In his June 11, 2003, testimony to the U.S. Senate Committee on Appropriations, Donald Hoover of the Rutgers Institute for Health, Health Care Policy, and Aging Research presented data on medical expenditures during the last year of life for Americans age sixty-five and older. Hoover noted that Medicare currently pays most end-of-life medical costs for individuals in this age group but stated that the elderly may be expected to pay an increasing proportion of end-of-life costs as the number of elderly individuals in the population increases and end-of-life costs increase as a result. The results of Hoover's research are also published in the report "Medical Expenditures during the Last Year of Life: Findings from the 1992–1996 Medicare Current Beneficiary Survey," (Health Services Research, vol. 37, no. 6, December 2002).
The research results of Hoover and his colleagues showed that an average person over age sixty-five who died between 1992 and 1996 created approximately $40,000 of medical expenditures in his or her last year of life. Of this amount, Medicare paid approximately $32,800 (82%), supplemental/private insurance paid about $2,000 (5%), and the individual paid approximately $5,200 (13%). Hoover noted that several initiatives such as hospice and advanced directives have attempted to reduce end-of-life medical costs. However, those costs have not decreased notably as a fraction of Medicare expenditures over the past twenty-five years. Currently about 25% of Medicare expenditures and about 20% of all health care expenditures for the elderly go to those in their last year of life.
No specific information about the cost of end-of-life care exists for the one-fourth of those who die every year who are under age sixty-five. Such care is more than likely financed by employer health insurance, personal funds, Medicare, and Medicaid. Nonetheless, aside from funds paid out for hospice services, the government has no other information about this group's terminal health care.
Medicare Hospice Benefits
In 1982 Congress created a Medicare hospice benefit program (Tax Equity and Fiscal Responsibility Act, PL 97-248, 122) to provide services to terminally ill patients with six months or less to live. In 1989 the Government Accounting Office (GAO; now called the Government Accountability Office) reported that only 35% of eligible hospices were Medicare-certified, in part due to the Health Care Financing Administration's low rates of reimbursement to hospices. That same year Congress gave hospices a 20% increase in reimbursement rates through a provision in the Omnibus Budget Reconciliation Act (PL 101-239, 6005).
Under the Balanced Budget Act of 1997 (PL 105-33), Medicare hospice benefits are divided into three benefit periods:
TABLE 9.3 Medicare enrollees and expenditures, by type of service, selected years 1970–2004
| TABLE 9.3 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Medicare enrollees and expenditures, by type of service, selected years 1970–2004 | |||||||||
| [Data are compiled from various sources by the Centers for Medicare & Medicaid Services] | |||||||||
| Type of service | 1970 | 1980 | 1990 | 1995 | 2000 | 2001 | 2002 | 2003 | 2004a |
| Enrollees | Number in millions | ||||||||
| Totalb | 20.4 | 28.4 | 34.3 | 37.6 | 39.7 | 40.1 | 40.5 | 41.1 | 41.7 |
| Hospital insurance | 20.1 | 28.0 | 33.7 | 37.2 | 39.3 | 39.7 | 40.1 | 40.6 | 41.2 |
