Background on CMS’s Anti-Fraud Efforts in Hospice Care

On May 13, the Centers for Medicare and Medicaid Services (CMS) announced a nationwide, six-month moratorium on bringing new hospice service providers into Medicare ( the agency also announced a simultaneous moratorium for home health agencies ). Taking this step, which is aggressive when compared with previous program integrity actions, is justified based on recent trends. For broader context, Congress added hospice coverage to Medicare in the 1980s to provide lower-cost and more patient-centered settings for terminally ill beneficiaries. Eligibility is limited to patients with estimated remaining lifespans of no more than six months, as determined by their physicians. The patients who opt for hospice services agree to swap palliative care for the more intensive services generally associated with their conditions. The initial benefit is divided into two 90-day benefit periods, which are then followed by 60-day coverage increments that require recertifications of patient eligibility. Hospice care can be provided in community settings, hospitals, nursing homes, or free-standing facilities. Medicare spending on hospice care is small relative to the overall size of the program, as shown in Figure 1. In calendar year 2024, Medicare paid $1,109.8 billion for patient care, of which 44 percent went to Medicare Advantage (MA) plans. The balance of total spending went directly for care provided to traditional fee-for-service (FFS) patients. Relative to total program outlays, 43 percent of Medicare expenditures was for hospitals, physicians, prescription drug suppliers, and coverage plans, or skilled nursing facilities, while just 2.6 percent was for hospice-related services. Hospice’s share has not increased substantially in recent years ( it was 2.5 percent in 2010 ). MA enrollees can receive FFS-paid hospice care, too. In such cases, Medicare pays directly for hospice, while the MA plans are responsible for prescription drug coverage but not for services covered by parts A and B of the program. In 2024, 1.8 million program beneficiaries received hospice services, and just over half of those who died in 2024 received hospice care. Payments for hospice agencies are set as per diems without regard to the costs associated with individual patients. The typical case, for “routine home care,” has one rate for the first sixty days and then a lower rate for days beyond the first sixty. In 2026, the nationwide average per diem for these benefit periods is $261 and $182, respectively.  From the beginning, Congress also imposed an aggregate payment cap for hospice agencies tied to an annual per beneficiary limit, which is $35,361 in 2026. Like home health, the hospice benefit is vulnerable to abuse because the barriers to entering the market are lower than in more regulated settings. The capital investment to get started is minimal in comparison with building a new hospital, outpatient clinic, or nursing home. Further, the potential profit margins are high if a service provider is confident that the per diem is above what is needed to provide the required services. CMS’s concern is that unscrupulous agencies are using deceptive tactics to sign up patients while providing very little by way of actual palliative care. A surge in the number of registered hospice agencies since 2019 is seen as confirming the need for a closer look. According to the Medicare Payment Advisory Commission (MedPAC ), there were 6,535 hospice providers in 2023, up from 4,840 in 2019 (a 35 percent increase), and the entirety of the run-up is associated with new for-profit agencies, which jumped from 3,434 in 2019 to 5,068 in 2023. The fact that this heightened supply is concentrated in just four states (Arizona, California, Nevada, and Texas) is another signal that what is occurring may not be a normal response to changing market conditions. MedPAC estimates the average for-profit hospice margin in 2024 was 13.7 percent, which compares with -1.3 percent for the not-for-profit providers. The intention with hospice care is to provide palliative services for relatively short periods, which program data confirms is the norm. The median number of days in hospice was 18 in 2024, which is what it was in 2010. However, at the 90th percentile, the number of days in hospice has steadily increased over time, from 242 in 2010 to 278 in 2024. Although CMS’s focus on fraud in hospice care is warranted, stronger oversight by itself may not produce large program savings. In theory, more use of hospice care could lead to lower overall costs if the sponsoring agencies are competent and can help their patients avoid costly hospital or nursing home admissions. CMS’s investigations need to be subtle enough to weed out the bad actors without making it overly difficult for vulnerable patients to get the care they need in their own homes or in other low-cost community settings. The post Background on CMS’s Anti-Fraud Efforts in Hospice Care appeared first on American Enterprise Institute - AEI .