RUPRI Policy News: Rural Health Care

By Jocelyn Richgels, RUPRI Associate Director, Policy Programs

Rural health care policy is getting a rare surge of national attention. Two leading health care policy institutions, the Medicare Payment Advisory Commission (MedPac) and the Institute of Medicine (IOM), have released major reports that touch on rural health policy from two important angles. MedPac examines health-care policy that influences rural providers’ decisions and beneficiaries’ access to care, while IOM studies payment policies that are affected by the differences in cost of providing care across the geographic spectrum.

These reports are likely to have an influence on rural health payment considerations well into the future. Major health care organizations with an interest in rural health care policy, such as the National Rural Health Association, have weighed in with numerous studied reactions to the reports’ findings. Both Houses of Congress have reviewed the reports, staff have questioned the authors and will ponder how, if at all, report findings will factor into future health care policy legislation. 

Each report was undertaken to respond to different charges from policymaking bodies. However, both reports addressed geographic variability in health care across this country, albeit for different purposes.  

Medicare Payment Advisory Commission (MedPac)
MedPac is the independent Congressional agency that advises Congress on issues affecting the Medicare program. It released its biannual report in June, with Chapter 5 devoted to “Serving rural Medicare beneficiaries.”  MedPac last included a rural-focused chapter in its 2001 report and has released reports on rural-specific policies in the intervening years. Congress required that the Commission report on rural access to care, quality of care, rural-specific payments to hospitals and the adequacy of Medicare payments to rural providers.

The factors that affect access to care and the quality of care across the rural-urban continuum has a large research base and is better understood with each new study. This report, however, highlights variations across regions in the country.

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Source: MedPac Report, chapter 5, page 132

MedPac finds less variation across rural-urban places within regions than across different regions (see Table 5-7 above), particularly in access to and volume of care. The geographic variations across regions are noticeable in rural physician-to-population ratios, in the volume and utilization of care across regions, and the use of post-acute care, such as skilled nursing facilities and home health care. For people familiar with the variations in poverty, wealth, and health care status across different rural regions of the country, this finding from MedPac may not come as a surprise. The question now is whether there is enough research to understand why these variations exist, and whether and how much influence policy can have on evening them out. 

One area that federal Medicare policy already tries to address is geographic differences in the cost of providing care, through geographic adjustments to fee-for-service Medicare payments. Payments in high-cost and low-cost areas are increased and decreased respectively, relative to the national average.

Institute of Medicine (IOM)
The IOM is the independent health division of the National Academy of Sciences. IOM was charged through the Affordable Care Act to produce two reports on improving the accuracy of the data sources and methods used for making geographic adjustments to Medicare payments for both hospitals and physicians.

IOM’s major recommendation is that physician payment areas be transitioned to the same current payments areas as hospitals, which are divided into 441 metropolitan statistical areas (MSAs) and statewide non-metropolitan statistical areas. Given that MSAs are established based on resident populations and employment commuting patterns, payment rates based on existing known labor markets is the rationale for moving physician payment rates to the same structure as hospitals. The report also argues that using the same labor market definition for both hospitals and payments is in line with increasing integration of hospital and physician care settings and movement toward Accountable Care Organizations, where hospitals, physicians and other providers are jointly responsible for care delivery. 

The effect of payment changes on rural providers was an explicit consideration of the IOM, because as the report points out, the current physician payment areas were partly designed to attract providers in nonmetropolitan areas through payment calculations. Under this MSA/non-MSA approach, nonmetropolitan provider payment areas would see a decrease between 2 and 3 percent, under slightly different payment structures, while large metropolitan areas would increase payments by less than 1 percent to about 1 percent. IOM also found that “geographic areas used for payment adjustment are large relative to the locations of specific underserved populations. Thus, geographic payment adjustment is a blunt instrument for resolving these more localized disparities and is not sufficiently targeted to be an appropriate use of resources.”

As the federal government continues to consider unprecedented actions to address the country’s deficit, while at the same time new policies of the Affordable Care Act continue to be implemented, these reports from two respected institutions are well-timed to add to the policy considerations. Expect to see continued analysis and counter-analysis of both reports by rural health research and policy analysis institutions to add to this growing body of knowledge.


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