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Important Questions for Hospice in the Next Century

Publication Date



U.S. Department of Health and Human Services


Important Questions for Hospice in the Next Century

Executive Summary

Barbara Gage, Ph.D., Susan C. Miller, Ph.D., MBA, Kristen Coppola, Ph.D., Jennie Harvell, M.Ed., Linda Laliberte, JD, MS, Vincent Mor, Ph.D., and Joan Teno, M.D., MS

March 2000

This report was prepared under contract #HHS-100-97-0010 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Urban Institute. For additional information about the study, you may visit the DALTCP home page at or contact the ASPE Project Officer, Jennie Harvell, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. Her e-mail address is:

This report was prepared for the Office of Disability, Aging and Long-Term Care Policy in the Office of the Assistant Secretary for Planning and Evaluation, US Department of Health and Human Services under contract to the Urban Institute. The project officers were Jennie Harvell, ASPE and Carol Blackford, Health Care Financing Administration.

The authors appreciate the invaluable input of those noted in Appendix E for participating in discussions with us throughout the project. The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.


This work was conducted under the auspices of the Office of the Assistant Secretary for Planning and Evaluation (ASPE) as part of a larger ASPE study titled “Synthesis and Analysis of Medicare’s Hospice Benefit.” The ASPE study goal is to inform policy makers about the role of the Medicare hospice benefit, in general, and specifically about its contribution to end-of-life care for institutionalized beneficiaries.

This report contains six main sections. The first focuses on hospice coverage policies and reviews the history of the Medicare hospice benefit, its current structure, and its influence on care of the dying. Also included is a description of hospice care covered by other insurers including state Medicaid programs and private employers. The second section provides a literature review of the issues surrounding access to hospice and the provision of hospice care in nursing facilities. This is followed by a brief description of current end of life initiatives to improve care of the terminally ill. The next section summarizes discussions with hospice and nursing facility providers, federal and state certification surveyors, and state Medicaid officials regarding overlapping areas in caring for the terminally ill. Last, section 6 summarizes the issues and provides a framework for the four subsequent reports in this study, Medicare's Hospice Benefit: Use and Expenditures, Use of Medicare's Hospice Benefit Use by Nursing Facility Residents, Outcomes and Utilization for Hospice and Non-Hospice Nursing Facility Decedents, and Hospice Benefits and Utilization in the Large Employer Market.

Congress established the Medicare hospice benefit as both a cost-containment mechanism to limit the program's high costs for beneficiaries in their last year of life and a quality improvement tool to improve care for the dying. Medicare pays hospices a capitated per diem in exchange for delivering almost all services needed in a day to treat the patient's terminal illness. Excluded from this payment are room and board costs for a beneficiary who lives in a nursing facility and any costs for attending physicians who are not hospice staff. Hospices coordinate the care of the terminally ill acting as a gatekeeper to manage treatment of the terminal condition. They specialize in pain and symptom management and provide greater levels of aide services than otherwise available under Medicare. In addition, Medicare's hospice benefit also covers counseling and bereavement services for beneficiaries' family members.1

Medicare is the primary payer for hospice services covering 77 percent of all hospice expenditures. The rest is paid for by Medicaid (4 percent), private insurance (12 percent) or other sources (7 percent). In 1997, Medicare covered 374,723 hospice enrollees at a cost of $2.02 billion (MedPAC, 1998). Average length of coverage was 50 days, although that varied by provider type. For instance, beneficiaries served by free-standing hospices had the longest episodes (53 days per person) in contrast to those treated in skilled nursing facilities (SNFs) whose episodes of care lasted only 39 days per person, on average (HCFA, 1998a). Most hospice enrollees live at home or in a private residence, but an estimated 12 percent may be nursing facility residents (Gage, 1998).

While hospice is a relatively new Medicare benefit, it has been studied extensively. Early research, which focused on the benefit's implementation and use, found cancer patients are the most common hospice users (Mor and Kidder, 1985), although people with other terminal illnesses also are choosing hospice as the program matures (Banaszak-Holl and Mor, 1996). The National Hospice Study evaluated the benefit's cost effectiveness and found hospice achieved program savings (Kidder, 1992). These lower patient costs were due to patients having lower inpatient hospital costs, particularly in the last months of life. A more recent study which updated the NHS arrived at similar conclusions although this study focused only on cancer patients (Lewin, 1995).

High-cost hospice users -- and the adequacy of Medicare's payment rates for their care -- were the focus of yet another study. This study showed that higher expenses were due to longer enrollment periods, not higher daily costs (HCFA, 1993). As a result, the Secretary concluded that the per diem payment rates were adequate for covering this population because they adjusted for volume.

Another study which looked at coverage policies, analyzed the effect of removing the 210-day lifetime limit on Medicare hospice coverage (Banaszak-Holl and Mor, 1996). This study showed that for most cases, length of use did not go up substantially without the limit. However, patients with illnesses other than cancer were most likely to gain from the longer allowable enrollment periods because they tended to have longer episodes of hospice care.

