Home Health

Can Home Health Care Reduce Cost?

At one point, the answer may have been yes.  But today…

Although the initial impetus for establishing home health care was charitable, the Metropolitan Life Insurance Company (MetLife) discovered that by providing home health care, it could prolong life while collecting premiums and abstaining from death benefit payments. Yet the model experienced a requisite shift in focus in the 1920s stemming from a decrease in contagious diseases coupled with the proliferation of chronic illnesses, such as heart disease, diabetes, and stroke (Buhler-Wilkerson, 2007). MetLife and other insurers found that providing more care did not improve outcomes and sought to limit visits and eliminate the type of personal services offered. Ultimately, MetLife discontinued home nursing services, determining it unprofitable (Buhler-Wilkerson, 2007).

The years following World War II witnessed an increase in chronic conditions that overwhelmed hospitals and institutions, which, in turn, renewed interest in home health as an alternative to institutional care (Benjamin, 1993). Still, the reductions in institutional care assumed to flow from home health care proved elusive to document, and it was difficult to identify the appropriate population requiring home health care.

The argument in favor of funding home health care for the chronically ill parallels the argument supporters of much more preventive care make.  They both state the home health care/preventive care is an investment that reduces costs in other settings, but both have little evidence to document these savings in most cases.

Additionally, it is hard to contain cost when providers have an incentive to manipulate the system to maximize profits.  For instance, there is evidence of significant levels of upcoding.  According to one study, “92% of the case-mix increase since the HH PPS began resulted from changes in coding practices and documenting existing conditions rather than increased service utilization or more resource-intensive patients.”   Further, “MedPAC has noted that therapy visits were the most important factor in the growth of home health episodes; growth trends directly reflected distortions associated with therapy payment thresholds.”  Another study found that the level of service provided to the patients did not vary significantly, underlining the point that home care agency services are not responding to variances in patient health but to the reimbursement system itself.  Further, VNAA finds that many home health agencies have engaged in fraudulent activities such as: billing Medicare for home care services not provided, inducing referral sources; encouraging patients to ask for unnecessary care; encouraging admissions of patients with the lowest care needs (including limiting or providing inadequate care to patients with lower payment potential), and billing for unnecessary services.

Further, regional variation home health agencies treatment patterns causes significant variation in the price of care.  For instance, average home health cost in North Dakota was $2,396 versus $7,761 in Nevada.

Overall, Medicare paid $16.9 billion for home health services in 2008.  These payments covered 117.8 visits: 55% for skilled nursing, 18% for home health aides, and 26% for therapy (physical, occupational, and speech-language), averaging $5,337 per episode).


  • Judy Goldberg Dey, Ph.D, Margaret Johnson, MBA William Pajerowski, Myra Tanamor, MPP, Alyson Ward, RN, MPH. Home Health Study Report: Literature Review. L&M Policy Research, LLC, HHSM-500-2010-00072C, January 11, 2001.


  1. Speaking from a European perspective I am not sure that Home Healthcare reduces the overall costs. It is merely an exercise of redistributing it. There are many models that have been adopted in Europe, the biggest relates to home enteral feeding of chronic patients. We have seen companies like Abbott, Fresenious-Kabi and Nutricia all employing teams of nurses to support the care in the community.

    Ultimately the patient does benefit as their quality of life is increased, however the service still needs to be paid for and it is fair to say that it is now coming out of a variety of different budgets including that of the patient and carer.

  2. But in the meantime it is going to depend on every single one among us to do the perfect we could and to find ways to lower the cost of our wellbeing insurance on your own. … Of course the bigger of any insurance deductible within your budget the cheaper your regular quality price for health insurance coverage.

  3. One doctor (family practice) I know said home health care is a racket. He said home health gets paid more for a patient visit than he does. Another doctor I know (colorectal surgeon) is assaulted weekly by these home health forms that have to be signed by the referring physician and after working 60-70 hours/wk, he’s not sure what he’s signing for. He’s able to glance at them but not completely read them. He thinks they’re asking him if it’s okay to do more (for upcoding purposes no doubt). On top of that, he said he’s known nurses from many of these agencies to provide sub-quality care, even dangerous care. So what’s the answer authors? Given the dysfunction and insufficient employees at CMS, is there any hope that we have to continue to have our taxes go to these questionable agencies? Would widespread media coverage help?

  4. In addition, I have noticed that in our area there is a continual proliferation of home health agencies. It has reminded me of when, a few years back, I met so many people who were leaving what they were doing and going into the “mortgage business.”

  5. Home health care are better than hospital and affordable in reasonable prizes. its not a business, it is a duty, providing a better and reliable services to the patient.

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