Hospice Care's Midlife Crisis

April 13, 2023

Photo by Jon Cherry for Tradeoffs

More than 25 million terminally ill people have used Medicare’s hospice benefit. But as the popular policy turns 40 this year, it’s struggling with a midlife crisis.

Listen to the full episode below, read the transcript or scroll down for more information including a Q&A with Liz Fowler, deputy administrator at the Centers for Medicare and Medicaid Services.

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Bethany Snider looks concerned inside the headquarters of Hosparus Health, the nonprofit hospice agency where she is chief medical officer
Bethany Snider encouraged her nonprofit hospice agency to participate in a federal experiment to revamp Medicare's 40-year-old hospice policy, but she worries about its potential unintended consequences. (Photo by Jon Cherry for Tradeoffs.)

Hospice doctor Bethany Snider sees the writing on the wall: “The hospice care we’ve known and loved won’t be the same 10 years from now.”

Hosparus Health, the Louisville-based hospice agency where Snider serves as chief medical officer, is one of more than 100 provider organizations partnering with some of the country’s largest health insurers on a federal experiment that could transform hospice care for millions of people.

For the last four decades, Medicare has covered hospice services — including grief counseling, spiritual support and pain management — for terminally ill people. The benefit has helped more than 25 million Americans die more on their own terms, often at home, with the support of chaplains, social workers, nurses and others. Research shows hospice can reduce unwanted medical interventions, improve families’ satisfaction and, in some cases, save Medicare thousands of dollars.

Now Snider and others believe this popular benefit, whose structure has remained largely unchanged since its debut in 1983, is in the early days of an inexorable overhaul. Critical aspects of the 40-year-old policy no longer fit the needs of the people using the service — or the providers delivering it. Concerns with runaway costs — which topped $20 billion in 2019 — access and fraud dog the program.

In response, Medicare has begun a federal pilot project to test handing the reins of some hospice care over to private insurers, giving them more flexibility to control costs while also expanding access. The experiment, which began in 2021, involved several thousand patients in its first year, but multiple experts told Tradeoffs they believe it is likely to eventually become national policy and reshape the hospice care available to roughly 30 million Americans. 

In an email to Tradeoffs, Liz Fowler, deputy administrator at the Centers for Medicare and Medicaid Services, said the agency hopes the effort will help ensure all beneficiaries have “access to high quality and coordinated care.”

The changes to hospice are “inevitable,” said Torrie Fields, a consultant who has advised Medicare and private insurers. “The hope is this pilot sheds some light on the guidelines and guardrails needed.” 

One sign Medicare is seriously considering the policy: an announcement on March 23 that the pilot, initially slated to end in 2024, will continue through 2030.

A makeover for Medicare’s 40-year-old hospice benefit

This federal experiment, known by wonks as “the hospice carve-in,” is designed to revitalize a pair of particularly outdated hospice policies: how the program determines patient eligibility and the way it pays providers. Neither has changed significantly since 1983.

Here’s how the traditional program works now: To become eligible for hospice, patients must have two doctors certify they have less than six months to live and agree to stop all attempts at curing their terminal illness.

Many experts believe that harsh choice between giving up hope and getting help from hospice — along with the arbitrary 6-month cutoff — combine to repel many patients who could otherwise benefit. Only about one-third of Native, Asian, Black and Hispanic patients elect hospice compared to about half of white patients.

“One of the reasons that Black people shy away from hospice is because there isn’t room to reevaluate,” said Karen Bullock, a licensed clinical social worker and a professor at Boston College. “It’s too finite.”

Medicare covers much less at-home medical or social support for people who decline hospice. “They’re still ill. They’re still struggling,” Snider said. “But Medicare does not offer us a great way to serve that population.”

An outdated payment policy leaves hospice vulnerable to waste and abuse

For those who do enter hospice, Medicare has historically paid providers a flat rate for every day a person is enrolled in their care — even on days when they need little or no help.

That payment policy, experts say, made more fiscal sense in the early days of hospice when most patients had cancer and died within two months. Since then, hospice has become more popular with a wider range with diseases that are generally less predictable, such as dementia and heart failure. People, on average, now use hospice for almost 100 days.

Experts blame the program’s antiquated flat day rate as one reason for its ballooning costs, which are up more than 50 percent over the last decade. More than half of that budget is now consumed by stays longer than six months.

“The way Medicare pays for this benefit has not evolved to meet the changing needs of the people who use it,” said David Stevenson, a health policy professor at Vanderbilt University. Adding to those doubts is the flood of for-profit hospice businesses that have poured into the market.

About three-quarters of all providers are now for-profit and data suggest some are exploiting the program’s payment structure, averaging much longer stays and profits three times higher than nonprofit providers. Reports, including by ProPublica and the federal government, have also highlighted hundreds of millions of dollars in fraud and disturbing anecdotes of abuse.