| Supplementary medical insurance | 19.5 | 27.3 | 32.6 | 35.6 | 37.3 | 37.7 | 38.0 | 38.4 | 38.8 |
| Expenditures | Amount in billions | ||||||||
| Total | $7.5 | $36.8 | $110.8 | $184.0 | $221.8 | $244.8 | $265.7 | $280.8 | $308.9 |
| Total hospital insurance (HI) | 5.3 | 25.6 | 66.8 | 117.4 | 131.1 | 143.4 | 152.5 | 154.6 | 170.6 |
| HI payments to managed care organizationsc | — | 0.0 | 2.7 | 6.7 | 21.4 | 20.8 | 19.2 | 19.5 | 20.8 |
| HI payments for fee-for-service utilization | 5.3 | 25.5 | 64.2 | 110.7 | 109.7 | 122.6 | 133.3 | 135.1 | 149.8 |
| Inpatient hospital | 4.8 | 24.1 | 56.9 | 82.3 | 87.1 | 95.6 | 104.1 | 108.6 | 116.2 |
| Skilled nursing facility | 0.2 | 0.4 | 2.5 | 9.1 | 11.1 | 13.4 | 15.3 | 14.8 | 16.9 |
| Home health agency | 0.1 | 0.5 | 3.7 | 16.2 | 3.8 | 4.2 | 5.0 | 4.8 | 5.8 |
| Home health agency transferd | — | — | — | — | 1.7 | 3.1 | 1.2 | −2.2 | — |
| Hospice | — | — | 0.3 | 1.9 | 3.0 | 3.7 | 4.9 | 6.2 | 7.6 |
| Administrative expensese | 0.2 | 0.5 | 0.8 | 1.2 | 2.9 | 2.5 | 2.8 | 2.8 | 3.3 |
| Total supplementary medical insurance (SMI) | 2.2 | 11.2 | 44.0 | 66.6 | 90.7 | 101.4 | 113.2 | 126.1 | 138.3 |
| SMI payments to managed care organizationsc | 0.0 | 0.2 | 2.8 | 6.6 | 18.4 | 17.6 | 17.5 | 17.3 | 18.7 |
| SMI payments for fee-for-service utilizationf | 2.2 | 11.0 | 41.2 | 60.0 | 72.3 | 83.8 | 95.7 | 108.9 | 119.6 |
| Physician/suppliesg | 1.8 | 8.2 | 29.6 | — | — | — | — | — | — |
| Outpatient hospitalh | 0.1 | 1.9 | 8.5 | — | — | — | — | — | — |
| Independent laboratoryi | 0.0 | 0.1 | 1.5 | — | — | — | — | — | — |
| Physician fee schedule | — | — | — | 31.7 | 37.0 | 42.0 | 44.8 | 48.2 | 53.8 |
| Durable medical equipment | — | — | — | 3.7 | 4.7 | 5.4 | 6.6 | 7.7 | 8.0 |
| Laboratoryj | — | — | — | 4.3 | 4.0 | 4.4 | 5.0 | 5.5 | 6.0 |
| Otherk | — | — | — | 9.9 | 13.7 | 16.0 | 19.6 | 22.6 | 25.0 |
| Hospitall | — | — | — | 8.7 | 8.5 | 12.8 | 13.5 | 15.3 | 17.4 |
| Home health agency | — | 0.2 | 0.1 | 0.2 | 4.4 | 4.4 | 5.1 | 5.1 | 5.9 |
| Home health agency transferd | — | — | — | — | −1.7 | −3.1 | −1.2 | 2.2 | — |
| Administrative expensese | 0.2 | 0.6 | 1.5 | 1.6 | 1.8 | 1.8 | 2.3 | 2.4 | 3.4 |
| Percent distribution of expenditures | |||||||||
| Total hospital insurance (HI) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
| HI payments to managed care organizationsc | — | 0.0 | 4.0 | 5.7 | 16.3 | 14.5 | 12.6 | 12.6 | 12.2 |
| HI payments for fee-for-service utilization | 100.0 | 99.6 | 96.1 | 94.3 | 83.7 | 85.5 | 87.4 | 87.4 | 87.8 |
| Inpatient hospital | 90.6 | 94.5 | 85.1 | 70.1 | 66.5 | 66.7 | 68.2 | 70.3 | 68.1 |
| Skilled nursing facility | 3.8 | 1.6 | 3.7 | 7.8 | 8.5 | 9.4 | 10.1 | 9.6 | 9.9 |
| Home health agency | 1.9 | 2.0 | 5.5 | 13.8 | 2.9 | 2.9 | 3.3 | 3.1 | 3.4 |
| Home health agency transferd | — | — | — | — | 1.3 | 2.2 | 0.8 | −1.4 | — |
| Hospice | — | — | 0.4 | 1.6 | 2.3 | 2.6 | 3.2 | 4.0 | 4.4 |
| Administrative expensese | 3.8 | 2.0 | 1.2 | 1.0 | 2.2 | 1.7 | 1.9 | 1.8 | 2.0 |
- An initial ninety-day period
- A subsequent ninety-day period
- An unlimited number of subsequent sixty-day periods, based on a patient's satisfying the program eligibility requirements
At the start of each period the Medicare patient must be recertified as terminally ill. After the patient's death, the patient's family receives up to thirteen months of bereavement service.
