Medicare Advantage Plan Spending and Payments Under the Hospice Carve-Out

In 2021, the Centers for Medicare & Medicaid Services implemented a Value-Based Insurance Design (VBID) model to test the impact of including hospice services in the Medicare Advantage (MA) benefits package. In December 2024, the VBID was ended following widespread dissatisfaction, signaling a return to the hospice carve-out model. Under the carve-out model, after an MA enrollee elects hospice, health care related to their terminal illness is paid for by fee-for-service (FFS) Medicare. MA plans stop receiving the inpatient and outpatient portions of that enrollee's capitated payment but continue to receive premium and rebate payments.

To estimate MA plan spending relative to premium and rebate payments for hospice enrollees under the carve-out model.

This cross-sectional study estimated MA plan spending, premiums, and rebate payments for MA enrollees who elected hospice from 2017 through 2019 using 2016 to 2020 FFS claims, MA encounter records, and publicly available plan-level data.

MA plan spending and net payments for MA enrollees who elected hospice. Excess payments to MA plans following hospice election were estimated as the difference between MA plan spending and payments. Analyses were conducted between May 2024 and June 2025.

We included 314 087 MA enrollees (180 914 females [57.6%]; mean [SD] age, 80.7 [10.0] years); 125 321 (39.9%) were aged 85 years or older. The mean (SD) length of hospice stay was 1.76 (2.49) months. In the year after hospice election, mean MA spending fell to $57 per enrollee per month, with 81% of enrollees having no inpatient, outpatient, physician, skilled nursing facility, home health care, or prescription drug expenses that MA plans were liable for. MA plans continued to receive $120 per enrollee per month in premiums and rebates, equating to $23 million to $58 million in excess payments to MA plans annually under scenarios in which either 50% of rebate payments or 0% of rebate payments were allocated toward supplemental benefits, respectively.

In this cross-sectional study, MA plans received high premium and rebate payments for beneficiaries enrolled in hospice despite low health care spending after enrollees elected hospice. To reduce excess payments, the Centers for Medicare & Medicaid Services could require MA plans to submit information on enrollees' use of supplemental benefits and adjust payments made after election of hospice to align with spending.