BASIC STATISTICS ABOUT HOME CARE

Home care in the United States is a diverse and dynamic service industry. More than 20,000 providers deliver home care services to some 7.6 million individuals who require services because of acute illness, long-term health conditions, permanent disability, or terminal illness. Annual expenditures for home health care are projected to be $41.3 billion in 2001.⁽¹⁾

1. HOME CARE PROVIDERS
   
   The first home care agencies were established in the 1880s. Their number grew to some 1,100 by 1963 and to more than 20,000 currently. ⁽²⁾ Home health agencies, home care aide organizations, and hospices are known collectively as "home care organizations."
   
   
   1. Medicare-certified Agencies
      
      Home care agencies of various types have been providing high-quality, inhome services to Americans for more than a century. However, Medicare's enactment in 1965 greatly accelerated the industry's growth. Medicare made home care services, primarily skilled nursing and therapy, available to the elderly. In 1973, these services were extended to certain disabled younger Americans. Between 1967 and 1985, the number of agencies certified to participate in the Medicare program grew by more than three-fold, from 1,753 to 5,983. In the mid-1980s, the number of Medicare-certified home care agencies leveled off at around 5,900 as a result of increasing Medicare paperwork and unreliable payment policies. These problems led to a lawsuit brought against the Health Care Financing Administration (HCFA) in 1987 by a coalition of US Congress Members led by Reps. Harley Staggers (D-WV) and Claude Pepper (D-FL), consumer groups, and the National Association for Home Care (NAHC). The successful conclusion of this lawsuit gave NAHC the opportunity to participate in rewriting the Medicare home care payment policies. Following these revisions, Medicare's annual home care benefit increased significantly and the number of home care agencies had risen to over 10,000. More recently, the number of Medicare-certified home health agencies declined to 7,152. NAHC believes the 31.5% decline in agencies since 1997 is the direct result of changes in Medicare home health reimbursement enacted as part of the Balanced Budget Act of 1997 (P.L. 105-33).
      
      The number of hospital-based and freestanding proprietary agencies has grown faster than any other type of certified agency since the coverage clarifications took effect. Freestanding proprietary agencies comprise 40% and hospital-based agencies 30% of Medicare-certified agencies. This differs markedly from the industry composition in the early 1980s, when public health agencies dominated the ranks of certified agencies and proprietary and hospital-based agencies combined accounted for only one-fourth of the total. Table 1 shows the changes over time in types of agencies participating in Medicare.
      
      

2. Medicare-certified Hospices
   
   Medicare added hospice benefits in October 1983, 10 years after the first hospice was established in the United States. Hospices provide palliative medical care and supportive social, emotional, and spiritual services to the terminally ill and their families. The number of Medicare-certified hospices has grown from 31 in January 1984 to 2,273 as of December 2000 (for a separate fact sheet with detailed information on hospices, please contact the Hospice Association of America, 202/546-4759).
   
   
3. Non-Medicare-certified Agencies
   
   The noncertified home care agencies, home care aide organizations, and hospices that remain outside Medicare do so for a variety of reasons. Some do not provide the kinds of service that Medicare covers. For example, home care aide organizations that do not provide skilled nursing care are not eligible to participate in Medicare
   
   
2. HOME CARE EXPENDITURES AND UTILIZATION
   
   
   1. National Expenditures
      
      The Health Care Financing Administration (HCFA) estimated the total national expenditure for health care at $1,311.1 billion in 2000. ⁽³⁾ Since 1993, the rate of growth in health spending has roughly matched growth rates in the economy as a whole leading to a relatively stable 13.2 percent share of the gross domestic product attributable to health spending. Health spending grew at an annual rate of 4.8% in 1998 and 5.6% 1999. The projected growth in health spending over the next decade (2000-2010) is fueled in part by rapid increases in spending for prescription drugs. Other factors contributing to the projected faster health spending growth include rising provider costs, insurers' inability to negotiate increasing price discounts as obtained in the recent historical periods, and greater income growth. ⁽⁴⁾
      
      Table 2 provides the 1999 and projected 2000 national expenditures for personal health care by type. Personal health care is a subset of total health spending and includes spending for health care goods and services used by individuals. Of the $1,057.7 billion attributed to personal health care spending in 1999, more than 62% was for hospital care and physician services, and only a small fraction (3%) was spent on freestanding home care. Hospital-based home care is included with hospital expenditures.
      
