Long-Term Fix to Medicare Wage Index Formula Would Address Disparity Benefiting Bigger States

WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) today threw her support behind legislation to increase Medicare payments to rural states like Mississippi, which could help rural Mississippi hospitals ease growing financial pressures.

Hyde-Smith, a member of the Senate Labor, Health and Human Services, and Education Appropriations Subcommittee, is cosponsoring the bipartisan Save Rural Hospitals Act of 2020 (S.3665).  The bill would benefit Mississippi by setting a national minimum for the Medicare Area Wage Index (AWI) for determining Medicare reimbursements to hospitals

Hyde-Smith last year successfully encouraged the Trump administration to update the AWI formula for reimbursements for patient care, taking into account, among other things, the cost of labor in that geographic area.  According to the Mississippi Hospital Association, this formula update would provide an estimated more than $20 million in additional Medicare reimbursements to Mississippi hospitals annually.  These changes, however, expire in three years.

“I was pleased last year when the Trump administration updated this Medicare formula to be fairer to rural states like Mississippi.  The prior policy exacerbated inequities between rural and urban areas, and I am glad that our rural hospitals are now finally getting paid fairly,” Hyde-Smith said.  “This bill would permanently reform the formula by setting a nationwide minimum.  It is something we need to help fortify our rural hospitals, especially those at risk of closing.”

Authored by Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-Tenn.), S.3665 would:  

  • Establish an appropriate AWI national minimum (0.85)
  • Ensure payments to rural hospitals for the care they provide while preserving the existing reimbursements for urban hospitals
  • Ensure fairness in reimbursements for hospitals across the country, including many hospitals that are facing closure in rural areas
  • Fix severe and disproportionate disadvantages that unfairly penalize hundreds of communities and hospitals across the United States

Under a national 0.85 rural wage index floor, nearly all Mississippi hospitals would see a AWI reimbursement rate increase.