December 4, 2009

December 4, 2009 | Commentary on Health Care Reform

Don't Hold Your Breath

Congress is counting on a ton of savings from home health care to finance its costly coverage expansion. That sector got hit because, unlike big pharmaceuticals or the American Medical Association, it doesn't have a seat at the bargaining table. The House bill projects almost $57 billion, while the Senate is eyeing $42 billion. That's roughly 10 percent of all the estimated Medicare savings.

Is this feasible? That depends on two things. Can you actually find alleged waste? And will future Congresses sustain the cuts?

There is little likelihood that we will see huge savings through efficiency improvements in home health care.

Home health was touted originally as a big cost saver by keeping seniors out of the hospital. But soon the program was spending money rapidly while other parts of Medicare didn't seem to go down. Why? Because thousands of small organizations and businesses provide the care, often delivering "soft" services in the home, making it difficult to detect unnecessary services, excessive payments and fraud.

What's the likelihood that we will see the promised savings through the efficiency improvements that Congress expects? Not high. It's true that the government's auditors, the General Accounting Office, have found continuing billing fraud and overuse that in theory can be eliminated.

But while tough new rules and payment reductions may in theory reduce waste they also create obstacles for those who are best served by home care. One consequence of that could be more spending on costly skilled nursing facilities for seniors denied home services, blunting the projected home care savings. Another very likely result would be political pressure on future Congresses to roll back some or all of the cuts once stories circulate about seniors blocked by "heartless bureaucrats" from receiving "necessary" care in their own homes.

So let's not hold our breath. Congress and the White House are great at assuming savings to justify new spending. It's just not good at getting those savings

Stuart M. Butler, Ph.D., is Vice President for Domestic and Economic Policy Studies at The Heritage Foundation.

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First Appeared in New York Times blog