Hospice Care Saves Medicare Lots of Money, Study Finds

October 28, 2024
Dennis Thompson HealthDay Reporter

Hospice care is a compassionate and heartfelt enterprise, involving a medical team dedicated to maintaining a person’s comfort and dignity as they face the final curtain.

Now, new research shows hospice is also incredibly cost-effective as a health care service, a new report says.

For-profit hospice providers generate substantial savings for Medicare, according to a new analysis to be published in the American Economic Review.

Hospice for Alzheimer’s disease and dementia patients alone saves Medicare about $29,000 per person for the first five years following diagnosis, researchers said.

“Hospice is saving Medicare a lot of money,” said lead researcher Jonathan Gruber, chair of economics at MIT in Boston. “Those are big numbers.”

Hospice aims to offer an alternative to hospital care for someone nearing the end of life by sparing them unwanted medical procedures and focusing on their comfort.

People opt out of their existing medical network and receive nursing care as they approach the end, either at home or in hospice facilities. Generally, hospice patients are expected to have six months or less to live.

In recent decades, hospice care has grown dramatically, researchers noted.

The number of for-profit hospice organizations grew fivefold between 2000 and 2019, even as the number of nonprofit hospice providers remained fairly consistent.

That growth has fueled concerns that for-profit hospice organizations might be overly aggressive in pursuing patients, or that some dying people are being defrauded by these businesses, researchers said.

But the new analysis concludes that even as a for-profit enterprise, hospice care is meeting its intended goals.

People are receiving palliative care based around comfort rather than heroic medical efforts, and they’re receiving it at less cost, researchers found.

“What we found is that hospice basically operates as advertised,” Gruber said. “It does not extend lives on aggregate, and it does save money.”

Medicare has been covering hospice since the 1980s. Medicare payments for hospice care are now about $20 billion a year, up from $2.5 billion in 1999. Alzheimer’s and dementia patients make up about 38% of hospice patients.

To assess the cost-effectiveness of hospice, researchers analyzed data on more than 10 million patients between 1999 and 2019.

Researchers concluded that enrolling in hospice increased the five-year death rate of Alzheimer’s and dementia patients by 8.6 percentage points, from a baseline of 66.6%.

That winds up saving Medicare tens of thousands per patient, as people forgo life-extending surgeries and procedures in favor of more comfort and care, researchers found.

Due to concerns that hospice providers out for profit might wrangle in patients who could expect to live longer than six months, Medicare has put a roughly $29,205 cap on per-patient hospice reimbursements. Hospice organizations can’t exceed that average.

But that’s led to about 15% of hospice patients being discharged from hospice care while still alive, crowding some out of the system, researchers noted.

“The cap may be throwing the baby out with the bathwater.” Gruber said in an MIT news release. “The government has more focused tools to fight fraud. Using the cap for that is a blunt instrument.”

The researchers concluded that hospice appears to provide a valued service at less expense, as long as people entering the service are fully informed about the fact that it is end-of-life care that excludes life-extending treatment.

“The holy grail in health care is things that improve quality and save money,” Gruber said. “And with hospice, there are surveys saying people like it. And it certainly saves money, and there’s no evidence it’s doing harm [to patients]. We talk about how we struggle to deal with health care costs in this country, so this seems like what we want.”

More information

The National Institute on Aging has more about hospice care.

SOURCE: MIT, news release, Oct. 24, 2024

Aging: Misc.Insurance: Medicare Health Costs Hospices