Require a Copayment for Home Health Episodes Covered by Medicare

The Congressional Budget Office projects that the use of home health services, and the resulting costs to the Medicare program, will grow rapidly over the next 10 years, rising from about $23 billion in 2012 to $52 billion in 2021. One reason for the high level of spending is that Medicare beneficiaries are not required to pay any of the costs of home health services covered by the program.

This option would charge Medicare beneficiaries a copayment amounting to 10 percent of the total cost of each home health episode--a 60-day period of services-- starting on January 1, 2013. That change would yield net federal savings of $14 billion over the 2012-2016 period and $40 billion over the 2012-2021 period. For Medicare beneficiaries who use home health services, the average increase in Medicare copayments in 2013 would be about $600.

An argument in favor of this option is that it would directly offset a portion of Medicare's home health outlays and encourage some beneficiaries to use those services in a cost-conscious manner. The use of services would also decrease, most likely among the approximately 10 percent of beneficiaries with fee-for-service Medicare only--that is, beneficiaries who do not have supplemental insurance, such as medigap or "wraparound" retiree coverage, and who are not enrolled in Medicaid or a health maintenance organization.

An argument against this option is that it would increase the risk of significant out-of-pocket costs for the 10 percent of Medicare enrollees who have fee-for-service coverage only--a population that tends to have lower income than do beneficiaries with private supplemental insurance. As a result, implementing the option could cause some of those individuals to forgo beneficial care. Among the majority of enrollees who have supplemental insurance, little or no drop in use would be expected because their supplemental policies would presumably be expanded to cover the home health copayment proposed in this option. For that reason, the approximately 25 percent of enrollees with individually purchased medigap policies would probably face higher premiums, and the costs of employment-based supplemental policies could also rise. Finally, this option would result in increased spending by Medicaid for home health care for individuals who have both Medicare and Medicaid coverage; the federal share of higher Medicaid outlays is included in the estimated change in outlays.