"If Congress doesn't act now, seniors won't gain access to affordable prescription drugs through Medicare in the foreseeable future. And Iowa won't have the fair treatment it deserves under the Medicare payment system. This bill would mean at least another $440 million for health care providers and hospitals in Iowa," Grassley said.
The senator estimated that Iowa hospitals and health care providers would gain more than $300 million over the next ten years from Medicare, and Iowa hospitals that serve a disproportionate share of Medicaid recipients and the uninsured would gain another $141 million over the next ten years from Medicaid, as part of the rural health care package he advanced with this comprehensive legislation.
As chairman of the Senate Committee on Finance, Grassley was the lead architect of the Medicare bill that passed the Senate in June with a vote of 76 to 21. Grassley has been the chief Senate negotiator on the conference committee where the bills passed by the Senate and House of Representatives are being reconciled. Final consideration of the legislation by the Senate and House is expected to occur this week.
Earlier today, the AARP announced its strong endorsement of the prescription drug bill offered by the conference committee and said it will work vigorously for its passage.
Below is a description of how Iowa would benefit from Grassley's rural equity package in the Medicare bill and a copy of Grassley's weekend statement about the conference committee agreement.
Iowa and the Rural Health Care Package
Medicare's complex funding formula penalizes states such as Iowa for practicing high-quality, cost-effective medicine. The penalty is an unfair reimbursement rate. Under the pending conference agreement on the Medicare prescription drugs legislation, rural providers will receive approximately $25 billion in additional Medicare payments over the next ten years. This includes physicians, hospitals, home health agencies, renal dialysis facilities and ambulance services.
1) Increased payments for all physicians.
Explanation: Medicare pays for physician services based on a specific formula in law. For fiscal year 2004, physician fees were to be cut by 4.5 percent. This provision reverses that cut, and provides a guaranteed 1.5 percent payment increase for physicians for fiscal years 2004 and 2005.
Iowa Impact: This payment policy will provide an additional $20 million for Iowa physicians over the next ten years.
2) Establish a floor for the work geographic index for physicians.
Explanation: Medicare adjusts physician payments based on geographic adjustment factors. The purpose of the geographic adjustment is to reflect the relative cost difference in a given area compared to the national average. One factor, the work component, represents the value of a physician's time and effort. Payments to physicians in rural areas are adjusted downward by this work factor. In effect, Medicare de-values rural physicians' time and effort as compared with physicians practicing in an urban area. The pending legislation provides for a floor in the impact of the work component for three years.
Iowa Impact: Establishing the floor in the work component will provide an additional $30 million to Iowa physicians over the next ten years.
3) Create incentive payments in physician scarcity areas.
Explanation: Physicians practicing in rural areas with physician shortages will be eligible for a five- percent bonus payment in their fee schedule payment amounts for the next three years.
Iowa Impact: Establishing the floor in the work component will provide an additional $900,000 to Iowa physicians over the next ten years.
4) Equalize standardize amount for rural and small urban hospitals
Explanation: This provision will eliminate the disparity between large urban hospitals and rural and small urban hospitals by equalizing the inpatient base payment starting April 1, 2004. Previous legislation passed earlier this year eliminated this disparity from October 1, 2003 through March 30, 2004.
Iowa Impact: Equalizing the rates will bring over $163 million to Iowa hospitals over the next ten years.
5) Increase Medicaid Disproportionate Share allotments.
Explanation: Hospitals that serve a large number of uninsured patients and Medicaid enrollees receive additional Medicaid Disproportionate Share Hospital (DSH) payments. The Balanced Budget Act of 1997 capped the federal share of DSH payments at specific amounts for each state. States like Iowa (extremely low-DSH states) will receive a 16 percent increase in their allotments for the next five years.
Iowa Impact: Iowa will receive a $141 million increase over current law for the next ten years. The main Iowa beneficiaries of this provision are the University of Iowa Hospital and Blank Childrens Hospital and Broadlawns Medical Center in Des Moines.
6) Lower labor share of hospital wage index to 62 percent.
