The Medicare Payment Advisory Commission (MedPAC) has recommended to Congress a freeze on hospice payment increases starting in 2026.

In its annual report to Congress, MedPAC urged policymakers to eliminate hospice base-rate increases for 2026. The commission made a similar recommendation last year.

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.

“Based on the positive indicators of payment adequacy and strong margins, the Commission concludes that current payment rates are sufficient to support the provision of high-quality care without an increase to the payment rates in 2025,” MedPAC indicated in its report. “The Commission recommends that the Congress eliminate the update to the hospice base payment rates for fiscal year 2026.”

The 2021 aggregated Medicare hospice margin was 10.4%, according to MedPAC. The commission projected an aggregate 2025 margin of 8%. 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.

Also, estimating providers’ access to capital requires some guesswork.

“Continued growth in the number of for-profit providers (an increase of at least 10% in 2022) and reports of strong investor interest in the sector suggest that capital is available to these providers,” MedPAC indicated in its report. “Less is known about access to capital for nonprofit freestanding providers, for which capital may be more limited. Hospital-based and home health-based hospices have access to capital through their parent providers.”

More than 1.7 million Medicare beneficiaries received services in 2023 from close to 6,500 providers, up from 5,900 the prior year. Utilization is also on the rise. The overall share of Medicare decedents using hospice services increased to 51.7%, up from 49.1% in 2022, according to MedPAC. Total Medicare hospice expenditures reached $25.7 billion that year.

Congress is not obligated to act on these recommendations. Case in point, MedPAC for several years had asked lawmakers to cut the hospice aggregate cap by 20%, but Congress and CMS did not follow suit. MedPAC did not recommend changes to the payment cap for 2026.

In addition to freezing the hospice base rate, MedPAC recommended a 7% cut to home health payments.

Stakeholders in the hospice space voiced opposition to the commission’s recommendations, including the National Alliance for Care at Home.

“MedPAC’s recommendations are based on flawed and incomplete analyses with conclusions unsupported by all the available facts. These recommendations severely undervalue the critical role that home health and hospice providers play in ensuring the health and well-being of Medicare beneficiaries,” said Alliance CEO Dr. Steve Landers, in a statement. “Recommending unthinkable cuts for home health and stagnant payment rates for hospice in the face of workforce shortages and inflation threaten access to these vital services for our aging population and undermine the dedicated providers who support them.”