Statement of the Hon. Don Sherwood, a Representative in Congress from the State of Pennsylvania

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

Hearing on Medicare's Geographic Cost Adjustments

July 23, 2002

Thank you, very much, Madame Chairman, for convening this important hearing on the critical issue of Medicare access disparities caused by inequities built into the historic wage rates.  The current Medicare payment system has several adverse affects on the hospitals I represent. 

They have been shortchanged rather than rewarded by Medicare for keeping their wages down.  Hospitals in the cities of Scranton, Wilkes-Barre have kept wages down and now receive only the Pennsylvania rural floor wage index, which for 2002 is 0.8683 and for 2003 will be 0.8525.

My district borders the higher wage rate areas of Allentown, Pennsylvania to the southeast with a 0.9833 wage index and Harrisburg, Pennsylvania at 0.9315.  But by far the greatest threat to our health staff is from hospitals in the Newburgh, New York MSA to the East with a wage index of 1.1434.

A Hospital which is part of the Newburgh MSA classification put up a billboard in my hometown of Tunkhannock, under an hour away by car, to advertise for health workers.  How can the hospitals I represent be expected to compete when the federal government is giving a nearly 30% wage rate advantage to a neighboring employer?

As the healthcare manpower shortage continues to worsen, the hospitals I represent are in the difficult position of having to retain or attract healthcare workers without adequate resources.  Because every time we provide a percentage increase, the gap widens.

According to the 2001 Financial Analysis by the Pennsylvania Health Care Cost Containment Report on General Acute Hospitals, the hospitals in the region I represent posted a negative 1.51% operating margin.  That was the worst in the Commonwealth of Pennsylvania and contrary to a statewide improvement in operating margins to 2.10% from 2000.

As you know, I have been working hard to have some of the hospitals I represent reclassified in order to provide a more reasonable wage.  In trying to find an administrative solution, Centers for Medicare & Medicaid Services Administrator Tom Scully told me that the solution must come in the form of legislation.

Adequate Medicare reimbursement is vital for my hospitals because they serve a relatively higher population of older Americans.  We need to be able to attract and retain skilled nurses and health professionals to provide quality care for Medicare patients.

Madam Chairman, I know that there is no greater champion in the Congress for health care equity than you.  It was my great pleasure to work with you on behalf of your dairy farmers, and I saw how seriously you take your position as an advocate for the people of the Sixth District of Connecticut.  As the advocate for the Tenth Congressional District of Pennsylvania, I implore you and your colleagues here to address this issue legislatively.

I thank the Subcommittee for their efforts to find a remedy to this very critical problem and I look forward to supporting your good work.