Since its inception, Medicare has included a cap limiting the average annual payment per patient a hospice can receive.  The average annual payment cap is calculated for the period of November 1^st through October 31^st each year.  The cap amount for the period ending October 31, 2007 is $21,410.04. 

As written in the Medicare regulations, this cap is not a spending limit on each individual beneficiary, but is applied to the hospice provider.  If a hospice provider's total payments divided by its total number of beneficiaries exceeds the cap amount, then the provider must repay the excess to the program.

When the cap was first implemented, hospice patients could only receive six months of care and thus very few hospices ever encountered problems with the cap.  However, in 1998, the regulations were changed so that access to hospice was no longer limited to six months.  Instead, beneficiaries became eligible for an unlimited number of 60-day certification periods so long as they have a "life expectancy of 6 months or less if the terminal illness runs its course."

Seeking to expand the utilization of the hospice benefit, Nancy-Ann DeParle, then Administrator of the Heath Care Financing Administration (HCFA), told providers, "There is a disturbing misperception that hospices and beneficiaries will be penalized if a patient lives longer than six months.  Nothing could be further from the truth…Let me be clear.  In no way are hospice beneficiaries restricted to six months of coverage.  There is no limit on how long an individual beneficiary can receive hospice services, so long as they meet the eligibility criteria." 

Now, however, hospice providers are being penalized for caring for patients who live longer than six months.  In 2004, hospice providers in 15 states were asked to pay back about $100 million.  For fiscal year 2005, it is estimated that hospices in 25 states will be asked to pay back about $22 million.  A large proportion of the affected hospice programs are in the states of Alabama, Mississippi, Oklahoma, and Florida, all of whom have the same Medicare Contractor, Palmetto GBA. 

Palmetto GBA, realizing that hospice providers will be hard-hit by the requirement to pay money back to Medicare, has issued guidelines directing providers on how to avoid future financial liability.  These directions include avoidance of premature admissions, detailed discharge planning and use of the "Hospice Limitation Calculator."  According to Palmetto, the Hospice Limitation Calculator will assist hospice providers in calculating the hospice cap…The purpose of the calculator is to make the provider aware of the hospice cap…and to provide assistance in monitoring payment for those services." 

In other words, according to Palmetto, hospice providers should do a cost-benefit analysis.  They can care for terminally ill patients, and get paid for the care, but in the end, if they've cared for too many patients who have taken too long to die, and thus cost more than $21,410.04, the providers should plan to pay money back to Medicare.   

As a consequence of this cost-benefit analysis, hospice providers will limit their care to patients who have predictable dying processes, which generally means those with cancer diagnoses.  Beneficiaries with less predicable dying processes, such as those with dementia, chronic obstructive pulmonary disease, and heart disease will be left with no hospice care or hospice care only when they are "actively dying", which usually lasts less than ten days.      

The Hospice Payment Cap was configured to accommodate only six months of care.  The hospice benefit has since been expanded to cover care for beneficiaries who are terminally ill, regardless of how long they live with the terminal illness.  The Cap is obviously outdated and should be rescinded.  The role of the hospice provider should not be number crunching, but the provision of quality care to those who are dying.