Arguments in favor of cost sharing
include consistency within the Medicare program, consistency with private health
insurance policies, and generation of revenues to offset taxpayers’ costs for
Medicare. Opponents of cost sharing point out that beneficiaries who use home
health services are atypically low income, elderly, with chronic health problems and
limited ability for daily self care. Respondents to those arguments say that no other
component of Medicare takes socioeconomic or self care status into consideration for
cost sharing.
If Congress were to mandate cost-sharing for Medicare home health services,
it would be important to design a system that did not create financial disincentives
for beneficiaries to step down in a typical continuum in the cost of care, from
inpatient hospital care, to skilled nursing facility care, to home health care.
Requiring beneficiary cost sharing only for the first 60-day episode of care, or for all
episodes of care, or only for second and subsequent episodes might depend on
whether the PPS encourages home health agencies (HHAs) to provide unnecessary
continuing episodes of care. Cost sharing amounts could be calculated in a variety
ways, but considerations include balancing the affordability of out-of-pocket costs
with consistency in cost sharing amounts for other Medicare services. This report
will not be updated.

Contents
Background ..................................................1
Home Health Aide Services..................................2
Medicare Payment for Home Health Care...........................2
Beneficiary Cost Sharing for Medicare Services......................3
Home Health Costs and the Cost Sharing Issue.......................3
The Home Health Cost Sharing Debate.............................4
Alternative Approaches to Determination of Beneficiary Cost Sharing
Amounts .................................................7
Applicability of Cost Sharing to Post-institutional Care and
Community Beneficiaries...............................7
Design and Amount of Cost-Sharing...........................8
Concluding Considerations......................................9

Medicare’s Home Health Benefit:
Cost Sharing Issues and Options
Background
Medicare beneficiaries who are homebound are eligible for home health care
based on the need for intermittent skilled nursing care, physical therapy, or speech-
language pathology. For beneficiaries receiving at least one of these types of care,
Medicare also covers occupational therapy and the services of home health aides and
medical social workers. Beneficiaries may continue to receive occupational therapy
after they no longer need other skilled care or therapies and may receive home health
aide or social worker services as long as they receive occupational therapy. The
services provided must be medically necessary and carried out under a plan of care
prescribed and reviewed by a physician.¹
When the Medicare program was enacted in 1965, Part A of the program
covered up to 100 home health visits, at no charge to the beneficiary, provided the
care followed a hospital or a skilled nursing facility (SNF) stay of at least 3 days.²
Part B of Medicare also covered up to 100 home health visits to be used by
beneficiaries who exhausted their 100 Part A post-hospital visits, by beneficiaries
without a prior inpatient stay, or by those without Part A coverage. During the early
years of the program, Part B-covered care required the beneficiary to meet the Part
B annual deductible and to pay coinsurance of 20% of the Medicare-approved cost
of care.
The Social Security Amendments of 1972 (P.L. 92-603) eliminated the 20%
coinsurance requirements for home health care covered by Part B; the Omnibus
Budget Reconciliation Act of 1980 (P.L. 96-499) eliminated the 3-day prior
hospitalization requirement for Part A home health coverage, the 100-visit limits
under both Part A and Part B, and application of the deductible. Congress deleted
these requirements because it was thought that the limits would cause beneficiaries

¹ Medicare’s home health benefit is targeted at beneficiaries needing skilled nursing care and
therapies and has never been intended to cover long term personal care and assistance for
frail elderly or disabled individuals. After a stroke, injury, or illness, some beneficiaries do
not regain full independence in performing activities of daily living and require personal
assistance and care on a long term basis. In these kinds of situations it may be difficult to
determine when the need for skilled care ends and long term personal care begins, although
program guidelines try to clarify the distinction between the need for skilled care and lower
levels of care.
² Medicare covers SNF care only if it follows a hospitalization of at least 3 days.

