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Medicare's Hospice Benefit

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Publication Date: March 2009

Publisher(s): Library of Congress. Congressional Research Service

Series: R40429

Topic: Health (Health services for the chronically ill)

Type: Report

Coverage: United States

Abstract:

Hospice care provides an interdisciplinary approach to services for Medicare beneficiaries with a terminal illness. This care specializes in the relief of the pain and symptoms associated with a terminal illness and in the provision of supportive and counseling services to patients and their families during the final stages of a patient’s illness and death. The benefit covers a broad range of services, including prescription drugs for pain control and symptom management, skilled nursing care, physician services, home health aide services, homemaker services, patient counseling, and family bereavement counseling. Services are provided primarily in the patient’s home, but may also be provided in institutional settings, such as nursing homes. Hospice care is provided in lieu of most other Medicare services related to the curative treatment of the terminal illness.

For a person to be considered terminally ill and eligible for Medicare’s hospice benefit, the beneficiary’s attending physician and the medical director of the hospice (or physician member of the hospice team) must certify that the individual has a life expectancy of six months or less.
Beneficiaries electing hospice are covered for two 90-day periods, followed by an unlimited number of 60-day periods.

Medicare payments to hospices in 2007 totaled $10.1 billion, having more than tripled since 2000. Medicare spending for hospice is expected to continue growing and to more than double by 2018, reaching a projected $21 billion and outpacing the projected growth rates for Medicare payments in hospitals, skilled nursing facilities, physician services, and home health care. Growth in spending to date has been driven, in part, by increased utilization of hospice as well as spending per hospice user. For example, spending per user grew between 2004 and 2005 by 8%. Growth in spending per user may be in part a result of increasing lengths of stay among certain hospice providers.

The number of hospices participating in Medicare also grew by 33.4% during the four-year period from 2003 to 2007. As of 2007, for-profit hospices constituted the majority of these hospices, and since 2000, made up over 90% of hospices participating in Medicare.

Medicare pays hospices using a prospective payment system containing four categories of daily rates, which are predetermined, fixed amounts intended to pay for the costs of care for a hospice beneficiary, on average. These amounts are adjusted annually by the hospice market basket. Hospice payments are also adjusted for geographical differences. Total payments to hospices may not exceed an aggregate per beneficiary cap amount.

Some analysts have expressed concerns about Medicare margins earned by certain types of hospice providers, the growing number of hospices exceeding the aggregate per beneficiary cap, increasing lengths of stay, and the three-year phase out of the budget neutrality factor authorized under regulation in August of 2008. All of these topics are discussed in this report, which will be updated as necessary.