In 2004 there were 2,670 Medicare-certified hospices, a substantial increase from thirty-one hospices in 1984. This growth was stimulated in part by increased reimbursement rates established by Congress in 1989. Of the 2,670 hospices, 656 were with home health agencies (HHA), 562 were affiliated with hospitals (HOSP), 14 were with skilled nursing facilities (SNF), and 1,438 were freestanding hospices (FSTG). (See Table 9.5.) Medicare pays most of othe cost of hospice care.
Terminally ill Medicare patients who stayed in a hospice incurred less Medicare cost than those who stayed in a hospital or skilled nursing facility. In 2004 a one-day stay in a hospice cost Medicare $127, compared with $493 for a skilled nursing facility and $3,502 for a hospital. (See Table 9.6.)
The Hospice Association of America (HAA) contends that terminally ill patients often wait too long to enter hospice care. The HAA believes that the difficulty of predicting when death may occur could account for part of the delay, along with the reticence of caregivers, patients, and family to accept a terminal prognosis.
While terminal care is often associated with hospice, the hospice Medicare benefit represents a small
TABLE 9.3 Medicare enrollees and expenditures, by type of service, selected years 1970–2004 [CONTINUED]
| TABLE 9.3 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Medicare enrollees and expenditures, by type of service, selected years 1970–2004 [CONTINUED] | |||||||||
| [Data are compiled from various sources by the Centers for Medicare & Medicaid Services] | |||||||||
| Type of service | 1970 | 1980 | 1990 | 1995 | 2000 | 2001 | 2002 | 2003 | 2004a |
| aPreliminary figures. | |||||||||
| bAverage number enrolled in the hospital insurance (HI) and/or supplementary medical insurance (SMI) programs for the calendar year. | |||||||||
| cMedicare-approved managed care organizations. | |||||||||
| dReflects home health transfer amounts between HI and SMI. | |||||||||
| eIncludes research, costs of experiments and demonstration projects, and peer review activity. | |||||||||
| fType of service reporting categories for fee-for-service reimbursement differ before and after 1991. | |||||||||
| gIncludes payment for physicians, practitioners, durable medical equipment, and all suppliers other than independent laboratory, which is shown separately through 1990. Beginning in 1991, those physician services subject to the physician fee schedule are so broken out. Payments for laboratory services paid under the laboratory fee schedule and performed in a physician office are included under "laboratory" beginning in 1991. Payments for durable medical equipment are broken out and so labeled beginning in 1991. The remaining services from the "physician" category are included in "other." | |||||||||
| hIncludes payments for hospital outpatient department services, for skilled nursing facility outpatient services, for Part B services received as an inpatient in a hospital or skilled nursing facility setting, and for other types of outpatient facilities. Beginning in 1991, payments for hospital outpatient department services, except for laboratory services, are listed under "hospital." Hospital outpatient laboratory services are included in the "laboratory" line. | |||||||||
| iBeginning in 1991, those independent laboratory services that were paid under the laboratory fee schedule (most of "independent lab") are included in the "laboratory" line; the remaining services are included in "physician fee schedule" and "other" lines. | |||||||||
