House Decides Against Sending Billions in Medicare Payments to Low-Cost States

Cheryl Clark, for HealthLeaders Media, March 23, 2010

In the 11th hour of health reform negotiations last week, one strategic plan would have redirected about $3 billion of Medicare funds budgeted for California’s hospital patients to states with historically lower Medicare reimbursement rates.

The idea was that greater levels of reimbursement to those states might persuade any recalcitrant lawmakers to vote for the bill. But that approach is no longer in play.

"It was a part of the discussions that took place over the weekend," acknowledged Jan Emerson, spokeswoman for the California Hospital Association.

"But as a result of very intense negotiations involving not just California, but the other large high-cost states, this was ultimately removed. CHA and [the American Hospital Association] both withheld our support of the legislation until this issue was resolved, which happened late Friday night."

"The bottom line," Emerson said, "is that the final legislation sets out for a study of why Medicare costs vary in different parts of the country. We support this study.

"Also, the legislation allocates $400 million from the Hospital Insurance Trust Fund in 2014 and 2015 to be given to counties in smaller more rural states that have the low Medicare payment rates."

Emerson added that the difference in Medicare reimbursement to hospitals by region has "been a key issue that we've been working on for the past year. There are very good reasons why Medicare payments vary in different parts of the country. California and other large states have higher costs of living than do smaller, more rural states.

"Wages are higher, real estate is higher, utilities are more expensive, etc. Additionally, the patients we treat are more complex—many are uninsured, poor, inner-city."

Cheryl Clark is a senior editor and California correspondent for HealthLeaders Media Online. She can be reached at

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