"In my struggle for Medicare fairness for Iowa, today's agreement could be a turning point. All these provisions together constitute a home run for not only for Iowa hospitals, but also physicians, home health care providers, skilled nursing facilities and, most importantly, Medicare beneficiaries," Grassley said. "I talked with Sen. Daschle several weeks ago about making my rural health bill a priority. The bipartisan package Sen. Baucus and I put together is ready for prompt action by the full Senate. I hope Sen. Daschle schedules a vote soon. There's no time to waste."
These initiatives were included in legislation Grassley introduced last spring to address unfair treatment by the Medicare program to doctors, nurses and hospitals in states like Iowa that deliver high quality, cost-effective health care. Grassley is the ranking member of the Senate Finance Committee, which is responsible for Medicare policy.
"For the most part, Medicare formulas have failed rural Americans because they reward high-cost care in big cities," Grassley said. "The formulas also don't recognize special costs faced by smaller, more isolated physicians, hospitals and clinics. It obviously doesn't make sense to penalize states like Iowa who do more with less. That's why I'm so committed to fixing these formulas. The proposal I've put together with Sen. Baucus would provide a tremendous infusion of cash to hard-pressed health care providers across Iowa. It takes money to ensure access to care for Iowans, and this will help make the federal government part of the solution instead of part of the problem."
Grassley named his comprehensive proposal the IOWA bill, or Improving Our Well-being Act. Almost every provision from that legislation is included in the Grassley-Baucus agreement for a Medicare provider bill that could be passed before Congress adjourns later this year.
- Elimination of the downward geographic adjustment of the physician work component in low-cost states such as Iowa, reflecting the view that the value of a physician's work is no less in Iowa than anywhere else. Under current law, there are three components of physician payments: physician work, practice expense and malpractice insurance. The first of these, physician work, is intended to reflect the time and effort physicians put into treating patients. Medicare currently adjusts 25 percent of the physician work component to reflect regional differences in the amount of time and effort physicians provide. This adjustment lowers payments to all Iowa physicians, and the Grassley-Baucus legislation removes this adjustment for three years. Grassley's provisions in the Medicare provider proposal also require the independent General Accounting Office to report to Congress on whether Medicare's current geographical adjustment of practice expense and malpractice insurance is fair and accurate.
- A sharp increase in payments to hospitals in states underpaid by Medicare. Hospitals in Iowa have much lower profit margins on their Medicare patients than hospital in other states. The proposal agreed to today would provide payment increases of five percent per inpatient case to most hospitals in states like Iowa for fiscal years 2002-2005. For the extra payment to be made, the following conditions had to be met in 1999: 1) the rural hospitals in the state must have had an aggregate negative inpatient margin on Medicare, and 2) the urban hospitals in the state must have had an aggregate margin of three percent or less. Iowa is among approximately 14 states that would qualify. Seventy-five Iowa hospitals would receive over $100 million altogether. This legislation was first sponsored by Rep. Jim Nussle and included in the Medicare provider bill passed by the House of Representatives in July.
An increase in the base payment for hospitals in rural and small urban areas to the level of large urban hospitals. Medicare now pays hospitals in large cities, those with populations of more than one million, for each inpatient using a base payment that is 1.6 percent higher than that for hospitals that are in smaller cities or rural areas, including all of Iowa. Hospitals in smaller cities and in rural areas have much smaller Medicare inpatient margins than hospitals in large cities, and Grassley said one reason for this difference is this unsupported payment distinction between hospitals based on their location. The agreement Grassley reached today also includes a full inflation update for 2003 for all hospitals in Iowa.
- Improved and extended protection for rural hospital outpatient payments. Grassley said that hospitals, especially rural ones, increasingly provide health care on an outpatient basis. At the same time, rural hospitals suffer from significant Medicare outpatient shortfalls. A new Prospective Payment System was instituted for hospital outpatient services in 1999, and Congress acted to protect small rural hospitals from potential losses due to this system. The protection had some effect, but it expires at the end of 2003. Grassley's initiative would extend the protection through 2004. The legislation would also make a technical change that calculates losses on a more advantageous basis, resulting in sharply higher payments for rural hospitals.
- Additional support for the Critical Access Hospital program. This program is a proven success at preserving the viability of small-town hospitals, including 40 in Iowa. It offers cost-based reimbursement to small rural hospitals. Grassley said his provisions in the Medicare provider package would: 1) reinstate the Periodic Interim Payment, which provides facilities with a steadier stream of payment in order to improve their cash flow, and 2) eliminate the current requirement that Critical Access Hospital-based ambulance services be at least 35 miles from another ambulance service in order to receive cost-based payment, as this rule has prevented many such hospitals from having such services reimbursed based on costs. These provisions will improve payments to Critical Access Hospitals while reducing administrative hassles.
- Protected access to home health care in rural areas. Current law provides for a 10 percent payment boost for home health care patients residing in rural areas to reflect the higher costs due to distance, as well as the fact that there is often only one provider in rural areas. This special payment will expire within the current fiscal year. Grassley's provision would extend this 10 percent rural payment for two more years, through fiscal year 2004, in order to ensure access to home care for rural beneficiaries.
- Allow beneficiaries to remain in the existing Medicare cost contract plans in Iowa and other states. Grassley said some Medicare beneficiaries choose to enroll in private health plans that operate on cost contracts, as opposed to the risk contracts in the Medicare+Choice program. Many of these plans serve rural areas where Medicare+Choice plans have not chose to operate. These plans are scheduled to sunset in 2004. Grassley's provision extends these plans for five years, though 2009, so beneficiaries in existing cost contract plans may remain in them rather than experiencing disruption in their health coverage.
- Improve the hospital wage index so that it more accurately reflects the labor costs faced by hospitals in Iowa. Medicare's inpatient hospital payments consist of a labor-related amount (which is then adjusted to reflect local wages) and a nonlabor-related amount (which is not adjusted). The labor share is 71 percent, an estimate of the share of providers' costs determined by local wage levels. In low-wage areas this means that 71 percent of hospitals' base payments are adjusted downward. However, many Iowa hospitals report that much smaller shares of their costs are actually labor-related. The Grassley-Baucus bill will decrease the labor share to 68 percent for three years, meaning that a smaller share of their payments will receive this downward adjustment. In the meantime, the Medicare Payment Advisory Commission (MedPAC) will critique and make recommendations to Congress on CMS's current approach to computing the labor share.
- Correction of flaws in the current Medicare Incentive Payment program for physicians. Medicare provides a 10 percent add-on bonus payment to physicians serving patients in medically underserved rural areas (known as Health Professional Shortage Areas). Grassley said bureaucratic barriers are preventing many physicians from receiving these payments: physicians must attach a special code to their claims for the services, and are subject to a higher level of scrutiny and audits than they otherwise would be. Grassley's provision would pay the 10 percent bonus automatically, ensuring that physicians would get the bonus payments they are entitled to.