to the declarations of need for "alternatives to institutionalization"; and special attention is given to the difficulties placed in the path of one of the major alternatives, home-health care. In the discussion of Medicaid, the emergence of the intermediate care facility, or ICF, is examined in some detail, largely because it represents a major Federal effort to reduce costs through means of reimbursement practices that depend upon a precise definition of care. The success of this effort is still far from certain, and critics say that ICF's could cause further deterioration of care without reducing costs to any great degree, when total costs are accurately considered. Questions about the elements of the Federal response discussed above are raised in this chapter and buttress a central declaration of this report: the Federal policy on long-term care is still poorly defined, hampered by confused objectives of the two major programs now providing reimbursement for long-term care, and hindered-as will be seen in part-by a failure of the executive branch to carry out congressional intent through its enforcement responsibilities. I. AN EVALUATION OF MEDICARE Medicare's contribution to the needs of the infirm elderly in nursing homes is not very great. About $180 million was spent in 1972 and nearly $207 million in 1973. On any given day, approximately 70,000 individuals out of the 1 million in the Nation's 23,000 nursing homes have their care paid by Medicare.3 In 1968 and 1969, Medicare's contribution was much more significant, reaching about $340 million in 1968. If the average rate of growth in these allotments were projected forward from 1969, then, Medicare's present contribution should be about $600 million this year.* The obvious question is: Why isn't it at that level? The answer is complex. It involves an administration shift in policy in 1969, and judgments about where and how to allocate funds. It also involves questions of congressional intent at the time Medicare was enacted. Finally, it involves the reaction by the Congress and administration against some abuses of the program by providers. A. EARLY BEGINNINGS UNDER MEDICARE When the Congress passed Medicare in 1965, the question of whether to provide a "nursing home" benefit was debated. Congress feared adding new and prohibitive costs to a potentially expensive program. But at the same time, some members of the Congress realized that the existence of a nursing home benefit of some description would enable some individuals to be shifted from hospitals to less expensive facilities for all or part of the convalescence. In short, the enactment of an "extended care benefit" as part of Medicare was an effort by the Congress to meet limited objectives. Nursing homes could participate in the Medicare program if they could meet 2 Special Analyses-Budget of the United States Government-Fiscal Year 1974, p. 149. 3 "Trends in Long-Term Care," hearings by the Subcommittee on Long-Term Care. Part 18, p. 2006. In 1969. Medicare expenditures for nursing homes constituted 5 percent of total Medicare costs. Five percent of Medicare's $12.1 billion outlay in 1974 would be $600 million. high standards and provide "skilled nursing care." In employing these two crucial terms, the Congress attempted to make it clear that it drew the line at custodial care. Custodial care was not to be covered; only "skilled care" patients were compensable. For this same reason, Congress sedulously avoided using the term "nursing home." Qualifying nursing homes were to be known as "extended care facilities" (ECF's). Moreover, the Congress took other steps to insure that the Medicare program would help to decrease hospital stays, thus effecting great cost savings. To qualify for "extended care," a Medicare beneficiary was required to: (1) Be hospitalized for at least three consecutive days; (2) be transferred to a Medicare certified facility within 14 days of discharge from the hospital; and (3) be certified by a physician as needing "skilled nursing" care for further treatment of a condition which caused hospitalization. It is obvious that many providers misunderstood the nature of this Medicare benefit, or chose to resolve the question in a manner most advantageous to themselves. Senator Frank E. Moss, chairman of the subcommittee, sought to warn providers of their delusion. In an October 1966 speech before the American Nursing Home Association, he described the need for a true nursing home benefit under Medicare and emphasized that what had been created was something different: The Medicare program is a short-term, acute-care program which does not even include financing of nursing home care. But despite the fact that Congress deliberately avoided the use of the term "nursing home"--the notion seems to be widespread that Congress intended to finance nursing home care but apparently did not know what to call it. This is in part wishful. Many people have looked to Medicare for too much in the way of relief from problems that it was never intended to solve. Despite these warnings, the Medicare ECF program flourished in 1967 and 1968, providing many Americans with care. The high-water mark was 1968, with Medicare ECF payments totaling $340 million. Nursing home stocks became one of the most attractive issues on the New York Stock Exchange. This