MedPAC Tees Up Hospice Freeze & Aggregate Cap Cut for FY2022 Recommendations

WASHINGTON, D.C. (December 15, 2020)—The Medicare Payment Advisory Commission (MedPAC) reviewed the latest available data on Medicare hospice utilization and discussed potential hospice payment recommendations for FY 2022 with an eye toward their inclusion in the annual March Report to Congress. 

Commission members expressed preliminary support for inclusion of the following recommendations:

• For fiscal year 2022, eliminate the update to the 2021 Medicare base payment rates for hospice; and
• Wage adjust and reduce the hospice aggregate cap by 20 %.

Staff indicated that the aggregate cap policy would reduce total hospice outlays by about 3%. It is anticipated that the Commission will conduct a formal vote on the recommendations at its January meeting.

Following are some key data elements presented during the meeting:

• During 2019, hospice care was utilized by:
  • Over 1.6 million beneficiaries
  • Over 51% of Medicare 2019 decedents (51.6%) received hospice care
  • More than 4,800 Medicare certified hospices were in operation during 2019
  • Medicare expended $20.9 billion in payments for hospice services during 2019

MedPAC staff outlined the four factors that MedPAC examines to determine adequacy of Medicare payments, and conclusions that they have drawn through their analysis, which include:

• Beneficiaries’ access to care—Hospice use continues to grow, as demonstrated by:
  • An increase in the percent of decedents who have used hospice, and an increase in the average length of stay (from 90.3 days in 2018 to 92.6 days in 2019); MedPAC also calculates hospice Medicare marginal profit at 16 percent in 2018.
• Quality of care—Hospice quality data are limited, but available measures show generally positive findings; Office of the Inspector General reports issued during 2019 indicate a subgroup of providers (approx. 300) are poor performers based on deficiency and complaint data.
• Hospices’ access to capital—Appears positive for for-profit providers, although there is less information on access to capital for non-profit provider.
• Medicare payments and hospices’ costs—Medicare margins vary by type of provider but averaged 12.4% in 2018; margins increase with length of stay.

Staff also discussed what were initially “tragic” effects of the COVID-19 pandemic on hospice services, which included an initial decline in patient volume, a decrease in nursing and ALF patients, and varied impact on length of stay. Other factors include additional costs linked to supplies and testing, some of which have been eased by federal grants and loans and temporary regulatory flexibilities. Staff indicated that they do not anticipate the impact of COVID-19 on hospice operations to be permanent.

In follow up to the staff presentation, most commissioners expressed support for the proposed recommendations, although some expressed concern that the aggregate cap policy could negatively impact patients with certain diagnoses, such as neurological disorders, since these patients may be on service longer than others due to challenges in establishing an accurate prognosis. Others expressed concern that hospice services may represent end of life care for some patients but may be used as long-term care for others, and that there may be some “blurring” between home health, homecare and hospice care. Commissioners expressed an interest in further discussion on ensuring that hospice is appropriately used.

The next meeting of the Commission will occur on January 14-15, 2021. The transcript of the December meeting is available for review here.