Medicare banks on insurers’ incentives to reduce waste and improve care

Medicare’s experiment gives private insurers the flexibility to both expand eligibility and rein in costs. The same insurers already manage most other care for roughly 30 million Medicare beneficiaries through the program known as Medicare Advantage.

The hope is they can take that experience and those skills, like coordinating care and vetting the quality of providers, and apply them to improve hospice. Because private insurers get paid a lump sum to manage each Medicare patient, they are also motivated to keep costs down.

“There’s a natural alignment here,” said Susanne McComic, who’s overseeing the health insurer Humana’s involvement in the hospice demonstration. McComic said Humana had two main reasons for participating. First, they wanted to deliver better care to vulnerable members, and second, it made business sense: They own 40 percent of Gentiva, a large hospice chain.

A larger role for private insurers makes some experts uneasy, especially when it comes to end of life care. Joan Teno, a Brown University researcher and former hospice medical director, points to the United Kingdom’s experiment known as the Liverpool Care Pathway as a cautionary tale.

That program used financial incentives to encourage doctors to enroll more hospital patients in hospice-like services. Some families reported clinicians rushed their loved ones down a path toward death that they did not want or understand. Public outrage erupted and the government ultimately ended the initiative in 2013.

While Medicare’s hospice pilot has many differences, its reliance on financial incentives to change behavior still gives some experts pause.

In other areas of care, some Medicare Advantage insurers have aggressively declined requests for medical services — as much as 13 percent of the time, according to one federal report.

Insurers’ early efforts include cutting rates, cleaning carpets and expanding eligibility

Bethany Snider of Hosparus Health is also wary of what the pilot portends for nonprofit hospice agencies like hers — and their patients. But she encouraged Hosparus to take the leap and partner up with Humana. She valued the chance to shape — or at least glimpse — the likely future of hospice care for most Americans. “I wanted us to have as much time as possible to plan.”

The first big change providers like Hosparus are adapting to is the need to negotiate. The pilot lets insurers abandon Medicare’s day rate and pay providers however they want. An evaluation of the pilot’s first year by the RAND Corporation showed some insurers had already slashed payment rates by up to 12 percent.

The pilot also lets private insurers decline to contract with hospices that, for example, don’t meet certain quality standards. Soon, insurers can begin requiring patients to use only preferred providers.

The hope is this new power helps insurers weed out waste and bad actors. But Snider and others also worry that it could put some nonprofit hospices with thinner margins out of business and lead to further consolidation of the industry.

In an email to Tradeoffs, Medicare’s Liz Fowler emphasized the demonstration’s guardrails designed to protect patient choice. She also pointed to the agency’s “comprehensive monitoring strategy to address and track any unintended consequences.”

The other major shift being tested is an expansion of hospice’s eligibility criteria. Private insurers can choose to offer hospice care to people still pursuing chemotherapy or other curative treatments — and they can offer some services to seriously ill people with more than six months left to live. They can even give patients additional funds for nontraditional help, like carpet cleaning and rent — two uses Humana’s McComic said the insurer has tested.

Together, these experimental changes to who receives and who delivers hospice care, when, and at what cost represent relatively large shifts for a program that’s seen little change over the last 40 years. The overall effect on the cost and quality of care remains to be seen. Participation in the pilot was slow to start but has grown over time. The experiment, which this year includes 15 insurers serving patients across 23 states and Puerto Rico, was slated to end in 2024.

In a surprise announcement, Medicare made public on March 23 that they are extending the pilot through 2030. By then, private insurers are projected to manage the care of nearly 70 percent of Medicare beneficiaries — including, if this pilot becomes national policy, how they spend their final days.

Q&A with Medicare's Liz Fowler

In reporting this story, we reached out to the Centers for Medicare and Medicaid Services (CMS). Deputy administrator Liz Fowler, who also runs the CMS Innovation Center, provided additional responses that did not fit in the story above. We’re sharing those in full below.

(Note these responses were provided before Medicare announced recent changes to its hospice experiment including extending the test through 2030.)

What is the fundamental question that CMS hopes to answer by the end of this pilot?

Fowler: This test allows CMS to assess the impact on care delivery and quality of care and Medicare expenditures, especially for palliative and hospice care, when participating Medicare Advantage (MA) plans are financially responsible for all Parts A and B benefits.

What has CMS learned from the pilot thus far?

Fowler: For a comprehensive review of the Center for Medicare & Medicaid Innovation’s (the Innovation Center’s) “lessons-learned” from the first year of the Hospice Benefit Component, we would direct anyone interested to the Evaluation of Phase II of the Medicare Advantage Value-Based Insurance Design Model Test. This evaluation report covers the first year (2021) of the Hospice Benefit Component. Additionally, there is a “Hospice At-A-Glance” summary of the report available here.

What’s the most positive trend you’ve seen in the pilot’s early results? Most concerning?

