Delegation Expresses Concerns About Changes To Medicare Wage Index

The entire New York Congressional delegation has expressed concerns over recent Centers for Medicare and Medicaid Services proposed changes to the Medicare area wage index, arguing that it would disproportionately harm hospitals across New York state.

The Medicare Wage Index aims to ensure that Medicare payments adjust for markets with the highest costs of living, in which hospitals must pay employees more than they would in lower-wage areas. CMS proposed a change that would reduce wage index payments for hospitals in the top quarter of the most expensive hospital markets in the country, while sending the money to hospitals in the lowest quarter. While numerous New York hospitals – including those in urban, suburban and Upstate areas – stand to lose funding, none of New York’s rural hospitals stand to gain funding.

“New York hospitals never cease to provide innovative, world-class treatment to our communities, but they are often forced to do so on a razor-thin budget margin. New York can be an expensive place to live and do business, and so we need to ensure that hospitals have the funding they need to attract world-class doctors and health care providers,” said Sen. Charles Schumer, D-New York. “That’s why I, along with the entirety of New York’s Congressional delegation, am urging CMS to reverse course on this deeply misguided rule. The struggles faced by New York’s hospitals are no different from the struggles faced by the countless others across the nation, they must not be allowed to suffer as a result of their ZIP code.”

The Medicare AWI is a crucial adjustment applied to the reimbursement of hospitals that raises or lowers Medicare payments to account for geographic differences in labor costs. The representatives argued that the proposed changes from CMS would ignore the core intent of AWI: to account for real differences in wages in each labor market.

Instead, the representatives stated, CMS’ proposal would arbitrarily reweight AWI and unfairly redistribute funds across states without a sound policy rationale.

While CMS argues the proposed changes to the Medicare AWI would seek to help rural hospitals, the representatives pointed out that not a single one of New York’s rural hospitals, who face the exact same challenges as other rural hospitals across the country, would see a benefit from the policy. It is estimated that the proposed policy would reduce Medicare inpatient and outpatient funding to New York’s hospitals, both rural and urban, which would stand to lose roughly $53 million each year because of the changes. When factoring in Medicare payments for patients with private Medicare Advantage coverage, the potential losses jump to an estimated $83 million annually.