The Medicare hospice benefit: the effectiveness of price incentives in health care policy

Abstract

This article examines the implications of fixed-price reimbursement of providers for access to hospice care by Medicare beneficiaries. Hospices that are offered higher reimbursement rates by Medicare are found to be more likely to become certified to provide care under the Medicare Hospice Benefit program. Each $1.00 increase in the daily routine home care rate raises the probability of certification by 1.7%. In turn, the Hospice Benefit increases access to hospice care by enabling Medicare-certified facilities to serve more patients than they would if they were noncertified. However, care must be taken to set reimbursement rates appropriately. Failure to correctly adjust reimbursement rates for the real costs of certification across different parts of the country leads to disparities in hospice certification and differential access to hospice care for Medicare beneficiaries.