The American Hospital Association's bid to increase Medicare labor-cost compensation in low-wage rural areas suffered another blow last week when lawmakers followed the recommendation of a congressional advisory panel that said the AHA proposal was bad policy.
In proposing legislation that could funnel $13 billion to $15 billion in Medicare revenue to rural hospitals over the next decade, some 40 members of Congress rejected the AHA's bid to set a minimum on the "wage index" used to adjust Medicare inpatient and outpatient payments for hospitals based on their local labor costs. The wage index is a mathematical factor that reduces Medicare payments in low-wage areas and raises them in high-wage areas.
The minimum, or floor, on the wage index is a key component in the AHA's 2001 congressional agenda. Its estimated cost is about $6.1 billion between 2002 and 2006.
As it has pushed for the wage index floor this spring, the AHA has skirmished with the Medicare Payment Advisory Commission, which has been preparing a special report on the needs of rural Medicare beneficiaries and providers.
MedPAC has rejected the AHA's idea. In formally releasing the report last week, new MedPAC Chairman Glenn Hackbarth was unequivocal.
"We think the floor spreads money indiscriminately," he said.
MedPAC did endorse some new money for rural hospitals, such as a special payment increase for hospitals with fewer than 500 discharges a year and an increase in rural hospitals' Medicare disproportionate share hospital payments, which reimburse hospitals for uncompensated care.
But those proposals, which add up to $200 million a year in new revenue for rural hospitals, aren't enough, said Carmela Coyle, the AHA's senior vice president for policy.
"This is an issue that's about financial performance of rural hospitals," Coyle said. "The MedPAC proposals fall far short of the mark."