Statement of Task

An ad hoc committee will conduct a comprehensive empirical study on the accuracy of the geographic adjustment factors established under Sections 1848(e) and 1886(d)(3)(E) of Title XVIII of the Social Security Act and used to ensure that Medicare payment fees and rates reflect differences in input costs across geographic areas.

Specifically, the committee will

•  Evaluate the accuracy of the adjustment factors.

•  Evaluate the methodology used to determine the adjustment factors.

•  Evaluate the measures used for the adjustment factors for timeliness and frequency of revisions, for sources of data and the degree to which such data are representative of costs, and for operational costs of providers who participate in Medicare.

Within the context of the U.S. health care marketplace, the committee will also evaluate and consider

•  The effect of the adjustment factors on the level and distribution of the health care workforce and resources, including

°   Recruitment and retention, taking into account mobility between metropolitan and nonmetropolitan areas;

°   Ability of hospitals and other facilities to maintain an adequate and skilled workforce; and

°   Patient access to providers and needed medical technologies;

•  The effect of adjustment factors on population health and quality of care; and

•  The effect of the adjustment factors on the ability of providers to furnish efficient, high-value care.

A first report will address the issues surrounding the adjustment factors themselves, and then a second report that evaluates the possible effects of the adjustment factors will follow. The reports, containing findings and recommendations, will be submitted to the Secretary of HHS and the Congress.

The current report addresses the second phase of the IOM study of geographic adjustments in Medicare payment. The committee members deliberated at length about how to approach the statement of task for Phase II, which included both very specific and very expansive language about their responsibilities. The Phase I report had recommended that geographic adjustment should be used only to improve technical accuracy of Medicare payments and that policy objectives, such as equitable access to health care services in high- and low-cost areas, or influencing the distribution of the workforce in shortage areas, should be addressed through other means.

Thus, in Phase II, the committee was tasked with determining how its recommendations about the accuracy of geographic adjustment would affect access and quality of health care and the supply and distribution of the health care workforce. With regard to access to care, the committee learned from the payment simulations that payments to physicians and other

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