In addition to these national program studies, hospice use is also profiled regularly by the National Center for Health Statistics (NCHS) (NCHS, 1998). These ongoing surveys, which describe hospice use by all insured populations, underscore the important role Medicare plays in covering hospice care. Almost 80 percent of all hospice users are 65 or older, suggesting these probably are Medicare-covered enrollments.

In 1998, the Office of the Inspector General (OIG) in the Department of Health and Human Services (HHS) raised questions about the role of the hospice benefit for dually covered Medicare beneficiaries living in nursing facilities. While Medicare is the primary payer when both programs cover a benefit, the state Medicaid program covers room and board for the nursing facility resident in addition to the Medicare-covered hospice services. The OIG was concerned about the financial relationships between hospices and nursing facilities. Better information was needed about the role of the Medicare hospice benefit, in general, and its contribution to end-of- life care for institutionalized beneficiaries. Specifically, the OIG wanted to know if hospice changed the cost or quality of services provided to dying beneficiaries in nursing facilities. Also at issue was Medicaid's role in covering these nursing facility residents. These matters raised additional questions, including how other payers, like Medicaid and private insurers, cover their terminally ill populations and whether their hospice patients had to waive other use of hospital, skilled nursing facility and home health services as required by Medicare (Program manuals, section 144.4).

This study of Medicare's hospice benefit addresses these and other questions. Funded by the Office of the Assistant Secretary for Planning and Evaluation (ASPE), this report describes Medicare hospice eligibility, coverage and payment policies, and selected Medicaid (Title XIX) and private insurance programs. It also presents information on costs, utilization, and quality of care in Medicare's hospice program. These materials are supplemented with anecdotal reports from hospice representatives, nursing facility providers, and state Medicaid officials. These discussants focused on Medicare's hospice benefit in general, and issues around coordinating the staff, services, and payments for hospice enrollees living in nursing facilities. In addition, issues raised by program survey officials are included to describe the problems in assessing quality of care for hospice patients who live in nursing facilities. For example, because the goals of curative and palliative treatment differ, malnourished residents in a nursing facility may be perceived as either neglected or as exercising their right to refuse food, depending on whether they are hospice enrollees.

Hospice's influence on the costs and quality of care for dying Medicare beneficiaries is still being debated. Hospice may well save Medicare dollars, but because of inadequate study designs -- including the lack of adequate control for selection bias -- accurate estimates of savings are not available. Studies in the 1980s found few differences in the quality of life or symptoms measured at the end of life between hospice and non-hospice patients. The limited number of studies conducted since the 1980s appear to add very little support to the arguments that hospice care is superior to conventional care for patient and family outcomes. However, the need for better measurement has become evident in the literature, and research efforts are now addressing this need. Further, the changing populations enrolling in hospice raise questions about whether study findings that are largely based on cancer patients are applicable to other terminally ill populations. No study has yet compared the processes and outcomes of care for hospice and non- hospice beneficiaries in nursing facilities. Such research, to the extent possible, is now being conducted as part of this study.

Key questions addressed in this study include:

  • Who uses Medicare's hospice benefit? Has this population changed over time? Are enrollees in health maintenance organizations (HMOs) just as likely to use it as those in fee-for-service?

  • How do Medicare's eligibility guidelines affect the types of terminally ill patients who enroll in hospice?

  • How do nursing facility residents elect and use hospice? Are their choices affected by their institutional residency?

  • Are there differences in resources used by residents who are on hospice versus terminally ill residents who are not enrolled?

  • Are there differences in the processes of care and the outcomes (e.g., the quality of symptom management) of dying nursing facility residents who have elected hospice compared to those who have not?

  • What can we learn from other hospice benefit programs?

This report is the first in a series which analyze Medicare's hospice benefit today and its use in nursing facilities. The other reports in this study for ASPE use Medicare administrative data to analyze total Medicare use and expenditures for hospice patients during, and in the 6 months prior to, enrollment in the benefit in 1996 (Medicare's Hospice Benefit: Use and Expenditures). In addition, nursing facility data and Medicare Part A claims data from five states is examined to contrast the enrollees (Medicare's Hospice Benefit Use by Nursing Facility Residents) and expenditures, processes, and outcomes for hospice and non-hospice enrollees in nursing facilities (Outcomes and Utilization for Hospice and Non-Hospice Nursing Facility Decedents). And last, administrative data from employer-based insurance claims is used to compare differences in the benefits, use, and cost of covering hospice in the private sector (Hospice Benefits and Utilization in the Large Employer Market). Findings from these analyses will inform the policy debate regarding the provision of hospice care for different types of beneficiaries, including those in nursing facilities. Study conclusions and recommendations reflecting findings from these analyses and this literature review are forthcoming in the final report of this ASPE-funded study.



  1. Although health maintenance organizations may cover some outpatient drugs, this benefit varies by plan and generally is more limited than the pain medications covered under hospice.

The Full Report is also available from the DALTCP website ( or directly at

To obtain a printed copy of this report, send the full report title and your mailing information to:

U.S. Department of Health and Human Services
Office of Disability, Aging and Long-Term Care Policy
Room 424E, H.H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201
FAX:  202-401-7733