[Congressional Record (Bound Edition), Volume 148 (2002), Part 12]
[Senate]
[Pages 16847-16848]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    CHALLENGES IN RURAL HEALTH CARE

 Mr. DORGAN. Mr. President, I wanted to 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, those who provide emergency ambulance services, 
and other members of our rural health care system. And because of past 
and proposed cuts in Medicare reimbursement, plus historical unfairness 
in Medicare payments, these vital services are in jeopardy.
  Like most of my Senate colleagues, I supported the Balanced Budget 
Act, BBA, of 1997 when it was enacted by Congress with strong 
bipartisan support. Prior to the passage of this law, Medicare was 
projected to be insolvent by 2001, so it was imperative that we took 
action to extend Medicare's financial health and to constrain its rate 
of growth to a more sustainable level.
  We later found that the Balanced Budget Act worked to reduce Medicare 
program costs, but many health care providers were adversely affected 
by payment reductions that were larger than intended. To address these 
concerns, Congress in 1999 made adjustments in the Balanced Budget 
Refinement Act, BBRA, followed in 2000 by the Medicare Beneficiary 
Improvement and Protection Act, BIPA. Without these needed changes, 
frankly, as many as a dozen of North Dakota's hospitals might be closed 
today.
  But, 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 second oldest in the Nation, and our 
population is shrinking daily. In fact, in 13 of North Dakota's 
counties, there were 20 or fewer births for the entire county last 
year. 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 85 percent of their revenue. 
Obviously, given this reality, changes in Medicare reimbursement have 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. Of course, some of this difference can be explained 
by regional differences in the cost of health care and variations in 
the health status of older Americans. But this is not the whole 
explanation. Even after adjusting for these factors, a recent report by 
health care economists found that, for example, Medicare's per 
beneficiary spending was about $8,000 in Miami, but only $3,500 in 
Minneapolis. When average Medicare payments for the same procedure are 
compared, the disparities in payment in different areas of the country 
are dramatic. The table below compares payments for two of the most 
common procedures in North Dakota: hospitalization for heart failure 
and shock, and hospitalization for treatment of pneumonia.

------------------------------------------------------------------------
                                                   Heart
               Location in U.S.                 Failure and     Simple
                                                   Shock      pneumonia
------------------------------------------------------------------------
North Dakota..................................       $3,079       $3,383
California....................................        4,774        5,153
New York......................................        4,471        5,237
District of Columbia..........................        6,168        6,588
------------------------------------------------------------------------

  As you can see, the average payment for these same hospital 
procedures, in larger and more urbanized States like New York and 
California, is 150 percent of the Medicare payment for the same 
procedure in North Dakota. The average Medicare payment for these same 
procedures is twice as high in the District of Columbia. In my opinion, 
the difference is largely explained by a Medicare reimbursement system 
that is skewed in favor of urban area, and past legislation has done 
little to address that concern, despite efforts by some of us to do so.
  I have cosponsored legislation in the Senate, the Area Wage and Base 
Payment Improvement Act, S. 885, that would address the rural inequity 
in Medicare reimbursement in two 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.
  Second, S. 885 would increase the wage index for most of North 
Dakota's hospitals. This is a major area of concern that I hear about 
from North Dakota hospital administrators. 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.
  I am also a cosponsor of the Rural Health Care Improvement Act of 
2001, S. 1030. This legislation introduced by Senator Conrad would, 
among other things, provide for a new ``low volume'' adjustment payment 
for hospitals with a smaller number of patients and establish a 
revolving loan fund to help rural health care facilities make much-
needed capital improvements.
  I also want to mention a positive impact of the Balanced Budget Act 
of 1997. That legislation created the Critical Access Hospital program, 
which has proven to be critically important to the survival of North 
Dakota's smallest and most rural hospitals. Twenty-eight of North 
Dakota's rural hospitals, serving about 181,000 North Dakotans, have 
now converted to Critical Access Hospital status, which allows them to 
receive cost-based reimbursement from Medicare. I strongly support 
continuing this program and making some modest changes to strengthen 
the program. We also need to reauthorize the Rural Hospital Flexibility 
program, which provides grants to states to assist small rural 
hospitals in making the switch to Critical Access Hospitals.
  In addition, Congress also must make some other changes to Medicare 
reimbursement to head off some upcoming reductions in payments. For 
instance, Medicare reimbursement to physicians and allied health 
providers is scheduled to be reduced by 12 percent over the next three 
years because of problems

[[Page 16848]]

with the payment formula. In addition, reimbursement to home health 
agencies is scheduled to be cut by 15 percent on October 1, and a 10 
percent payment boost for rural home health agencies expires at the end 
of this year. And skilled nursing homes will be facing a 10 percent 
reduction in their Medicare payment rates in 2003 and a 19 percent cut 
in 2004 unless Congress acts to avert this ``cliff'' in funding. I 
support making changes in all of these areas to help address these 
concerns.
  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 that 
reflect rural health care as a strong national priority.

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