Medicare Advantage and Hospice

I enjoyed Carl McDonald‘s presentation at the AcademyHealth National Health Policy Conference, on Monday in Washington D.C. He analyzes the health care industry for Citi and discussed earnings trajectories for publicly traded managed care organizations and insurance companies under various health reform scenarios.

One aspect of his talk reminded me of my grandfather’s advice, “be careful what you pray for, you might get it.”

McDonald was asked about about proposals to shift more Medicare beneficiaries (or even all of them) into a private insurance option and he noted that this would be great news for them. A questioner pushed back reminding him that since everyone dies and we know that health care costs rise near death, a total privatization would mean that private insurance would be responsible for paying for health care for the vast majority of the sickest, most expensive patients in the U.S., whereas today, fee for service Medicare is doing a great deal of that.

This interchange reminded me of an oddity of Medicare Advantage (the private health insurance Medicare option that nearly one-fourth of all seniors choose to be covered by).

  • If you are covered by a Medicare Advantage plan and you elect hospice, the payment for such care reverts back to fee for service Medicare. I believe this is the only part of the Medicare benefit package that is not covered by Advantage plans. And so far as I know, private insurance Medicare plans (the precursors to Medicare Advantage) have never covered hospice. Why is this the the case?

I assume it is related to the politics/optics of a private insurance company being viewed as having an incentive to steer people into hospice in order to reduce health care outlays which could help their bottom line. Of course, under the current set up, such an incentive might be even stronger. This exclusion makes little sense in policy terms so far as I can tell, and private insurers cover hospice in commercial plans for younger persons. Were insurance companies not trusted to do this in private Medicare, or did they want no part of it? I don’t know.

The politics of end of life discussions are hot and not conducive to thoughtful, reasoned policy making. And we don’t seem to be able to have any sort of rational discussion about health care costs. Thinking all this through at the 30,000 foot level (on the plane back from the conference) I couldn’t stop thinking “why in the world would the private insurance companies want to be responsible for insuring all of the elderly”?


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