For immediate release - Thursday, July 3, 2003.
Contact Bob Brammer - 515-281-6699.
State Fights for Fair
General, Governor, Members of Congress, and
medical leaders challenge
Federal government reimbursement rates that put Iowa last in the nation.
Iowa Attorney General Tom Miller, Governor Tom Vilsack and other Iowa
elected officials and medical leaders issued a sharp, bipartisan challenge
today to the Medicare reimbursement rate proposed by the U.S. government
-- a rate that ranks Iowa last in the nation in money spent in the state
per Medicare beneficiary. Sen. Tom Harkin, Rep. Leonard Boswell, Rep.
Steve King, and Kirk Norris, President and CEO of the Iowa Hospital Association,
joined the bipartisan effort.
The challenge said
"the inappropriately low Medicare reimbursements are harmful to Medicare
beneficiaries, the hospitals that serve them, and the Iowa economy as
a whole" -- and it claimed the reimbursement scheme fails to comply with
the mandates of the Social Security Act.
low payment rates" proposed by the Centers for Medicare and Medicaid Services
(CMS) for hospitals in Iowa "are flatly inconsistent with the law governing
reimbursement," said the formal letter challenging
CMS's proposed reimbursement plan. The agency will have about a month
to consider the Iowa challenge before it issues its final reimbursement
rates on August 1 for the federal fiscal year beginning October 1.
Under the Medicare law,
payment system rates must be adjusted "for area differences in hospital
wage levels." But the Iowa officials say the proposed reimbursement rate
runs afoul of the statute's requirement that the adjustment must be made
reflecting actual relative wage levels and the cost of providing inpatient
services for Iowa hospitals compared to national wage levels.
"The agency has not
satisfied this obligation," the Iowa officials wrote -- and they proposed
several actions CMS should take to remedy the problem.
Attorney General Tom Miller,
who coordinated the formal Iowa "Comment" to CMS, said: "Our message demonstrates
the shortfall in reimbursement to Iowa and the widespread damage it inflicts
on our state. CMS has an obligation to act now to ensure that the wage
index factor complies with the federal law and accomplishes the purposes
of the law."
Lt. Governor Sally Pederson,
who appeared with Miller and Boswell and leaders of Iowa's medical community
at a State Capitol news conference announcing the action, said: "Iowans
value security and fairness -- and at the center of that is healthcare
security and Medicare fairness. The time is right to correct the inequity
of the Medicare payment system. We need to ensure that this essential
federal program meets its obligations to all Americans who depend on it
for their health care, comfort, and quality of life."
The formal "Comment" on
the Medicare reimbursement rates is addressed to Thomas A. Scully, Administrator
of the Centers for Medicare and Medicaid Services (CMS) of the Dept. of
Health and Human Services.
Miller said the deadline
for submitting the Comment is July 16 - but it is being submitted now
so CMS has ample time to review the Iowa argument before CMS issues its
final reimbursement rate August 1. Other officials and medical community
leaders may join in supporting the Comment before the July 16 deadline,
Miller said the State was
assisted in drafting the Comment by the law firm of Hogan & Hartson,
one of the nation's leading health care law firms.
Harm Caused by Iowa's Lowest-in-the-Nation Reimbursement
The Iowa leaders'
letter detailed a litany of damage caused by Iowa's reimbursement rates
for money spent in Iowa -- rates lower than any other state in the nation,
at $3,414 per beneficiary. Iowa's average trails the next lowest state
by more than $275 per enrollee and it is less than half the average of
the state with the highest per capita expenditure. The letter tells CMS
there are many damaging consequences of the inordinately low reimbursement
hospitals lose money treating Medicare patients -- amounting to 6.5% of
their total operating expenditures in 1999 (the most recent data available)
and the worst in the nation. (Those losses, the letter says, indicate
"it cannot seriously be questioned that Iowa hospitals are being woefully
underreimbursed by the Medicare program.")
Iowa hospitals must cover those losses, their overall operations are harmed.
It is more difficult for them to keep medical equipment and facilities
up to date. It is more difficult for them to invest in newer technologies
and advancements. They have more difficulty retaining top medical staff.
Iowans often must travel long distances for care.
Iowans -- and businesses that employ them -- must make up the shortfall
in Medicare reimbursements by paying more for hospital care. The higher
costs lead to higher insurance premiums, which make it more costly for
businesses to operate in Iowa, which puts the state at a competitive disadvantage.
"This spiral harms
Medicare beneficiaries and our health care community," Miller said, "and
it causes a ripple effect of damage that washes over Iowa's whole economy."
has "obligation" to adjust the "hospital wage index":
The Iowa officials
said the state's low Medicare reimbursement level largely results from
the "hospital wage index" -- both the wage index values and how the wage
index is applied by CMS. CMS's proposed formula fails to comply with the
Medicare law, the Comment argues, because it results in application of
extremely low wage index factors in Iowa that don't reflect either actual
labor costs here or the proportion of a hospital's total costs expended
on labor. The wage index values and how they are applied both should be
revised to comply with the law, the Comment said.
CMS proposes to continue
to peg the labor-related share at 71% of hospitals' overall expenses,
but the Iowa officials say the share should be reduced to just over 61%
(which would result in substantially higher Medicare reimbursement in
Iowa.) The Comment notes, for example, that computer services, postage,
and accounting and billing services are actually purchased nationally
but are viewed by CMS as affected by local labor markets - which results
in an inappropriate increase in the "labor-related" share of costs discounted
for reimbursement. The Comment also cited MedPAC's well-respected figures
that wage-related costs as a percentage of total operating costs total
just over 61%, well short of the 71% CMS proposes to continue into next
The formal Comment urged
CMS to reduce the labor-related share to just over 61% and to consider
other corrective measures, such as providing additional payments in states
with low (or negative) Medicare hospital margins, adjusting hospital wage-index
values, and including a floor on wage index values for rural areas.
Noting that Iowa providers
furnish care that is among the most efficient and highest quality in the
nation, the Comment also urged CMS to consider giving hospitals a Medicare
bonus payment for ranking high on quality measures. CMS is considering
a demonstration project on those lines.
"The federal government
has an obligation to remedy this situation," Miller said. "The Medicare
statute requires that the wage index must accurately reflect Iowa wage
levels compared to national wage levels, but the proposed formula will
not fulfill this requirement."
Miller noted that
more than 450,000 Iowans depend on Medicare and nearly half of all Iowa
hospital income comes from Medicare -- but that Medicare doesn't fully
cover the hospitals' costs. "Overall, there's a gigantic gap between what
Medicare pays and what it costs Iowa hospitals to care for Medicare patients,"
he said. "We all are paying for that gap, and it's not fair. Our message
is that the U.S. government has an obligation to fix this problem."
Click here for link to the formal Comment letter. (PDF)
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