Medicare Program Expenditures Associated with Hospice Use

BACKGROUND: Hospice providers contend that enrollment reduces the cost of the Medicare programs, but estimates of effects are dated, methodologically limited, and focused on persons with cancer. OBJECTIVE: To estimate the effects of hospice care on Medicare program payments during the last year of life from 1996 to 1999 within cohorts defined by age and diagnosis. DESIGN: Retrospective cohort. SETTING: Deceased Medicare enrollees. PARTICIPANTS: Elderly Medicare fee-for-service beneficiaries who received 36 months of continuous Part A and B coverage before death during 1996 to 1999 (n = 245 326). Age- and condition-specific (cancer or noncancer and principal condition) cohorts were defined. MEASUREMENTS: Medicare expenditures in the last year of life, as a total figure and by service type. The cost effects of hospice were estimated by using linear regression within the cohorts for hospice enrollees compared with nonenrollees after adjustment for propensity to use hospice, gender, race, enrollment in Medicaid, urban setting, duration of illness, comorbid conditions, low use of Medicare, nursing home residence, and year of death. RESULTS: Adjusted mean expenditures were 4.0% higher overall among hospice enrollees than among nonenrollees. Adjusted mean expenditures were 1% lower for hospice enrollees with cancer than for patients with cancer who did not use hospice. Savings were highest (7% to 17%) among enrollees with lung cancer and other very aggressive types of cancer diagnosed in the last year of life. Expenditures for hospice enrollees without cancer were 11% higher than for nonenrollees, ranging from 20% to 44% for patients with dementia and 0% to 16% for those with chronic heart failure or failure of most other organ systems. Hospice-related savings decreased and relative costs increased with age. CONCLUSION: Hospice enrollment correlates with reduced Medicare expenditures among younger decedents with cancer but increased expenditures among decedents without cancer and those older than 84 years of age. Future studies should assess the effects of hospice on quality and on expenditures from all payment sources.