A joint report published on March 22, 2023 found the total costs of care for Medicare beneficiaries who used hospice was 3.1 percent lower than those who did not, and that earlier enrollment in hospice and longer lengths of stay (LOS) likely reduce overall Medicare spending. The study, conducted by NORC at the University of Chicago, analyzed enrollment and administrative claims data for Medicare patients covered by Medicare Advantage and traditional Medicare.

Due to increases in Medicare’s hospice benefit enrollment and spending from 2015 to 2019, the Medicare Payment Advisory Commission (MedPAC) recommended that FY 2023 Medicare base payment rates for hospice remain at 2022 levels, and that the hospice aggregate cap should be wage-adjusted and reduced by 20%. The study, which was funded by the National Association for Home Care & Hospice (NAHC) and the National Hospice and Palliative Care Organization (NHPCO), analyzed the value of the Medicare hospice benefit for patients with terminal conditions, their families, and caregivers, as well as its impact on Medicare spending.

NORC compared the utilization of health services and costs of care for the last 12 months of life of more than 500,000 Medicare beneficiaries who died in 2019 and had a hospice stay immediately prior to death to more than 457,000 Medicare decedents who had similar risk profiles but did not have a hospice stay. Differences in chronic health status, end-of-life diagnoses, and demographics between the two populations were addressed with a propensity weight model.

Key findings include:

• In the last year of life, the total costs of care for Medicare beneficiaries who used hospice was 3.1 percent lower than the adjusted spending of beneficiaries who did not use hospice. This reduction in adjusted Medicare spending translates to an estimated $3.5 billion less in Medicare outlays for beneficiaries in their last year of life.
• Examination of Medicare spending in policy-relevant LOS groupings (0-14 days, 15-30, 31- 60, etc.) found that total Medicare spending in the 12 months preceding death is consistently lower for beneficiaries with LOS of 15 days or more, compared to beneficiaries who did not use hospice, regardless of disease group.
• Analyses to find the specific day when Medicare spending for non-hospice users equals spending for hospice users—revealed the “break-even” point at day 10. Starting on day 11 (prior to death), hospice users’ Medicare spending is lower compared to spending for non-hospice users. In other words, earlier enrollment in hospice—and longer LOS—may reduce Medicare spending.
• Hospice stays of six months or more add value to Medicare. For those who spent at least 6 months in hospice in the last year of their lives, spending was 11 percent lower than the adjusted spending of beneficiaries who did not use hospice. When sorted by disease group, spending ranged from being 4 percent lower for neurodegenerative disease to 25 percent lower for chronic kidney disease/end stage renal disease.
• Hospice care benefits patients, family members, and caregivers. From increased satisfaction and quality of life, to improved pain control, to reduced physical and emotional distress, and reduced prolonged grief and other emotional distress, hospice offers multiple benefits to patient, families, and caregivers.

While conducting the study, NORC identified several areas that warrant further exploration, including modeling both the proportion of non-hospice user decedents who might be eligible for hospice as well as which short-stay hospice users might be brought into hospice earlier, investigating how MA enrollment impacts the likelihood that enrollees will enter hospice, and exploring what health care utilization, diagnoses, and changing frailty represent for mortality risk and prediction of hospice use.

The full report is available here.