RAND Study Finds Choosing Hospice Care Raises Medicare Costs for the Last Year of Life

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February 16, 2004

Patients who choose hospice care cost the federal Medicare system more than patients who use only traditional medical care, a finding that is contrary to traditional views that hospice care is less costly to provide, according to a RAND Corporation study released today.

RAND Health 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. Researchers found that 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. However, hospice patients who died from illnesses other than cancer averaged costs that were 11 percent higher than similar patients who received standard medical care.

Medicare is the federal medical insurance program for people age 65 and older.

The study is the most thorough examination undertaken of the cost of hospice care — focused on care at home and making dying people comfortable and free of pain — compared with traditional medical care. The findings are published in the February 17 edition of the Annals of Internal Medicine.

“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.”

Dr. Diane Campbell, who is the lead author of the study and is affiliated with RAND and Medical Outcomes Research and Evaluation Services in Vermont, said: “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.”

“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.

Overall, researchers found that hospice care increases Medicare costs, but they found great variation in relative costs, based on both the type of illness diagnosed and the age of patients.

For example, among non-cancer patients enrolled in hospice care, costs for patients age 68 to 79 averaged $1,356 more in the last year of life than those receiving traditional medical care; costs were $3,725 for patients age 85 or older. Hospice patients with dementia were 44 percent more expensive on average than similar patients not enrolled in hospice. Patients with heart failure had hospice costs that were 16 percent higher on average than Medicare recipients not enrolled in hospice care.

In contrast, the average hospice enrollee with cancer had Medicare costs that were $648 less in his or her last year of life than similar patients who did not use hospice. But savings were seen only among younger Medicare recipients. Costs were $1,703 lower in the last year of life for cancer patients age 68 to 79 who used hospice, while costs were $1,193 higher for cancer patients age 85 and older using hospice, according to the study.

Other authors of the study are Tom A. Louis of Johns Hopkins Bloomberg School of Public Health and Lisa R. Shugarman of RAND.

Support for the project was provided by the U.S. Agency for Healthcare Research and Quality, the National Institute on Aging, the Fan Fox-Leslie Samuels Foundation, and the Washington Home Center for Palliative Care Studies.

RAND Health is the nation’s largest independent health policy research organization, with a broad research portfolio that focuses on health care quality, costs, and delivery, among other topics.


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