Mandated Benefits Review - Senate Bill 499 - Staff Analysis of Act 34 Requirements
(in response to the eight requirements of Act 34, Section 9)

  1. The extent to which the proposed benefit and the services it would provide are needed by, available to and utilized by the population of the Commonwealth.

The submission from the Managed Care Association noted that home health services are utilized to varying degrees among different populations but to a greater extent by the elderly or Medicare population. They provided the following figures for Pennsylvania:

The Managed Care Association points out that Pennsylvania, through the work of the Intra-Governmental Council on Long-Term Care, has advocated strongly for finding ways to shift State funding from nursing facilities to community and home-based services. They add, "The Commonwealth, therefore, is seemingly headed in a policy direction which includes increased utilization of home health services."

The submission from Highmark noted, "Nearly sixty percent of all reimbursement for home care services is made available through Medicare funding. With over 38 million enrolled in Medicare in 1997, an estimated 3.9 million (or roughly ten percent) were expected to access home care."

Highmark also stated, "Home care in this nation represents a diverse and rapidly growing service industry. According to the National Association for Home Care (NAHC), services are administered through over 20,000 home care organizations with 7 million individuals annually requiring home care for acute illness, long-term health conditions, permanent disability or terminal illness. They suggest that home care follow-up is escalating for those under age-65.

Highmark also writes, "...the Pennsylvania Department of Health Home Health Division confirms a total of 366 Medicare-certified home health agencies. Another 101 are exclusively state licensed, but currently without Medicare certification."

While information submitted to the Council generally discussed these issues, the documentation lacked specificity in outlining the need for, availability of, and utilization of the proposed benefits for home health care in Pennsylvania.

  1. The extent to which insurance coverage for the proposed benefit already exists, or if no such coverage exists, the extent to which this lack of coverage results in inadequate health care or financial hardship for the population of the Commonwealth.

Based on the information provided to the Council, it appears, in general, that home health benefits are already widely offered. The Managed Care Association, Highmark, and the Insurance Federation all noted that coverage for home health services is widely available.

The Managed Care Association states, "home health care is generally a covered benefit under most commercial health insurance policies. Home health is also a covered benefit under the Medicare and Medicaid programs." They continue, "HMOs [health maintenance organizations] and other managed care plans serving the commercial market generally include a home health component as part of the base HMO plan.

According to the Insurance Federation, "Home health care coverage is already widely available in the Commonwealth through both conventional health policies and long-term care contracts. Both are offered and sold in competitive health care markets.

Highmark administers home health benefits for "the majority of its subscribers and members enrolled in most group programs, both indemnity and managed care, based on medical necessity." In addition, their major medical benefit design offers home health coverage as a standard benefit. They write, ". . . our group and direct-pay contracts provide for home care rendered by a home care agency or a hospital program for home health care. If elected by the group, the following services are eligible: skilled nursing services of a registered nurse or licensed practical nurse (excluded is private duty nursing), physical, occupational and speech therapies, medical and surgical supplies, oxygen and its administration, medical social work consultation, and health aide services."

Submissions did not demonstrate that there is currently an inadequate level of coverage or that a lack of coverage results in financial hardship or inadequate health care.

  1. The demand for the proposed benefit from the public and the source and extent of the opposition to mandating the benefit.

As previously stated, the Council received no submissions supporting this benefit. The only submissions received were opposed to the bill. Opposition was expressed both to Senate Bill 499 in particular and to mandates in general.

Specific Opposition to Senate Bill 499

The Insurance Federation states, "For an optional mandate to be meaningful, there must be a shortage of that coverage in the market, a demand for the coverage and an attractively priced product. None of these conditions has been demonstrated to exist." They argue that, without these conditions, the result will be duplicative work by insurers by forcing them to go forward with the process of "designing, pricing, and approving a product that will not be purchased."

Continuing, the Insurance Federation adds, "The result of this [legislation] is that a plan offering home health services must be richly priced, particularly on an indemnity basis for small groups and individuals. This makes coverage unmarketable in many instances. Further, some insurers are in no position to offer this coverage because of their size, expertise or market niche. Yet, the bill would require those insurers to offer this coverage or withdraw from the Commonwealth's health insurance market. . . .Small insurers offering such limited plans are likely to have neither the market expertise nor the management capability to offer such coverage profitably. Their only alternative is to price the optional coverage very conservatively, making their product noncompetitive and defeating the purpose."

The Managed Care Association notes that the bill requires that insurers offer coverage in accordance with an "approved home health care plan of treatment." They state that insurers would be concerned about "having to offer a specific level of benefits according to an 'approved' treatment plan yet having no role in reviewing the plan with the provider." Further, they write, "The definition of a 'home health care plan of treatment' is also problematic. While treatment plans are not at all uncommon, Senate Bill 499 does not identify a role for the health plan. It simply states that treatment plans be developed and reviewed by a physician and does not reference any role for the health plan. This will cause difficulties should a physician approve a treatment plan which exceeds an individual's coverage."