      

Total home care spending is difficult to estimate due to limitations of data sources. The Health Care Financing Administration estimates total spending for home care was $34.5 billion in 1997 and declined to $33.1 billion in 1999. The decline is largely the result of dramatic decreases in Medicare home health. These estimates do not include spending for home care services that are not included in the national health accounts data, for example payments made by consumers to independent providers.


2. Medicare Home Health
   
   Medicare is the largest single payer of home care services. In 1999, Medicare spending accounted for about 26% of total estimated home care expenditures.(Table 3) Other public funding sources for home care include Medicaid, the Older Americans Act, Title XX Social Services Block Grants, the Veterans' Administration and Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Private insurance comprised only a small portion of home care payments. Slightly more than one-quarter (27.2%) of home care services is financed through out-of-pocket payments. In July 2001, HCFA projected that Medicare home health spending would grow 12.4 percent per year from 1999 to 2004 and to account for nearly 28 percent of total home health spending by 2010. Private spending was projected to grow from 51 percent of home health spending in 1999 to about 53 percent in 2010. These data do not reflect legislative changes enacted in late 2001.
   
   

About 44% of the projected $238 billion Medicare benefit payments in fiscal year 2001 will go to hospitals with 17% going to physician services. Hospice payments will account for one percent of the total Medicare benefit payments in fiscal year 2001 (FY2001). (Table 4)

The home health benefit accounts for four percent of total Medicare spending in FY2001. As recently as 1997, home health spending was nine percent of total Medicare benefit payments. Growth in the Medicare home health benefit between 1990 and 1996 can be attributed to specific legislative expansions of the benefit and to a number of socio-demographic trends, which had fostered growth in the program from the beginning.

Between fiscal years 1998 and 2000, Medicare spending fell from $14 billion to $9.1 billion, a 34% decrease. (Table 4) No other benefit in the Medicare program experienced proportionate reductions anywhere near the magnitude that home health experienced as a result of changes imposed by the Balanced Budget Act of 1997 (BBA). The BBA's interim payment system (IPS) introduced a new per beneficiary limit, designed to reduce growth in Medicare home health expenditures. In addition, to further reduce payments, the BBA required that reimbursement limits be held to a below-inflation rate of growth by excluding a two-year period from the home health inflation adjustment. Finally, agency payments under the IPS were restricted to the lowest of the agency's allowable costs, its per-visit cost limits, or its per-beneficiary cost limits. The Lewin Group estimated that 90 percent of agencies would have costs that exceed BBA limits in 1998 by an average of 32% without a change in Medicare practice patterns.⁽⁵⁾

Table 5 shows the changes in utilization and expenditures in the Medicare home health benefit that have occurred since 1994. An estimated 3.5 million Medicare enrollees received fee-for-service home health services in 1997, twice the number of home health recipients in 1990. Since 1997, utilization of the home health benefit has decreased significantly. About 840,000 fewer beneficiaries used the benefit in 1999 than did in 1997. Visits per client and per client reimbursement have also declined since 1996 and remain below 1994 averages. Two studies conducted by researchers at George Washington University identified beneficiary access problems resulting from the BBA.⁽⁶⁾ Studies conducted for the Medicare Payment Advisory Commission (MedPAC) and by the General Accounting Office (GAO) also found access is a growing problem for patients who require intensive services.⁽⁷⁾ Outlays for Medicare home health are expected to remain below 1994 levels through 2001 and will likely decrease further following the 15% reduction in payments scheduled to take effect October 1, 2002.

