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Grassley to Seek Extension in Lame Duck of Mechanism to Boost Hospital Payments

By John Reichard, CQ HealthBeat Editor

October 20, 2006 -- Senate Finance Committee Chairman Charles E. Grassley traveled to Pennsylvania on Friday to say he'll seek an extension of statutory language to ensure that Medicare payments to hospitals accurately reflect local wage rates.

"Medicare hospital payments need to adequately account for differences in wages so that hospitals are able to obtain staffing in a competitive workforce environment," Grassley said in a press release Friday.

Grassley made the trip to give a boost to the struggling Senate reelection campaign of Pennsylvania Republican Rick Santorum, a fellow member of the Senate Finance Committee.

Santorum highlighted his position on the powerful committee in a press release, saying he was "able to secure a temporary extension of funding" for hospitals in northeastern Pennsylvania "financially disadvantaged" by the current wage mechanism.

The extension remains to be enacted, however. Grassley said he would seek its enactment as part of a package of Medicare legislation that "may" be considered during the lame-duck session of Congress scheduled to start Nov. 13. A Grassley aide said that negotiations have begun between House and Senate staff on assembling the Medicare package.

At issue is Section 508 of the Medicare overhaul law (PL 108-173), which allows certain hospitals to be "reclassified" into different geographic regions for purposes of applying a Medicare wage index. Hospitals near high-cost areas complain that the index doesn't accurately reflect the cost of wages they must pay to compete for labor in such areas.

The 508 provision is due to expire in March 2007. The language Grassley is seeking would extend it through September 2007. Grassley said the extension would give him time to work on a long-term solution to problems with the index.

A hospital lobbyist estimated that hospitals have benefited under the Medicare law's reclassification mechanism to the tune of a billion dollars. Grassley spokeswoman Jill Kozeny couldn't confirm the estimate but said the cost of the six-month extension would be under $100 million. She noted that 21 senators wrote to Grassley and Finance Committee ranking member Max Baucus, D-Mont., in June urging an extension of the 508 provision. Bills are pending, such as S 3500, that would require a longer extension than Grassley has proposed, she said. In developing his long-term fix, Grassley would consider recommendations on wage index changes by the independent federal Medicare Payment Advisory Commission, she said.

Santorum said that without Section 508 funding, hospitals in northeastern Pennsylvania stand to lose $34 million a year.

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