Financing end-of-life care in the USA

J R Soc Med 2001;94:458-461
© 2001 Royal Society of Medicine

 

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J R Soc Med 2001;94:458-461
© 2001 The Royal Society of Medicine


Carol Raphael PPA
Joann Ahrens MPA
Nicole Fowler MHSA


Visiting Nursing Service of New York, 107 East 70th Street, New York, NY
10021, USA

Correspondence to: Carol Raphael E-mail:
craphael{at}vnsny.org




INTRODUCTION

Go to previous sectionTOP

 INTRODUCTION
Go to next sectionCURRENT FINANCING

Go to next sectionBARRIERS TO END-OF-LIFE CARE

Go to next sectionHOW CAN WE IMPROVE…

Go to next sectionCONCLUSION

Go to next sectionREFERENCES

 

This paper offers an overview of how end-of-life care is currently financed
in the USA. It discusses the limitations of the current system, as well as
certain population and disease trends that lead us to recommend how financing
should be restructured so that optimal end-of-life care is available for the
entire population.




CURRENT FINANCING

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Go to previous sectionINTRODUCTION

 CURRENT FINANCING
Go to next sectionBARRIERS TO END-OF-LIFE CARE

Go to next sectionHOW CAN WE IMPROVE…

Go to next sectionCONCLUSION

Go to next sectionREFERENCES

 

We do not know precisely how much is currently spent on end-of-life care in
the USA. According to one estimate, end-of-life care accounts for about 10-12%
of all healthcare
spending1. Annual
expenditures for hospice and home care—two healthcare segments that are
closely involved in the provision of end-of-life care—are about $ 3.5
billion and $ 29 billion,
respectively2.

Medicare’s influential role

Medicare, the largest health insurance plan in the USA, is highly
influential in end-of-life care because of the large number of Medicare
beneficiaries who die each year. Of the 2.3 million people who died in 1997,
80% were Medicare beneficiaries at the time of
death3. Of that 80%,
one-fifth were also eligible for Medicaid (the ‘dually
eligible’).

According to a report from the Medicare Payment Advisory Commission
(MedPAC), about a quarter of the total Medicare budget is spent on services
for beneficiaries in their last year of
life3,4,
40% of it on the last 30
days5. In 1997
Medicare paid an average of about $ 26 000 per person in the last year of
life, or six times the cost for
survivors3. The
relation between costs for those in the last year and those for survivors has
been remarkably stable; in 1988 it was seven to
one5. The cost of
end-of-life care for people age 85 and over was reported to be one-third lower
than that for people aged
65-753. One
explanation for the stability of Medicare’s end-of-life costs is that more
people are dying at older ages after lengthy chronic illnesses and long
periods of functional decline. During this extended period they may receive
little in the way of end-of-life services or support.

Site of death is another factor that accounts for variation in end-of-life
costs. A 1993 study showed that 44% of all deaths among Medicare beneficiaries
occurred in
hospitals3. Medicare
costs for beneficiaries who died in a hospital inpatient setting were twice
those for beneficiaries who died in other settings (e.g. their
homes)4. The
likelihood of dying in hospital in the USA depends not on patient preference
but on the number of hospital beds and physicians per head, which varies
geographically6. For
Medicare beneficiaries in some western and north-western States, the chance of
dying in an inpatient hospital setting is as low as 20%, compared with more
than 50% for those in some southern and eastern
States7. The site of
death for Medicare beneficiaries also correlates with hospice use. For
Medicare beneficiaries who used some type of hospice service, 68% died in
their homes compared with only 16% of those who did not use
hospice3.

Economic burden

Insurance, whether public or private, does not cover all end-of-life
costs—the cost of informal caregiving, for example. As a conservative
estimate, all informal caregiving in the USA (of which end-of-life care would
be a sizeable part) is valued at $ 196 billion or 18% of total national
healthcare
spending8. This
figure is based primarily on lost wages and social security payments. One
study showed that, for patients needing substantial care, 10% of household
income was spent on healthcare; families had to take out a loan or second
mortgage, spend savings, or take an additional job to cover these
costs9. The economic
burdens of end-of-life caregiving are complicated by the many social and
psychological consequences of caregiving. Caregivers of patients with high
needs were more likely to have depressive symptoms and to report that
caregiving interfered with their
lives9. In addition,
caregivers often have little knowledge of how to deal with insurance
companies,and feel overburdened and alone.

