Grassley, Baucus Sponsor Bill to Improve Accuracy of Medicare Payments to Hospitals
Grassley, Baucus Sponsor Bill to Improve Accuracy of Medicare Payments to Hospitals
WASHINGTON - Sens. Chuck Grassley and Max Baucus today introduced legislation to improve the accuracy of Medicare payments to hospitals that provide acute care. The senators said their bill the Medicare Wage Index Improvement Act of 2006 is needed in order to give the Centers for Medicare & Medicaid Services (CMS) the opportunity to develop a process in which the agency accurately adjusts inpatient hospital payments for differences in area labor prices.
"These payment adjustments can have a big impact on a full-service hospital's ability to keep its doors open in rural America, and area residents depend on these institutions for health care," Grassley said. "Congress needs to act to make certain the Medicare program can properly develop the adjustments and, in turn, make accurate payments."
"Medicare payments to hospitals must be both accurate and predictable. Adjusting hospital payments with hurriedly-collected data, at the 11th hour, will provide neither accurate nor predictable payment information," said Baucus. "This bill will ensure that any unforeseen consequences of phasing in of the occupational mix adjustment can be spotted early and controlled
or avoided."
Medicare makes a number of adjustments to payments for inpatient hospital services to take into account differences such as geographic location, types of patients served and staffing. The area wage index is one of these adjustments and is intended to account for differences in area labor prices. The Benefits Improvement and Protection Act of 2000 also required CMS to
adjust the wage index for a hospital's occupational mix in order to ensure that the wage index reflects differences in labor costs among markets and not a hospital's decision to employ higher skilled and more expensive workers. CMS is required to collect data every three years on a hospital's staffing in order to calculate the occupational mix adjustment.
Based on data collected in 2004, CMS only adjusted 10 percent of the wage index for occupational mix in fiscal years 2005 and 2006 in part because the agency lacked confidence in the data. The agency originally proposed to continue this limited adjustment for occupational mix in fiscal year 2007, but a federal appellate court ordered the agency to apply the occupational mix adjustment, based on data collected in 2006, to 100 percent of the wage index effective for fiscal year 2007.
In order to comply with the court's decision, CMS collected these data hurriedly, using only three months of data collected this year and will not be able to post the final wage index information until after the agency announces the fiscal year 2007 inpatient hospital payment rates. On top of that, since the survey instrument used to collect data in 2006 has changed from the last time the agency collected data in 2004, CMS will not have sufficient time to analyze fully the data and determine its
accuracy.
Grassley and Baucus said that given the lack of opportunity to ensure data accuracy, the uncertainty of how the occupational mix adjustment will affect hospital payments, and the disruption that can occur in moving immediately from a 10 percent adjustment for occupational mix to a 100 percent adjustment, the Medicare Wage Index Improvement Act of 2006 would limit application of the occupational mix to the current rate for a two-year period and require the agency to conduct a study on the collection of data and manner in which the occupational mix adjustment is calculated. Grassley is Chairman and Baucus is Ranking Member of the Senate Committee on Finance, which is responsible for Medicare legislation.
The text of the floor statements made today by Grassley and Baucus follow here.
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http://finance.senate.gov/press/Gpress/2005/prgb080106.pdf