The Medicare home health benefit implications of recent payment changes

The interim payment system (IPS) for Medicare home health services, enacted in the Balanced Budget Act of 1997, was intended to slow the growth of home health expenses until HCFA could design a new prospective system. Instead, the IPS has acted like a per-case payment system without case-mix adjustment. Its impact on agencies, along with other policy pressures, has been first to slow and then to reverse the dramatic expansion of the home health sector. In this paper, we identify the impetus for payment changes in the recent history of the Medicare home health benefit. We then present emerging evidence about the effects of IPS and other recent policies on home health. Finally, we draw several lessons from this experience for the impending prospective payment system.