Shelby: CMS Finalizes Long-Awaited Medicare Wage Index Fix

Statement

U.S. Senator Richard Shelby (R-Ala.) today announced that the Centers for Medicare & Medicaid Services (CMS) has finalized the Inpatient Prospective Payment System (IPPS) proposed rule which will now provide relief from the increasing disproportion of reimbursement to hospitals created by the Medicare wage index.

"Alabama hospitals have suffered the negative effects of the Medicare wage index for over two decades," said Senator Shelby. "I am proud that Administrator Verma and CMS have worked tirelessly to ensure that this injustice to our state's hospitals has been appropriately addressed. This rule adjustment will bring balance to Medicare reimbursement for Alabama, particularly our rural hospitals, and hospitals across the country."

Prior to the long-awaited rule change, CMS used flawed wage index data based on regional labor costs to determine Medicare reimbursement levels for hospitals in a particular area. Many hospitals in Alabama and around the nation have been negatively affected as a result of flawed data.

On multiple occasions, the Office of Inspector General (OIG) for the Department of Health and Human Services (HHS) has pointed out that the area wage index is an issue that CMS should address. In November of 2018, HHS OIG issued a report that outlined concerns with the current wage index calculations, including incorrect or incomplete wage data, insufficient reviews of information, and the inaccuracy of rural floor and hold-harmless provisions. With the lowest wage index in the country, many of Alabama's urban and rural hospitals have suffered from low reimbursement levels, while hospitals in other states have taken advantage of overpayments illustrated in the report. Most recently, the HHS OIG released an updated list of top 25 recommendations in July to highlight waste fraud and abuse in the health care system. Addressing the area wage index was listed in the top five issues.

Earlier this year, Senator Shelby led a letter, signed by the entire Alabama Congressional delegation, to CMS Administrator Seema Verma encouraging the agency to provide Alabama hospitals relief from the Medicare wage index through the use of its rulemaking process authority. Prior to the letter and throughout this entire process, Senator Shelby participated in many calls, meetings, and discussions with Administrator Verma and other CMS officials to encourage an adjustment to the Medicare wage index.

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