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Medicare Hospice Threatened by Long Stays, Looming Boomer Influx (Corrected)

Dec. 3, 2020, 10:30 AM; Updated: Dec. 4, 2020, 6:46 PM

Medicare’s hospice benefit, already being misused to the tune of billions of dollars a year, is on a collision course with baby boomer recipients with neurological diseases who could fuel a dramatic increase in spending for end-of-life care.

“The aging of the baby boomers is going to cause a massive escalation in the number of people living with Alzheimer’s,” said Matthew Baumgart, vice president of health policy at the Alzheimer’s Association. “And it’s going to create a massive financial burden on both Medicare and Medicaid unless we do something about it.”

The hospice benefit provides specialized care and support services for terminally ill patients with a life expectancy of less than six months. But 38% of Medicare’s hospice spending in 2018—$7.3 billion—went for care provided beyond that six-month window, some of it way beyond, according to the Medicare Payment Advisory Commission.

While the unpredictable course of neurological diseases makes it hard to determine life expectancy, the commission says some providers are gaming the system, cherry-picking beneficiaries most likely to have long, lucrative stays—like dementia patients. If Medicare doesn’t get a handle on the situation, it faces a demographic and financial reckoning that could further weaken the program’s already-shaky finances.

Baby Boomers

The number of seniors age 65 and older with Alzheimer’s disease is expected to jump 22% to 7.1 million by 2025, according to the Alzheimer’s Association.

By 2030, the entire baby-boom generation—which already struggles with declining cognitive function in percentages not seen earlier generations—will be eligible for Medicare. These millions born between 1946 and 1964 are expected to double Medicare spending from $782 billion in 2019 to $1.5 trillion in 2029, the Congressional Budget Office projects.

That could spur the restructuring of Medicare’s hospice benefit and trigger more care options for patients who need hospice-like services earlier in their diagnoses, said Jason Karlawish, co-director of the Penn Memory Center.

“It’s going to force America to address” the lack of “adequate long-term care services and supports for persons with chronic diseases for which there’s no cure,” Karlawish said.

‘America’s Fault’

About 14% of Medicare hospice patients who died in 2018 had stays exceeding 180 days, the commission reported. But those beneficiaries accounted for 60% of total hospice spending. Average length of stay topped 268 days at some 10% of Medicare hospices in 2018, the commission found. At others, 57% of beneficiaries were discharged alive.

Medicare covers neither long-term nursing home care nor “home care,” the provision of nonskilled personal services like bathing, toileting, and housekeeping that help patients remain in their homes. Beneficiaries with neurological disorders often need both. Medicare’s hospice benefit, however, provides both skilled care services and unskilled “home care,” depending on a patient’s needs. But it is designed to do so only during the final weeks of life.

Yet it’s “pretty clear that hospice is really filling an important coverage gap for our beneficiaries with dementia and other conditions,” commission member David Grabowski said at the panel’s October meeting. “Beneficiaries lack broader palliative care. They also, in many instances, lack long-term care. And hospice provides coverage for both, although I would argue imperfectly.”

Beneficiaries who outlive their initial six months of coverage and want to continue hospice care must reestablish eligibility every two months with the Centers for Medicare & Medicaid Services. That must include a hospice doctor’s certification that the patient has less than six months to live.

To fight fraud, each recertification requires a physician or nurse practitioner to conduct a face-to-face visit with the patient and detail the clinical findings that support a six-month life expectancy. Still, some beneficiaries are re-certified over and over again every two months, often for more than a year.

“This isn’t the patients’ fault. This isn’t the caregivers’ fault,” Karlawish said. “This is America’s fault for not creating the right kind of system of care” for people with “an incurable disease and progressive disability.”

For-Profit Hospices

Along with visits from nurses, social workers, and therapists, the hospice benefit also covers drugs, medical equipment, and supplies, as well as short-term inpatient or respite care and even bereavement for family members.

While the industry is fragmented among small and regional providers, some of the nation’s largest hospice providers include Vitas Healthcare, Kindred Healthcare, and Amedisys Inc.

Medicare pays a hospice for every day a beneficiary is enrolled in care, regardless of whether services are provided on a given day. That gives hospices a financial incentive to enroll patients, often in institutional settings, that require less complex care, the Department of Health and Human Services Office of Inspector General has found.

For example, Medicare decedents in 2018 with neurological conditions and chronic obstructive pulmonary disease had substantially higher average lengths of stay (151 days and 119 days, respectively) compared with decedents with cancer (53 days).

For-profit hospices, on average, have longer patient stays—about 110 days—compared with nonprofits, which average 68 days, the commission reported. That’s because for-profits enroll more patients with ailments that are more likely to have long stays. But all patients, regardless of their diagnoses, typically have longer stays at for-profits, the commission found.

Medicare Fraud

Practices that bring unnecessary costs to Medicare could constitute program abuse, which “includes any practice that does not provide patients with medically necessary services or meet professionally recognized standards of care,” according to CMS.

Like Medicare fraud, which includes knowingly submitting false claims or misrepresenting facts to obtain an undeserved payment, Medicare abuse can also expose providers to criminal, civil, and administrative penalties. These can include jail time, nonpayment of claims, monetary fines, or exclusion from federal health care programs.

The commission, which advises Congress on Medicare costs, quality, and access, is studying whether stricter participation criteria, or “compliance thresholds,” will curb hospice abuses. For example, if a hospice provider’s average length of stay or rate of live discharges exceeds a certain level, they would get a lower payment. That would discourage “patient selection” and “revenue generation strategies” in hospice business models.

The commission is also looking at reducing hospice payments by basing them more on the lower rate paid to home health providers.

Financial Incentives ‘Likely Play a Role’

The long stays mostly reflect the unpredictable progression of neurological and chronic diseases and the difficulty of determining life expectancy, said William Dombi, president of the National Association for Home Care & Hospice.

Beneficiaries with neurological conditions averaged 151 days in hospice in 2018, the commission reported.

Still, the commission maintains, other factors are likely at work. Among Medicare hospice decedents in 2018, those with neurological conditions had average stays of 445 days among 10% of providers, the commission said.

“Since long stays in hospice are more profitable than short stays, financial incentives likely play a role,” the commission said in a March report to Congress.

Any concern about hospice program integrity should be tempered by the knowledge that the program saves money by keeping patients out of hospitals and institutional care, said Susan Enguidanos, associate professor of gerontology at the University of Southern California.

“You have to look at the bigger picture,” Enguidanos, said. “Yes, we’re spending a lot of money, but are we potentially saving money? Because when they’re in hospice, they’re not going to the emergency room” and nursing homes.

(In Dec. 3 story, deletes reference to HCR ManorCare in 16th paragraph. )

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Gregory Henderson at ghenderson@bloombergindustry.com

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