[Congressional Record Volume 149, Number 65 (Monday, May 5, 2003)]
[Senate]
[Pages S5731-S5733]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself and Mr. Burns):
  S. 987. A bill to amend title XVIII of the Social Security Act to 
provide for national standardized payment amounts for inpatient 
hospital services furnished under the medicare program and to make 
other rural health care improvements; to the Committee on Finance.
  Mr. DORGAN. Mr. President, today I am introducing legislation, the 
Rural Health Care Fairness and Medicare Equity Act, that will help to 
make Medicare reimbursement more fair and equitable for rural and small 
urban hospitals and physicians. I am pleased to be joined in 
introducing this bill by Senator Burns.
  First, let me take a few minutes to describe some of the challenges 
facing rural health care systems and why I feel it is critical for the 
Senate to act now to reduce the inequities in Medicare funding between 
rural and urban providers.
  Rural America depends on its small town hospitals, physicians and 
nurses, nursing homes, emergency ambulance services, and other members 
of our rural health care system. And because of past cuts in Medicare 
reimbursement, plus the historical unfairness in Medicare payments, 
these vital services are in jeopardy. Fortunately, Congress acted in 
1999 and again in 2000 to address some of the cuts that turned out to 
have a larger impact than intended.

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  However, additional legislation is still needed to improve Medicare 
reimbursement for health care providers in order to stabilize the 
Medicare program and ensure that beneficiaries, especially in rural 
areas, will continue to have access to their local hospitals, 
physicians, nursing homes, home health, and other services. Many small 
rural hospitals in particular serve as the anchor for the full range of 
health care services in their communities, from ambulatory to long-term 
care. Medicare is the single most significant payer for services at 
these hospitals, and as such, it has an impact on the whole community.
  Part of the problem in North Dakota is simply demographics: North 
Dakota's population is the fifth oldest in the Nation, and about two-
thirds of North Dakota's 103,000 Medicare beneficiaries live in rural 
areas. In addition, North Dakota's population--and the population of 
many rural states in our Nation's Heartland--is shrinking daily. In 
fact, in 13 of North Dakota's counties, there were 20 or fewer births 
for the entire county in 2001.
  Admissions to rural hospitals have dropped by a drastic 60 percent in 
the last two decades, and those patients who do remain tend to be 
older, poorer, and sicker. This means that rural hospitals tend to be 
disproportionately dependent upon Medicare reimbursement, to the extent 
that Medicare accounts for 75 to 80 percent of the revenue for some 
rural hospitals. Obviously, given this reality, Medicare reimbursement 
has a major impact on the financial health of rural hospitals.
  Another part of the problem is that Medicare has historically 
reimbursed urban health care providers at a much higher rate than their 
rural counterparts. North Dakota Medicare beneficiaries pay the exact 
same Medicare payroll taxes and premiums as beneficiaries elsewhere but 
receive less benefit from the Medicare program. Medicare beneficiaries 
in North Dakota receive an average of $4,458 in Medicare benefits. This 
is $632 less than the national average spending per Medicare 
beneficiary of $5,490, and $5,500 less than the spending for Medicare 
beneficiaries in Washington, DC. Moreover, most North Dakotans do not 
even have the option of Medicare+Choice plans because Medicare 
reimbursement for these plans is so low in rural areas that they are 
not offered.
  As a result of the skewed Medicare formula, North Dakota hospitals 
are reimbursed significantly less than hospitals of similar size and 
type elsewhere in the country. For instance, North Dakota hospitals are 
reimbursed as much as $2,000 less for a Medicare beneficiary with heart 
failure compared to hospitals of a similar size and mission in 
Minnesota, New York and California. More specifically, for example, St. 
Alexius Medical Center in Bismarck, North Dakota is paid about $4,000 
for a heart failure patient. A similar sized hospital, with a similar 
mission, would be paid $5,900 in California, $6,500 in New York, and 
$6,800 in Minneapolis, MN for caring for the same patient.
  Likewise, a similar payment inequity exists for physicians. For 
example, a physician in Beulah, ND is paid about $46 by Medicare for an 
office visit, while a doctor in San Francisco is paid $63 for a 
comparable office visit. A physician who inserts a pacemaker in a 
patient in New York City is paid about $646, but a doctor who performs 
the exact same procedure in Fargo, ND is paid only $481, about a 
quarter less.
  This inequity in Medicare reimbursement has real consequences for 
hospitals and clinics: They have to reduce services, have greater 
difficulty recruiting staff, are less able to make capital 
improvements, and struggle to give their patients access to the latest 
innovations in medical care.
