September 11, 2001, turned the world upside down, especially in Washington, DC. Overnight the health care issues that had dominated much of the Congressional debate—funding prescription drugs and reforming Medicare—were replaced by bigger priorities, such as the war effort and the recession. To help make sense of it all and predict where home health may be headed in 2002, Dealer/Provider asked four people in the know:

What should HME providers look for legislatively in 2002?
Asela Cuervo:
We can expect Congress to resume work on the issues it was addressing last year. Some of the priority issues for AAHomecare included Centers for Medicare & Medicaid Services (CMS) regulatory reform, changes to average wholesale price (AWP) reimbursement for Medicare-covered drugs, and the elimination of the 15% cut for home health. Last year, Congress recessed without resolving their differences on these issues. Changes to AWP reimbursement and CMS regulatory reform, both of which will affect HME suppliers, will remain priorities for Congress. We can also expect a lot of discussion, as well as concrete proposals, for a prescription drug benefit under Medicare. However, the fact that Congress did not pass an economic stimulus package at the end of last year—even though this was a priority for the President—may mean that little gets accomplished in the end, especially given that this will be an election year.

Cara Bachenheimer:
The question is going to be: What is the economy going to be doing and what will the budget surplus, or lack thereof, mean for Medicare legislation? At this point in the game, it doesn’t look like there is any impetus for a massive Medicare budget bill.

It is also an election year and that dynamic is always important. It is more talk and less getting things done. The big question mark is: Is Congress seriously going to consider a prescription drug benefit? There will be a lot of lobbying going on to put pressure on Congress to pass a prescription drug bill. But Congress is starting at square one in terms of where they are going to find the money for that....

The end of 2002 is also the end of the competitive bidding demonstration, but there is still a series of reports that CMS is required to give to Congress. So it will be more of a 2003 issue than a 2002 issue.

The unfinished business of Congress this year is the Medicare regulatory reform. The House passed a compromise bill that was then introduced in the Senate, but the Senate Finance Committee still has to consider it. [The reform bill] is overall a good package. It is the kind of package that will not have an immediate impact on companies in the industry but definitely moves forward significantly to rationalize the system.

Corrine Parver:
Given the fact that it is an election year, I think Members of Congress will want to leave Washington early; they are not going to want to hang around Washington to debate Medicare proposals well into the end of June. They are going to want to get home for the summer recess and campaign. So it will be a very short legislative session.

Considering that in 2001 there was no action on prescription drugs, no resolution of the debate on the patient’s bill of rights, and no true Medicare reform, there is a lot on the plate for the next Congress. Today, enormous funds are being allocated for homeland security, defense, and anti-terrorism activities, and I don’t expect that to change too much this year.

However, the Democrats ... are going to be looking for issues to create a difference from the Republicans, and I anticipate that distinction will occur with domestic issues. Since the Democrats have control of the Senate, they may push to accomplish some of the health care reform legislation that was not concluded in 2001, especially so they can at least have a platform upon which to announce a winning agenda.

The health care issues of 2002 will be much more global. If Congress finds that the budget surplus is reduced to the point where the deficit is considerable, Members will look at all sectors of health care for cuts. HME suppliers and home health agency providers will not be excluded from this “trimming” effort. Therefore, I don’t think the picture will be particularly rosy legislatively for this segment of health care, but not more so than for any other health industry sector.

Sheldon Prial:
The year 2002 will be a fascinating one, what with our government involved in a war with an almost invisible enemy. Fighting terrorists is a difficult time-consuming effort, yet despite this, the country must continue to move forward.

The surplus of money that was available prior to the September 11 attack on the World Trade Center has disappeared. The need for additional funds is now a major problem for Congress. In order to continue servicing Medicare, provide assistance to the states for Medicaid programs, and push for a prescription drug plan, Congress has to find the necessary dollars.

Where will these dollars come from? I heard CMS Administrator Tom Scully speak at Medtrade, and I have a great deal of confidence in his ability to bring about the changes he promised. I recognize the strength that Tommy Thompson, Health and Human Services (HHS) Secretary, has brought to HHS. I consider them as allies to the industry. We must let each of these administrators know the needs of our customers and our businesses.

