With a final rule that went into effect on Oct. 1, 2008, the Center for Medicare/Medicaid Services began a three year phase out of a key element in the Medicare hospice wage index that will cut hospice payment rates by 4.1 percent, costing the nation’s hospices more than $2 billion over the next five years.

This cut came at a surprising time considering the fact that it has been documented that hospice saves money for the Medicare fund. According to an independent study conducted in 2007 by the Sanford Institute for Public Policy at Duke University (conducted under a grant from the Robert Wood Johnson Foundation), hospice saves Medicare an average of $2,300 per patient, amounting to a total savings of about $2 billion a year. Reducing payment to hospice services may result in service cutbacks as well as a reduction in coverage to outlying areas, with the greatest impact being felt in rural areas. Additionally, job losses can be expected as a consequence of this rate cut.

Considered to be the model for high-quality care for terminally ill patients, hospice focuses on caring, not curing, and, in most cases, is provided in the patient’s home. The hospice interdisciplinary teams are experts in providing pain and symptom management on a physical, emotional, social and spiritual level.  Their focus is on helping patients to die on their own terms.  Along with the patients, families are counseled and supported and receive training in caregiving.  A number of hospices also provide complementary care services such as massage therapy, music therapy, acupuncture and other non-pharmacological interventions that aid in pain and symptom management.  These services are not reimbursed by Medicare, and the pending cuts threaten the existence of such programs.  More than 1.3 million dying Americans received care from the nation’s hospice providers last year, a number that continues to rise.  If hospice services are curtailed, then patients will receive care in more expensive settings within the health care system.

The American Recovery and Reinvestment Act, signed into law by President Obama, contained a provision that included a one-year delay in the implementation of this rate cut. But, it was only a one-year delay. If nothing else happens to further delay or rescind the regulation, the second year of the cut would go into effect on Oct. 1, 2009, resulting in a 3.1 percent cut in hospice reimbursements. The full impact of the regulation will go into effect on Oct. 1, 2010 and beyond, reducing hospice reimbursements by 4.1 percent.  In New York, where our hospice is located, the average reduction is closer to 6 percent.  The total cut to all hospices will be slightly over $2 billion.  This $2 billion is out of a total expenditure that was $11 billion in 2008.

In May of this year, members of the House of Representatives signed a letter authored by Representatives Van Hollen and Brown-Waite that was sent to President Obama urging him to take action to stop further cuts.  Senators Specter, Harkin, Roberts and Wyden are circulating a similar letter, asking that the 2008 regulation to slash hospice rates be rescinded.  Like the House letter, it will be signed by supporters of hospice in the Senate and sent to the White House demonstrating that Congress would support presidential action taken to permanently rescind the rule to cut hospice rates.  Hospices around the nation were successful in getting their Representatives to sign the House letter and are now working with their Senators to sign the letter so that it can be forwarded to the President.

Stopping the rate cuts is of vital importance to the hospice industry. The hospice community, which relies on Medicare for over 80 percent of its revenue, simply cannot withstand a 4.1 percent reduction in payment rates without having to reduce or eliminate certain services or limit service areas. According to a June 2008 Medicare Payment Advisory Committee (MEDPAC) report, hospice margins, in the aggregate, are only 3.4 percent. Many hospices, particularly smaller non-profits and those in rural areas, actually operate on negative margins and rely on fundraising to stay afloat – fundraising that is dwindling in this challenging economic environment.   An average cut that exceeds the average margin can only result in a negative impact that will effect the most vulnerable of patients in the health care system - those who have a terminal illness and wish to die in their home.

While the debate on health care reform is taking shape, hospice will continue to work on two fronts:  to demonstrate that it is a model of effectiveness that lowers cost to the larger health care system and to continue to care for patients and families who exercise their choice to live their lives with dignity, comfort and support.

Thanks to the National Hospice and Palliative Care Organization for source materials used in this article.