Study Finds Hospice Care Raises Medicare Costs

March 9, 2004
Contradicting the widespread belief that hospice care saves money, a RAND Corporation study finds that patients choosing hospice care cost the federal Medicare system more than those who use only traditional medical care.

“Most advocates for hospice believe that hospice care saves money, so this is going to be a surprise,” said Dr. Joanne Lynn, the paper’s senior author and a well-known hospice care pioneer. Lynn has affiliations with both RAND Health and the Washington Home Center for Palliative Care Studies.

“These findings don’t mean that hospice isn’t worthwhile because hospice care probably does provide better care and improve quality at the end of patients’ lives,” Lynn said. “But we need to do a better job learning which patients benefit because we can no longer just assume that hospice care saves money.”

Researchers examined Medicare spending for nearly 250,000 people with traditional fee-for-service Medicare coverage who had been enrolled in the program for at least three years and died during 1996 to 1999. They found:

• Expenses were 4 percent higher for the last year of life among patients who used hospice services compared with similar patients who received traditional medical care.
• Cancer patients who chose hospice care were about 1 percent less expensive for Medicare, although the savings were as large as 17 percent for patients with aggressive tumors such as lung cancer.
• Average costs for hospice patients who died from illnesses other than cancer that were 11 percent higher than similar patients who received standard medical care.

“Our findings suggest that the one-size-fits-all hospice benefit may not be the best approach to meeting the needs of all patients as they approach the end-of-life,” said Dr. Diane Campbell, the lead author of the study and is affiliated with RAND and Medical Outcomes Research and Evaluation Services in Vermont, said:

“Hospice was designed around the terminal cancer trajectory characterized by an obvious decline within a relatively short period before death,” Campbell said. “When the hospice benefit was added to the Medicare program in the late 1980s, over 95 percent of hospice enrollees were cancer patients. Now, half of all hospice enrollees are people with dementia and other illnesses with uncertain prognoses.”

The trajectory to death for these patients is characterized by a slow decline for one or more years with periodic acute health problems. Campbell said the findings suggest researchers need to re-examine how to organize and finance care for these patients to ensure their needs are well met.

The use of hospice services among Medicare recipients has grown steadily in the past decade. Medicare beneficiaries who used the hospice benefit increased from 9 percent in 1992 to 23 percent in 2000. The number of people with conditions other than cancer who used hospice benefits also increased during the period to nearly 50 percent of all hospice enrollees.

Changes made to the Medicare system in 1997 expanded hospice benefits, encouraging more terminally ill people — including those with conditions other than cancer — to use the services.

The study was published in the Annals of Internal Medicine.

The complete text can also be found on the RAND Web site.

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