Hospice doctor Bethany Snider sees the writing on the wall: “The hospice care we’ve known and loved won’t be the same 10 years from now.”

Hosparus Health, the Louisville-based hospice agency where Snider serves as chief medical officer, is one of more than 100 provider organizations partnering with some of the country’s largest health insurers on a federal experiment that could transform hospice care for millions of people.

For the last four decades, Medicare has covered hospice services — including grief counseling, spiritual support and pain management — for terminally ill people. The benefit has helped more than 25 million Americans die more on their own terms, often at home, with the support of chaplains, social workers, nurses and others.

Research shows hospice can reduce unwanted medical interventions, improve families’ satisfaction and, in some cases, save Medicare thousands of dollars.

Now Snider and others believe this popular benefit, whose structure has remained largely unchanged since its debut in 1983, is in the early days of an inexorable overhaul. Critical aspects of the 40-year-old policy no longer fit the needs of the people using the service — or the providers delivering it. Concerns about access, fraud and runaway costs, which topped $20 billion in 2019, dog the program.

In response, Medicare has begun a federal pilot project to test handing the reins of some hospice care over to private insurers, giving them more flexibility to control costs while also expanding access. The experiment, which began in 2021, involved several thousand patients in its first year, but multiple experts told Tradeoffs that they believe it is likely to eventually become national policy and reshape the hospice care available to roughly 30 million Americans.

The changes to hospice are “inevitable,” said Torrie Fields, a consultant who has advised Medicare and private insurers. “The hope is this pilot sheds some light on the guidelines and guardrails needed.”

One sign Medicare is seriously considering the policy: an announcement on March 23 that the pilot, initially slated to end in 2024, will continue through 2030.

Medicare pilots a makeover for its 40-year-old hospice benefit

This federal experiment, known by wonks as “the hospice carve-in,” is designed to revitalize a pair of particularly outdated hospice policies: how the program determines patient eligibility and the way it pays providers. Neither has changed significantly since 1983.

Here’s how the traditional program works now: To become eligible for hospice, patients must have two doctors certify they have less than six months to live and agree to stop all attempts at curing their terminal illness.

Many experts believe that harsh choice between giving up hope and getting help from hospice — along with the arbitrary six-month cutoff — combine to repel many patients who could otherwise benefit. Only about one-third of Native, Asian, Black and Hispanic patients elect hospice compared to about half of white patients.

“One of the reasons that Black people shy away from hospice is because there isn’t room to reevaluate,” said Karen Bullock, a licensed clinical social worker and a professor at Boston College. “It’s too finite.”

An outdated payment policy leaves hospice vulnerable to waste and abuse

For those who do enter hospice, Medicare has historically paid providers a flat rate for every day a person is enrolled in their care — even on days when they need little or no help.

That payment policy, experts say, made more fiscal sense in the early days of hospice when most patients had cancer and died within two months. Since then, hospice has become more popular with a wider range of patients with diseases that are generally less predictable, such as dementia and heart failure. People, on average, now use hospice for almost 100 days.

Experts blame the program’s antiquated flat day rate as one reason for its ballooning costs, which are up more than 50% over the last decade. More than half of that budget is now consumed by stays longer than six months.

“The way Medicare pays for this benefit has not evolved to meet the changing needs of the people who use it,” said David Stevenson, a health policy professor at Vanderbilt. Adding to those doubts is the flood of for-profit hospice businesses that have poured into the market.

About three-quarters of all providers are now for-profit and data suggests some are exploiting the program’s payment structure, averaging much longer stays and profits three times higher than nonprofit providers. Reports, including by ProPublica and the federal government, have also highlighted hundreds of millions of dollars in fraud and disturbing anecdotes of abuse.

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