Senator Lamar Alexander on Thursday joined a bipartisan group in introducing legislation to protect hospitals from shrinking Medicare reimbursements that make it harder for them to recruit staff, care for patients, and stay in business. Officials said "Tennessee hospitals have lost nearly $99 million since 2011 because of Medicare’s flawed reimbursement formula."
“Like many hospitals, Tennessee hospitals are getting less and less from Medicare, while hospitals in other areas of the country get more and more for the same services, because of a flawed formula,” said Senator Alexander, the chairman of the Senate health committee. “This bill will protect Tennessee hospitals, and others around the country, from shrinking Medicare reimbursements that make it harder for them to recruit skilled doctors and nurses, make payroll, pay bills and care for patients.”
Medicare uses a wage index to calculate the costs of labor associated with hospital services for Medicare patients—so hospitals in areas with a high cost of living get more from Medicare and hospitals in areas with a low cost of living get less. The wage index sets the national average at 1.0 – so a San Jose, Ca., hospital is indexed at about 1.77 and a Johnson City, Tn., hospital is indexed at about 0.74.
In recent years, Tennessee hospitals have seen drastic decreases in payments as a result of this formula. For example, the Knoxville region saw its AWI decrease from 0.92 to 0.73 between 2000 and 2014.
The Fair Medicare Hospital Payments Act of 2016 (S. 2832) – which is co-sponsored by Senators Johnny Isakson (R-Ga.), Alexander, Mark Warner (D-Va.), Sherrod Brown (D-Ohio), Jeff Sessions (R-Al.) and Tim Kaine (D-Va.) – would protect hospitals in states like Tennessee from increasingly lower compensation for the services they provide by establishing a national floor for the Medicare Area Wage Index (AWI), set at 0.874, meaning many Tennessee hospitals would see an increase in their Medicare reimbursements.