3. Medicare Home Health Prospective Payment
   
   The BBA mandated that HCFA develop a prospective payment system (PPS) for Medicare home health. HCFA implemented home health PPS on October 1, 2000.⁽⁸⁾ The notion behind the move from the modified fee-for-service payment system to a PPS is that by setting a national payment rate, providers will provide care more efficiently. The preliminary findings of an evaluation of HCFA's episode-based PPS demonstration identified a reduction in cost per patient when agencies were paid prospectively based on an episode of care.⁽⁹⁾ The home health PPS relies on an 80-category case-mix adjuster to set payment rates based on determining patient characteristics including clinical severity, functional status, and use of rehabilitative therapy services. The notion of a case-mix adjusted payment rate is similar to the Medicare skilled nursing facility and inpatient hospital prospective payment systems. Like its counterparts, the home health system also includes payments for unexpectedly high utilization cases through an outlier and adjusts payments for local labor market differences through an area wage index. However, a major difference among the systems is the unit of payment. Hospitals are paid by the stay, skilled nursing facilities are paid by the day. Under PPS, the unit of payment shifts from the home health visit to a 60-day episode.
   
   
4. Medicaid Home Care
   
   Medicaid payments for home care are divided into three main categories: the traditional home health benefit that is a mandatory service provided by all states, and two optional programs—the personal care option and home and community-based waivers. Together, these three home health services represent a relatively small but growing portion of total Medicaid payments. Table 6 shows that approximately 44% ($62 billion) of the $141 billion in Medicaid benefit payments in fiscal year 1998 (FY98) were for hospital care and institutional services. Home care services comprised 12.5% of the payments. Hospice is an optional Medicaid service that is currently offered by 44 states. Payments for hospice services were estimated at $325 million in FY98.
   
   

Table 7 shows the growth in the Medicaid home health benefit since FY75. Between FY96 and FY97, expenditures increased from $10.6 billion to $12.2 billion, an increase of 15.6%. Medicaid home care expenditures increased an additional 43.8% between FY97 and FY98 bringing total payments to $17.6 billion.

5. Managed Care
   
   Health care services in the United States are increasingly financed through managed care organizations. A managed care organization, including health maintenance organizations (HMOs), typically finances health care services through a negotiated prepaid rate to health care providers. A fully capitated contract specifies a lump sum payment per enrollee to cover all care provided through the plan, but there are many variations. In contrast, traditional health insurance pays providers based on the number of services delivered with few limitations on which providers would be paid, a payment arrangement commonly termed fee-for-service.
   
   Managed care is most prevalent in the employer-based health insurance market. Ninety-two percent of workers with health insurance received health insurance through a managed care plan in 2000.⁽¹⁰⁾ Managed care enrollment has increased among Medicaid enrollees as states seek federal waivers to convert their Medicaid program to a managed care program. In 1999, 55.6% of all Medicaid beneficiaries were enrolled in managed care. ⁽¹¹⁾ Medicare managed care has increased at a slower pace. As of April 2001, about 15% of Medicare beneficiaries were enrolled in Medicare+Choice. ⁽¹²⁾
   
   The increasingly competitive health care market has created incentives for home care agencies to enter managed care provider networks. However, little is known about the extent to which home care agencies have entered into managed care arrangements. A preliminary study conducted for HCFA compared patient outcomes and total expenditures for Medicare home health clients who received services through Medicare managed care and a group who received services through fee-for-service Medicare home health. The authors found the managed care clients used less home health resources but also had less favorable outcomes on average than their Medicare fee-for-service counterparts suggesting the need for further research on the relationship between volume of home care services and outcomes. ⁽¹³⁾
   
   
3. HOME CARE RECIPIENTS
   
   The 1998 Home and Hospice Care Survey findings indicate that 7.6 million individuals received formal home care services in 1998. (Table 8)⁽¹⁴⁾ This figure represents roughly 2.8% of the US Bureau of Census estimated US population as of July 1, 1998. Of these recipients, 68.6% were over age 65 and 62.3% were women.
   
