#econsky #publiceconomics

We are immensely grateful to the editor, reviewers, colleagues, and peers, who gave us valuable feedback along the way, to the NIA and AHRQ for financial support, and to @pennldi.bsky.social where Norma and I met and got this research off the ground. Stay tuned for more.

But they still fall short of eliminating their cap liabilities. We hypothesize that they are limited by non-pecuniary features of the hospice benefit, including that enrollees forgo Medicare coverage for their terminal illnesses. Hospices with cap liabilities had to repay $500K on average per year.

The marginal enrollees are less likely to have had a recent hospital stay, have a longer average remaining lifetime, and are less likely to ultimately die in hospice care, which supports the idea that hospices on track to exceed the cap move down the demand curve to enroll new patients.

We find that hospices on track to exceed the cap near year’s end enroll new patients and discharge others. Enrollments lower average revenue by raising its denominator. Consequently, enrollments can lower hospices’ cap liabilities (but not total costs!)

In particular, we examine how hospices respond to the cap in the Medicare hospice benefit on their average annual revenue. The cap has existed since Medicare began paying for hospice in the 1980s.

We investigate how health care providers respond to a regulated cap on their average revenue. In theory, such caps can cut costs from overutilization, but they can also create a purely financial mechanism for one patient’s care to affect another’s.