Medicare reimbursement for hospice care: an approach for analyzing cost consequences

The federal impact in health policy, as in most public policy areas, is generally large but indirect. Private choices, based on rational or sometimes irrational individual and institutional concerns, are the intervening variables, and policy analysts generally have inadequate information about how these variables operate. The new Medicare reimbursement for hospice care, the only new human service benefit passed by the 97th Congress, provides an example of this problem. This paper uses the results of a 1984 survey of hospices to create a model to analyze one such set of intervening variables: provider decisions about how, and whether, to participate in the new Medicare hospice benefit. Our analysis provides a rationale for the substantially lower-than-expected provider participation rate.