   

Table 9 shows that 33.5% of Medicare home health patients in 1998 had conditions related to diseases of the circulatory system as their principal diagnosis. People with heart disease, including congestive heart failure, made up about half of this group. Injury and poisoning, diseases of the musculoskeletal system and connective tissue, and diseases of the respiratory system were also frequent principal diagnoses for Medicare home health patients. Medicare home health patients with neoplasms comprised 7.0% of all the program’s home health admissions; diabetes accounted for 7.9%.

Many hospital patients are discharged to home care services for continued rehabilitative care. As hospital stays shortened in the early 1980s, the percentage of Medicare patients discharged to home health care increased from 9.1% in 1981 to 17.9% in 1985. The Prospective Payment Assessment Commission estimated that 16 percent of Medicare hospital patients used home health care within 30 days of discharge in FY96.⁽¹⁵⁾ Table 10 shows the percentage of Medicare beneficiaries discharged from an acute care hospital to home health care by top diagnosis related group (DRG). DRG is a patient classification system used to define different types of hospital inpatients. The DRG system has been used by Medicare since 1983 as part of the prospective payment system for funding hospitals.⁽¹⁶⁾

A more recent study performed by the Department of Health and Human Services, Office of Inspector General, found that 38% of Medicare beneficiaries who began use of home health care in the year 2000 came directly from the community, with no prior hospital (48%) or nursing home (14%) stay within 15 days of receiving home health care.(17) Table 11 shows the top five diagnoses for Medicare community home health beneficiaries. Diagnosis is indicated by ICD-9 code (International Classification of Diseases).

CAREGIVERS

1. Informal Caregivers
   
   The 1997 National Family Caregiver Survey, sponsored by the National Alliance for Caregiving and AARP, documented the prevalence of caregiving in the US. The study found that nearly one in four (23% or 22.4 million) US households was involved in helping care for a spouse, relative, or other person older than age 50. A 1996 Bureau of the Census telephone survey estimated that 9.3 million people reported providing unpaid care to a family member or friend.(18)
   
   
2. Formal Caregivers
   
   Formal caregivers include professionals and paraprofessionals who provide inhome health care and personal care services, and are compensated for the services they provide. BLS and HCFA provide data on these employees. However, agency definitions and methods of counting are different. BLS provides an occupational classification for "home health care services," which excludes hospital-based and public agency workers. Its method of counting is "number of employees." HCFA limits its statistics to employees of certified home health agencies. Furthermore, its survey presents data on full-time equivalents (FTEs).
   
   In Table 12, BLS estimated that 671,600 persons were employed in home health care agencies in 1998, with the exclusions described above. HCFA recorded 240,136 FTEs employed in Medicare-certified agencies as of December 2000. The HCFA FTE counts show a decline of 170,972 FTEs since December 1997. For both BLS and HCFA, the largest numbers of employees are home care aides and RNs.
   
   

The 1998 number of employees data by job category presented in Table 12 is based on the Current Population Survey, which is conducted every three years. BLS also collects monthly information on employment for all workers, which includes home care services. BLS monthly statistics present data at an aggregate level combining all job titles. Table 13 shows the calendar year home care services employment for 1993-2000, based on BLS monthly statistics for December (the 1998 employment data cited in Table 11 are based on mid-year estimates). During the period 1993-1997, home care employment grew from 510,000 employees to 707,000 employees—an 8.7% average annual rate of growth. Total home care employment has declined by more than nine percent since 1997. As of December 2000, there were 642,000 home health workers employed by private, freestanding home care organizations.

3. Productivity
   
   Employee productivity in home care is typically based on the average number of visits provided per day. Several studies of nursing productivity reveal that nurses deliver an average of five visits per day (see Table 14). Nurses who specialize in pediatric care average 2.4 visits per day, while IV nurses average as many as other nurses.
   
   

In 1996, the National Association for Home Care surveyed its member home care and hospice agencies about their staff productivity.⁽¹⁹⁾ The survey was nonrandom, and therefore results are not statistically reliable as estimates of home care agency productivity in general. The productivity averages by discipline are presented in Table 15. These findings were limited to salaried and hourly employees making home care visits from January to March 1996. Data for hospice staff were reported separately. The productivity measure is based on a formula and definition developed by the home care industry and published in the Uniform Data Set for Home Care and Hospice.⁽²⁰⁾ It should also be noted that since 1996, the BBA and PPS are likely to have changed home care staff productivity significantly.

