When rural and urban compete for resources

That's the scenario at stake in the proposal of the Centers for Medicare and Medicaid Services  to shift some reimbursement funds to rural hospitals.  Because the pot of money is (apparently) fixed, this is a zero sum game, meaning that urban hospitals will lose what/if rural ones gain.  Bloomberg Law reports this morning under the headline, "Rural Hospitals See $200 Million Medicare Win at Cities' Expense."  Here's the lede from Tony Pugh's story:

Low-wage rural hospitals would see more than $200 million a year in additional Medicare payments under a Trump administration plan to shift money from urban hospitals in areas with higher wages, a leading health-care law firm found. 

The proposal by the Centers for Medicare & Medicaid Services is designed to cut payment disparities between urban hospitals and rural facilities. Rural clinics and hospitals are struggling in many states that haven’t expanded eligibility for Medicaid under the Affordable Care Act. 

Since the proposed rule was published earlier this month, "hospital associations in states with higher concentrations of urban facilities" have been protesting.  Pugh cites the analysis of the Hall Render law firm, which shows, for example, that California's Medicare payments would be reduced by $108 million annually.  Other big losers would be New York ($41 million); Massachusetts ($19 million) and New Jersey ($18 million).  Southern states stand to gain most, presumably because the South is the most rural region in the nation.  The reductions would be phased in, taking full effect in 2021.

Sarah Jane Tribble, covering the same issue for NPR, provides an illustration of the "wage index," which has been around since the 1980s. 

[It] means under the current index a rural community hospital could receive a Medicare payment of about $4,000 to treat someone with pneumonia while an urban hospital received nearly $6,000 for the same case, according to CMS.

They "why" for the shift is hinted at in the article's opening line:  the wages paid by rural hospitals are lower than those at their urban counterparts, and Medicare reimbursements have typically been pegged to an "area wage index."  This has meant rural hospitals with low local labor costs have typically received lower Medicare payments than urban ones, albeit for rendering the same services.  A related story on NPR, by Sarah Jane Tribble, is here.

I'm very sympathetic to the needs of rural hospitals, and I'll be fascinated to see if this proposal goes into effect because I've never seen a proposal that takes from the urban (rich?) and gives to the rural (poor?) implemented--at least I cannot recall such a circumstance.  For example, since it was published in 2010, I have been pondering the careful word choice of the California Commission on Access to Justice Report, "Improving Access to Civil Justice in Rural California," framed to avoid a rural-urban contest for funding streams.  Here's a quote of one of the key recommendations from that report:

2.  Expand Funding for Rural Legal Services The significant lack of funding for California’s rural legal aid programs must be addressed. All legal aid programs face the challenge of inadequate resources, including programs in urban as well as in rural areas; therefore any initiative to address the severe lack of resources in rural areas should not be developed in a way that unnecessarily undermines urban programs. The goal is to increase the total resources available for all legal services programs across the state, not merely to reallocate existing resources. 

In fact, what has happened in the years since that report was published is that per "poor person" funding for legal aid organizations serving rural populations has fallen relative to that for organizations serving urban populations.  This just emphasizes again how hard it is for rural institutions to get their "fair share" of funding in all sorts of contexts.

Maybe this Robin Hood-like move at CMR will go forward, however, at least if the Trump administration sees it as currying favor with the president's rural "base."