MedPAC Calls for Freeze on Hospice Payment Rates

The Medicare Payment Advisory Commission (MedPAC) has voted to recommend a freeze on hospice payment increases starting in 2025. However, the commission pulled back on prior calls for cuts to the aggregate payment cap.

While MedPAC cannot implement policy or payment rate changes, it does make annual recommendations to Congress and the U.S. Centers for Medicare & Medicaid Services (CMS). Congress has the authority to accept or reject MedPAC’s recommendations.

The prospect of stagnated per diems would be woeful news for hospice providers that are facing widespread wage increases along with inflation and other costs, according to Bill Dombi, president of the National Association for Home Health & Hospice (NAHC).

“This recommendation is offered at a time when hospice care costs have risen faster than any inflation update provided by CMS,” Dombi told Hospice News in an email. “A rate freeze would interfere with the progress made through hospice wherein highly patient-centered care, controlled by the patient at the most important point of an individual’s life, offers Medicare with significant financial savings while providing incredible end-of-life care.”

For this year, CMS increased the hospice base rate by 3.1%. That translates to a $780 million bump to hospice payments compared to Fiscal Year 2023, according to CMS. The agency also raises the aggregate payment cap to $33,494.01 for next year, up from $32,486.92 set in 2023.

But, while welcoming the increase, providers and industry organizations have contended that the rate hike was insufficient relative to rising costs. In comments on the proposed 2024 hospice payment rule, the National Hospice and Palliative Care Organization (NHPCO) estimated that operators would need a 6.5% increase to keep pace with inflation.

“At a time when costs have been increasing across the board and hospices are competing for a limited health care workforce, keeping hospice payments flat would put the squeeze on hospice providers even as patient demand for hospice care is expected to keep growing,” NHPCO COO and interim CEO Ben Marcantonio said in a statement. “In order to serve the American public, Congress should ensure hospice providers are reimbursed to provide the end-of-life care people want and deserve.”

In a meeting on Thursday, MedPAC commissioners maintained that hospice payment levels were “favorable,” due to increases in utilization and length of stay, sufficient access to capital, investor interest in the space and margin data.

The 2021 aggregated Medicare hospice margin was 13.3%, according to MedPAC. The commission projected an aggregate 2024 margin of 9%. However, these aggregated numbers do not reflect the sometimes significant differences in margins among individual providers, ranging from large, national companies to smaller, local nonprofits.

The recommendation to curb hospice spending comes after a March 2023 study that found that hospice care generates roughly $3.5 billion in Medicare savings for patients in the last year of life, a 3.1% reduction. Hospice stays that extended beyond six months generated the highest percentage of savings at 11%.

In addition to the payment recommendation, MedPAC did not propose any cuts to the aggregate payment cap for 2025, as it has previously for several years running.

“MedPAC’s shift away from its previous recommendations to cut the aggregate payment cap is a win for hospices, patients, and families,” Marcantonio said. “For nearly five years, NHPCO and our members have publicly and privately made it clear that cutting the hospice aggregate cap would likely reduce access to hospice care by forcing some providers to close and incentivizing hospices to discharge patients after 180 days of care. We are gratified that Congress never acted on the cap cut concept. Further, we appreciate that MedPAC has heard our concerns, and that its next report to Congress will not include the recommendation.”