MEDPAC Votes to Slash Hospice Aggregate Payment Cap

The Medicare Payment Advisory Commission (MEDPAC) has voted
unanimously to eliminate the update to the Fiscal Year 2021 Medicare
base payment rates for hospice for Fiscal Year 2022 and to cut by 20% the hospice aggregate cap.

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 MEDPAC. 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.

“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 March 2020 report in which it proposed the cut.

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.


“The policy recommendations could ultimately limit access to high-quality hospice and palliative care services,” said Liz Fowler, CEO of Kentucky-based hospice provider Bluegrass Care Navigators. “The sweeping recommendations lack nuance and could have very real consequences that limit the ability of hospice organizations to effectively respond to the needs of dying Medicare beneficiaries.” 

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. 


“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,” said National Hospice & Palliative Care Organization President and CEO Edo Banach. “In the short term, we urge MEDPAC to use a targeted approach that will have a higher likelihood of rewarding high quality and improving access.”

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