who needed extensive visits to seek costly institutional care instead of home care,
particularly those with Part A coverage only.^3, ⁴
The liberalizations in OBRA 1980 resulted in an increase in the proportion of
beneficiaries receiving home health benefits from 3.4% in 1980 to 5.1% in 1985.
Medicare spending for home health more than doubled over that period. However,
tight administrative rules regarding eligibility for home health care constrained
continued expansion of spending for the benefit. Utilization and costs did not
increase significantly until settlement of a class action suit in 1987 led to loosening
of home health eligibility and benefit guidelines.⁵
Home Health Aide Services. A controversial component of Medicare’s
home health benefit is coverage of home health aide services. Aides carry out routine
medical tasks and procedures, but they may also provide personal care such as
bathing, dressing, and certain household chores. Medicare coverage of home health
aide services ends when a patient no longer qualifies for in-home skilled nursing care
or therapy. It is alleged that homebound beneficiaries sometimes continue to be
certified as needing minimal intermittent skilled nursing care (say, two skilled nurse
visits a month) in order to continue their qualification for regular visits by a home
health aide. Some say that such beneficiaries are actually receiving, at no charge to
them, long term assistance with activities of daily living, which is not medically
necessary and therefore outside the scope of Medicare’s home health benefit.
Medicare Payment for Home Health Care
In the early years of the program, Medicare reimbursed home health agencies
(HHAs) for their reasonable costs. The 1972 legislation eliminating coinsurance for
Part B-covered home health services also provided authority for Medicare to limit its
payments for services. Starting in 1979, Medicare implemented limitations on cost
reimbursements to HHAs, and that general system remained in effect until October
1, 2000, when Medicare implemented a prospective payment system (PPS) for
HHAs. Under the PPS, agencies receive predetermined, fixed amounts per 60-day
episode of home health care for each individual beneficiary served. Beneficiaries are
categorized into one of 80 different payment groups (known as home health resource

³ U.S. Department of Health and Human Services. Health Care Financing Administration.
A Profile of Medicare Home Health: Chart Book, August 1999. p.81.
⁴ The Balanced Budget Act of 1997 shifted the financing of posthospital home health visits
in excess of the first 100 visits from Part A to Part B, and continued the policy of no
beneficiary cost sharing for services charged to Part B. The change is essentially a
bookkeeping operation and is of no consequence to beneficiaries and home health agencies
(HHAs.) The purpose of the change was to reduce costs paid from the Hospital Insurance
Trust Fund, which finances Part A benefits only.
⁵ U.S. General Accounting Office. Health, Education, and Human Services Division.
Medicare: Home Health Cost Growth and the Administration’s Proposal for Prospective
Payment, Statement of William J. Scanlon, Director, Health Financing and Systems Issues,
before the Subcommittee on Health and Environment, Committee on Commerce, House of
Representatives. March 5, 1997.

groups or “HHRGs”), depending on the type and intensity of care to be furnished.
(Payments are adjusted for relative differences in area wages.)
Beneficiary Cost Sharing for Medicare Services
Home health care is the only Medicare-covered service, except for clinical
laboratory tests, for which beneficiaries currently have no cost sharing. Inpatient
hospital stays are covered by Medicare after the beneficiary pays a deductible of $812
(in 2002), but no coinsurance is charged until the hospitalization exceeds 60 days.
(Most inpatient stays are shorter than 60 days.) Beneficiary coinsurance per day of
inpatient care is $203 for day 61 and continuing through day 90, after which the daily
amount doubles (to $406 in 2002) for days 91 through 150. Days 91 through 150 are
referred to as “lifetime reserve days,” and are available only once in a lifetime.
SNF care is often the second step in the continuum of a beneficiary’s
recuperation from an acute illness or injury. Patients needing daily skilled nursing
care or therapy but who do not need to remain in a full service acute care hospital
may receive care in a SNF with no cost sharing for the first 20 days (provided the
prior hospitalization lasted at least 3 days). Thus, under current law, beneficiaries
have no financial reason to object to moving from a hospital to a SNF. Starting with
day 21 in a SNF, however, beneficiaries pay $112 per day (in 2002) through day 100,
but Medicare covers no SNF care after 100 days. Most SNF stays end before 20
days; the average stay in 1999 was 23 days.
Once a beneficiary no longer requires either hospitalization or daily SNF care,
he or she may be discharged to home where, as long as the beneficiary is homebound,
Medicare covers medically necessary intermittent or part time skilled nursing care or
restorative therapies as well as occupational therapy, nurse aide, and medical social
services. Because there is no cost sharing for home health services, under current
law, beneficiaries have no financial reason to object to being discharged from an
inpatient facility to receive home health services. The basis for the requirement that
beneficiaries be homebound in order to qualify for home health care is to restrict the
benefit to individuals who are unable to travel to a physician’s or therapist’s office
or to an outpatient facility for ongoing care. Once a beneficiary can leave home
regularly, ongoing care is covered only in outpatient facilities in which services are
generally less costly than when delivered one-on-one in a patient’s home.
Home Health Costs and the Cost Sharing Issue
The cost-sharing features of health insurance plans include beneficiary
deductibles (a specified amount which the patient must pay for covered care before
plan payments begin); coinsurance (a percentage of a plan’s approved amount for
care or services), or copayments (a specified dollar amount an enrollee must pay per
unit of service, such as $15 per doctor visit).
Cost sharing is a key element in the design of any health insurance plan and is
used primarily to control utilization by making covered individuals aware of the cost
of care. Patients’ payments also offset plan costs. In the past, Medicare’s home
health benefit has been subject to criticisms of inappropriate and over-utilization.

