HHS Secretary Alex Azar on Thursday acknowledged "absurdity" in the Medicare wage index after several senators complained about wide disparities in payments between states.
During a Senate Money Committee hearing, Azar said HHS is seeking comments on a revision to the entire wage index system but cautioned that HHS can only change the index so much on its own.
Sen. Sheldon Whitehouse (D-R.I.) complainted that hospitals in his state have a lower wage index compared to hospitals in nearby states, saying it "boggles his mind" why his local hospitals would get a 20% hit compared to those in Connecticut.
"I appreciate you recognize so much of the absurdity is based into statute," Azar said to the senator.
Azar told lawmakers last June that Congress needs to update the wage index that was originally created in the 1980s. Rural hospitals in areas that have a lower cost of living have cited the index as a reason for increased closures.
HHS' Office of the Inspector General also last year called for HHS to make changes to the index program to address inaccuracies in payments.
But Whitehouse and other senators bashed Azar over a decision that the agency made last year to let a rural floor policy expire at the start of federal fiscal 2019 in October. The rural floor says an urban hospital's index can't be below a rural hospital's index if both are in the same state, but the CMS was concerned it caused a disparity with rural hospitals that had no urban hospitals in the state.
States with a mix of urban and rural hospitals such as Delaware, New Jersey and Rhode Island no longer got an increase in their wage index when the policy expired.
Sen. Bob Menendez (D-N.J.) said that the Trump administration is the first administration to ever do away with the policy.
"There is a real consequence for Jersey hospitals," he said.
After the elimination of the policy, Whitehouse was skeptical that the administration would be able to fix the index soon.
"I have zero confidence in that process producing anything resembling a solution to this problem," he said.