Do Reimbursement Rates from Medicare Undermine Optimal Care for the Dying?

Impact of Medicare financing methods on end of life care

In 1999 and 2000, researchers at Harvard Medical School examined how Medicare helps and/or hinders health care providers in giving quality end-of-life care and made recommendations for change.

Researchers interviewed 54 clinicians and administrators at 35 end-of-life provider organizations (hospitals, hospice agencies, home health agencies, skilled-nursing facilities [SNFs], and medical groups) in five cities (Boston; Cleveland, Greenville, S.C. Miami, and Seattle) and one rural area (the Fargo, N.D./Moorhead, Minn. area).

The project was part of the Robert Wood Johnson Foundation (RWJF) program, Targeted End-of-Life Projects Initiative.

Key Findings

  • The hospice per diem (payment per day) does not reflect current treatment practice; it is too low for high-cost patients and results in access problems for patients in some markets.

  • Some interviewees are concerned about quality of patient care due to reimbursement limitations on hospitals and hospices mandated under the Balanced Budget Act of 1997.

  • SNFs are under reimbursed for certain secondary services (pharmaceuticals, infusion [intravenous] therapy, respiratory therapy, lab tests, imaging services, and patient transportation), creating an incentive at SNFs to avoid patients who need many of these services.

  • The reimbursement rate for rural patients may be too low, considering rural travel costs (including staff travel time).


  • Pay hospices extra—above and beyond the standard per diem—for extremely high-cost hospice stays.

  • Review hospice rates, focusing on how well current hospice per diems account for changes in treatment practices since the Medicare hospice benefit was implemented in 1982.

  • Monitor the implementation of the 1997 Medicare home health payment system's impact on severely ill and dying patients.

  • Explore differences in travel costs among staff serving hospice patients, and adjust per diems accordingly.