These concerns intensified as home health spending began to grow rapidly in the late
1980s, rising from $2.0 billion in 1988 to $18 billion in 1996, an average annual
increase of 31%. This spending growth reflected both increasing numbers of
beneficiaries served and more than a three-fold increase in the average number of
visits per user. The causes for the increases are generally attributed to a 1987 lawsuit
settlement that led to liberalizations in the definition of “intermittent” and “part-time”
used to determine covered services; to a payment system that inherently motivated
HHAs to provide increasing numbers of visits per eligible beneficiary (HHAs were
paid for each visit made to a beneficiary); and to a lack of incentives for beneficiaries
to be judicious about the amount of services they consumed. In addition, some
questioned whether Medicare’s home health benefit was being used to cover care for
those whose real need was long-term personal care and assistance rather than acute
care, pointing to the growing proportions of all visits that home health aide visits
accounted for (one-third in 1987 and 48% in 1997).⁶
In the Balanced Budget Act of 1997, Congress sought to curtail the upward
trend in home health spending by imposing a new limit on payments to HHAs (the
so-called “per beneficiary limit”). This change removed the incentives for HHAs to
maximize the number of visits to individual beneficiaries and reversed the increasing
rate of utilization; spending dropped by about half by 1999. The average number of
visits per home health user dropped from 74 in 1996 to 42 in 1999. Many observers
note that the dramatic decline caused by the 1997 law was much larger than had been
anticipated. This situation of uncontrolled spending increases followed by
unanticipated decreases caused some to speculate that home health utilization and
spending cannot be controlled appropriately and effectively by merely manipulating
the payment system. Thus, they suggest adding a financial incentive for beneficiaries
to participate in the decision about the quantity of care they use.
The first consideration regarding cost sharing for Medicare home health services
is whether to impose such a requirement or not. If, on balance, Congress determines
that a new cost sharing requirement for home health care is appropriate, the second
consideration is how to set the amount.
The Home Health Cost Sharing Debate
Arguments in favor of beneficiary cost sharing are predicated on the assumption
that beneficiaries would use less care if they had a financial incentive to do so. This
assertion about beneficiary behavior is difficult to evaluate because about 24% of
beneficiaries have individually purchased supplemental plans commonly referred to
as “medigap” policies; about 36% have coverage obtained through a current or
former employer (which might or might not pay home health care cost sharing,
depending on the plan’s design), and about 13% are low income beneficiaries also
covered by Medicaid, which generally pays Medicare cost sharing for the beneficiary
(1998 data).⁷ If a new beneficiary cost sharing requirement for home health care
were covered by supplemental insurance, it would probably add to the cost of those

⁶ Ibid. Health Care Financing Administration, 1999, p. 51.
⁷ CRS Report RL31085, Medicare Structural Reform: Background and Options, by Jennifer
O’Sullivan, Hinda Ripps Chaikind, and Sibyl Tilson, July, 24, 2001. p. 8.

