Abstract
The stylized fact is that while private insurance has tended to innovate on the benefit design side of the insurance contract, Medicare has lead innovation on the payment side. Traditional or Fee-For-Service Medicare has produced many innovations in the payment for health care services, such as Prospective Payment for hospitals, Diagnostic-Related Groups to categorize care, and the Resource-Based Relative Value System used by the program to pay physicians, while private insurance has produced a series of benefit design innovations. This story misses one important example of Medicare benefit innovation: the creation of the Medicare hospice benefit. A key question is whether Medicare can again lead a system-wide benefit design effort to improve upon current hospice and palliative care policy.
Keywords
Recent Medicare reform proposals have focused discussion on the relative merits of traditional Medicare (TM) as compared to private Medicare (PM), either the existing Medicare Advantage program or a revised approach in which Medicare beneficiaries use government subsidies to purchase private health insurance. In evaluating such proposals, an important question is the degree to which private versus public insurance innovates. The stylized narrative is that while TM has produced numerous insurance payment innovations (Diagnostic-Related Groups, Prospective Payment, Resource-Based Relative Value System), PM has been the primary innovator on the benefit side of the equation.
I believe this narrative to generally be true, but it overlooks an important exception: the addition by TM of hospice to its benefit package in 1983, which was a key step in mainstreaming hospice as a treatment option, paving the way for its broad embrace by public and private payers. A report by the National Hospice and Palliative Care Organization (NHCPO) celebrating the 25th anniversary of the Medicare hospice benefit puts it this way1(p16):
Those who developed and passed the Medicare hospice benefit changed healthcare in America forever and for the better . . . . Most of them [patients] would not have been cared for by hospice programs if the foundation had not been laid by the Medicare hospice benefit.
In the late 1970s and early 1980s, the concept of hospice was garnering interest in some medical and nursing circles, driven in large part by the view that the way that many persons died was inconsistent with their wishes, resulting in needless suffering and higher costs. However, these early advocates were viewed as trailblazers or even radicals by some. The first step to mainstreaming hospice was its addition as a temporary Medicare benefit as part of the TEFRA 1982 tax reform law, with the benefit being permanently extended on a bipartisan vote in Congress in 1986. 1
The initial rules and regulations promulgated by Medicare were aspirational in the sense that very few providers met the requirements, but they served to set a standard of care that was believed to be necessary to provide high-quality hospice services for those who were dying. These regulations are essentially unchanged since 1983, including the basic requirement that a patient unelects curative treatments in order to receive hospice care, and a tiered per diem payment approach based on setting (most hospice is provided in patients’ homes) and the level of care.
Role of Private Insurance and Medicare
In the introduction to a 2007 paper on the impact of hospice on Medicare costs, I wrote “Coverage of hospice by Medicare hastened diffusion of hospice into the U.S. health care system because it covered the service for the elderly population which is most likely to die.” 2
I have similarly stated as fact in presentations on hospice and end-of-life issues that Medicare innovated by creating the hospice benefit, and in doing so helped to mainstream the concept in a way that would have been difficult for private insurers due to the required discontinuation of “curative” therapies that some would likely view as being driven by financial motives. In hospice and palliative care circles, such statements bring knowing nods, yet the story of Medicare leading the way on hospice does not seem to be well known in general health policy circles.
However, when looking more closely at this issue, I think my basic narrative, while correct, is a bit more nuanced with respect to the interplay between Medicare and private insurers.
The Congressional record provides evidence that some large employers were interested in including a hospice benefit in their major medical plans provided to employees and felt that Medicare first doing so would aid in this goal. For example, Robert Neiswanger, of Travelers Insurance Company, testified on the proposed hospice benefit before the Health Subcommittee of the Committee on the Ways and the Means on March 25, 1982, that though some employers wanted to add hospice coverage to their plans, the lack of standardized benefits would likely stifle adoption of hospice by smaller companies. 3 Medicare’s addition of the hospice benefit, and the subsequent standardization that came with its regulations helped to mainstream the concept throughout the US health care system and provided a predictable payment stream for the insurer that covered around 8 in 10 persons dying in a given year (Medicare). Other public and private insurers followed, and it would be incomprehensible for hospice to not be a covered service today.
The policy debate around hospice and palliative care has matured to encompass issues of length of use, role of for-profit status, and diffusion of the model to caring for persons dying from diseases other than cancer. 4 Recently, private insurance has been innovating with hospice benefit design, as Aetna published an evaluation of their relaxation of hospice eligibility in their nonelderly commercial business and in some Medicare Advantage plans to include persons believed to be in their last year (as opposed to 6 months of life) and not requiring unelection of all curative care to receive hospice services. 5 The Affordable Care Act provides for demonstrations of this so-called concurrent care model in Medicare patterned in this manner.
The Medicare hospice benefit remains essentially unchanged today, nearly 30 years after it was initiated and it needs to be updated. 4,6 A key question is whether we can now muster the political ability to modernize the Medicare hospice benefit in a manner that more closely matches the needs of patients and the reality of care delivery today. There are real questions about whether any reasoned discussion of how we care for those who are dying is possible today, given the realities of how our political and health policy systems intersect. Will Medicare as innovator in hospice benefit design only be a thing of the past? It is an important question since Medicare pays for the care of more than 8 in 10 persons who die each year in the United States.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: in part by the Changes in Health Care Financing and Organization (HCFO) initiative of the Robert Wood Johnston Foundation and the Agency for Healthcare Research and Quality (Grant number: 5R01HS018360). The funders were not involved in the development of this submission.