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Medicare adviser supports no pay increase for hospices in 2021, cap reduction

A congressional Medicare adviser supports no change in Medicare payments for hospice services in 2021 and lowering providers' annual payment cap.

During a Dec. 6 meeting, members of the Medicare Payment Advisory Commission, or MedPAC, supported eliminating a payment update for hospices for fiscal year 2021 due to providers reporting sufficient Medicare profit margins. The commission also supported a wage adjustment and Medicare payment cap reduction of 20% to better reign in spending.

Overall Medicare spending for hospices totaled $19.2 billion in 2018, covering over 1.5 million beneficiaries and going to over 4,600 providers, according to data presented by MedPAC. The Centers for Medicare and Medicaid Services finalized a payment increase of about $520 million, or 2.6%, for hospices in fiscal year 2020.

MedPAC advises Congress and delivers policy and payment recommendations in March and June reports. However, it does not have legislative authority.

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Payment update recommendations for hospice providers and outpatient dialysis services were heard Dec. 6, and seven recommendations were discussed Dec. 5. Final recommendations will be voted on in MedPAC's January meeting and then included in the March report to Congress.

Pay freeze for hospice care

Kim Neuman, a principal policy analyst for MedPAC, said beneficiaries' access to care would not be hurt by a freeze in pay because current payments may be higher than needed. Medicare margins for hospice providers were 12.6% in 2017, the most recent year complete data was available, according to Neuman. MedPAC projects that margins will remain at 12.6% in 2020.

Margins varied widely depending on the provider type and beneficiaries' length of stay. Medicare margins for for-profit providers were 20.2% in 2017, while margins for nonprofit providers were 2.5%, according to data presented by MedPAC. The top 20% of providers in terms of beneficiaries' length of stay past 180 days had Medicare margins of 17.8%, and the second-highest quintile had margins of 22.1%.

Meanwhile, the lowest 20% of providers according to the same metric had Medicare margins of minus 4.5%, and the second-lowest quintile had margins of 7%, according to the commission.

Neuman said MedPAC is confident that as the length of stay goes up, margins go up as well.

Reducing payment cap

CMS caps total annual Medicare payments to hospice providers to ensure that "Medicare payments did not exceed the cost of conventional care for patients at the end of life," according to MedPAC's March 2019 report.

While the cap is meant to reflect per-patient spending, it is relative to a provider's overall spending. The cap is not enforced according to each individual patient's episode of care.

Neuman said lowering the cap level by 20% will better divide providers according to similar characteristics, like for-profit providers, longer beneficiary stays and higher margins.

James Mathews, MedPAC's executive director, said keeping 2021 payments flat and a cap reduction would effectively amount to a 2.8% payment reduction for providers. However, Mathews explained that rather than cutting pay across the board, lowering the cap will target providers that have higher profits and longer beneficiary stays.