policies, and some say these policies are already overly costly. Furthermore, it might
have little impact on utilization because beneficiaries with supplemental coverage
would remain insulated from the cost of care.
Advocates of cost sharing point out that all other Medicare-covered services
require cost sharing (except clinical laboratory tests) and that cost sharing for home
health services would create consistency within the program. However, a frequently
heard objection to this rationale is that Medicare data show that home health users
are different from Medicare beneficiaries in general in that they tend to be older, to
be lower income, to live alone, and to have more impairments in their ability to
perform activities of daily living, such as bathing, dressing, and toileting; cost sharing
opponents say that these beneficiaries are less able than others to afford the premium
for a medigap policy and are unlikely to have third-party insurance from a former
employer. Thus, it is said that home health cost sharing could increase out-of-pocket
costs for those least able to afford it, thereby reducing access to needed services or
hastening a move to institutional long-term care.
Cost sharing proponents respond that (a) Medicare is not a welfare benefit, (b)
very low income beneficiaries receive assistance with their cost sharing through
Medicaid, (c) cost sharing for other Medicare-covered services does not apply
differently depending on the socioeconomic status of beneficiaries, and (d) cost
sharing would deter beneficiaries from seeking to prolong minimal use of skilled care
in order to use home health aides for cost-free personal assistance with activities of
daily living. Again, long term care for those needing personal assistance is not
covered by Medicare.
Another argument supporting home health cost sharing is that private health
insurance plans generally require it for enrollees using home health services.
Implementation of cost sharing for Medicare home health care would move toward
replication of the design features of private health insurance. This factor is
particularly cogent for those who advocate restructuring Medicare along the lines of
private insurance, including doing away with the situation in which most
beneficiaries have “first dollar coverage,” meaning a third-party insurance plan picks
up the first dollar’s worth of health care used.
An issue raised in opposition to home health cost sharing focuses on the
disincentives it might create for beneficiaries to agree to move down in the level of
care they are receiving. For instance, beneficiaries who might be discharged from a
hospital when home health care is available would have a financial reason to object
to discharge if they would be required immediately to make another out-of-pocket
payment. Once the inpatient hospital deductible is paid, there is no additional cost
sharing for staying longer in the hospital (at least, up to the first 60 days). Similarly,
patients who might be discharged from a SNF within the first 20 days (while there
is no cost sharing) would have a financial reason to object to being discharged to
home health services if it implied an immediate out-of-pocket expenditure (unless the
beneficiary’s other coverage would pick up the cost sharing). As a result, hospital
costs might rise if certain patients stayed longer, leading to pressure to increase
payments to hospitals. Because Medicare pays SNFs for each day a beneficiary is in
care, delaying discharge to home health care could result in increased Medicare SNF

payments. However, the disincentives are likely to apply only to beneficiaries
without supplemental insurance that would pick up the home health cost sharing.
Arguments made in the past about the need for beneficiary cost sharing as a way
to curtail over-furnishing of visits by HHAs may no longer be salient. Since
implementation of the home health PPS on October 1, 2000, HHAs do not have a
financial incentive to provide unnecessary home visits because Medicare pays
agencies one amount per 60-day episode of care. The only possibility for over-supply
of care under the new payment system might be that agencies could stint on care
during an initial 60-day episode and seek certification for a second episode of care
for some patients, thereby triggering another payment. Beneficiaries who feel they
don’t really need care after the first episode might object to a second episode if they
had a financial reason to do so. If data eventually indicate that the number of
beneficiaries certified for multiple episodes of care is too high, a requirement for cost
sharing for second and subsequent episodes might be appropriate.
Finally, some opponents note that implementation of cost sharing would add
new administrative burdens and costs to the program and to the responsibilities of
HHAs.
Overall, it may be too early to know how home health utilization dynamics are
working under the PPS. Although PPSs in general are designed to create incentives
for providers to furnish care efficiently, new Medicare payment systems usually need
some fine tuning as the Medicare program and providers gain experience with them.
It is not yet clear how the new home health PPS has affected utilization or spending
because of problems with collection of spending data. The General Accounting
Office (GAO) estimated that, in the first 6 months of the PPS, payments to HHAs
were about 35% higher on average than estimated agency costs for providing care,
and preliminary data also suggest that home health patients are receiving fewer visits
on average than had been foreseen.⁸
In summary, beneficiary cost sharing might cause more judicious use of home
health if beneficiaries had a financial interest in the amount of care they consumed.
Applying cost sharing to home health would be consistent with beneficiary payment
requirements in other components of the program and would be consistent with
private health insurance design. The major drawbacks are that as long as some
beneficiaries have third party coverage, their utilization patterns and thus the goal of
controlling utilization and Medicare costs might not be achieved to any significant
degree. Moreover, higher medigap policy premiums might result, increasing
beneficiary out-of-pocket costs and perhaps forcing some to drop their medigap
policies. Finally, the new home health PPS may, to a great extent, obviate the need
for beneficiary-based utilization controls because the payment system no longer has
strong financial incentives for HHAs to oversupply services, although beneficiary
cost sharing might be appropriate if continuous and multiple 60-day episodes emerge
as a pattern.

