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Volume 23.05

According to the March Report to Congress, “Based on the generally positive indicators of payment adequacy and strong margins, the Commission concludes that a reduction to aggregate payments is warranted. However, in this sector, with the range of financial performance across providers and the existence of the hospice aggregate cap, there is the potential to focus payment reductions on providers with disproportionately long stays and high margins. Therefore, the Commission recommends that the Congress wage adjust and reduce the hospice aggregate cap by 20 percent while maintaining the current-law update for fiscal year 2024. Under this recommendation, payments would increase for many hospice providers by an estimated 2.9 percent, while payments would be reduced for providers with very long lengths of stay and low costs relative to payments.”

MedPAC reported that the average margin for hospices in 2020 was 14.2%.  Even so, MedPAC reported that “Above-cap hospices had a Medicare aggregate margin of about 22.8% before the return of overpayments but had a margin of 7.7% after the return of overpayments.”  By their own data, above-CAP hospices had a margin of less than the average, yet, they continue to recommend a 20% reduction to the CAP.  Such a reduction will impact many providers that never experienced a CAP liability in the past.  MedPAC’s own data validates an overall reduction to the CAP is not justified.  The MedPAC report is available here.

Applying the wage-index to the CAP calculation is needed.  MedPAC got it right in stating, “Because the hospice payments are wage adjusted but the aggregate cap is not, the cap is more generous in some areas of the country than in others.”

MedPAC, by recommending a 20% reduction in the CAP, is proposing a simple, but improper approach to reducing Medicare expenditures for hospice services, rather than looking at rational approaches for addressing the underlying problem of excessive, and potentially inappropriate, lengths of stay in hospice.  The arbitrary overall 20% reduction in the hospice CAP will have significant and unintended consequences on hospice providers across the country.

The Hospice benefit is a remarkable benefit to the terminally ill and their families.  While there are integrity issues which should be addressed, we encourage an appropriate, but thorough assessment of integrity issues and actions to address those issues without a general, and inappropriate attack on the benefit itself.

Recently, the National Association for Home Care & Hospice (“NAHC”) and the National Hospice and Palliative Care Organization (“NHPCO”) commissioned NORC at the University of Chicago to assess the value of hospice to the Medicare program and to beneficiaries, their families, and caregivers.  The key findings follow:

  • “In the last year of life, the total costs of care for Medicare beneficiaries who used hospice was 3.1 percent lower than the adjusted spending of beneficiaries who did not use hospice. This relatively modest reduction in adjusted Medicare spending translates to an estimated $3.7 billion less in Medicare outlays for beneficiaries in their last year of life.
  • Examination of Medicare spending in policy-relevant length of stay groupings (0-14 days, 15-30, 31- 60, etc.) found that total Medicare spending in the 12 months preceding death is consistently lower for beneficiaries with LOS of 15 days or more, compared to beneficiaries who did not use hospice, regardless of disease group.
  • Furthermore, analyses to find the specific day when Medicare spending for non-hospice users equals spending for hospice users—revealed the “break-even” point at day 10.  Starting on day 11 (prior to death), hospice users’ Medicare spending is lower compared to spending for non-hospice users. In other words, earlier enrollment in hospice—and longer lengths of stay—may reduce Medicare spending.
  • Hospice stays of six months or more add value to Medicare.  For those who spent at least 6 months in hospice in the last year of their lives, spending was 11 percent lower than the adjusted spending of beneficiaries who did not use hospice.  When sorted by disease group, spending ranged from being 4 percent lower for neurodegenerative disease to 25 percent lower for chronic kidney disease/end stage renal disease (CKD/ESRD).
  • Hospice care benefits patients, family members, and caregivers.  From increased satisfaction and quality of life, to improved pain control, to reduced physical and emotional distress, and reduced prolonged grief and other emotional distress, hospice offers multiple benefits to patients, families, and caregivers.”

The entire NORC report can be viewed at Value-of-Hospice-in-Medicare_032023_FINAL3.pdf (nahc.org) and Value of Hospice in Medicare Report | NHPCO.