| jPayments for laboratory services paid under the laboratory fee schedule performed in a physician office, independent lab, or in a hospital outpatient department. | |||||||||
| kIncludes payments for physician-administered drugs; free-standing ambulatory surgical center facility services; ambulance services; supplies; free-standing end-stage renal disease (ESRD) dialysis facility services; rural health clinics; outpatient rehabilitation facilities; psychiatric hospitals; and federally qualified health centers. | |||||||||
| lIncludes the hospital facility costs for Medicare Part B services that are predominantly in the outpatient department, with the exception of hospital outpatient laboratory services, which are included on the "laboratory" line. Physician reimbursement is included on the "physician fee schedule" line. | |||||||||
| Notes: "—" = Data not available. 0.0 quantity greater than 0 but less than 0.05. "—"=Quantity zero. Percents are calculated using unrounded data. Table includes service disbursements as of February 2005 for Medicare enrollees residing in Puerto Rico, Virgin Islands, Guam, other outlying areas, foreign countries, and unknown residence. Totals do not necessarily equal the sum of rounded components. | |||||||||
| SOURCE: "Table 139. Medicare Enrollees and Expenditures and Percent Distribution, according to Type of Service: United States and Other Areas, Selected Years 1970–2004," in Health, United States, 2005, Centers for Disease Control and Prevention, National Center for Health Statistics, November 2005, http://www.cdc.gov/nchs/data/hus/hus05.pdf (accessed February 27, 2006) | |||||||||
| Percent distribution of expenditures | |||||||||
| Total supplementary medical insurance (SMI) | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
| SMI payments to managed care organizationsc | 0.0 | 1.8 | 6.4 | 9.9 | 20.3 | 17.3 | 15.5 | 13.7 | 13.5 |
| SMI payments for fee-for-service utilizationf | 100.0 | 98.2 | 93.6 | 90.1 | 79.8 | 82.7 | 84.5 | 86.3 | 86.5 |
| Physician/suppliesg | 85.7 | 73.2 | 67.3 | — | — | — | — | — | — |
| Outpatient hospitalh | 4.8 | 17.0 | 19.3 | — | — | — | — | — | — |
| Independent laboratoryi | 0.0 | 0.9 | 3.4 | — | — | — | — | — | — |
| Physician fee schedule | — | — | — | 47.5 | 40.8 | 41.5 | 39.6 | 38.2 | 38.9 |
| Durable medical equipment | — | — | — | 5.5 | 5.2 | 5.4 | 5.8 | 6.1 | 5.8 |
| Laboratoryj | — | — | — | 6.4 | 4.4 | 4.3 | 4.4 | 4.3 | 4.3 |
| Otherk | — | — | — | 14.8 | 15.1 | 15.8 | 17.3 | 17.9 | 18.1 |
| Hospitall | — | — | — | 13.0 | 9.4 | 12.6 | 12.0 | 12.2 | 12.6 |
| Home health agency | 0.0 | 1.8 | 0.2 | 0.3 | 4.8 | 4.4 | 4.5 | 4.0 | 4.2 |
| Home health agency transferd | — | — | — | 0.0 | −1.9 | −3.1 | −1.1 | 1.7 | — |
| Administrative expensese | 9.5 | 5.4 | 3.4 | 2.4 | 2.0 | 1.8 | 2.0 | 1.9 | 2.5 |
proportion of the total Medicare dollars spent. In 2004 only about 2.5% ($7.2 billion) of all Medicare benefit payments went to hospice care. The 2005 projected hospice spending was comparably small ($8.6 billion, or 2.6% of the projected $326 billion total Medicare expenditures). (See Table 9.7.)
Medicaid Hospice Benefits
Hospice services also comprise a small portion of Medicaid reimbursements. In 2002 Medicaid reimbursements for hospice accounted for only 0.3% ($706.2 million) of the $214.2 billion total expenditures. (See Table 9.8.) Providing hospice care under Medicaid is optional for each state. In 2002 forty-seven states and Washington, D.C., offered hospice benefits. (See Table 9.9.)
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