CMS Releases Capitation Rates for Hospice Coverage Through Medicare Advantage

The U.S. Centers for Medicare and Medicaid Services (CMS) has announced the capitation rates for hospice care under the value-based insurance design model (VBID), often referred to as the Medicare Advantage hospice carve-in.

The agency indicated that medicare advantage organizations (MAOs) during the first month of a patient’s stay would receive Medicare A/B capitated payments, as well as a Medicare Advantage rebate and a monthly payment for prescription drugs. Also during the first month, CMS would give MAOs a capitation payment that corresponds to the number of days the patient spent in hospice during that month.

“The key difference between this model and Medicare Advantage is that the payment rates will not be risk adjusted. There’ll be other adjustments but there’s no risk adjustments,” Rich Coil, an actuary with CMS said during an agency conference call. “The payments were developed to be budget neutral relative to the current state. There’s a key difference that the [hospice] rates today are paid on a per diem over a per hour basis. We’re making a monthly capitation payment.” 


This payment would total $1,764 for the first six days of the patient’s hospice stay, and then $3,330 for days seven through 15. For the 16th day through the end of the first month the MAO would receive $5,291.

For the second month of the stay through the end, the monthly capitation payment would total $5,187.

CMS based the hospice capitation rates on the policies that presently govern rate setting through Medicare Advantage, including the use of base experience for multiple years, localized rates developed through use of an average geographic adjustment, as well as base data trended to contract year.


“Today Medicare Advantage plans are paid on a capitated monthly rate to provide services that are provided under Part A and Part B of Medicare. But obviously because they don’t [currently] include the hospice services in those benefits under Medicare Advantage, the payment rate that Medicare Advantage plans are paid excludes any costs related to hospice care,” said Matt Kazan, principal at the health care consulting firm Avalere, told Hospice News. “Under this demonstration Medicare Advantage plans are going to be asked to provide more benefits than they do today. The Center for Medicare & Medicaid Innovation said they will pay them an extra capitated amount that will be based on hospice fee-for-service costs.”

The Medicare Advantage program has been growing in recent years. The number of participating beneficiaries tripled between 2019 and 2020, totaling nearly 1.2 million enrollees in 30 states, according to CMS.

CMS earlier this year announced that it would test coverage of hospice care through Medicare Advantage plans. The demonstration is designed to increase access to hospice services and facilitate better coordination between patients’ hospice providers and their other clinicians, according to CMS. Reactions to the demo have been mixed in the hospice community, with some applauding the move and others expressing worry about potential payment cuts, among other concerns.

Medicare Advantage plans are offered by private insurance companies approved by CMS, and include HMO, PPO, and fee-for-service plans among other options. The program represents an integrated care model that promotes coordination of services and provides incentives for quality and patient satisfaction. Beginning in 2020, the program will be available in all 50 states as well as U.S. territories.

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