was possible because the Bureau of Health Insurance (BHI) allowed thousands of substandard nursing homes to participate. As a concession for the tremendous demand for nursing home care, facilities with deficiencies were certified if they were "in substantial compliance" with standards.1a HEW's October 24, 1974 letter to Senator Moss: "contends that there were other factors that entered into the certification of extended care facilities during the period from July 1966 through 1967. For example : 1. There was lack of a clear understanding of what an extended care facility was or the services it provided. The ECF was an entirely new concept, a new kind of facility, created by statute and not well defined. It was not a hospital and it was not a nursing home. It was more nearly related to a convalescent facility. Since few or none of these kinds of facilities existed and hospitals did not have convalescent wards, it was natural to consider nursing homes as ECF's. That only 5.000 ECF's were certified out of 23,000 nursing homes and 7,500 hospitals in the Nation, attests to how well the certification was carried out. "2. The demand for certification of ECFs came from many sources, including the public, the nursing home and hospital industry, from Government officials at all levels and from professional health associations. "3. States hired individuals with varying backgrounds, mostly with absolutely no inspecting experience. to make surveys. As a result, a number of ECF's initially were improperly certified. Later considerable effort was made by States and the Department to terminate ECFs that could not meet the conditions." B. 1969: BENEFITS CUT BACK SHARPLY The market boom and the growth in the nursing home industry slowed considerably in early 1969. There were two reasons for this: (1) A decision by the Nixon administration to reduce costs, which took the form of new retroactive regulations for Medicare providers; and (2) Hearings and a followup report by the Senate Finance Committee called attention to excessive costs, profiteering, abuses, and inefficiency in the Medicare program. Regulations imposed on the Medicare ECF program by the Nixon administration were announced in April 1969. Former requirements were continued: prehospitalization for 3 days, transfer within 14 days to a certified facility, and physician's verification of the need for "skilled nursing" in continuation of care. But a new condition was added requiring a patient to have "rehabilitative potential," effectively excluding coverage for terminal patients. The second part of these April directives was the most devastating. It was a revised and narrowed definition of the term "skilled nursing," which by statute was a precondition to coverage. BHI regulations spelled out with great specificity which medical and nursing services were covered. Despite elaborate steps to eliminate ambiguities, the administration of the new regulations resulted in confusion for patients, providers, fiscal intermediaries, and Government officials. Identical claims submitted to an intermediary insurance company were returned with some paid and some rejected. To providers, the only consistency was that most of their patients were being denied coverage. To make matters worse, these denials were given retroactive effect. "Retroactive denials," a term that strikes deep concern in the hearts of physicians and other providers, spring from the Nixon administration April 1969 directives. In other words, a claim approved and paid in 1968 could be disallowed in 1969-with the nursing home or the patient required to make repayment. In February 1970, the Senate Finance Committee issued its report, "Medicare and Medicaid: Problems, Issues, and Alternatives." The committee quoted 1967 estimates that the Medicare nursing home program would cost the Government $1.80 per beneficiary per year. However, the report revealed that the actual cost was $18 per beneficiary, or 10 times the earlier estimate. The committee report also incorporated Bureau of Health Insurance (BHI) intermediary letter No. 370 of April 1969, and its definition of covered care under the Medicare program. This action on the part of the Senate Finance Committee gave strong support to the cutbacks initiated by the administration in April 1969. At the same time, the committee was highly critical of the Bureau of Health Insurance for its "wholesale certification of nursing homes as extended care facilities." The report noted that 2,000 nursing homes were originally thought to be eligible to participate in the Medicare 5 "Medicare and Medicaid," hearings by the Committee on Finance, Washington, D.C., July 1 and 2, 1969, pp. 22-23. program. However, BHI allowed almost 5,000 to be certified, the great majority being only "in substantial compliance," rather than in full compliance with standards. The Finance Committee called for an end to certification of facilities which did not fully conform to standards. Because of the tremendous demand for nursing home care and the acquiescence of the Bureau of Health Insurance, the Medicare ECF programs provided broadly defined traditional nursing home care. rather than narrowly defined posthospital, postoperative care. Unfortunately, the administration chose to announce new eligibility regulations which were applied retroactively. In January 