⁸ Medicare Home Health Care: Payments to Home Health Agencies are Considerable
Higher than Costs, GAO-02-663, May 2002.

Alternative Approaches to Determination of Beneficiary Cost
Sharing Amounts
Some say that cost sharing is important in order to contain costs; others say
those savings come at the expense of deterrence of use of needed and preventive
services. Some say cost sharing is needed to curtail use of marginal or ineffective
care; others that beneficiaries need protection from cost sharing that would increase
their out-of-pocket costs. Any of these statements could be true, depending on how
the cost sharing is designed. Unfortunately, there are no data to inform the debate on⁹
the effects on elderly people of cost sharing or alternative designs or amounts.
Applicability of Cost Sharing to Post-institutional Care and
Community Beneficiaries. If it were to be decided that cost sharing should be
implemented for home health care, an initial decision would be whether there should
be a distinction between care that follows a hospitalization (or a covered SNF stay)
and care that does not. (Cost sharing under the original Medicare program had such
a distinction.) If cost sharing were required for all patients, including those with a
prior hospitalization, there could be disincentives for patients to agree to discharge
from a hospital or a SNF to home health care if they would be required to make an
immediate out-of-pocket payment. If cost sharing were applicable only to care not
following a hospitalization, some “community beneficiaries” (defined as those
without a prior hospitalization) might seek hospitalization to avoid home health cost
sharing when they have insurance that pays the hospital inpatient deductible. If
supplemental insurance were to pay home health care cost sharing also, the effects
of home health cost sharing for all beneficiaries with supplemental insurance would
be neutralized.
Home health care is intended for those whose primary need is for skilled care,
and the services are required to be reasonable and “medically necessary.” In many
community beneficiary cases medical necessity is hard to establish with certainty.
Although program guidelines try to distinguish between the need for skilled care
versus unskilled care, there is little information on what the norms are for covered
home health care. Some favoring home health cost sharing say that community
beneficiaries are often actually seeking coverage of care for ongoing chronic
conditions and long term care and personal assistance. Depending on the structure
of the cost sharing and how it is covered under supplemental insurance policies, cost
sharing might weed out such use by community beneficiaries.

⁹ One of the best sources of information on the effect of cost sharing on health care
utilization is the Rand Corporation’s Health Insurance Experiment carried out in the 1980s
under contract with the U.S. Department of Health and Human Services. The Rand Health
Insurance Experiment carried out in the 1980s concluded generally that people use fewer
services when they are required to pay for them. The research found that coinsurance
reduces the amount of care individuals seek, but, once care is sought, the amount received
appeared to be controlled by the treating physician rather than the patient’s cost sharing.
However, elderly individuals and Medicare beneficiaries were not included in the population
studied. (See Benefit Design in Health Care Reform: Patient Cost-Sharing, Office of
Technology Assessment, OTA-BP-H-112, September 1993.)