  The bill I am introducing today, the Rural Health Care Fairness and 
Medicare Equity Act, would address the rural inequity in Medicare 
reimbursement in five ways. First, this bill would equalize the 
``standardized payment'' which forms the basis for Medicare's 
reimbursement to hospitals. You would think something called the 
``standardized payment'' would already be standard, but the fact is 
that hospitals in rural and small urban areas, including all of North 
Dakota, receive a smaller standardized payment than large urban 
hospitals. This bill would raise all hospitals up to the same 
standardized payment. The fiscal year 2003 Omnibus Appropriations bill 
enacted by Congress earlier this year takes a step in the right 
direction by equalizing this base payment for the last six months of 
this fiscal year, but my bill would make this equalization permanent.
  Second, my bill would create a wage index floor for the hospitals in 
this country with the very lowest wage indexes. The current wage index, 
which is an important factor in a hospital's total Medicare 
reimbursement, is based on an antiquated theory that it costs more to 
hire hospital staff in urban areas than it does in rural areas. That 
may have been true once, but it is no longer true today. Today, 
hospitals in North Dakota are competing with hospitals in Minnesota, 
Chicago and elsewhere for the same doctors and nurses, and they have to 
pay competitive wages in order to recruit staff. However, their low 
wage index has the effect of limiting the salaries that many rural and 
small urban hospitals can afford to pay their staff. By creating a 
floor, we would at least level the playing field a bit for hospitals 
with a wage index under 0.85.
  Third, this bill would reduce the importance of the wage index in 
factoring a hospital's total Medicare reimbursement. The current 
``labor market share'' of 71.1 percent overstates the actual amount 
that hospitals in North Dakota and nationwide pay for labor. For 
instance, in North Dakota, a hospital in Bismarck has a labor market 
share of 58 percent, while a small rural hospital in Cando, ND has a 
labor market share of 55 percent. For hospitals in North Dakota and 
other states that already have a low wage index this overstatement of 
labor costs magnifies the reimbursement inequity. My bill would set the 
labor market share at 62 percent, which more closely reflects what the 
correct proportion should be. However, hospitals that would be 
adversely affected by this change would be held harmless.
  In addition, this legislation creates alternative criteria for some 
hospitals to appeal to the Medicare program for a higher wage index. 
Hospitals currently can qualify for reclassification to an area with a 
higher wage index if they can demonstrate that they are proximate to 
the area to which they seek to be reclassified and pay similar wages or 
have a similar patient case-mix. The current reclassification process 
has been used predominantly in areas with high population density as a 
way for hospitals to increase their Medicare reimbursement. According 
to a GAO study last year, two-thirds of all hospitals that are able to 
reclassify are in two areas--California and the northeast.
  Unfortunately, however, many rural and small urban hospitals located 
in states with a large land base and lots of distance between 
communities largely have not been able to take advantage of the 
reclassification process because they cannot meet the proximity 
criteria. This is the case even though, despite the longer distances 
between communities, hospitals are still competing against each other 
to recruit nurses and other staff. To address this concern, my bill 
would create an alternative reclassification process for hospitals in 
sparsely populated states with large distances between metropolitan 
areas that do not meet the current proximity criteria but do meet the 
other reclassification criteria.
  Finally, my legislation would establish a floor of 1.00 for the 
physician work component of the Medicare physician payment system. The 
Medicare program currently adjusts physician payments based on a 
``geographic practice cost index'' that is intended to reflect regional 
cost-of-living differences. The result has been that physicians in 
rural areas are generally reimbursed less by Medicare for providing the 
same exact level of care as doctors in urban areas. Since rural medical 
practices tend to serve higher proportions of Medicare beneficiaries, 
they are doubly impacted by this payment inequity.
  As many of my colleagues know, it is already very difficult to 
recruit physicians to rural underserved areas. In fact, many small 
towns in my State are increasingly relying on foreign physicians 
working in the country under J-1 visas because they are unable to 
recruit American physicians. I am very concerned that the disparity in

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Medicare reimbursement for doctors provides yet another reason for 
physicians to decline to serve in rural areas.
  By establishing a floor of 1.00 for the work geographic practice cost 
index, this legislation will ensure that doctors' work in rural areas 
would at least be valued at the national average. However, it would 
still allow for payments higher than the national average for 
physicians serving in areas with a high cost of living.
  In closing, I think we as a nation need to acknowledge that a strong 
health care system is an important part of our rural infrastructure. 
Over the years, we have determined that rural electric service, rural 
telephone service, an interstate highway system through rural areas, 
and rural mail delivery, to name a few services, make us a better, more 
unified nation. We need to make the same determination in support of 
our rural health care system, and I will be fighting for policies, such 
as those reflected in this legislation, that reflect rural health care 
as a strong national priority. I encourage my colleagues to join 
Senator Burns and me in cosponsoring this bill.
  Mr. BURNS. Mr. President, I rise to introduce The Rural Health Care 
Fairness and Medicare Equity Act with my good friend and colleague, 
Senator Dorgan, from North Dakota.
