"A dramatic disparity exists even though all Americans pay the same payroll tax of 2.9 percent to the Medicare Trust Fund," Grassley said. "While Iowa may have an ability to provide services at a lower cost than in some other areas of the country, the difference in the Medicare payment rate for Iowa as compared to New York or Miami is far greater and more egregious than any reasonable measurement of the cost of providing health care services."
Grassley sponsored The Medicare Payment Equity Act of 1997 with Sen. Craig Thomas of Wyoming. "This bill takes a very aggressive approach to HMO payment reform. It works to correct a fundamentally unfair formula which allows a 300 percent disparity on average between Medicare reimbursement rates in rural and urban areas of the country. As it stands today, rural beneficiaries are prevented from having access to the benefits and choices provided by managed care plans," Grassley said.
In Iowa, Allamakee County receives the lowest monthly Medicare payment rate, known as the adjusted-average-per-capita-amount (AAPCC). It is $252 per Medicare beneficiary. The highest rate in Iowa is $411 in Pottawattamie County. These rates contrast sharply with other areas of the country. For instance, Richmond County, New York, receives $767 per Medicare beneficiary. HMOs in Miami receive $748 per month per beneficiary.
"The current payment plan leaves Iowans without the additional benefits -- including eyeglasses, prescription drugs and payment of premiums at no extra cost -- enjoyed by many urban Medicare beneficiaries," Grassley said. "Congress and the President must correct this injustice. Rural providers must be given the same opportunity to provide benefit options to rural residents."
The Thomas/Grassley bill seeks to "uncouple" payments to Health Maintenance Organizations (HMOs) from fee-for-service Medicare payments. This is important because the current system rewards managed care plans in regions with inefficient patterns of medical practice, while punishing areas, such as Iowa, where health care costs have been kept low. The legislation would:
Overall, the Thomas/Grassley initiative reflects recommendations put forth by the Physician Payment Review Commission in its 1996 Annual Report to Congress. It also incorporates changes advocated by the Rural Policy Research Institute.
Grassley serves as a senior member of the Finance Committee, where all legislation affecting the Medicare program is considered.