Medicare Payment Cuts Could Hurt State

As the national spotlight focused on other aspects of federal health care reform this past year, a less-publicized but highly significant debate over Medicare funding based on geography was taking place. Depending on which side prevails, billions of dollars could be redirected away from urban patients, physicians, and hospitals to their rural counterparts.

The funding-shift proposal was fueled by the longstanding belief among rural physicians and hospitals that Medicare underpays them, leading to workforce shortages and access problems.

While the Mass. Medical Society (MMS) has traditionally sympathized with that position, in a budget-neutral world, increased funding for rural areas means decreased funds and under-reimbursement for urban areas, which is how Medicare classifies Massachusetts.

Meanwhile, some published studies that compare regional health care cost and value depict Massachusetts as a high-cost, low-value state. Funding-shift proponents used that data as a rationale for misguided amendments to redirect dollars away from Massachusetts and several other states to rural areas.

At the core of the MMS argument against such changes are two points:

• Data has consistently shown that practice costs (rent and wages) in urban areas are higher than in rural zones, which is why the Medicare formula, from its inception, has included a geographic adjustment; and
• The national cost/value findings do not sufficiently account for socioeconomic status and urban versus rural disparities in health status.

With the support of the entire Massachusetts Congressional delegation, U.S. Reps. Michael Capuano and Richard Neal led the fight to prevent the redirecting of Medicare funds. As an influential member of the Senate Finance Committee, U.S. Sen. John Kerry made sure that any plan to allocate more Medicare money to rural states did not take money away from urban areas. As a result of these efforts, the Accountable Care Act that was passed in March protected our state from any geography-based funding shifts and mandated a number of studies into these issues.

In September, MMS President Dr. Alice Coombs testified before an Institute of Medicine meeting of a commission studying geographic adjustments. She made three main points:

• Real practice expenses are dramatically higher in Massachusetts than the national average;
• Underfunding practice expenses will exacerbate physician shortages and impede patient access; and
• Cutting Medicare reimbursements to urban providers will worsen access and outcomes for already underserved and vulnerable populations.

In a separate move this past summer, the Centers for Medicare and Medicaid Services issued proposed rulemaking that would redirect billions of dollars away from Massachusetts and other states by changing geographic-variable calculations in the Medicare Economic Index. If this rule is finalized, all physicians in metro Boston would see a 6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} reduction in Medicare payments, and all other Massachusetts physicians would experience a 3{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} cut.

Sen. Kerry and Rep. Capuano both took the lead in their respective chambers opposing this proposal. Rep. Capuano cosponsored a letter of opposition to Health and Human Services Secretary Kathleen Sebelius. Nearly 80 representatives signed the letter, including the entire Massachusetts House delegation. Sen. Kerry sponsored a similar letter opposing the proposal, which garnered significant Senate support, including Sen. Scott Brown’s signature.

Alex Calcagno writes about government affairs for Vital Signs, the member publication of the Mass. Medical Society.