  Many predominately rural States, such as my home State of Montana, 
face difficult challenges in the health care arena. Funding, staffing 
shortages, and inadequate reimbursement levels have plagued many 
hospitals and health care providers in the most rural areas of our 
country since the passage of the Balanced Budget Act of 1997. I have 
been a strong supporter of improving access to health care in these 
areas through education and telemedicine, but many rural communities in 
particular still face dangerous health care-related shortages.
  The Rural Health Care Fairness and Medicare Equity Act seeks to make 
Medicare reimbursement more fair and equitable for rural and small 
urban hospitals and physicians by correcting the unintended inequities 
in the Medicare system put in place by the Balanced Budget Act of 1997 
with five components. First, this act would provide a single 
standardized amount under the Medicare inpatient Provider Payment 
System, PPS, by permanently raising the standardized amount for rural 
and other hospitals to the same standardized amount level as large 
urban area hospitals. My colleagues in the Senate and I recognized the 
importance of doing this in the fiscal year 2003 Omnibus Appropriations 
package, which made this change for the remaining months of fiscal year 
2003. We should now standardize hospital levels by making this change 
permanent, and this bill does just that.
  Second, this bill would change the hospital labor market share from 
its current level of 71.1 percent, to 62 percent, based on a study done 
by the University of North Carolina Rural Health Research and Policy 
Analysis Center demonstrating that the current hospital labor market 
share is too high. Hospitals that would be harmed by this change would 
be held harmless. Third, this legislation would create a wage index 
floor of 0.85 for hospitals that would otherwise have a wage index less 
than the floor. Thirty of my colleagues and I cosponsored legislation 
in the 107th Congress that included a 0.925 floor, and I am hopeful 
that by setting the floor at 0.85, this provision will be better 
targeted toward rural hospitals with negative Medicare inpatient 
margins, helping our rural health centers to not only keep their doors 
open, but to continue providing quality, affordable health services to 
the rural communities they serve.
  Fourth, this bill would create new, alternative criteria for hospital 
reclassification. This bill would require the Secretary of Health and 
Human Services to develop a new category of reclassiciation of 
hospitals for area wage index and standardized amount purposes. I am 
greatly concerned that the current reclassification process, 
particularly the proximity and adjacency criteria, has not been helpful 
to hospitals in States like Montana, with large land bases and lots of 
distance between communities, even though these hospitals must still 
compete with one another for nurses and other health care staff.
  Two-thirds of all hospital reclassification take place in California 
and in the Northeast, largely because of these proximity and adjacency 
criteria. This bill would allow hospitals located in sparsely populated 
States that do not meet these prohibitive criteria to re-classify if 
they otherwise need reclassification criteria. This bill defines a 
sparsely populated state to be one in which there are fewer than 20 
people per square mile of land, under which eight States, including 
Montana, qualify. Finally, the Rural Health Care Fairness and Medicare 
Equity Act would create a physician geographic adjustment floor of 1.0 
for the physician work component of the Medicare physician payment 
system, beginning in 2004. This provision would lessen the geographic 
disparities in Medicare payment so gravely affecting physicians in the 
field today.
  Patients in both rural and urban areas depend on the availability of 
quality health care providers to offer superior, affordable health 
services to people across the Nation. Medicare physician payments are 
intended to correspond to the costs that efficient providers incur. 
Instead, research has shown that the sustainable growth rate, SGR, 
under which reimbursement rates are supposed to be adjusted annually 
fails to account for all the relevant factors that affect the cost of 
physician payments, and maintains further inequities, such as Medicare 
paying different amounts for the same service, depending on where the 
service is provided.
  Cuts in Medicare reimbursement to health care providers have forced 
health providers to make difficult choices, including becoming a 
nonparticipating Medicare provider, moving to areas with better 
reimbursement rates or less Medicare patients, retiring from practice 
early, limiting or discontinuing charitble care, reducing staff, or 
leaving Medicare entirely. The impact on these cuts has taken a serious 
toll on rural communities, such as those in Montana. The most recent 
cut in physician payment levels was the largest in Medicare history, 
immediately affecting 1 million health care professionals and the 
countless millions of elderly and disabled patients they, in turn, 
serve. Not only does this create a negative health care environment so 
adverse to the principles of the Medicare system, but the inequities in 
physician reimbursement rates have created a crisis situation for many 
patients in rural areas who do not have the luxury of choosing to see a 
different health care provider who can still afford to take Medicare 
patients.
  This bill is extremely important to ensure that America's seniors and 
low-income have access to high quality physician services. It is 
imperative that Congress continue it commitment to rural health care 
quality, accessibility, and affordability, and the Rural Health Care 
Fairness and Medicare Equity Act is an important step toward this goal.
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