Fowler: We see a positive trend in how Medicare Advantage Organizations (MAOs) are identifying and partnering with hospice providers. For example, MAOs are partnering with hospice providers that have strong relationships with their local communities to actively collaborate with them and community-based organizations that help meet the social needs of patients. Additionally, MAOs are helping ensure cultural competency throughout their hospice networks.

In terms of challenges, we are hoping to see increased uptake in palliative care, transitional concurrent care (TCC), and hospice supplemental benefits. Standing up the infrastructure to deliver these two types of care is a significant undertaking for MAOs, hospice providers, palliative care providers, and all other provider types. This is in part because the Medicare hospice benefit has always been carved out of Medicare Advantage. Both MAOs and hospice providers have had to collaborate to create MAO-provider communication systems, patient/enrollee notification systems, billing and claims systems, clinical information exchanges, care management feedback loops, and others.

Moving forward, we look forward to seeing how these relationships become more established and the infrastructure for the collaboration becomes more routine. Ultimately, we hope the gradual maturing of the operational structures leads to improvements in uptake of services such as hospice care, palliative care, and transitional concurrent care.

Some experts told us they were concerned that some Medicare Advantage organizations were already paying hospice providers 10-12% less than traditional Medicare and that some MA insurers who own hospice businesses might unfairly favor those agencies over others.

How is CMS monitoring for those types of issues? What guardrails are in place to prevent them?

Fowler: CMS has a comprehensive monitoring strategy to address and track any unintended consequences associated with the Hospice Benefit Component. The most recent version can be found here.

With respect to negotiations between MAOs and hospice providers, CMS would like to highlight three key policy guardrails put into place across all four years of the Hospice Benefit Component: 1) a requirement for all enrollees in a plan participating in the Hospice Benefit Component to have complete access to in-network and out-of-network care* and 2) a requirement for all MAOs to reimburse out-of-network hospice care at 100% of Medicare fee-for-service rates, and 3) a requirement for MAOs to submit and implement strategies for network development that must include considerations beyond minimizing costs. Additionally, as of Calendar Year 2023, we have added on an additional layer of network adequacy requirements for MAOs with prior experience with the Component in a service area that take the form of a quantitative requirement to have a minimum number of hospice providers in-network along with additional qualitative requirements for creating and implementing a comprehensive network development strategy.

These policies are intended to help ensure continued enrollee access and serve as a guardrail for any hospice providers who may decide that a proposed rate during contract negotiations may not be sufficient. Finally, we would like to point out that Section 1854(a)(6)(B) of the Social Security Act specifically prohibits CMS from requiring an MAO to contract with a specific provider and from requiring a particular price structure for payment under such a contract, except for limited statutory exceptions (e.g., payments to federally qualified health centers).

*Last week, Medicare announced they will phase out this requirement, stating, “Beginning in 2026, participating MAOs will have more flexibility to require their enrollees to only receive hospice services from hospice providers in their network, as long as the MAOs meet CMS’s qualitative and quantitative network adequacy requirements.”

Tradeoffs’ coverage of Medicare sustainability is supported, in part, by Arnold Ventures.

Episode Resources

Additional Research and Reporting on Hospice and the Carve-In Pilot:

Hospice Services (MedPAC, 3/15/2023)

How Hospice Become a For-Profit Hustle (Ava Kofman, ProPublica/New Yorker, 11/28/2022)

The Hurdles Facing Black Families Navigating Serious Illness (Tradeoffs, 11/10/2022)

Evaluation of Phase II of the Medicare Advantage Value-Based Insurance Design Model Test (RAND Corporation, 10/2022)

Carving in Hospice to Medicare Advantage—Potential Unintended Consequences (Joan Teno, JAMA Health Forum, 7/1/2021)

When a Health Insurer Also Wants to Be a Hospice Company (Reed Abelson, New York Times, 6/22/2018)

Medicare’s Hospice Benefit: Revising the Payment System to Better Reflect Visit Intensity (Steve Sheingold, Susan Bogasky and Sally Stearns; ASPE; 5/27/2015)

Integrating Care at the End of Life: Should Medicare Advantage Include Hospice? (David Stevenson and Haiden Huskamp, JAMA, 4/16/2014)

Episode Credits


Vince Mor, PhD, Professor of Health Services, Policy & Practice, Brown University

Bethany Snider, MD, Chief Medical Officer, Hosparus Health

David Stevenson, PhD, Professor of Health Policy, Vanderbilt University School of Medicine

Leslie Walker, Senior Producer, Tradeoffs

The Tradeoffs theme song was composed by Ty Citerman, with additional music this episode by Blue Dot Sessions and Epidemic Sound.

This episode was reported and produced by Leslie Walker and mixed by Andrew Parrella and Cedric Wilson. Editing assistance from Cate Cahan.

Additional thanks to Karen Bullock, Torrie Fields, Mireille Jacobson, Rebecca Anhang Price, Sally Stearns and Joan Teno.