Hospice care

Hospice care, often covered by Medicare’s hospice benefit, provides
end-of-life care to a limited number of patients who are in their last six
months of life. Most hospice care is provided on an outpatient basis, with
routine home care the most common
service10. The
primary diagnosis of 63% of all hospice users includes at least one type of
cancer, while the total number having some type of cancer is even
greater10; 45% of
all cancer patients use
hospice3.

Hospice use is on the rise. From 1994 to 1998 hospice use by Medicare
decedents increased from 11% to
19%3. From 1998 to
1999, total hospice use increased almost 30% from 540 000 to 700 000
people11. The
number of hospices has also increased, from about 1000 in 1991 to more than
2200 Medicare certified hospices in
19983.

Despite the growing number of hospices and of people who need end-of-life
care, hospice revenues and margins have dropped. One reason is that lengths of
stay remain low, though they are increasing: from 1988 to 1999, the median
stay increased from 25 to 29
days11. In general,
hospices incur a financial loss when a patient stays less than one to two
weeks; and one sample of hospice enrollees from 1996 showed that 15.6% died
within seven days of
admission12.

Hospice spending accounted for 1% of total Medicare spending and only about
0.1% of total Medicaid
spending4,13.
Medicare covers about two-thirds of all hospice
costs11, the
remainder coming from private insurance (12%), other (11%), Medicaid (8%) and
indigent (4%).

Does hospice care save money? In one study, though total costs were little
different, Medicare payments were higher for hospice users than for
non-users4. This
analysis may be skewed by failure to take into account self-selection and
diagnosis; one might also argue that hospice care, even if it does cost more,
is closer to patient needs and preferences. Other more comprehensive studies,
however, have shown savings on Medicare expenditures as high as
68%11.

Key trends affecting end-of-life care

An ageing population, increasing diversity and changing patterns of death
and disability are driving demand for changes in the way care is financed as
well as how it is provided. Today, 34.8 million Americans are 65 years old or
older. This number will more than double by 2050 to about 72.2 million, with a
240% increase in the population age
85-plus14. Of the
4.3 million Americans who are over age 85, 83% are women, 43% are women who
live alone and 17% are women living at or below the povertylevel.

In addition there is an increase in the number from ethnic and racial
minority groups, of which the Latino population is the fastest growing. From
2000 to 2030, the Latino population is expected to increase by 7%, the African
American populationby 1% and the Asian/Pacific Islander population by 6%.

Until recently most Americans died soon after the onset of a terminal
disease, but today medical developments allow us to die more slowly, from
diseases that are often chronic and disabling before death. The prognosis
becomes less definite: ‘on the day before death, the median prognosis
for patients with heart failure is still a 50% chance to live 6 or more
months’15.

For people over age 65, the average man lives 6 of his last 15 years with a
disability and the average women 8 out of her last
1916. Four of the
top five leading causes of death in the USA are now chronic
conditions—heart disease, cancer, stroke and cardiopulmonary
disease3 (the other
top cause is pneumonia). Three-quarters of people who live to age 65 will
develop cancer, heart disease, chronic obstructive pulmonary disease, or
dementia or will have a stroke in their last year of
life15.




BARRIERS TO END-OF-LIFE CARE

Go to previous sectionTOP

Go to previous sectionINTRODUCTION

Go to previous sectionCURRENT FINANCING

 BARRIERS TO END-OF-LIFE CARE
Go to next sectionHOW CAN WE IMPROVE…

Go to next sectionCONCLUSION

Go to next sectionREFERENCES

 

Under the current system, barriers to access or finance mean that people
are not informed of their options, forgo care that is necessary or receive
care that is not optimal or appropriate.

Financial

All of the trends we have discussed raise issues about the extent to which
services covered by Medicare, Medicaid and insurance companies meet the needs
of these populations. The first major financial barrier is that most insurance
plans do not cover services that are necessary for good-quality end-of-life
care. Traditional health insurance favours high-tech/high-cost services and
inpatient hospital care, rather than the kind of palliative or custodial care
that can often be provided in people’s homes (for some States, Medicaid is the
one payer that provides significant coverage for these types of supportive
care). Another barrier is that coverage is usually linked to a specific site
rather than the person. This provides contradictory incentives to providers
and often results in lack of coordination and difficult transitions for people
who receive care in a variety of settings. Lastly, payment for most services
is dictated by a time limit and not by the amount of service that is
necessary. In the end, patients are under-served and exhaust benefits for
services that wouldbe better used at another time.

