Can hospice function under Medicare premium support?

Obviously we health policy types have been wonking it out about premium support in Medicare given the selection of Rep. Ryan as Gov. Romney’s running mate. Austin asked via twitter:

The short version is that hospice should be able to work under a private insurance option in Medicare that preserves the option of Seniors remaining in traditional Medicare, though there is a policy oddity regarding hospice and the current Medicare Advantage (MA) program that would have to be changed. Further, there are also some less obvious ways in which our lack of a straightforward long term care financing system will complicate hospice policy for the elderly going forward, especially if you coupled premium support with a block granting of Medicaid that was designed to reduce federal expenditures. This post is an overview, and I will revisit some of these topics in more detail.

• Current policy with MA. If a beneficiary covered by a Medicare Advantage plan elects hospice, then ALL payment for all of their health care reverts back to traditional Medicare after the election of hospice. This includes Part A payments of hospice services (see p.8-9), as well care covered by traditional Medicare’s benefit package (Parts A & B) that is unrelated to the terminal illness (ex. a hip fracture from a fall while in hospice [MA plans would still provide any extra benefits, such as dental care to their beneficiaries who had elected hospice]). Hospice has been “carved out” in this way since it was introduced to Medicare in 1982. It is not entirely clear to me why this is the case, and I have speculated a bit in the past and will write a longer follow up on the politics of hospice policy later.
• What would have to change under competitive bidding? Private plans would have to pay for hospice and other care if it was chosen by beneficiaries for traditional Medicare and private options to compete on an even footing.
• How common is it for MA patients to elect hospice as compared to traditional Medicare? MA patients are more likely to choose hospice than are beneficiaries in traditional Medicare, though the gap has been shrinking (47.8% of MA decedents v. 43% FFS in 2010; 30.9% MA v. 20.5% FFS in 2000 p. 288; longstanding p.141-143). MA plans have a financial incentive to encourage hospice selection because it pushes end-of-life costs to traditional Medicare, though a study testing whether making hospice a part of the capitation payment for MA* concluded that it would only save traditional Medicare a modest amount of money. However, this study focused on enrollment in hospice during the last month of life, which covers around two-thirds of users, using data from the 1990s. Since then, the expansion of hospice in Medicare has grown steadily, primarily through increased use of hospice by older beneficiaries, and via an increase in the use of hospice by persons with non-Cancer terminal diagnoses (like CHF and dementia). This means the tails of one side of the distribution (long users) have gotten a lot longer (90th percentile 150 days in 2000, 250 days in 2010 while the 25th percentile stay has been 5-6 days for 20 years. There is a literature on the correlates of hospice choice that partially line up with the correlates of MA advantage selection that I will post on later (urban, white, higher education and higher income are all more likely to choose MA, and hospice, even within traditional Medicare).
• It is not only about the costs. Hospice has been shown to increase quality of life prior to death, so while the above focuses on the shifting of costs from private insurance companies to traditional Medicare, another perspective is that MA decedents are more likely to reap the benefits of hospice prior to death and there is too much focus on cost in hospice policy in any event. In fact, from a quality standpoint, encouraging longer stays for most users would likely be associated with higher quality and lower costs to traditional Medicare. Cost and quality must be considered together.
• Can hospice exist in private insurance? Yes, it does now; private insurance policies for persons under the age of 65 routinely cover hospice. Indeed, Aetna** has innovated the hospice benefit structure in the under-65 population toward a “concurrent” benefit in which hospice care can be received without unelecting “curative” care, providing more flexibility than does the current policy for hospice in traditional Medicare. It is worth noting that a little over 8 in 10 persons who die in the U.S. are Medicare beneficiaries, so the under age 65 hospice experience in private insurance has been generated based on more “unusual” (probabilistically speaking) events, and is more cancer-focused than are overall Medicare hospice deaths.
• Long Term Care is muddied up with hospice policy. I believe that a lot of the angst over long hospice lengths of stay are driven by fears at CMS that hospice is in danger of turning into a back door long term care benefit. Most work on long lengths of hospice stay focus on Non Profit v. For Profit ownership of the hospice. I cannot find an analysis of whether long stay users are more likely to come from MA or traditional Medicare into hospice. Further, dual eligible Medicare beneficiaries are less likely to choose hospice than are non-duals (39.2% of decedents v. 45.5%, p. 288), as are Medicare beneficiaries in SNFs. This is due to perverse interactions between Medicaid and Medicare that mean in some states a dual eligible choosing hospice would become responsible for per diem room and board costs if they do so, almost certainly reducing quality and increasing aggregate cost (but shifting costs between Medicare and Medicaid). This is one thing that has lead me to call for federalizing the dual eligible Medicaid costs. Gov. Romney and Rep. Ryan favor block granting Medicaid, and this would likely exacerbate these perverse incentives since increased flexibility to states would come with less money under likely block granting scenarios. At a minimum, the lack of a coherent LTC financing system makes hospice policy more difficult, especially given that around 9 in 10 hospice decedents receive such care in their home.

In short, hospice is the part of private insurance options in Medicare that will have to change the most if we move toward a premium support option based on competitive bidding. It should be doable, but, as always, the details are crucial.

update: a few tweaks for clarity and I initially forgot to list the two papers below.

*G. Riley, C. Herbolsdheimer. Including hospice in Medicare capitation payments: would is save money? Health Care Financing Review 2001;23(1): 137-147.

**Krakauer R, Spettell CL, Reisman L, Wade MJ. Opportunities to Improve the Quality of Care for Advanced Illness. Health Affairs 2009; 28:1357-59.