4. Compensation
   
   Since 1996, NAHC has worked with the Hospital and Healthcare Compensation Service (HCS) to conduct an annual survey of compensation in the home care and hospice industry. This agreement avoids duplication of effort in data collection by combining the efforts of both organizations. Summary results for the 2001-2002 HCS survey are shown in Table 16 and Table 17. As in past surveys, compensation is reported for the median salary, rather than mean salary, to reduce the likelihood that very high or very low salaries would skew results.
   
   

5. COST EFFECTIVENESS
   
   Home care is a cost-effective service, not only for individuals recuperating from a hospital stay but also for those who, because of a functional or cognitive disability, are unable to take care of themselves. Table 18 compares the average Medicare charges on a per day basis for hospital and skilled nursing facility (SNF) to the average Medicare charge for a home health visit. The following section lists some examples of cost-effective home care. However, it should be noted that cost-effectiveness is not the only rationale for home care. In fact, the best argument for home care is that it is a humane and compassionate way to deliver health care and supportive services. Home care reinforces and supplements the care provided by family members and friends and maintains the recipient's dignity and independence, qualities that are all too often lost even in the best institutions. Further, home care allows patients to take an active role in their care, becoming members of a multidisciplinary health care team.⁽²¹⁾
   
   

Several research studies conducted in the past several years have compared inpatient care to home care costs for a specific group of patients. A recent analysis of studies that investigated the use of home care as a cost-effective substitute for acute care services found a statistically significant relationship between home health use and reduced use of inpatient hospital care. ⁽²²⁾ The cost savings data for six studies of home care cost-effectiveness are summarized in Table 19. The information has been aggregated at a monthly level for purposes of comparison.

Several additional studies of home care cost effectiveness are summarized in the following paragraphs.


1. Psychiatric Care
   
   An inhome crisis intervention program developed for psychiatric patients in Connecticut was effective in reducing hospital admissions, lengths of stay, and readmissions. A two-year analysis of more than 600 patients showed that 80.7% of patients referred for hospital care could be treated at home instead. When inpatient admissions were necessary, the average length of stay was reduced from 11.97 days to 7.48 days by adding elements of the inhome care program; and patients who received home care services were less likely to be readmitted for hospital care (11.8% of home care patients were readmitted compared to 45.9% of patients who did not receive home care services).⁽²³⁾
   
   
2. Terminally Ill Veterans
   
   A home care program for terminally ill veterans reduced hospital per capita costs by $971. In the six-month study, patients receiving home care used 5.9 fewer hospital days than those in the control group. No differences were found in patient survival, activities of daily living, cognitive functioning, or morale. However, patient and caregiver satisfaction with care was significantly better among the patients receiving home care.⁽²⁴⁾
   
   
3. Patients with COPD
   
   An innovative home care program for patients with chronic obstructive pulmonary disease (COPD) that was tested in Connecticut found significant cost savings. The overall goal of the program was to provide more comprehensive home care services to COPD patients who previously required frequent hospitalizations. Monthly costs for hospitalizations, emergency room visits and home care fell from $2,836 per patient before the intervention to $2,508 per patient--a net savings of $328 per patient per month.⁽²⁵⁾
   
   
4. Patients with Congestive Heart Failure
   
   The impact of intensive home care monitoring on the morbidity rates of elderly patients with congestive heart failure was the focus of another study. The study found that with intensive home care surveillance, the total hospitalization rate dropped from 3.2 admissions per year to 1.2 admissions per year and the length of stay decreased from 26 days per year to 6 days per year. Cardiovascular admissions declined from 2.9 admissions per year to 0.8 admissions per year and length of stay decreased from 23 days per year to four days per year. An inhome program also resulted in significant functional status improvement in elderly patients with congestive heart failure.⁽²⁶⁾
   
   

Endnotes