Torricelli, Corzine Bill Would Eliminate Geographic Adjustment of Some Medicare Payments

Sens. Robert Torricelli (D-N.J.) and John Corzine (D-N.J.) have introduced a bill that would eliminate a "disparity in how Medicare reimbursements are allocated" based on the hospital wage index, the States News Service/Bergen Record reports. Medicare reimbursements for inpatient services now are adjusted based on the average of all the hospital wages paid in a metropolitan statistical area, as determined by HCFA in consultation with hospitals, so that hospitals with higher labor costs receive higher payments. By law, there are options for hospitals to be re-designated to an MSA other than the MSA where the hospital is acutally located (HCFA fact sheet, March 2001). The States News Service/Record presents the following example to illustrate the situation: if federal regulators approve a request from a hospital in the Bergen-Passaic statistical area to be reclassified into the New York City statistical area -- where average wages are higher -- that hospital's reimbursement would go up and hospitals remaining in the Bergen-Passaic area would likely have reduced Medicare payments. The bill, which is based on a recommendation from the Medicare Payment Advisory Commission, would prevent hospitals that have not been reclassified from having their payments reduced. The States News Service/Record reports that the regulation causes about 250 hospitals nationwide to lose $80 million per year in Medicare payments. Because the regulation "favors New York City hospitals," New Jersey hospitals lose a total of $50 million annually in Medicare payments, the States News Service/Record reports. Torricelli said, "It is patently unfair for some hospitals to receive less Medicare funding than others competing in the same labor market." Rep. Marge Roukema (R-N.J.), who plans to introduce the companion bill in the House, added, "Many [New Jersey] hospitals are unable to reclassify into the labor markets of New York or Philadelphia. They should not have their collective wage index reimbursement reduced just because one hospital reclassifies" (Vekshin, States News Service/Bergen Record, 5/2).