MedPAC Discusses Draft Hospice Payment Recommendations for 2024; MedPAC’s Recommended Hospice Cuts Considered by Congress

The Medicare Payment Advisory Commission (“MedPAC”) held a public virtual meeting on December 8, 2022, to assess payment adequacy and updating payments for hospice services.¹ By law, each year MedPAC reviews Medicare’s fee-for-service payment policies and makes payment update recommendations to Congress.² In its March 2023 Report to Congress, MedPAC will consider whether payments to hospice service providers are adequate and how they should be updated in 2024.³

MedPAC’s recommendations often offer insights into future legislation or regulations, and its reports to Congress have prompted shifts Medicare payment policies.⁴ As Congress is negotiating a year-end omnibus legislative package, it is considering cutting hospice payments to pay for other programs and policies by reducing the hospice aggregate cap.⁵ This “aggregate cap” is an absolute dollar limit on the average annual payment per beneficiary a hospice can receive.⁶ If a hospice’s total payments exceed its total number of Medicare patients multiplied by the aggregate cap — $32,486.92 for fiscal year 2023 — it must repay the difference.⁷

In its past three annual reports to Congress, MedPAC has recommended reducing the aggregate cap by 20%.⁸ According to MedPAC, the aggregate cap functions as a mechanism that reduces payments to hospices with long stays and high margins.⁹ The percentage of hospices exceeding the aggregate cap has increased from 12.3% in 2015 to 19% in 2019.¹⁰ Over the same timeframe, average payments over the cap per hospice exceeding it have increased from about $316,000 to $384,000.¹¹ In MedPAC’s view, the 20% aggregate cap reduction would be more equitable across providers than an across-the-board payment reduction, focusing payment reductions on providers with the highest margins and longest stays.¹² Under its cap reduction recommendation, MedPAC anticipates that the share of hospices exceeding the cap would increase to 33%, with the additional providers estimated to exceed the cap predominantly comprised of for-profit and freestanding providers with stay lengths averaging 243 days.¹³

Hospice industry leaders oppose MedPAC’s aggregate cap cut recommendation. The National Association for Home Care (“NAHC”) recently criticized it, pointing out that changes to the aggregate cap update amount methodology effective for years 2016-2030 have already reduced the cap, produced savings, and apparently contributed to the increase in the number of hospices exceeding the cap.¹⁴ The Congressional Budget Office estimates that extending the same cap methodology to 2031 would produce savings of $594 million for that single year.¹⁵ NAHC estimates that this methodology change alone will have reduced the cap by nearly 20% by 2031.¹⁶

“MedPAC provided no analysis supporting the appropriateness of the cap cut except that it would change financial incentives and potentially reduce long lengths of stay on the benefit,” said NAHC.¹⁷ The “overly blunt” proposal is problematic because it would disincentivize serving patients with more unpredictable disease trajectories, likely exacerbate health disparities by impacting care in medically underserved communities, and potentially increase overall Medicare spending, as patients who might have been served by cost-saving hospice instead would utilize more expensive and aggressive care, such as hospital, ER, and skilled nursing facility services.¹⁸

The Idaho Health Continuum of Care Alliance (“IHCCA”) agreed, echoing NAHC’s view that a cut to the hospice cap is a “crude tool” to change hospice financial incentives that fails to consider many factors contributing to patient care needs.¹⁹  In its view, modifications to the cap are not the right tool to address the most important program integrity concerns in hospice, such as the large and rapid growth in hospice licenses in some parts of the country that seem to be unrelated to the need for such growth.²⁰ Both groups concur that it would be bad policy for Congress to hastily implement MedPAC’s suggested 20% aggregate cap cut without a more thorough analysis.²¹

In its December 8, 2022, meeting, MedPAC Commissioners reviewed its findings on access to hospice care, quality of care, providers’ access to capital, and the relationship between Medicare’s payments and provider’s costs. The Commissioners discussed the MedPAC Chair’s draft recommendations for its March 2023 report to Congress. Consistent with MedPAC’s long-standing precedent, the Chair’s draft recommendations were presented on screen and read aloud during the public session. A transcript is publicly available the week after the meeting.²² Hospice providers would be wise to remain aware of MedPAC’s policy recommendations and their influence on Congress. Additionally, NAHC urges everyone to tell Congress to reject efforts to reduce the hospice aggregate cap in the end-of-year legislative package that Congress is negotiating, and has provided a draft communication to that effect.²³

For more information about the proposed cuts or hospice cap issues in general, contact AGG Healthcare attorney Lisa Churvis or the AGG Home Health & Hospice team.

[1] https://www.medpac.gov/meeting/december-8-9-2022/.

[2] Id.

[3] Id.

[4] § 22:2. Generally, Health Care Fin. Transactions Man. § 22:2 (2022).

[5] National Association for Home Care & Hospice: Ask Congress to Reject Efforts to Reduce the Hospice Aggregate Cap in an End-of-Year Bill! (November 2022) (hereinafter “NAHC Action Request”), available at https://p2a.co/mhu6Q52; Idaho Health Continuum of Care Alliance Action Alert: Tell Congress Not to Cut the Hospice Cap! (Dec. 12, 2022) (hereinafter “IHCCA Action Alert”), available at https://www.ihcca.org/home/?page_id=1659.

[6] Hospice Services Payment System Payment Basics, revised October 2022, available at https://www.medpac.gov/wp-content/uploads/2021/11/MedPAC_Payment_Basics_22_hospice_FINAL_SEC.pdf.

[7] Id.

[8] Neuman, Kim, Assessing Payment Adequacy and Updating Payments: Hospice Services (Jan. 13, 2022) (hereinafter “Assessing Hospice Payments”), p. 12, available at https://www.medpac.gov/wp-content/uploads/2021/10/ASC_ESRD_Hospice_update-MedPAC-Jan22.pdf; Medicare Payment Policy Report to the Congress (March 2022) (hereinafter “MedPAC March 2022 Report”), p. 363, available at https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_v3_SEC.pdf.

[9] MedPAC March 2022 Report, p. 363, available at https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_v3_SEC.pdf.

[10] Id., p. 380.

[11] Id.

[12] Assessing Hospice Payments, p. 12.

[13] MedPAC March 2022 Report, p. 391, available at https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_v3_SEC.pdf.

[14] National Association for Home Care & Hospice Fact Sheet (hereinafter “NAHC Fact Sheet”), p. 2, available at https://www.ihcca.org/home/wp-content/uploads/2022/12/NAHC_FactSheet_HospiceAggregateCap_P2Ao2IItCrGYv1663007476.pdf.

[15] Id.

[16] Id.

[17] NAHC Action Request, available at https://p2a.co/mhu6Q52.

[18] Id.

[19] IHCCA Action Alert, available at http://www.ihcca.org/home/?page_id=1659.

[20] Id.

[21] NAHC Fact Sheet, available at https://www.ihcca.org/home/wp-content/uploads/2022/12/NAHC_FactSheet_HospiceAggregateCap_P2Ao2IItCrGYv1663007476.pdf; IHCCA Action Alert, available at http://www.ihcca.org/home/?page_id=1659.

[22] See https://www.medpac.gov/document-type/transcripts/.

[23] NAHC Action Request, available at https://p2a.co/mhu6Q52.