MedPAC Mulls 20% Cut to Hospice Payment Cap

The Medicare Payment Advisory Commission (MedPAC) is considering a recommendation that Congress reduce by 20% the annual aggregate payment cap for hospice care. Also under consideration is a potential recommendation to adjust the cap according to the wage index for different geographic regions to reflect the varying costs of care in different parts of the country.

The payment cap represents the maximum amount of funds that current regulations allow Medicare to pay a hospice for an individual’s care. When a hospice exceeds the cap amount which is set at $29,964.78 for fiscal year 2020 they are required to return the excess dollars to CMS.

About 12.7% of hospices exceeded the cap during 2016, according to MedPAC. These organizations were disproportionately for-profit, freestanding, urban and small.


Hospice organizations that were made aware of the discussion were quick to oppose the notion of a 20% cut, though expressed some optimism about modifying payments based on the wage index.

“The idea of wage indexing the aggregate cap is something that we are intrigued by, and that we want to talk more about with MedPAC. The devil is in the details, but that is generally a good idea. The cost of care in rural Georgia may be different than the cost of care in Miami, and it should be flexible in that way,” Edo Banach, president of the National Hospice & Palliative Care Organization, told Hospice News. “We are absolutely not in favor of a 20% across the board cut, because that’s ultimately going to deprive some folks of needed access to care.”

The cap issue was first raised at the commission’s meeting earlier today. Though the panel has yet to make specific recommendations to Congress regarding the cap, a MedPAC representative told Hospice News that work on the issue would continue, and the commission may vote on the issue before the end of the year.


Some stakeholders voiced concern that wage indexing the cap could lead to trouble if not implemented very carefully.

“There is some appeal to the notion of incorporating a wage component in the cap as under the current flat rate a hospice in one part of the county can hit the cap for patients on service after a shorter time period than a hospice in another area of the country,” Theresa Forster, vice president for hospice policy for the National Association of Home Care & Hospice, told Hospice News. “But incorporating a wage component will make calculation and tracking of the cap much more complex, so there are some issues that would need to be worked out if MedPAC wants to consider this change for recommendation to Congress. ”

MedPAC’s goals for new policies related to the cap is to “improve the equity of the cap among providers, improve payment accuracy and reduce overpayment to providers as well as the attractiveness of business models that focus on long lengths of stay,” according to documents MedPAC provided to Hospice News.

“Long lengths of stay” refers to durations of care that exceed the six-month terminal prognosis that Medicare requires for patients who elect hospice.

The aggregate cap was implemented at the inception of the Medicare Hospice Benefit with the goal of ensuring that Medicare did not pay more for patients in hospice care than they did outside of hospice care, but according to Banach “not much has been done since then to test that assumption.”

“A hospice may be at the cap and therefore returning $1,000 back to the government, but unless there is any calculation that ties the payment that the government made to the hospice compared to what the government might have paid outside of hospice, it seems that there is really almost a ‘Monopoly money’ exchange that has no bearing to reality,” Banach said. “We would love to see MedPAC’s data and analysis that says that a reduction in the cap would lead to greater savings overall.”

According to Banach, MedPAC’s concern is that bad actors in the hospice space might be gaming the system by extending lengths of stay or by certifying patients for hospice who are not expected to die within six months. This issue has been a top concern among regulators, including CMS and the Department of Health and Human Services Inspector General, and lengths of stay that exceed six months is a frequent trigger or regulatory audits of hospices.

However, many in the hospice community have questioned the validity of the six-month requirement, saying that does not reflect the needs of the current patient population. The Medicare Hospice Benefit which began as a demonstration project in 1979 and become an official part of Medicare in 1983 was primarily designed around the needs of cancer patients.

Today, hospices serve rising numbers of patients suffering from dementia, congestive heart failure, respiratory and other conditions that have a slower and less predictable trajectory than cancer.

“A cut of this magnitude could have a significant impact on not just those providers who bring patients onto service for long periods of time but also those providers who accept patients onto service that have a previous history of hospice care,” Forster said. “While a significant reduction in the cap may appear to be a targeted approach for dealing with long length of stay, there is some potential collateral damage that could result.”

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