A small proportion of Medicare patients and a larger proportion of younger patients are in capitated care systems, in which a provider or insurer receives a set amount of money each month for every member regardless of how much care is provided. In general, these arrangements do not pay the fiscal risk-taking entity better for a patient who is sick, since rates are set “per capita” for a population. (Risk-adjusted payments are being implemented in the Medicare capitated payment system; Iezzoni, 1997). However, capitation also allows much more flexible use of the funding and thus can cover medications, personal care, and other elements not generally covered in Medicare fee for service, if the insurer decides to offer those benefits (to attract enrollees). Capitation undoubtedly creates pressures to reduce services generally, but the one careful study of the effects of provider or payer type on the costs of the last year of life for the frail elderly found no differences between Medicare health maintenance organizations (HMOs), traditional fee for service, and Medicare-Medicaid dual eligibles (in California, in 1990–1993) (Experton et al., 1999).

Innovative approaches that combine elements of these approaches are not hard to find. Some benefits managers are “carving out” care of cancer patients and handling them as a separate capitation to specialists, for example.


The most substantial innovation to serve advanced cancer patients is hospice. The Medicare hospice benefit mostly pays the hospice provider organization a daily rate for each patient enrolled and served at home. A small proportion (by law, less than 20 percent) of the days that Medicare pays to hospice providers can cover continuous nursing care, inpatient respite stay, or inpatient symptom management. The services that hospices provide include many elements that are not typically part of Medicare coverage: for example, interdisciplinary team, care planning, personal care nursing, family or patient teaching and support, chaplaincy, medication (with a small copayment), counseling, symptomatic treatment, and bereavement. The attending physician services either are paid within the hospice benefit (if the physician is a hospice employee) or are paid upon a separate billing from the physician to Medicare.

Hospice pioneers did not envision hospice as a part of routine health care, although this is what it has become. More than half of Medicare beneficiaries dying with a cancer diagnosis used at least some hospice care in 1998 (Hogan et al., 2000). However, the ways in which hospice programs are not parallel to (or integrated with) other health care programs are evident. For example, under Medicare, hospice programs may serve only patients enrolled specifically in the hospice benefit (which restricts

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