Explanation: Beginning October 1, 2004, the labor-related share of the Inpatient Prospective Payment System will be reduced to from 71 percent to 62 percent of the standardized amount, only if this reduction would result in higher payments to the hospital.
Iowa Impact: A revision of the labor share will result in over $100 million to Iowa hospitals over the next ten years. This gives Iowa hospitals the ability to offer more attractive salaries and benefits to health care workers.
7) Improve payments to Critical Access Hospitals (CAHs).
Explanation: The Critical Access Hospital Program was created in 1997 to assist small rural, limited-service hospitals. Unlike larger facilities, CAHs are reimbursed based on their costs. To receive this cost-based reimbursement, CAHs must meet certain service guidelines such as bed limits, staffing, and emergency care. The bill will provide additional funding and flexibility by increasing in payments to 101 percent of costs; increasing the bed limit to 25 acute care beds; authorizing periodic interim payments; paying for costs of an expanded number of emergency room on-call providers; permitting psychiatric and rehabilitation distinct part units; and providing four additional years of special grant funding.
Iowa Impact: Nearly half of Iowa's hospitals, 54 in total, are Critical Access Hospitals. The CAH improvements in the bill will provide over $12.5 million to Iowa's Critical Access Hospitals over the next ten years.
8) Increased Indirect Medical Education payments.
Explanation: Medicare provides additional payments to hospitals that incur the costs of providing graduate medical education. Current law sets this payment level at 5.5 percent. This provision boosts that percentage over the next three years.
Iowa Impact: Iowa's teaching facilities will receive an additional $2.4 million over the next ten years.
9) Full market basket update for 2004-2007 with submission of data on quality.
Explanation: Hospitals paid on the Prospective Payment System will receive a full market basket update for FY 2004. For FY 2005-2007, these hospitals will receive a full market basket update each year they submit data on the ten quality indicators in the National Voluntary Hospital Reporting Initiative.
Iowa Impact: The Iowa Hospital Association has endorsed the National Voluntary Hospital Reporting Initiative. Currently, approximately 30 Iowa hospitals have begun the process of voluntarily submitting facility-specific information in three main practice areas: heart attack, heart failure and pneumonia. Grassley worked with Iowa providers and businesses on various initiatives to incorporate payment-for-quality into Medicare's reimbursement system. This will be the first step in that process by garnering direct evidence about Iowa's high-quality health care system.
Statement by U.S. Sen. Chuck Grassley, of Iowa
Chairman, Senate Committee on Finance
Conference Committee Agreement on Medicare Legislation
Sunday, Nov. 16, 2003
The bipartisan conference report is the best opportunity to add a prescription drug benefit to the Medicare program. If Congress doesn't act now, seniors won't gain access to affordable prescription drugs through Medicare in the foreseeable future. The discount drug card in this bill will mean immediate reductions in the cost of prescription drugs. Cost savings will continue when the permanent program gets up and running. In addition, opening the door for reimporting drugs from Canada could mean lower prices for consumers buying prescription drugs.
The bill is a tremendous legislative victory for seniors who cannot afford the expensive prescription drugs they need each month. It gives choices to seniors who rely on Medicare. If you want to keep Medicare just like you have it today, you can do so. If you want to access a prescription drug benefit along with traditional Medicare, you can do that. Or, if you want to opt for new kinds of Medicare plans ? like the kinds of health insurance found in the workplace ? you can make that choice.
This bill includes substantial subsidies to keep employer-sponsored retiree plans. For retirees who have lost employer-sponsored coverage in recent years, this bill creates a safety net. Today there's no safety net, and those people have nothing.
This bill includes my fix to the geographic payment inequity, and that's a major victory for Iowa. Iowans ? and taxpayers in 30 other states ? pay the same payroll tax to help run Medicare as the rest of the country, but have been penalized for providing cost-effective medicine. The robust rural health package ferrets out the flaws in Medicare's payment formula. It will dramatically increase reimbursements for rural hospitals and doctors. This will make a big difference in recruiting physicians and maintaining the strong health care delivery system we have in rural America.