Design and Amount of Cost-Sharing. Beneficiaries might be required to
(a) meet a deductible at the start of an episode of home health care; (b) pay a flat
dollar copayment per episode (similar to a deductible); or (c) pay coinsurance
determined as a percentage of the applicable HHRG or some other amount. A
combination of these cost sharing features could be used.
Deductibles and copayments. A one-time annual deductible might be
based on some concept of the average Medicare payment for a unit of home health
care. For example, the inpatient hospital deductible was set initially to equal the
average cost of a day in a hospital, updated over time (although updating the amount
and keeping it affordable have been problematic). According to the GAO’s
preliminary estimates, average HHRG payments for 60-day home health episodes
during January through June of 2001 were about $2,691. The GAO found that home
health patients received an average of 22 visits during this time period, for an average
cost of about $122 per visit.¹⁰
This method for establishing a deductible is roughly modeled on the inpatient
deductible, but it has several drawbacks. The number will change over time, and
could change dramatically as the new PPS is refined. It is also higher than the $100
annual deductible applicable to all outpatient services, and thus, appears out of line
(although some argue that the $100 Part B deductible is out of date).
Alternatively, a deductible or copayment could be established that is not based
on home health costs. It could be set at, say, half of the Part B deductible, which
would be $50 per year, or some other proportion. This amount is also less than the
current daily copayment for a stay in a SNF after 20 days ($112), and thus, there
would be little financial incentive for a patient to continue to stay in a SNF past 20
days.
If the hypothetical payment of $50 were to be characterized as a copayment
rather than a deductible, it might be charged at the start of every 60-day home health
episode in order to deter the program’s being used as long term care. However, to
protect beneficiaries’ out-of-pocket costs, the copayment could decline after the first
episode, and/or be subject to an annual cap. An advantage to this approach is that a
straightforward updating procedure could be applied, such as the home health market
basket index increase or the most recent cost-of-living adjustment applicable to
Social Security cash benefits.
Coinsurance. Coinsurance generally is a percentage of the recognized cost
of care used. Medicare Part B-covered services usually require beneficiaries to pay
20% of Medicare’s approved amount, and Medicare pays 80%. If applied to home
health care, a beneficiary could be charged 20% of the Medicare payment for the
HHRG into which he or she is classified for home health care. According to the
GAO’s preliminary estimates, in 2001, episode payments ranged from $1,114 to
$5,947. At 20%, cost sharing for those 60-day episodes would be $223 and $1,189
respectively. Although using this method to establish coinsurance would have to
await better data on care used under the new PPS, the amounts appear high in relation

¹⁰ Ibid. General Accounting Office.

to other deductibles and cost sharing in the program. The amounts could be adjusted
by, for example, dividing them by 60 for the total days in an episode or by the
number of visits planned for the patient during a 60-day episode. Dividing by 60
days would result in a total coinsurance amount of $3.71 for the lowest cost episode
(20% of $1,114 divided by 60) and $19.82 for the higher cost episode (20% of
$5,947 divided by 60). Dividing by the number of visits a beneficiary is scheduled
to receive rather than by 60 days would yield a larger cost sharing amount, but,
within one HHRG, beneficiaries with a low number of visits would pay more than
those with a higher number of visits.
Although some might argue that a methodology such as this is appropriate
because it produces a coinsurance amount that is tied to Medicare’s costs for the
beneficiary’s care, critics might say it “penalizes” those who are the most ill and need
the most or the costliest care; moreover it appears to be overly contrived, and in
future years, as utilization patterns and costs change, the numbers could lose
credibility. Nevertheless, there is precedent in the Medicare program for charging
the very ill who receive substantial care more than those who use less, i.e.,
beneficiaries pay more if they are so ill that they remain hospitalized for more than

60 days or are cared for in a SNF for more than 20 days.

Alternatively, cost sharing could apply to second or subsequent episodes of care
only. Such a policy would not create incentives for beneficiaries to object to moving
to home health care from a hospital or SNF stay and could deter inappropriate use of
extended episodes of care.
Concluding Considerations
The reasons for and against implementing cost sharing for Medicare home
health services may be stymied by the availability of third party insurance that would
insulate some beneficiaries (allegedly those who are financially better off) from the
very reasons for implementing cost sharing, that is, to provide financial incentives
for beneficiaries to use services more judiciously. Although Congress could change
the law to disallow coverage of home health care cost sharing under supplemental
policies, it could be argued that such an arrangement would discriminate unfairly
against home health users unless it were also to disallow coverage of most or all
other Medicare cost sharing. Modifying the coverage rules for supplemental
insurance in this way would be a policy change of substantial proportion, and it
would be likely to take debate on the issue far beyond the home health benefit.
The design of the new home health PPS should curtail the overutilization
problems that plagued the program in the past; some believe it obviates the need for
cost sharing. Although coverage of cost sharing by supplemental insurance policies
and implementation of the PPS may take the edge off some arguments for cost
sharing as a utilization and cost control device, other reasons supporting cost sharing
include consistency within the Medicare program, consistency with private health
insurance, and generation of revenues to help offset taxpayers’ costs for Medicare.