The Medicare hospice benefit, authorized in 1982 under part A of the Medicare program, covers medical and palliative care services for terminally ill beneficiaries. A Medicare-certified hospice provides physician services, nursing care, physical and occupational therapy, home health aide services, medical supplies and equipment, and short-term inpatient hospital care for pain control and symptom management. In addition, the hospice benefit provides coverage for several services not generally available under the regular fee-for-service Medicare benefit. These include outpatient prescription drugs for treating pain and other symptoms of the terminal illness, homemaker services, short-term inpatient respite care, and bereavement counseling for the patient’s family. Patients may receive services from freestanding hospice providers or from a hospice program based in a home health agency, hospital, or skilled nursing facility. For each day a beneficiary is enrolled, the hospice provider is paid an all-inclusive, prospectively determined rate, depending on the level of hospice care provided (routine home care, continuous home care, inpatient respite, or general inpatient care).Initial payment rates were based on cost data reported by 26 hospice programs that participated in Medicare’s hospice demonstration project from 1980 to 1982.Since 1993, these rates have been updated by an annual statutory adjustment factor tied to inflation in the hospital market basket (a measure of the cost of goods and services purchased by hospitals nationwide). Eligibility for hospice services requires that the beneficiary’s physician and the hospice medical director (or other physician affiliated with the hospice) certify that the individual’s prognosis is for a life expectancy of 6 months or less, if the terminal illness runs its normal course. Beneficiaries who elect hospice must waive all other Medicare coverage of care related to their terminal illness, although they retain coverage for services unrelated to their terminal illness. A beneficiary can cancel his or her election of hospice benefits at any time and return to regular Medicare, and beneficiaries are free to reselect hospice coverage at a later date. While there are currently no limits on the number of days an individual can receive hospice care, a beneficiary’s prognosis must be reaffirmed at 90 days, at 180 days, and every 60 days thereafter. The hospice eligibility requirement that a beneficiary be certified as having a prognosis of 6 months or less has been an ongoing concern expressed by advocates and providers. The requirement has been challenged as difficult to implement and a deterrent to hospice referrals, especially for beneficiaries with noncancer diagnoses. Research suggests that it can be difficult for physicians to accurately predict whether a patient is likely to die within 6 months.It is particularly difficult to estimate life expectancy for persons with noncancer diagnoses because the course of their disease is likely to be erratic.For example, patients with heart disease are more likely to die suddenly than persons with cancer, who commonly have a period of steady decline before death. Similarly, very elderly people in frail health or with certain chronic illnesses may experience long periods of declining health punctuated by several medical crises—any one of which can be fatal. In such cases, physicians may find it difficult to justify a hospice referral for beneficiaries who appear to be relatively stable, and, as a result, the physicians may delay initiation of hospice services until a medical crisis occurs shortly before death. From 1992 to 1998, the number of Medicare beneficiaries enrolling in hospice more than doubled, with growth in all population subgroups and in all states. Growth was particularly rapid among beneficiaries with diagnoses other than cancer. At the same time, many beneficiaries had shorter stays. On average, the days of hospice service used per beneficiary declined by about one-fifth during the 7-year period and beneficiaries with diagnoses other than cancer experienced the sharpest reductions. Our analysis of Medicare claims data indicates substantial growth in hospice use. The number of beneficiaries electing hospice care increased 2 ½ times from 1992 to 1998, from about 143,000 to nearly 360,000 persons annually. (See fig. 1.) Across most demographic groups, the use of hospice services has grown at a relatively consistent rate. Thus, hospice users today are similar to users in 1992; the distribution of enrollees by race has not changed (89 percent are white), and the proportion of enrollees who are women has climbed only slightly (from 50 to 54 percent). However, the use of hospice services grew more rapidly among beneficiaries aged 80 and older than it did among younger beneficiaries. This age group now makes up 47 percent of Medicare hospice enrollees, up from 35 percent in 1992. Overall, 19 percent of Medicare beneficiaries who died in 1998 received hospice services, compared with 8 percent in 1992.However, this measure understates the proportion of Medicare beneficiaries who choose hospice care among those for whom the benefit was intended. According to a former president of the National