1970, the Associated Press reported that 500 facilities had withdrawn from the Medicare program because of retroactive denials and general discontent with Medicare.' In October 1971, the Department of HEW placed the number at 2,000 who had quit the program for some reason. On August 13, 1972, a New York Times article quoted a General Accounting Office audit which announced that 3 out of every 10 U.S. hospitals and nursing homes had dropped out of the program. According to the GAO, some 5,000 hospitals and nursing homes had withdrawn from the program by the end of 1971.9 Evidently many administrators shared the sentiments of Lee Dalabout, executive director of the Utah Nursing Home Association, who claimed operators were: "glad that in spite of Medicare they have survived . . . and are sorry that they ever heard of it." 10 C. IMPACT UPON PATIENTS AND PROVIDERS What does all of this mean to the patients? Very simply, necessary nursing home care is not available. Recent statistics from Maryland and Pennsylvania note that Medicare patients make up only 5 percent of their patients. Iowa reports less than 5 percent of its patients received Medicare reimbursement. CRITICISMS OF RETROACTIVE DENIAL Hearings by the Subcommittee on Long-Term Care in 1969 and 1970 brought numerous criticisms of the retroactive application of the HEW regulations." Physicians, such as Dr. L. L. Long of Perry, Iowa, and Dr. Frederick Offenkrantz, medical director of the Cranford (N.J.) Health and Extended Care Center, testified. Providers were forced to seek repay • Medicare and Medicaid-Problems, Issues and Alternatives, Report of the Staff to the Committee on Finance. February 9, 1970, pp. 97-99. 7 Washington Evening Star, January 22, 1970. The January 20, 1971, press release from the American Nursing Home Association denounced "the hoax perpetrated on the elderly by the Medicare program", and reported that the ANHA Executive Board "urged the more than 7.000 nursing homes across the country, who are members of ANHA, to reassess their current participation in Medicare". 8 Page 2005, part 18, hearings cited in footnote 3. See Sizable Amounts Due the Government by Institutions That Terminated Their Participation in the Medicare Program, GAO report, August 4, 1972; and Problems Associated With Reimbursement to Hospitals for Services Furnished Under Medicare, GAO report, August 3, 1972. See also, New York Times, August 13, 1972., 10 Page 612, part 7, hearings cited in footnote 3. 11 See Developments in Aging: 1969, Special Committee on Aging, May 15, 1970, pp. 80-90; see also appendix 1, p. 113, this report. ment from patients or their families. In many cases the patients had died and providers had no recourse. Beneficiaries were hard-pressed to understand such arbitrary and capricious policies. Other physicians, such as Dr. Michael B. Miller of the White Plains Center for Nursing Care, objected to the overruling of the judgments by the nursing home's medical director and utilization committee by insurance company clerks who never saw the patient or the patient's chart.12 Senator Moss, who earlier warned that Medicare had not created a traditional nursing home benefit, watched with concern. He agreed that the Nixon administration had the legal right to return the program to its narrow post-hospital, post-operative stance contemplated by the law. However, he took sharp exception with methods employed by the Social Security Administration in early 1969. Specifically, he requested that new regulations be given prospective and not retroactive effect. Senator Moss summed up: Nursing home administrators have complained to me that accepting a Medicare patient is as unpredictable as putting a quarter in a slot machine. I have received heavy mail decrying this lack of predictability and the retroactive denial of claims. The problem has reached extremes in the State of Georgia, where the Georgia State Nursing Home Association has recommended that its members not participate in the Medicare program. In the face of the resistance of nursing home administrators receiving Medicare patients, physicians have had little choice but to retain patients in the hospital. Again a paradox; the Medicare machinery seems willing to pay hospital costs for patients who could be housed in a nursing home for about one-third of the hospital price. In an effort to cut back on the the number of days patients spent in extended care nursing homes, the Social Security Administration has significantly increased the burdens on the hospital. Small wonder the administration felt the need to increase dramatically Medicare premiums. In the final analysis, it is the consumer of the service that suffers. I find it most regrettable that Medicare is beginning to take on the color of another broken promise. I can empathize with the nursing home patient who has it on the authority of his Medicare handbook that he has the guarantee of 100 days in a nursing home. I can sympathize with the nursing home administrator who must break these bubbles of misconception and often suffer a financial loss as well.13 Senator Harrison Williams, then chairman of this committee, charged that the dismantling of the ECF benefit was contrary to the intent of Congress: 12 Page 305, part 3, hearings cited in footnote 3. 13 Page 150, part 2, hearings cited in footnote 3. |