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Testimony on Effects of Public Financing on Public Health Care Infrastructure by Wayne Myers, M.D.
Director, Office of Rural Health Policy
Health Resources and Services Administration
U.S. Department of Health and Human Services

Before the Senate Subcommittee on Public Health
Field Hearing in Wichita, KS
July 7, 1999


Senator Brownback, distinguished fellow panelists, members of the audience - thank you for inviting me to testify today about current federal programs designed to help rural providers and their communities deal with ongoing changes in the Medicare program.

First, however, let me tell you a little about the Federal Office of Rural Health Policy. We were established in 1987 to inform and advise the Secretary on the rural impact of the Department=s policies and regulations. We work hard to seek solutions to health care problems in rural communities by working with other Federal agencies, the States, national associations, foundations and the private sector. In short, we are rural health advocates inside the beltway.

As all of you know, Medicare policies are very important to the rural health care delivery system because:

  • A greater percentage of rural residents are Medicare beneficiaries, compared to urban residents (18 vs 15);
  • Medicare payments account for (1) 33 percent of practice revenues for rural physicians; (2) 39 percent of rural hospital inpatient revenue, and (3) it can reach as high as 80 percent of inpatient revenues for small rural hospitals.
    • 50 percent of all patient days in rural hospitals are from Medicare beneficiaries; compared to 37 percent in urban hospitals;
    • And finally, total Medicare payment per beneficiary is nearly $1,000 less for rural beneficiaries than for urban beneficiaries.

    As you can see, changes in Medicare payments that are contained in the Balanced Budget Act of 1997 could have a significant impact on the health care infrastructure of rural towns all across America. My colleague from the Health Care Financing Administration has described some of these reforms in more detail. I can assure you , however, that the Department is closely monitoring the impact of these changes.

    While Medicare payments and policies are critical, there is currently a wide range of Federal programs that directly address the unique health care needs of rural communities - many of which are being implemented by my Office. For example:

    • The State Office of Rural Health program provides matching grants to all 50 states. Thanks to the leadership provided by Dick Morrissey, Kansas has one of the finest in the nation.
    • Our Rural Outreach and Network Development programs help rural communities find innovative ways to stretch and coordinate their scarce health care dollars.
    • We support five rural health research centers around the country. A number of them are currently conducting studies to identify the impact of the BBA on rural providers and communities.
    • The office staffs the National Advisory Committee on Rural Health that makes policy recommendations annually to the Secretary. It is currently looking at issues related to the BBA. Don Wilson, President of the Kansas Hospital Association, was a former member, and his strong advocacy for rural hospitals helped shaped many of their recommendations. I am also pleased to announce that Senator Kassebaum-Baker has accepted the Secretary=s invitation to be the new chair of this Committee.
    • The Children=s Health Insurance Program is a major initiative that is helping States provide coverage to 10 million children in families that work, but are still too poor to afford health insurance.
    • There are also a number of other programs that help bring services to underserved rural areas including Community Health Centers, and the National Health Service Corps. There are now more than 3500 Rural Health Clinics that currently receive cost-based reimbursement from Medicare.
    • Starting this year, my Office will administer the new $25 million Rural Hospital Flexibility program. We are currently providing grants of up to $800,000 to States to support network development and stabilize their small rural hospitals by helping them consider, plan for, and obtain designation as a ACritical Access Hospital@. These CAHs can strengthen their outpatient, primary care and emergency services while maintaining a limited inpatient capacity. To help them financially, the Federal Government will pay on a cost basis for care delivered to Medicare patients. The successful implementation of an earlier demonstration project here in Kansas helped convince the Congress to let all States participate in this program.

    There are, in addition to the ones I described, many Federal programs currently available for rural health. I always urge rural communities to come together - decide what they need - and then apply for these grants.

    In conclusion, I want to thank Senator Brownback for the opportunity to be here today, and I will be pleased to try to answer any questions you may have.


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