Medicare’s current benefits, as summarized in
Box 1, illustrate these
barriers. The services Medicare covers are often inconsistent with the needs
of patients who have chronic illnesses and/or are in the last stages of life.
Hospice is available only forpeople who meet specific criteria.



View this table:
[in this window]
[in a new window]
Box 1. Medicare benefits

 

Access

Difficulties created by financial barriers are compounded by the issue of
access to end-of-life care, in this instance the Medicare hospice benefit
itself. ‘Access’ encompasses a variety of issues, including
awareness of the hospice benefit (e.g. what types of patients do physicians
refer to hospice?), acceptance of the hospice benefit in light of cultural and
language issues, acceptance of the Medicare hospice benefit in lieu of the
regular Medicare benefit, and the ability to supplement the hospice benefit
with other caregivers.

In low-income populations and minorities there are special issues of
access. Medicare beneficiaries who die in low-income areas have higher
end-of-life costs, are less likely to use hospices and are more likely to die
in a hospital than the general
population3. African
Americans represent only 8% of hospice users, yet make up 13% of the total
population11.
Language and cultural barriers, possible distrust of the system (e.g. fear of
being mistreated or undertreated), and lack of hospice referrals from the
medicalcommunity may all contribute to this low utilization rate.

Nursing-home residents are another group that tend not to receive hospice
care. Only 1% of the nursing-home population is enrolled in hospice, and 70%
of nursing homes have no patients enrolled in
hospice13. This is
despite the growing number of people who die in nursing homes (20% of the
total population in 1993, up from 18.7% in
1986)13. This
underutilization results from the emphasis on rehabilitation and restoration
that is embedded in both nursing-home philosophy and nursing-home payment
systems. The Medicare skilled-nursing-home benefit is specifically designed
for short-term rehabilitation patients and not for those who are in the last
stages of life. In addition, in most States Medicaid pays hospices directly
for any hospice patients who are in nursing homes. The hospices must then pay
the nursing homes (for patients’ room and board). This process delays payments
to the nursing homes, which may already be concerned about narrow margins, and
becomes a barrier to hospice services for nursing-home residents.

People with non-cancer diagnoses are also less likely to use hospice,
usually because physicians tend not to refer them. Possible explanations are
that physicians think hospice services are only for cancer patients, do not
think of these patients as ‘dying’ or simply find the task of
prognosticationtoo difficult for non-cancer diagnoses.

The HIV/AIDS population is surprisingly under-represented in hospice. One
reason is that many people with HIV/AIDS—who tend to be young—want
the option of aggressive and experimental care in addition to hospice
services. Medicare’s hospice guidelines prohibit this. In addition, the
increasing life expectancy and reliance on complex drug regimens often make
HIV/AIDS patients ineligible for hospice—either because they do not meet
the six-months-to-live criterion or because the cost of the drugs is too
high.




HOW CAN WE IMPROVE THE WAY END-OF-LIFE CARE IS FINANCED?

Go to previous sectionTOP

Go to previous sectionINTRODUCTION

Go to previous sectionCURRENT FINANCING

Go to previous sectionBARRIERS TO END-OF-LIFE CARE

 HOW CAN WE IMPROVE…
Go to next sectionCONCLUSION

Go to next sectionREFERENCES

 

The major strength of our current financing system is that hospice care is
a standard benefit included in the Medicare programme and in many commercial
insurance plans. Without paying additional premiums, patients can choose
hospice and receive palliative care primarily in a home-based setting. Hospice
tries to manage a patient’s physical, social and spiritual needs, with a
strong emphasis on controlling pain and discomfort. Counselling and support is
also provided to family members. As a result of this benefit and a raised
consciousness about end-of-life care in both the medical community and the
consumer population, the number of hospice programmes is increasing and
hospice is now the standard of care for certain groups of patients (e.g.
cancerpatients).

