LAST YEAR, Congress allowed the Medicare program to begin paying limited amounts for hospice care for hopelessly ill patients. Although Congress was cutting back on many other services, it decided that hospice care--which helps dying people to remain in their homes and free of pain as long as possible--was both a humane and relatively inexpensive alternative to high-technology hospital care. Now, however, the administration, following terms set in the law, has calculated payment limits for hospice care that may discourage its use.

When Congress passed the law allowing Medicare hospice payments, it was well aware that strict limits were needed to prevent the commercialization of the hospice approach. One reason that hospice care is both less expensive and more comforting for the terminally ill than regular hospital care ill is that it uses volunteers extensively and relies, whenever possible, on care in the home with the involvement of other family members. To keep costs in bound, Congress carefully prescribed the types of programs and services that are covered. It also put a cap on average payments, which, the Ways and Means Committee calculated, would amount to about $7,000 per hospice patient.

In following the formula set in the law, however, the administration came up with a limit of $4,332. Although experience with hospice programs is not extensive enough to be certain about the needed amounts, enough is known to suggest that the lower limit would discourage hospice use by the most severely ill patients who need relatively intensive care. That would have the perverse effect of driving such patients into high-cost hospitals even when they preferred hospice care.

The lower limit doesn't displease cost-conscious budget officials who question whether the expected budget savings from hospice care will materialize. But the limit was not set as a reflection of administration policy--it was set simply by applying the formula in the law, which, the Ways and Means Committee admits, was incorrectly specified.

The mistake can easily be rectified by a technical amendment. In deciding upon a correction, however, Congress might well take the time to review what has been learned thus far in the 26 hospice demonstration projects that the Federal Health Care Financing Administration has been financing. The hospice is an important innovation in American medicine, but close observation is needed to make sure that it is neither being used in the wrong cases nor discouraged when the conditions for it are right.