Hospice and the Cost of End-of-Life Care

A significant portion of total Medicaid spending goes for care in the last year of a person’s life.  To avoid hospitalization or other institutional settings, Medicare has encouraged use of hospice.  While the hospice companies have gamed the reimbursement system, in general the perception has been that use of hospice saves Medicare large dollars.  A new report sponsored by the Medicare Payment Advisory Commission challenges that assumption.   (MedPAC Report)    Hospice use has doubled in the last decade and the majority of patients with cancer now use it.  Since hospice is usually used near the end-of-life (although non-last year of life hospice stays are increasing), greater hospice use should mean proportionally less spending on end-of-life care if it is cheaper than usual care.  The researchers found no evidence to support this proposition.  The authors next looked at the prior research on the topic, some of which showed large hospice savings.  They concluded that the supposed savings were an artifact of the methodology of the studies, and that when properly adjusted, there were no savings from hospice use as opposed to usual care.  Next they created a market-level approach to estimate the effect of hospice use on last-year of life spending.  This analysis found that hospice use actually modestly increased overall Medicare spending, primarily due to non-cancer decedents and longer hospice stays.  On average, however, hospice use did reduce spending for beneficiaries with cancer.

The analysis appears to be fairly rigorous and would suggest that at least for some patients, Medicare would be better off financially to avoid hospice use.  Some of the results, however, may be affected by well-recognized efforts of providers to take advantage of the current hospice reimbursement design, which allows greater profits for certain lengths and types of stays.  Those efforts likely raise total Medicare spending.  It is also important to recognize, as the authors of the report do, that hospice may be beneficial regardless of financial consequences.  It may offer patients a higher quality of life near its end.  That has a substantial value and the paper should not deter allowing, or even encouraging patients to use hospice due to quality of life concerns.  But CMS may also want to do a better job of designing hospice reimbursement to avoid provider revenue maximization tactics.