Highmark, while noting that the legislation "might simply be viewed as a 'mandated offering' of optional home health care," expressed concerns about the possible ramifications this bill may have in time, including requiring insurers to cover home health care services. Referring to the bill, they state, "A more expansive interpretation, however, establishes a broadly crafted mandate with the potential for substantial costs for purchasers of traditional coverage and managed care plans in Pennsylvania." They note, too, that there is ambiguity as to the "level, scope and extent of treatment required by the mandate and any cost-sharing, if any, required of the patient."

The American Family Life Assurance Company suggests that supplemental health insurance policies be excluded from the bill (accident-only, specified disease, hospital indemnity, Medicare supplement, long-term care, disability income or other limited benefit health insurance). They argue that these policies are of limited nature and fill the gaps "between what is covered by comprehensive insurance and the total financial impact of an illness or injury." They state, "Not only is there no need for this type of mandate to include supplemental insurance, there is also no public demand for it."

General Opposition to Health Insurance Mandates

Both the purchaser and insurer communities expressed strong opposition to the general idea of legislatively imposed health care mandates. In general, submissions contend that mandates result in rising health insurance costs, which cause employers and individuals to drop coverage, and thereby contribute to the increasing number of uninsured. The following are some of the arguments made by opponents of mandates:

  1. All relevant findings bearing on the social impact of the lack of the proposed benefit.

Based on the limited amount of information submitted to the Council, we were not able to identify, in any comprehensive way, the social impact of this legislation. Since coverage for home health care services appears to already be widely offered, it is assumed that the social impact would be relatively small.

The Insurance Federation writes that the services proposed are already readily obtainable, so "the failure to mandate this offering has virtually no social impact."

The Managed Care Association stated that, "Although not exclusive to the elderly, the demand for home health benefits is more apparent in light of the increasing number of elderly residents in the Commonwealth. In terms of the Medicaid and Medicare programs, the proposed legislation would have virtually no impact currently as home health services are already a covered benefit with few limitations."

In referring to the possibility of mandatory coverage of home health care services (not the mandatory offering of services provided for in Senate Bill 499), Highmark states, ". . . the introduction of home care services for a chronic, disabling, or terminal condition will serve to alleviate the financial and access hardships that may be experienced. In some cases, however, even then access may not be readily available for those residing in rural areas, for culturally diverse populations, for the poor and AIDS patients."

  1. Where the proposed benefit would mandate coverage of a particular therapy, the results of at least one professionally accepted, controlled trial comparing the medical consequences of the proposed therapy, alternative therapies, and no therapy.

Senate Bill 499 does not call for the coverage of a particular therapy.

  1. Where the proposed benefit would mandate coverage of an additional class of practitioners, the result of at least one professionally accepted, controlled trial comparing the medical results achieved by the additional class of practitioners and those practitioners already covered by benefits.

Senate Bill 499 does not explicitly include another class of practitioners. The Council notes, however, the submission from Highmark which states that in mandating such services as nursing; physical, occupational and speech therapies; and social worker and home health aide services, the legislation "may compel insurers to recognize practitioners of services in fulfilling the home health care plan of treatment. While certain established agencies and staff administering home care are now reimbursable, the expansive approach to home care is likely to attract provider interest for the reimbursement opportunities linked to this proposed mandate."

  1. The results of any other relevant research.

Research findings on mandates, in general, were discussed under Section iii, above. Highmark's submission noted the findings of several studies relevant to home health care: (1) Medicare home health care visits are used primarily to provide long-term care. (2) There is no evidence suggesting that services provided at home replace hospital services. (3) There are potentially important benefits of home visiting services for newborns and their mothers. (4) Hospitals affiliated with home health agencies are more likely to make referrals for these services. (5) For both elderly men and women, the most commonly used home health service was skilled nursing and the primary admission diagnosis was related to heart disease. (6) Increased reliance on these services is expected in the future, not only for the elderly but hospice, pediatric, and HIV positive/AIDS patients.

  1. Evidence of the financial impact of the proposed legislation, including at least:
    1. The extent to which the proposed benefit would increase or decrease cost for treatment or service.

      Since this legislation is a mandate to offer services not cover them, it can only be supposed that utilization of services might change in response to this measure. Increased utilization of home care services would lead to increased costs. Currently, Medicare expenditures on home health care are expected to grow at an annual rate of 10.6% from 1997-2002. Submissions did not adequately address whether these costs might be offset by savings in the future from decreased hospital costs, etc.

      On this issue, the submission from Highmark states, "This legislation may serve to reduce cost by eliminating or reducing inpatient hospital utilization among some patients. Conversely, costs may tend to increase through the introduction of the additional cost of home health services supplementing the normal period of hospitalization." They add, by requiring a written plan of care, "the legislation seeks to establish accountability by the lead or primary provider. Conversely, the 'written plan' may represent a 'blank check' sufficiently broad to include benefits of virtually every duration, cost and intensity."

