Senators to Azar: Why aren't you fixing Medicare wage index?

Senators on Thursday asked HHS Secretary Alex Azar on Thursday why the CMS' newly unveiled rural health strategy does not address the Medicare wage index, which they claim poses one of the greatest threats to access to care in these areas.

Under the index, payments to hospitals are adjusted for market conditions such as the differences in hospital wage rates among labor markets and it also takes into account cost of living.

As things are now, a hospital in Tennessee could bill CMS for $100 and get $82 from Medicare, while a hospital in Connecticut could get $126 for the same claim, Sen. Lamar Alexander (R-Tenn.) said during a Senate Appropriations subcommittee hearing on HHS' fiscal year 2019 budget proposal.

"There is a big fairness issue because of the wage index," Alexander said. "CMS announced a rural health initiative, but it didn't include any relief from the wage index."

Hospitals and physicians with higher average wages, which also tend to be in higher cost areas, get larger reimbursements, and regions with lower wages are reimbursed at lower rates.

Alexander called the wage index discriminatory and said it's leading to some hospitals to close.

Sen. Jerry Moran (R-Kan.) claimed the wage index leads to a shortage of some provider types in rural areas.

"What happens is if you're a cardiologist you have a tendency to move to the East Coast where you can get paid more for the same procedure," Moran said.

Azar called the wage index one of the most vexing issues facing his agency because its structured to be budget neutral. As a result, the agency couldn't change the way rates are paid in one state without it impacting another state he said in response to Alexander's question.

"It leads to a constant back and forth of winners and losers," Azar said. Without congressional action, the agency can do little to tinker with the index, he said.

It's unclear if lawmakers across the aisle would support a change to the index. Sen. Chris Murphy (D-Conn.) said the current system makes sense as not only are costs higher in states like his, but they also pay higher taxes than more rural markets.

"If we're interested in equity and parity than we would be more than happy to adjust tax rates," Murphy said. "If that was the deal, we'd be more than happy to accept less in Medicare reimbursement."