MedPAC discusses hospice Medicare payment cap

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Here are a few comments from meeting

Members of the Medicare Payment Advisory Commission (MedPAC) met in October and discussed the hospice payment benefit's aggregate, average, per beneficiary limit, which providers call the Medicare cap.

MedPAC staff expert Jim Mathews and MedPAC commissioners, including chair Glenn M. Hackbarth, JD, vice chair Robert D. Reischauer, PhD, Thomas M. Dean, MD, Mitra Behroozi, JD, and William J. Scanlon, PhD, discussed possible changes that might be recommended for the cap at the recent meeting. Here are some excerpts from the panel's 50 pages of comments at the meeting:

Mathews: "Last year, the fiscal intermediaries that process Medicare hospice claims reported that about 5% of hospices reached the cap in 2004. Hospices reaching the cap tended to be smaller in terms of their average patient count, 190 patients on average in 2002, compared to 308 for noncap providers. They also had lengths of stay that were about 54% greater than noncap hospices in 2002 and 107% greater in 2005.

Some diagnoses as you see here, such as Alzheimer's disease and chronic ischemic heart disease, have relatively long lengths of stay. Further prognosticating the likely remaining life span of patients with terminal stages of these diseases is something of an inexact science.

Because of the association between diagnosis and length of stay, we hypothesized that cap hospices may be treating a disproportionate number of patients with conditions that typically have longer lengths of stay. If so, the caps maybe unduly impeding access to hospice for these patients and adversely financially affecting the hospices that treat them."

Reischauer: "... If we relax the requirements so that people get in earlier, do you end up saving Medicare money or costing Medicare money?"

Mathews: "There is a reasonable body of literature on this specific question, and it runs the gamut. There are three or four studies that say hospice saves the program money relative to traditional Medicare, and other studies that say it costs money.

Most recently there was a study, I think it just came out last month, by some folks at Duke University who looked at cost of hospice use for patients relative to a cohort of patients both in their last week of life, in the period between their death and the election of hospice, and in their last year of life, and they kind of had some interesting observations about the cost effects of hospice use relative to nonhospice users.1 I think they found that for decedents with cancer, hospice use was more cost-effective up to 233 days of care. And for noncancer patients, hospice use was cost-effective up to 154 days of hospice care, above which the cost for hospice patients was greater than nonhospice."

Behroozi: "On the issue that you identified, Jim, about the cap not being adjusted by the wage index but the payments counted against the cap and presumably the costs to the provider are adjusted by the wage index — being from New York, you know I have to say, 'No fair.' And as the cost and wage index continues to go up so the payments continue to go up and the caps don't get adjusted that way, are providers in New York in particular — or any other high-wage index MSA [Metropolitan Statistical Area] — going to start dropping out? And then when it's my turn I won't have one to go to, but Tom and his buddies will have plenty of options."

Dean: "... And so I just wonder is [hospice] truly just a substitute for nursing home care, which it sort of looks like it is in some cases."

Scanlon: "... Having seen, as probably everybody has, personally how well a hospice can do in terms of providing benefits, and it's something that you want to really protect and preserve. But from a Medicare payment perspective, I — at the same time — felt so ignorant about what's exactly happening with respect to Medicare hospices, the trends over time, etc., that it's kind of hard to come to conclusions as to what the appropriate Medicare payment policies should be.

Another part of this is that it's not just payment policy that we should be focused on. There's this whole issue of — we've had 600 new hospices, according to your chart, between 2002 and 2005 — what are the entry requirements? What are we asking a hospice to demonstrate before we're admitting them to the program? And then once admitted, what are we asking in terms of continually showing capacity to provide the services that we expect?"

Hackbarth: "I've heard from people in the industry, Jim, that the entry requirements are pretty low, that the ease of entry is pretty high. And that often hospices are very small entities with only a few staff — maybe often is not the right characterization. But there are many that are very small.

"... I've heard the same accounts, but I have not verified those independently. I mean, there are conditions of participation for hospice that have been in existence since — I want to say very early on in the benefit — '83, I think."

Scanlon: "I just wanted to put one more thing on the table, and we can maybe talk about it in some of the future presentations, and that's another area of my ignorance, which is the issue of what's happening with respect to hospice and nursing home residents. Because it's not that hospice is precluded. In fact, I heard that it's increasing in terms of the proportion of long-stay nursing home residents that are getting hospice care. And how it relates to the care that the resident or the Medicaid program is paying for in the nursing home is something that I think we should be looking at as well."


1. Taylor DH, Ostermann J, Van Houtven CH, et al. What length of hospice use maximizes reduction in medical expenditures near death in the U.S. Medicare program? Soc Sci Med 2007; 65:1,466-1,478.