    2. The extent to which similar mandated benefits in other states have affected charges, costs and payments for services.

      Highmark notes that, "Mandates have been enacted through legislation in a number of states since 1975. This includes the mandated offering of home health service coverage in California, Colorado, Kentucky, Montana, New Mexico, Texas, and Washington. Actual benefit mandates have been adopted in Arizona, Connecticut, Florida, Maine, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Vermont and Wisconsin." No submission, however, provided information as to how these mandates in other states have affected charges, costs, and payments for services. Council staff was also unable to obtain such information through independent research.

    3. The extent to which the proposed benefit would increase the appropriate use of treatment or service.

      Since benefits for home care services appear to already be widely offered and available, it is difficult to assess the impact this legislation would have on the appropriate use for treatment. Furthermore, since this legislation is a mandate to offer coverage, it is not possible to predict how many purchasers will add such coverage to their policies if this new benefit is offered to them.

      In discussing the appropriate use of home health care services, Highmark writes, "Although fraud and abuse may affect any aspect of health care delivery, the U.S. Health Care Financing Administration (HCFA) has focused significant attention to instances of fraud in Medicare home care reimbursement." Bruce Vladeck, then HCFA administrator, stated in testimony that, "The invisibility of the home health setting invites profiteers to prey on disabled and elderly patients who may often be isolated, uninformed, and lacking the support of friends or family. We are finding continuous problems with unnecessary home health service, especially those provided to beneficiaries who are not homebound. Because of the difficulty in monitoring these situations, the patient may be at the mercy of an unethical provider or supplier. Over-prescription and overcharging of oxygen and tube feeding supplies for home health patients have been found in bills submitted to Medicare and Medicaid."

    4. The impact of the proposed benefit on administrative expenses of health care insurers.

      The administrative costs which insurers will experience if Senate Bill 499 is enacted will most likely be in the development of the optional benefits to be offered to purchasers. The Insurance Federation explains that there would be costs involved in "creating, pricing, clearing and offering this optional coverage."

      Highmark suggests that administrative expenses would have only minimal impact on insurers, if it represents a mandated offering.

    5. The impact of the proposed benefits on benefits costs of purchasers.

      Senate Bill 499 is a mandate to offer benefits for home health care, so the enactment of the bill would not necessarily have a significant impact on the benefits costs of purchasers. Purchasers of health care would have the ability to decline these optional benefits.

      The Pennsylvania Business Roundtable, however, expressed concern about a number of issues related to costs that mandates, in general, place on the business community and purchasers of health care (discussed in more detail in Section iii, above). They write, "The greatest concern is that such mandates will impose additional financial burdens on the payers of health insurance, whether they be private or public. Such burdens would be imposed on the very businesses that are providing good family-sustaining jobs that pay good wages and offer benefits."

      The Insurance Federation writes, "While it can be argued that overall there may be a relatively light economic impact all around, this does not recommend the bill. Indeed, the constrictions on insurer product design and the additional costs added to the system lead to a less market oriented insurance marketplace, more regulation and less freedom to innovate."

      Highmark states, "If the legislation under consideration were limited to an offering of optional home health services, we find that the cost impact would prove negligible since group purchasers now have an opportunity to elect such benefits by design. If, however, the legislation is deemed to mandate a comprehensive set of benefits in all health plans, Highmark finds that the actuarial cost projection in serving our 6.5 million members will be $19,102,000 annually."

    6. The impact of the proposed benefits on the total cost of health care within the Commonwealth.

      Insufficient information was received to identify precisely how this measure would impact the total cost of health care in Pennsylvania. Submissions did discuss this issue in general:

      Opponents claim that-while some mandates are more costly than others-all mandates cost, noting that there is a correlation between the number of mandates and the increased cost of health insurance, the number of uninsured, and the decreasing number of employees covered by employer provided health insurance.

      In addressing their concern about extending this mandate from one of offering these services to one of covering them, Highmark estimated the cost of covering these services to over $36 million annually excluding Medicare, Medicaid, self-insured companies, and the uninsured population. According to the Managed Care Association, home health services are estimated to average $15,000 per year, with greater expenses for those requiring ongoing care for permanently disabling conditions.

      Highmark stated, "In just one four-year period (1990-1994), Medicare home health care costs rose by 35 percent annually. Home health benefits represent one of the fastest growing areas of Medicare expenditures, with increases of more than 30 percent annually since 1989. These expenditures are projected to continue to grow at an annual rate of 10.6 percent over the period 1997-2002."

      Though this particular legislation-in mandating that these services be offered-may not have a substantial impact of health care costs, there is concern that Senate Bill 499 may open the door for future, and significantly more costly, mandates involving reimbursement for home health care services.