Hospice offers significant nonfinancial benefits but not Medicare savings

The significant rise in the use of the Medicare hospice benefit has not, as previous studies suggested, reduced Medicare spending, according to a report prepared by Direct Research, LLC, for the Medicare Payment Advisory Commission (MedPAC). While the report focused on the impact of the hospice benefit on Medicare costs, it noted that its findings do not focus on the main benefits of hospice, which are not financial, and offer patients individualized, “holistic end-of-life care” that is focused on the management of symptoms and providing psychosocial supports.

Hospice growth

The use of Medicare hospice by elderly fee-for-service decedents almost doubled over the past decade, rising from 26 percent in 2002 to 47 percent in 2012. Hospice currently provides services to the majority of elderly beneficiaries who die from cancer and provides services to a growing percentage of elderly non-cancer beneficiaries.


A previous study estimated that hospice saved thousands of dollars per patient for even short stays. The Direct Research report reasoned that if this were true, the rapid hospice growth should have reduced last-year-of-life spending. The study took three approaches to determining the effect of the Medicare hospice benefit on spending. It first tracked the trend in end-of-life spending and hospice enrollment over the past decade. It then replicated and reconciled conflicting findings relating to hospice savings or costs. Lastly, it departed from a person-level analysis of the hospice benefit’s impact on Medicare spending in favor of a market-level analysis.

Medicare spending

According to the findings of the report, the “preponderance of evidence” suggests that hospice has not led to reductions in Medicare spending. The report documented the substantial growth in Medicare hospice use over the past decade while finding that Medicare end-of-life costs also grew. Additionally, the report demonstrated that results of previous studies finding hospice cost savings may have resulted from the methodology employed, and another methodology suggests that hospice did not result in costs savings, and may have even led to modestly higher costs, which were concentrated in non-cancer, longer-stay decedents. Finally, the report examined the cost of all decedents at a market level, which validated its prior findings that hospice appears to lead to the modest rise in end-of-life costs, and only reduces the costs for decedents with cancer, but not other individuals who have long stays in hospice.