We will see many new efforts to stop some of the fraud and abuse that have been siphoning money from the system. Had more effort been put into this battle years ago, we might have prevented some of the draconian legislation I hear bandied about. Will we see the 15% reduction in reimbursement, a project on which we all worked so hard, now remain in place?

If you wish to see changes made and some of the legislative constraints on the industry relaxed, then you must become an active participant in the process. This means writing letters, making phone calls, involving your customers, and being very forthright and direct about the changes you request.

Will the shrinking budget surplus and recession impact HME?
Asela Cuervo:
Certainly the fact that there will be fewer dollars can impact suppliers. Congress will need to find ways to fund, for example, a prescription drug benefit. Some of that money could come from offsets from other programs such as the DME benefit. We also know that Congress views some Medicare “reforms,” such as competitive bidding, as having the potential to achieve great savings for the Medicare program. There also will be less money for fee schedule adjustments and other “givebacks” as the Balanced Budget Amendment (BBA) Consumer Price Index (CPI) freeze expires.

Cara Bachenheimer:
The budget surplus and the recession are critical because when Congress is looking for money for an overall budget resolution package, there is always the potential it may look at cuts in the Medicare program. I don’t want to suggest that, but those things always swing with the budget pendulum. Depending on where we are, that will dictate if there is any momentum in that arena.

The [Bob] Graham [D-Fla] budget proposal in the Senate actually did include some competitive bidding as contributing in a minute way [to saving money in the budget]. However, there aren’t a lot of dollars to gain from cuts to this industry...

Corrine Parver:
I am concerned that, given the budget deficit, with billions of dollars going to homeland defense and to New York and Washington, DC, for repairs, Congress will look everywhere for money for new initiatives.

With regard to the impact of the recession on home care, I see a bit of a turning tide. Our economy appeared to be a bit more positive toward the end of December and the beginning of January. Health care industry companies are starting to perform a bit better now in general, so I do not believe there will be as much of an adverse effect on home care because of the recession as perhaps from [government funds] going elsewhere.

Sheldon Prial:
As the country is trying to rise from the bear market, which has cost our citizens mega-bucks, and the recession, I see services reduced and possibly new taxes introduced just to fund the programs currently in place.

What will the merger between AAHomecare and the American Home Care Association (AHCA) mean for HME providers?
Asela Cuervo:
HME suppliers will have a stronger organization. Their representation in Washington and with CMS will not change. AAHomecare represents the entire community of home care providers and suppliers—not just discrete lines of service. My own view is that the merger with home health will permit us to be the credible voice in Washington when Medicare reform is on the table. Because we represent all of home care, we will be in a position to promote an expanded home care benefit that can meet the needs and preferences of the growing Medicare population in a cost-effective way.

Cara Bachenheimer:
It reflects what is going on in the marketplace more. And it is always better to have a larger association with more members, more power, more grassroots constituents, and a stronger presence in Washington. When you are representing both the home health agencies and the HME providers, you have a fairly limited list of priorities. It may be more complex from an association management perspective, but that is really not an issue for people on Capitol Hill. From a legislative and lobbying perspective, it is a great move.

Corrine Parver:
I have long been extremely supportive of bringing together the smaller, disparate home care groups....Now, with the merger, there is a larger force that more significantly represents each component in the spectrum of home care services. I think the merger is extremely positive from a business standpoint.

When it comes to legislative and regulatory concerns, however, the “rubber meets the road,” primarily because of the different way home health care companies are reimbursed. There is the anomaly of federal home health care reimbursement flowing from two different pots: Medicare Part A pays for the home health agency side, and Medicare Part B, the DME side. When the last minute of Congressional debate on budget cuts arrives—where Congress is looking for money to be offered up in exchange for positive legislative provisions—and [a powerful Committee Chair or staffer] says to AAHomecare: “We have X amount of dollars that we need from you in order to be able to fund this legislative provision, where is the money going to come from, Part A or Part B? Which legislative provision is your number one priority, a home health agency provision or an HME one?” That is where the situation becomes tricky....If years go by and that scenario never occurs, wonderful! But the concern is what happens if, and most likely when, the newly merged group is faced with that dilemma.