MedPAC calls for 20 Percent Cut to Hospice Aggregate Cap

Last week, as expected, the Medicare Payment Advisory Commission’s (MedPAC) March 2022 Report to Congress recommended that:

  • Medicare base payment rates for hospice for Fiscal Year 2023 remain at current levels
  • The hospice aggregate cap should be wage-adjusted and reduced by 20 percent.
  • Hospices be required to report telehealth services on Medicare claims

MedPAC’s chapter on hospice services explores the latest data on hospice utilization and access to care, payment adequacy, quality of care, the hospice aggregate cap, the impact of the COVID-19 public health emergency on hospice services, and potential hospice payment policy directions. This information is combined with the recommendations to Congress for FY2023 listed above. It is important to remember that MedPAC’s recommendations are not required to be implemented. MedPAC is a solely an advisory body to Congress. It would take specific congressional action to put any recommendations into effect.

The recommendation to wage-adjust and reduce the aggregate cap by 20 percent was initially put forth by MedPAC in its 2020 report to Congress. MedPAC estimates that the payment recommendations would decrease hospice spending by $250 million to $750 million over one year and between $5 and $10 billion over 5 years.

“We have had longstanding concerns about MedPAC’s treatment of home health, and the Commission is now on a similar path for hospice care with its recommendations that there be no recognition of cost inflation in 2023 rate setting and the dangerous proposal to reduce the annual aggregate cap by 20 percent,” said NAHC President William A. Dombi. “First, MedPAC relies on Medicare cost reports that intentionally do not include all hospice costs, such as bereavement support. Second, it is readily apparent that the cap reduction proposed would disadvantage any hospice that serves patients with non-cancer diagnoses, such as dementia, as these patients tend to increase risk of exceeding the cap.  We must condemn any proposal that would diminish the breadth of the hospice benefit, particularly one that could trigger the loss of care access for certain patient populations.”

According to MedPAC data from 2020:

  • Hospice care was utilized by over 1.7 million beneficiaries;
  • 47.8 percent of Medicare decedents received hospice care;
  • More than 5000 Medicare certified hospices were in operation;
  • Medicare expended $22.4 billion in payments for hospice services.


As in analyses from previous years, MedPAC assessed access to care, quality of care, providers’ access to capital, and the relationship between providers’ costs and Medicare payments in making its determination of payment adequacy, which is a key driver in MedPAC’s decision around payment recommendations for hospice.

MedPAC drew the following conclusions:

Beneficiaries’ access to hospice services is believed to be favorable given the growing number of hospice providers.  Further, while the share of decedents using hospice dropped slightly in 2020 compared to 2019 (47.8 percent of Medicare decedents in 2020 vs. 51.6 percent in 2019) as a result of overall deaths increasing more rapidly than hospice enrollments (likely due to the pandemic), the overall number of people receiving hospice continues to increase, as does the volume of services provided (including an increase in the overall length of stay). While the number of rural hospices has declined, MedPAC notes that providers in urban areas provide services to rural areas, and the share of rural decedents using hospice has grown. The chapter discusses some particular concerns related to continuing growth in the number of hospices in California and Texas and patterns of care that may warrant additional oversight.

MedPAC estimates that Medicare hospice payments in 2019 exceeded marginal costs by approximately 17 percent, which they believe provides strong incentives for providers with the capacity to accept new patients.

While data on hospice quality is limited, and was disrupted significantly due to the pandemic, scores based on data through 2019 are generally good. (Hospice Item Set composite measure scores are very high, CAHPS scores are stable, and scores on the Visits in the Last Days of Life measures have improved (there is, however, room for improvement for a subset of providers.) MedPAC continues to support development of additional outcome measures for hospice care, and has continuing concerns about hospices with high live discharge rates, which are discussed at length.

Providers’ access to capital is believed to be adequate, based on growth in the number of for-profit providers.  Less is known regarding non-profit hospices access to capital.

While costs vary substantially by provider type and patient mix, the aggregate Medicare margin for hospice in 2019 was 13.4 percent.  This excludes bereavement and volunteer costs, which would decrease margins by 1.2 percentage points and 0.4 percentage points, respectively.  Above cap hospices in 2019, which MedPAC estimates at 19 percent of all hospices, had a margin of approximately 22.5 percent (10 percent after return of cap overpayments). Margins for 2022 are projected to be approximately 13 percent. MedPAC states that it does not generally anticipate long-term pandemic-related effects in the hospice sector, except for increased wage rates, which are accounted for via CMS’s market basket index.

In-person visits of all kinds (nurse, aide, social worker) decreased in 2020, attributable mostly to the pandemic. While we know that many hospices utilized telehealth and audio-only technologies to make up for the decrease in in-person visits, because hospices cannot report telehealth visits on claims, MedPAC lacks the quantitative data needed to determine the extent to which telehealth was used to supplement in-person visits. To address this data shortcoming, one of MedPAC’s official recommendations is that the HHS Secretary should require that hospices report telehealth services on Medicare claims. NAHC applauds this recommendation, as we have consistently asked CMS to create telehealth codes for hospice so that the full scope of services is captured and can inform future policy.


