The Medicare Payment Advisory Commission’s (MedPAC’s) June 2007 report to Congress examines several approaches to promoting greater efficiency in the Medicare program, including a more accurate approach for computing the hospital wage index, which is used to adjust payments for differences in labor costs across geographic areas.
MedPAC recommends that Congress repeal the existing hospital wage index statute and give the Secretary of HHS authority to establish new wage index systems. MedPAC further suggests that HHS establish a hospital compensation index that:
- Uses wage data representing all employers and industry-specific occupational weights
- Is adjusted for geographic differences in the ratio of wages to benefits
- Adjusts market-level indexes for county-level wage differences and smoothes large differences between counties
- Is implemented so that large changes in wage index values are phased in over a transition period
Download the full report (297 pages).
