In January 2019, the Centers for Medicare and Medicaid Services (CMS) announced an expansion of its “value-based insurance design” (VBID) model for Medicare Advantage (MA) plans. With the industry moving away from fee-for-service models and towards fee-for-value arrangements, the Medicare Payment Advisory Commission (MedPAC) has advocated for the addition of carved-in hospice benefits to Medicare Advantage plans, including a test of this offering, starting in 2021. This arrangement would expand access to hospice services and incentivize hospice providers, clinicians, and their patients to coordinate care in the most efficient and economical way possible, without sacrificing quality. Through piloting this benefit in the form of a test, CMS will be able to determine if flexibility in coverage will improve outcomes and reduce expenditures for MA enrollees facing end-of-life decisions.

Hospice Care Explained

Unlike palliative care, which is a benefit that helps patients manage pain or other symptoms associated with serious, but not currently life-threatening conditions, hospice care is generally offered to patients who have been diagnosed with a life-limiting illness and are expected to live less than 6 months.

Why Medicare Advantage?

Congress and the administration have authorized the Centers for Medicare and Medicaid Innovation (CMMI) to encourage innovation in models of care for Medicare beneficiaries, and MA plans are in the best position to serve as laboratories for innovation.  MA is a way for seniors to obtain coverage for services from approved insurance carriers instead of directly from the Federal government.

The focus on inclusion of hospice benefits in MA derives from the growing acknowledgment on the part of CMS and Commercial payers that end-of-life care, including palliative and hospice care, is an integral part of the continuum of care.

How Will Hospice be Reimbursed?

CMS has not released details of how the test rollout will function, but industry experts believe that the MA hospice benefit will change the model of reimbursement for such services. Hospice benefits are currently reimbursed per diem. This will likely change to the per-visit model used for MA reimbursement for home care services.

It is also unclear whether patients will be able to access hospice services without having to meet the less than 6-month prognosis requirement currently in place.  The prognosis requirement is unique to hospice and is a barrier to patients accessing needed palliative care services in the home.

The Downsides of the New Plan

The hospice proposal has met with some pushback by critics in the industry. Some have argued that CMS should not be in the business of managing end-of-life care, but rather should focus on prolonging high-quality years of life. Others have argued that the absence of data regarding how much the program will cost may imperil the success of the hospice carve-in trial. Still, others have argued that the new reimbursement model will mean providers will no longer be able to afford to provide care to seniors facing the end of life.

One criticism of hospice has been that most patients are referred long after the time they could begin to benefit from the service. Some patients may be transferred to hospice too soon and may have to transfer out again if they outlive their six-month prognosis. Critics of the new MA hospice expansion have argued that the proposal will not solve this “too late vs. too early” problem.

The Upsides of the Medicare Advantage Hospice Benefit

Integration of hospice into the continuum of care will likely solve, rather than exacerbate the current uncertainty as to when to initiate hospice care. A recent study showed that there is only a “too late” problem: the median length of hospice care was 12.5 days, suggesting that patients are being admitted to hospice for less than 2 weeks, whereas the hospice benefit is designed for those who, according to their doctors, are likely to live as long as 6 months.

The inclusion of hospice into the continuum of care adopts a more holistic approach that not only is preferred by MA enrollees but is also more cost-effective.  Research suggests that early access to palliative care services for patients with advanced cancer improves survival as well as the quality of life.1

Substantial amounts of money are spent by CMS for care at the end of life. In a three year study of Denmark, England, France, Germany, Japan, the Netherlands, Taiwan, the United States, and the Canadian province of Quebec, the proportion spent during the last 12 months of life ranged from 8.5 percent (United States) to 11.2 percent (Taiwan) of total healthcare costs.

Quality of Life

Whether these percentages appear large or not-so-large depends on one’s point of view. Nevertheless, the amount of spending on end-of-life care is substantial. From this perspective, the MA hospice benefit may be seen not as means to reduce total spending, but rather to spend those healthcare dollars in a way that maximizes patient outcomes, particularly quality of life.

1. Temel JS, Greer JA, Muzikansky A, et al. Early palliative care for patients with metastatic non-small-cell lung cancer. N Engl J Med. 2010