Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, and home health and hospice care. Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services. Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Parts A and B services, except hospice. Part D covers outpatient prescription drug benefits. Medicare fee-for-service (FFS)—Medicare Parts A or B—provides coverage in a beneficiary's home for certain services and treatments of an illness or injury. Beneficiaries entitled to benefits under Part A do not need to enroll in Part B to receive full coverage for home health visits; however, beneficiaries must meet Medicare's home health eligibility requirements. Beneficiaries who meet the home health eligibility requirements are entitled to a 60-day episode of home health coverage and then to an unlimited number of 60-day episodes, so long as they continue to meet the eligibility requirements. This report describes home health eligibility criteria, home health services, characteristics of Medicare beneficiaries who use home health services, and home health providers. Further, this report describes in detail the Medicare home health prospective payment system (HH PPS), provides an overview of Medicare home health payments, and discusses issues for Congress related to the Medicare home health benefit. For information on major legislative changes to the home health benefit, see the Appendix . To be eligible for Medicare-covered home health services, a beneficiary must meet three requirements: he/she must be homebound, he/she must need part-time or intermittent skilled nursing care and/or skilled rehabilitation , or, after establishing prior eligibility, a continuing need for occupational therapy, and he/she must be under the care of a physician and need reasonable and necessary home health services that have been certified by a physician and established in a 60-day plan of care. The following sections describe each of these requirements in greater detail. To be eligible for covered home health services, beneficiaries must be homebound; however, homebound eligibility criteria have caused confusion and have been misinterpreted by providers and Medicare claims contractors. Congress and the Centers for Medicare & Medicaid Services (CMS) have clarified the definition of homebound over time to better assist beneficiaries, providers, and Medicare claims contractors in the eligibility process. Currently, the regulatory definition of homebound states that a beneficiary must be confined to the home or in an institution that is not a hospital, Medicare-participating skilled nursing facility (SNF), or Medicaid-participating nursing facility. While a beneficiary must be confined to the home, the beneficiary does not have to be bedridden. Beneficiaries are considered homebound if leaving their residence requires a considerable and taxing effort. Absences from the home must be infrequent, or for periods of relatively short duration, or to receive medical treatment. In a March 2012 report, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) concluded from a medical record review sample of 495 Medicare home health claims that in 98% of Medicare home health claims the homebound requirement was met. The HHS-OIG was unable to determine from a medical record review if the remaining 2% of claims met the requirement of homebound. For beneficiaries who meet the requirement of homebound, Medicare will provide coverage for reasonable and necessary part-time or intermittent skilled nursing care and skilled rehabilitation services in the home. For purposes of determining eligibility, intermittent skilled nursing care is defined as care that is needed fewer than seven days each week, or less than eight hours of each day for periods of 21 days or less. Prior to 1989, the definition of "intermittent" was interpreted by the Health Care Financing Administration (forerunner to CMS) to mean skilled nursing care provided four days or fewer per week. As part of an agreement reached in a class action lawsuit, Duggan v Bowen , the definition of "intermittent," published in 1989 by the Health Care Financing Administration redefined intermittent as fewer than seven days a week. Intermittent skilled nursing care is covered under Medicare if the skills of a registered nurse (RN), or a licensed nurse under the supervision of an RN, are reasonable and necessary to treat a medically predictable recurring need. Beneficiaries who are diabetics may receive an exception to the intermittent requirement if there is no caregiver (or an unwilling caregiver) to administer insulin. Beneficiaries requiring skilled rehabilitation services (e.g., physical therapy, speech-language pathology services, occupational therapy) may be eligible if the services are reasonable and necessary to treat or maintain function affected by their illness or injury and, for the most part, such rehabilitation services cannot be carried out by non-skilled personnel. For beneficiaries who are homebound, the skills or supervision of a registered nurse are reasonable and necessary (and therefore covered by Medicare) based upon the inherent complexity of the service, the condition of the beneficiary, and accepted standards of medical practice. Observation and assessments may also be considered reasonable and necessary if there is a reasonable potential for change in the beneficiary's condition that requires the skills of a registered nurse to identify and evaluate, as well as to ensure that essential non-skilled care is achieving its purpose. Skilled rehabilitation services are reasonable and necessary if the inherent complexity of the service is such that it can be performed safely and/or effectively only by or under the general supervision of a skilled therapist. In addition to rehabilitation services to improve a beneficiary's function, maintenance therapy may be considered reasonable and necessary to prevent a decline in a beneficiary's functional ability. Medicare beneficiaries who meet the home health eligibility criteria are entitled to a 60-day episode of home visits by skilled health care professionals. Beneficiaries can be recertified for an unlimited number of episodes so long as they continue to meet the home health benefit's eligibility criteria. There are no beneficiary cost-sharing requirements associated with the home health episode; however, a 20% coinsurance is required for all covered durable medical equipment and covered Part B drugs and biologics. Roughly 9.5% (or 3.4 million) of Medicare FFS beneficiaries used home health services in 2011. For beneficiaries who meet the eligibility criteria, covered services include skilled nursing care (e.g., administering IV injections, wound care); physical therapy (e.g., range of motion exercises); occupational therapy (e.g., wood working activities to restore range of motion loss); speech and language pathology services (e.g., tasks to restore speech/voice production); medical social work services (e.g., assessment of the beneficiary's social and emotional factors related to the illness); and home health aide services (e.g., bathing, dressing). The home health benefit also provides coverage for items such as medical supplies, osteoporosis drugs, durable medical equipment, and items provided on an outpatient basis which cannot be made readily available in the beneficiary's residence. Since 2000, the proportion of visits has shifted towards more skilled nursing and therapy services. In 2000, roughly 49% of home health visits were for skilled nursing services, 19% for therapy services, 31% for home health aide services, and 1% for medical social services. In 2011, roughly 51% of home health visits were for skilled nursing services, 33% for therapy services, 15% from home health aides, and 1% for medical social services. While the distribution of visits has shifted towards greater therapy, the number of visits home health users receive has been relatively constant, with an average 36.2 visits per home health user in 2011 compared to an average of 36.8 visits per user in 2000. However, prior to payment reductions in the Balanced Budget Act of 1997 (BBA 97, P.L. 105-33 ), the average number of visits per home health user was much higher—72.6 visits per user. This decrease in home health visits per user has important implications since the current Medicare home health payment system uses a base payment rate that was constructed from 1997-1998 Medicare HHA cost reports and home health claims data, as discussed subsequently in this report. Similar to other Medicare post-acute care services, there is wide variation across the United States in the percentage of beneficiaries who receive Medicare-covered home health services. Geographic variation in home health admissions may in part be explained by demand factors, such as health and illness of residents in a state or treatment preferences, or supply factors, such as the number of home health agencies in the area, local practice preference, reduced nonmonetary costs (e.g., shorter distances for patient travel, shorter wait times). As shown in Figure 1 , in 2011, Medicare-covered home health admission rates were relatively higher in the West South Central region (i.e., Arkansas, Louisiana, Oklahoma, and Texas). In 2011, the rate of beneficiaries who received covered home health services per 1,000 Part A enrollees was highest in Louisiana (144) and Texas (144), followed by Florida (143). The three states with the lowest rates of home health admissions were Hawaii (23), Alaska (36), and South Dakota (36). Medicare has covered home health benefits since enactment, and it has been traditionally categorized as a "post-acute care" benefit—providing limited skilled coverage following a beneficiary's hospitalization.