Selected Federal Government Issues With Rural Health:
Perspective Of The Rural Wisconsin Health Cooperative
By Tim Size, Executive Director, April 8th, 1996
Equity For Rural Hospitals' Slipping
Since federal Prospective Payment System (PPS) Year 9, the Medicare margin for urban hospitals has climbed markedly into positive numbers while that for rural hospitals remains negative. The urban-rural differential is now at seven percent, nearly the same as when we began.
Some urban hospitals will say that these numbers reflect superior management; but when you look at total margins that include Medicare and all other activities, rural hospitals are doing as well, in fact better, than their urban colleagues. It seems fair to say that reasonable people would conclude that the growing Medicare differential has more to do with urban political power in lobbying and gaming favorable Medicare reimbursement policies than it relates to any one's managerial competencies.
Data Source: Prospective Payment Commission's preliminary analysis of Medicare Cost Report data from the Health Care Financing Administration.
Rural Medicare Capita Payments Declining
Contrary to conventional wisdom, Medicare spending for rural person served has not been increasing; accounting for inflation, it has actually decreased. Program payments for rural residents increased by 2 billion dollars (7.4 percent) from 1992 to 1993 but that was due to a 7.4 percent increase in the number of rural elderly participating in Medicare.
Rural-Urban Expenditure Gap Growing
The average payment per rural person served fell from 86.5 percent of the national average to 85.2 percent. In Calendar Year 1993, the average amount per person served was $4,660 urban, $3,739 ruralp;a 25% difference. In Calendar Year 1992, the average amount per person served was $4,568 urban, $3,738 ruralp;a 22% difference.
Data Source: Health Care Financing Review Medicare and Medicaid Statistical Supplements, Table 13, 1993 and 1994 editions.
"Rural Seniors Are Shut Out Of HMOs"
From the front page of the St Paul Pioneer Press, Final Edition, 3/18/96: "Leland Dalan of Milan, Minn., says Medicare takes care of his basic medical needs. 'I've got no complaints about what I'm getting,' said Dalan, 74, a retired farmer and service station operator. But 'it's not fair' that he and his fellow seniors in the rural Midwest are, in effect, subsidizing extra health benefits - such as free prescription drugs, eyeglasses, hearing aids, dental care and even diet classes for Medicare beneficiaries in New York City, Miami and Los Angeles."
"Medicare, the government's giant health insurance program for the elderly, pays health maintenance organizations up to $759 a month to provide care for each senior citizen they enroll in New York City. But Medicare would pay an HMO only $229 a month to care for Dalan and his fellow seniors in Chippewa County in western Minnesota."
"In other words, Medicare pays more than three times as much for health care for New Yorkers as it does for Chippewa County residents - even though Medicare beneficiaries in both locations paid the same tax (2.9 percent of wages) and have the same premiums ($42.50) deducted from their monthly Social Security checks for Medicare supplemental insurance."
The "H.R. 2425 Floor" of $300 in 1996 proposed for the first time a minimum monthly payment for HMOs that serve rural (or urban) Medicare residents. This payment would have been like the often referenced Adjusted Average Per Capita Cost or "AAPCC" and would also have formed the basis for Medical Savings Account payments. The effect of this payment policy is shown in the chart below for a sample array of RWHC counties.
In addition to the floor, a system of higher than average annual updates for counties with below average utilization rates was proposed. As shown above, this would have helped lead to a convergence of the extreme variance of the AAPCC within Wisconsin and among all states.
Proposed Failsafe Budget Mechanism Falls Disproportionately On Rural Providers
Last Fall, the Rural Policy Research Institute in their analysis of the Republican budget proposals for the Rural Health Care Coalition of the U.S. House of Representatives. Our first working report was completed on December 5th and presented to the Coalition on the 10th. When Medicare reform proposals resurface, any "Failsafe budget mechanisms need to be applied fairly to all providers and not put rural providers disproportionately at risk as happened last Fall.
"Adverse selection between MedicarPlus choices and the traditional option will result in a triggering of the 'Failsafe' budget mechanisms. This is likely to lead to significant adverse consequences for rural residents who stay in traditional fee for service Medicare through cuts in provider reimbursement rates... The failure of managed care and other provisions to produce the savings necessary to achieve spending targets will trigger the further reductions in fee for service payments under the Failsafe budget mechanism, falling disproportionately on rural providers."
We Still Need To Implement A Medicare "Part A" Occupational Mix Adjustment
In 1994, the National Advisory Committee on Rural Health repeated its 1989 recommendation to the Secretary of Health and Human Services that the "Secretary base the wage index, which is used to calculate Medicare hospital payments, on relative labor costs adjusted to a standard occupational mix. To accomplish this the Secretary should establish a data base for making a labor market specific occupational mix adjustment."
"Under the prospective payment system (PPS), hospitals are paid a standardized amount that is adjusted for the diagnosis of the patient and the labor costs of the labor market area. Hospitals receive higher payments for treating patients with more severe disease. These higher payments are supposed to compensate a hospital for the more costly staffing mix that is required to treat these patients. The labor adjustment is supposed to account for differences in labor prices among labor market areas. However, as currently calculated, the wage index provides a second, duplicate source of compensation for hiring a more costly staff mix."
Title V - Promoting Access and Availability of Health Coverage in Rural Areas
The House Rules Committee did not make in order the rural health amendment to H.R. 3103 offered by Gunderson (WI), Roberts (KS), Poshard (IL) and Mr. Gutknecht (MN). However leadership did promise these legislators that a rural health bill would be debated on the House floor this year.
· Establishment of Critical Access Hospitals. Creates a limited service hospital program. Grants would be available to states to establish rural hospital networks with at least one critical access hospital and one limited service hospital. To become a limited service hospital, the average length of stay would be 72 hours and six beds. Facilities reimbursed on a reasonable cost basis.
· Clarification of Medicare payments to EACH/RPCH facilities. Technical payment provision to help seven states that rural health demonstration networks consisting of Essential Access Community Hospitals (EACH)/Rural Primary Care Hospitals (RPCH).
· Establishment of Rural Emergency Access Care Hospitals (REACH) Creates an emergency service hospital program providing 24-hour health care. A new category of hospitals under Medicare to provide for medical screening exams and treatment for emergency medical conditions. Facilities reimbursed on a reasonable cost basis.
· Classification of Rural Referral Centers (RRC). Prohibits the Medicare Geographic Classification Review Board from denying a RRC a classification for purposes of determining the area wage index applicable to the hospital. Grandfathers RRC's classified as of FY 1994.
· Small Rural Hospital Antitrust Fairness. Provide antitrust relief to small rural hospitals attempting to consolidate or share health care services.
· Exclude National Health Service Corps Loan Repayment from gross income. For tax purposes, health care professionals participating in the NHSC would not have to include the value of their loan as income.
· Enhancement of Telemedicine Services. Expand telemedicine in rural areas by directing HHS to develop a payment methodology for teleconsultations performed in underserved areas. Currently, HHS does not have a reimburse mechanism for telemedicine procedures.