MEDPAC Reports Rise in Hospice Use, Calls for Payment Cap Cut

More Medicare beneficiaries are electing hospice than ever before, and they are generally receiving care for longer periods of time, according to the Medicare Payment Advisory Commission (MEDPAC). As the commission reports these gains, MEDPAC continues to recommend to Congress a 20% reduction in the aggregate cap for hospice payments.

During 2019, hospice utilization among Medicare decedents rose to 51.6%, a new record, up from 50.6% in 2018, according to MEDPAC. Likewise, average length of stay rose to 92.6 last year from 90.3 days in 2018. Patients with longer lengths of stay, such as those suffering from dementia or congestive heart failure can drive up averages, a high proportion of hospice patients receive services for too short a time, often seven days or less.

MEDPAC released the numbers in a presentation by Kim Neuman, principal policy analyst for the commission, which makes annual recommendations to Congress regarding policy changes related to Medicare. For 2021,the commission recommended to Congress that 2021 per diem payments for hospices remain unchanged from fiscal year 2020 levels, and that the aggregate payment cap be reduced by 20%.


“This recommendation would bring aggregate payments closer to costs, would lead to savings for taxpayers, and would be consistent with the commission’s principle that it is incumbent on Medicare to maintain financial pressure on providers to constrain costs,“ MEDPAC indicated in its report.

The payment cap is the upper limit to the amount of funds a hospice can collect from Medicare in a single year. If a hospice exceeds the payment cap, it must refund that amount to CMS. For Fiscal Year 2021, the hospice cap is $30, 684 per patient (not wage adjusted). About 16% of hospices exceeded the cap in 2019, according to Neuman’s presentation. On average, hospices exceeding the cap saw margins in the range of 21.9%, which fell to 12.1% following refunds to CMS for cap overages.

For a cap reduction to take place, Congress would have to accept the recommendation and legislate accordingly. Historically lawmakers have not pursued recommended cuts to hospice payments. 


The proposed cuts to the payment cap are designed to target hospice providers that see longer lengths of stay and high margins, improve equity of the payment cap among different types of providers, and generate cost savings for taxpayers and the Medicare Part A Trust Fund, according to MEDPAC.

“Over the years, the commission has been concerned that the high profitability associated with long stays in hospice may be spurring some providers to enter the hospice field with revenue-generation strategies. Because some diagnoses are associated with longer stays than others, providers that wish to do so can select patients with conditions likely to have long, profitable stays,” MEDPAC said in its report.

Average marginal profit for hospice providers in 2018 was 16%, the commission reported, as well as a continued rise in the number of for-profit providers and growing private equity interest in the space. However, MEDPAC acknowledged that financial data were limited from freestanding nonprofit providers.

Stakeholders in the hospice space have voiced opposition to the cap reduction.

“Without reliable data, it is unclear how such reductions would lead to Medicare savings, increase access to care, or lead to higher quality of care,” said NHPCO President and CEO Edo Banach. “If the recommendation is adopted by Congress, it could lead to a decrease in hospice access for patients and families, especially in rural and underserved areas.”