The hospice chapter provides in-depth analysis related to the recommendation to modify the aggregate cap, and updates a simulation on the impact of the policy. Under the new analysis, 33 percent of hospices would exceed the cap under the new policy (as compared with the 19 percent of hospices that exceeded the aggregate cap in 2019), and overall hospice outlays would be reduced by 3.7 percent (based on 2019 data and assumption of no behavioral change in response to the policy change). The policy is estimated to reduce payments for hospices in the top two length of stay quintiles — by five percent for those in the fourth quintile and 15 percent for those in the fifth quintile.

NAHC strongly opposes the recommendation to reduce the cap across-the-board by 20 percent. We recognize that MedPAC’s interest in this policy stems from concerns about what they see as inappropriately long LOS for certain kinds of hospice patients. While NAHC welcomes targeted, data-driven program integrity solutions that focus on truly fraudulent or abusive provider behavior, a 20 percent cap cut is an blunt tool that would negatively impact access to care by introducing disincentives to serve patients that have a more unpredictable disease trajectory, such as those with dementia, who, despite their less predictable illness course, are in fact eligible for hospice care based on the clinical judgement of the certifying physician. Additionally, the cap reduction recommendation could further exacerbate health disparities in hospice access and utilization. The individuals most likely to have their access to hospice impacted by the cap reduction (those with dementia and other neurological diagnoses) are also more likely to be from underserved minority communities that already have lower rates of hospice utilization and poorer end-of-life care outcomes. Finally, by disincentivizing hospice care for certain patients, a 20 percent cap reduction could result in increased overall Medicare outlays, as those individuals who might have received cost-saving hospice care end up utilizing more expensive and aggressive care such as hospital, ER, and nursing home services. Research has shown that hospice use by Medicare beneficiaries is associated with significantly lower total health care costs across all payers, without cost-shifting to families.

The shortcomings of the cap reduction proposal notwithstanding, MedPAC remains concerned about providers with very long lengths of stay and high profit margins, and in 2021’s report they put forward a number of ideas for additional payment reforms that might help address these concerns. While the 2022 report does not go into as much detail on these various reform options, it does once again encourage further exploration of a “compliance threshold” policy aimed at hospices that have care patterns that have raised concerns (including high live discharge rates or patients with very long lengths of stay).  Under such a policy, if a hospice provider exceeds the threshold, payment rates would be reduced for all patients. This and other payment reform ideas are preliminary at this point, but NAHC expects that MedPAC will continue to more thoroughly explore them in the future.


This year, the report includes a new section focused on analysis of Medicare spending on hospice beneficiaries that takes place outside of the Medicare hospice benefit (Part A, Part B, and Part D outside spending). Key data points highlighted in this section include:

  • In 2018, Medicare spent $1.1 billion (an additional 5.6 percent) on nonhospice services for beneficiaries enrolled in hospice (Beneficiaries spent an additional $177 million on cost sharing for nonhospice services while enrolled in hospice in 2018)
  • Of the total $1.3 billion of non-hospice spending (Medicare and patient cost-sharing): 40 percent of this 2018 non-hospice spending was for Part D drugs; 23.1 percent was for physician and supplier services; 13.6 percent was for outpatient hospital services; and 13.3 percent was for inpatient hospital services.
  • 47 percent of beneficiaries using hospice in 2018 received at least one Part A or Part B service or Part D drug during their hospice stay.
  • Hospices that exceeded the aggregate cap, had a long average length of stay, or had a high live-discharge rate were more likely to have high non-hospice spending.

While it lacks hard data to prove its hypothesis, MedPAC states that it believes much of the Part A and Part B services paid for outside the hospice benefit are related to the beneficiaries’ terminal condition and related conditions, and therefore should be considered duplicative of what the hospice itself should cover. To address these non-hospice spending concerns, which are also the focus of a recent OIG Data brief on the same topic, MedPAC recommends a number of potential options to explore, including:

  • More audits of hospice spending
  • Some kind of bundled payment mechanism that would incorporate all services a hospice beneficiary would need, regardless of whether they are related to the terminal condition and related conditions
  • A payment penalty for hospices that exceed a non-hospice spending threshold.

NAHC believes that much of the non-hospice spending for beneficiaries is not in the control of hospices, and therefore they should not be punished with more penalties or administrative burden as a result of behavior that they have no tools or authority to influence.

We will continue to engage with MedPAC and members of Congress to educate them on the realities of the hospice benefit and how it is implemented, and oppose problematic policy recommendations that would negatively impact patients, families, and providers.