S.C. Hospitals Fight Medicare ' Boondoggle'

7:37 PM, Mar 28, 2013   |    comments
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By Mary Orndorff Troyan

Gannett Washington Bureau

WASHINGTON - South Carolina hospitals are losing out on about $10 million a year because of a change in the Medicare funding policy that mostly benefits one state at the expense of others.

Known as the "Bay State boondoggle" by its critics on Capitol Hill, the provision in the 2010 health care law has pumped an extra $367 million annually into the 82 hospitals in Massachusetts - and reduced payments to hospitals nearly everywhere else.

The South Carolina Hospital Association is among those urging Congress and the White House to correct the "ill-advised" provision.

"Scarce Medicare funding should reward value and efficiency in health care, not be diverted based on artful manipulation of obscure payment formulas," hospital officials from South Carolina and 19 other states wrote in a letter to the White House.

Massachusetts is benefiting from the wage-related part of the formula used to reimburse hospitals for treating Medicare patients. The reimbursement levels in each state cannot fall below what is paid to the state's rural hospitals, typically located in low-wage areas.

Under the amendment to 2010 health care law, the wage-related reimbursements must come from a national pool of money. That means increases to hospitals in one state result in decreases to hospitals in other states.

Massachusetts is a special case because its only rural hospital, according to the federal definition, is on Nantucket Island, a seasonal getaway frequented by the very rich, with a high cost of living and high wages.

According to one estimate, South Carolina gets about $10.2 million less in annual reimbursements for in-patient and out-patient care of Medicare patients because of the provision benefiting Massachusetts. The National Rural Health Association says the provision will reduce reimbursements to hospitals in Alabama and 48 other states by $3.5 billion over the next 10 years.

"This is just a very egregious example of the existing inequity in the system," said J. Michael Horsley, president of the Alabama Hospital Association. "I don't think the intent ever was to let one hospital set the rural floor where you could pump money into it and raise wage rates and continue to siphon money out of the rest of the states."

The Senate, in a bipartisan but largely symbolic move, voted last week to repeal the provision. The repeal - promoted by Sens. Tom Coburn, R-Okla., and Claire McCaskill, D-Mo. - passed 68-31 on March 22 as an amendment to the Senate budget resolution. Both South Carolina members, Sens. Lindsey Graham and Tim Scott, voted for the repeal.

The amendment to the budget resolution doesn't have the force of law, but the repeal vote shows growing momentum for a bipartisan effort to dump the Bay State boondoggle. Pending legislation from McCaskill would sunset the provision this October.

Members of the Massachusetts congressional delegation said the Medicare provision benefiting their state didn't result from any secret plotting on their part. Instead, they said the amendment to the Affordable Care Act from Sens. Robert Menendez, D-N.J., and then-Sen. John Kerry, D-Mass., was intended simply to return the wage-related part of the Medicare formula to what it was before federal officials changed it in 2008.

"Allegations that a Massachusetts-only 'fix' was 'slipped in' are clearly false, and we must conclude, motivated by a desire not to reform Medicare policy but to attack the Affordable Care Act," wrote the Massachusetts lawmakers in a January letter to President Barack Obama.

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