1. Do Selection or Treatment Effects Explain Differences in Medicare EOL Costs Among Hospice and Normal Care Users? Donald H. Taylor, Jr. Duke University Funded by The Robert Wood Johnson Foundations Changes in Health Care Financing and Organization (HCFO) Initiative

2. Question Does hospice save Medicare money? –Are observed differences in cost due to treatment effects (hospice) or selection effects?

3. Background/Context Hospice improves patient QOL Large cost to Medicare near end-of-life –Hospice/cost effect is mixed in past work –Medicare hospice use expanding

4. Data Screening sample for NLTCS 10,319 decedents (died 1993-2000) Medicare claims 2 yrs. prior to death Total Medicare-financed payments

5. Analytic Approach Match decedents on pred prob of hospice Compare cost--hospice users v. matches –Marginal & cumulative costs –Varied follow-up periods Predicted weekly costs in LYOL –Regressed cost on time, t 2, t 3, t 4

6. Results 13% died in hospice (1,309/10,319) 143 began, but did not die in hospice Median LOS=15 days; mean=50 –cancer dx longer

9. Hospice Save Medicare Money? Marginal acctgYes. Hospice saves Medicare ~$1,800 (50%) in the last 2 wks Cumulative acctg--Yes. Hospice saves Medicare ~$1,600 (15%) during last 60 days

12. Policy/Comment/Questions Matching increased cost savings ~10% Strong effectsavings in last 2 wks show cumulative savings in last 2 months Answer is sensitive to follow up period Earlier use of hospice will improve QOL and potentially save money

14. Matching Logit of hospice use –Predictors of use: younger, white, later death, higher Medicare costs in year prior, dx cancer, urban Pred prob ranged from 0.03-0.49 Matches were close; largest difference between hospice user and match was 0.01

15. Limitations/Extensions Time to death is assumed exogenous to choice of hospice/no hospice Partial solution: predict time of hospice entry and costs prospectively from date of study entry –Predict daily prob of hospice entry –Calculate costs between each day and time of death –Calculate expected cost after hospice entry by integrating over all days (for hospice users and non- users)