Hospice Organization, “when the number of deaths nationwide is adjusted to reflect only those that are likely to be appropriate for hospice care, the percentage of dying patients cared for in hospice care is probably about 40 percent.” Some groups of beneficiaries are more likely to choose hospice services than others. For example, 20 percent of white Medicare beneficiaries who died in 1998 elected hospice services, compared with 15 percent of black beneficiaries who died that year. Similarly, the use of hospice services is more common among beneficiaries who are enrolled in Medicare health maintenance organizations (HMO) at the end of life than among those in fee-for-service plans. Of the beneficiaries who died in 1998, 27 percent of those enrolled in an HMO elected hospice, compared with 18 percent of fee-for-service beneficiaries. (See app. II for detailed information about hospice use rates among decedents.) In addition, the proportion of Medicare decedents who used the hospice benefit varies widely by state. For example, in 1998, the number of hospice users as a share of Medicare decedents was more than four times higher in Arizona than in Maine. Table 1 shows states with the highest and lowest rates of hospice use in 1998. Although people who die from cancer are more likely to choose hospice services than are those who die from other conditions, the use of hospice services by beneficiaries with noncancer diagnoses has increased rapidly. From 1992 to 1998, hospice enrollment by beneficiaries with cancer increased 91 percent, while enrollment by beneficiaries with all other conditions increased 338 percent. The most dramatic growth in use was among individuals with other terminal conditions, such as heart disease, lung disease, stroke, or Alzheimer’s disease. About 43 percent of beneficiaries who elected hospice in 1998 had noncancer diagnoses, compared with about 24 percent in 1992. Table 2 shows the distribution of new hospice enrollees by primary diagnosis. For many of the leading causes of death, the proportion of elderly decedents who use the hospice benefit has increased. In 1997, about half of the people aged 65 and older who died from cancer had used hospice services, compared with about one-fourth in 1992.This pattern generally held for breast cancer, lung cancer, and prostate cancer. However, the use of hospice services is even more common among persons with other types of cancer; roughly 75 percent of people age 65 and older who died from brain or liver cancer in 1997 used hospice services before death. The proportion of elderly decedents who used hospice services also increased among beneficiaries who died from other causes. Table 3 shows the change in hospice use rates from 1992 to 1997 for common hospice diagnoses. Although more Medicare beneficiaries are receiving hospice services, on average, they are receiving fewer days of care than did beneficiaries in the past.From 1992 to 1998, average length of stay declined 20 percent (from 74 to 59 days), while median length of stay declined 27 percent (from 26 to 19 days). (See fig. 2.) The overall decline in average length of service appears to have been driven by both (1) a reduction in the proportion of beneficiaries with very long hospice stays and (2) an increase in the share of users with very short stays. (See table 4.) From 1992 to 1998, the share of hospice enrollees with more than 6 months of service use declined from 9.3 to 7.3 percent. Over the same period, the proportion of beneficiaries who used hospice for a very brief period before death rose sharply. In 1998, 28 percent of all beneficiaries using hospice care did so for 1 week or less. The decline in the average number of hospice days used has been especially dramatic among beneficiaries with a primary diagnosis other than cancer. While these beneficiaries historically had many more days of care than cancer patients, the average number of days used declined 38 percent between 1992 and 1998. In comparison, average days used by beneficiaries diagnosed with cancer declined by 14 percent. As a result, differences in length of stay across diagnosis categories have narrowed considerably. In 1998, cancer patients used an average of 54 days while noncancer patients used 68 days, on average. Figure 3 compares the decline in the average number of hospice days used for beneficiaries with cancer and noncancer diagnoses. At the state level, average length of service declined in 42 of 50 states and the District of Columbia from 1992 to 1998, and variation in average length of service across states lessened considerably. (State data appear in app. II.) In 1992, 27 states had average service periods within 10 days of the 74- day national average. By 1998, 36 states had average service periods within 10 days of the 59-day average. Several factors influence beneficiary choice about whether and when to use hospice care. These include physician preferences and referral practices, individual patient choice and circumstances, and general awareness of the benefit among the public and professional communities. In addition, recent federal oversight of compliance with patient eligibility requirements may have affected certain beneficiaries’ use of the hospice benefit.