Despite the growth of hospice programmes, changes in financing are needed
if high-quality end-of-life care is to be available to everyone. Currently,
limited knowledge about and access to hospice prevents many patients from
taking advantage of this option. Many families cannot handle the additional
burdens caused by the gaps in hospice coverage (e.g. limited home health aide
hours). A serious weakness in our current system is that in most instances
patients receive palliative care only at the very end of their life and only
if they choose hospice. Finally, many hospices are struggling to achieve
long-term financial stability under the current system, and the closing of any
hospices would make access an even largerissue.

Incremental changes

Incremental changes in end-of-life financing could be focused on the
hospice benefit or on the entire system.

Hospices operate with little or no financial cushion. The increasing burden
of drugs is illustrated by the fact that in one New York City hospice
medications are reimbursed at $ 1.50 per day but the average cost for drugs $
10-12 per day. One possible remedy would be to develop a payment adjuster or
outlier for high-cost patients under the hospice benefit. Payments would be
higher for the first and last day of care and for people who required
additional amounts of care (e.g. more drugs, intensive treatments or
additional custodial care). This would ensure that hospices remained
financially sound even if they cared for a sicker patient population or if
patients were being referred to them at the very last and most expensive
stages of their illnesses.

To meet the challenges imposed by the changing demographics in America,
hospices must become more culturally diverse. They must reach out to
under-served ethnic groups and offer care that is culturally sensitive, from
multilingual providers. In addition, the hospice benefit should be modified to
includethe needs of non-cancer patients and nursing-home residents.

In terms of incremental changes to the current system, one option would be
to pay hospitals for end-of-life care using a DRG (diagnosis-related group)
modifier. This would enable hospitals to sustain comprehensive end-of-life
programmes within their institutions.

Another option might be to provide financial incentives to nursing homes to
provide end-of-life care. This could be done by creating a special hospice
benefit for nursing-home residents, by allowing nursing homes to bill Medicaid
directly for residents who are on hospice, or by increasing the payments for
patients who are clinically complex, deteriorating and in need of intensive
symptomand pain management.

A third option is to create a risk adjuster for Medicare’s managed care
programme to provide Medicare+Choice plans with an incentive to care for
beneficiaries who are very sick and chronically ill. (Current incentives tend
to favour the younger, healthier, beneficiaries who need services less
frequently.)

Comprehensive system change

Currently, many people who would benefit from hospice care do not get it at
all—or get it only in the last weeks or days of their lives. The
question remains: must palliative care be restricted to the dying or should it
be available to anyone with a progressive debilitating chronic illness that
will eventuallybe fatal?

Comprehensive system change is another way to improve the current system.
Under a new system, end-of-life care would be provided on the basis of disease
severity and functional disability—not by prognosis. In this way, the
most appropriate set of services could be offered at an earlier point in the
disease trajectory.

Yet another way to change the financing of end-of-life care would be to
change the flow of payments to encourage continuity of care across site and
time. Allowing the benefits to follow the patient would ease problems with
transitions and give patientsa broader range of options.

Finally, a stronger financial emphasis could be placed on supporting family
caregiving. Expanded respite benefits and other services (such as increased
training for caregivers, additional custodial services, and expanded
transportation services) would relieve some of the caregivers’ burdens. They
would also provide families with a more realistic option of caring for dying
family membersat home.




CONCLUSION

Go to previous sectionTOP

Go to previous sectionINTRODUCTION

Go to previous sectionCURRENT FINANCING

Go to previous sectionBARRIERS TO END-OF-LIFE CARE

Go to previous sectionHOW CAN WE IMPROVE…

 CONCLUSION
Go to next sectionREFERENCES

 

Whatever path is chosen, the new financing system needs to include three
major elements. First, the system needs to define and measure the essential
elements for good-quality end-of-life care. Secondly, the system needs to
support patient and family preferences and provide them with the knowledge and
tools to make informed decisions; for patients and families to make a real
choice, they need to know what their options are. Finally, the goal of the
system must be that good end-of-life care is the norm rather than the
exception.




REFERENCES

Go to previous sectionTOP

Go to previous sectionINTRODUCTION

Go to previous sectionCURRENT FINANCING

Go to previous sectionBARRIERS TO END-OF-LIFE CARE

Go to previous sectionHOW CAN WE IMPROVE…

Go to previous sectionCONCLUSION

 REFERENCES

 

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