June 22, 2001

MedPAC Report Focuses On Rural Health Care

With the exception of the Medicare+Choice program, rural health care is fairly healthy, according to the Medicare Payment Advisory Commission's (MedPAC) 2001 June Report, which was released June 15. However, the report calls for "continued vigilance" to ensure that Medicare policies do not inadvertently weaken the rural system and, when appropriate, reflect special circumstances confronting rural beneficiaries and providers. MedPAC also notes that few Medicare+Choice plans service rural beneficiaries and that efforts to increase this option in rural areas face a difficult uphill battle due to specific circumstances facing rural health plans, such as a relative paucity of providers and low Medicare beneficiary population density.

Among specific changes set forth in the report, MedPAC recommends that the hospital inpatient prospective payment system include an adjustment for hospitals with low volumes of discharges, as well as increase the cap on the Medicare disproportionate share add-on from 5.25 percent to 10 percent for rural hospitals. The report also recommends that in FY 2002, the Secretary should implement fully the policy of excluding from the hospital wage index salaries and hours for teaching physicians, residents, and certified registered nurse anesthetists. Currently, these wages are being phased out over a five-year period; FY 2002 will be the third year of the transition. In a related area, MedPAC rejected the idea of establishing a wage index "floor," a policy option that is being advocated by some hospital groups.

Information: Karen Fisher, AAMC Division of Health Care Affairs, 202-862-6140.