As Iowa Independent reported last month, low federal Medicare/Medicaid reimbursement rates are one of the primary reasons rural states like Iowa have difficulty retaining physicians. On Friday, U.S. Rep. Bruce Braley introduced legislation that has the potential of defusing the reimbursement disparity that exists between urban and rural sections of the nation.

Federal reimbursements to physicians are currently calculated based on two primary indexes: The cost of the doctors’ labor and the cost of physical expenses like office space and equipment. One of the key factors the federal government uses in making the reimbursement calculation is the cost of doing business in the given area.

Because the federal government considered the cost of doing business in Iowa and other rural states to be low, physicians providing services in the Hawkeye State are reimbursed at a much lower rate than physicians offering the same services in other parts of the nation.

“There is a ‘brain drain’ of doctors from Iowa and other small, rural states,” said Braley, a Democrat from Waterloo. “States with higher Medicare reimbursement rates are more attractive to practicing doctors. If you can earn more practicing medicine in California than in Iowa, then you’re more likely to practice in California.”

According to Braley, a doctor performing a cataract removal in Santa Clara, Calif., would be reimbursed $814.68 by Medicare. In Iowa, a doctor performing the same procedure would receive $600 — more than 25 percent less than what the California doctor is paid.

The proposed legislation, the Medicare Equity and Accessiblity Act of 2009, was introduced Friday by Braley, who represents Iowa’s 1st Congressional District, and U.S. Rep. Adrian Smith, a Nebraska Republican. Representatives from Virginia, Georgia, Wisconsin and New Mexico are co-sponsors.

The primary result of the legislation would be a permanent floor of the two indexes used to calculate reimbursement rates, which would result in higher reimbursements for physicians in rural states without impact to reimbursement rates of the larger, more urban states.

Although creating a floor for reimbursement rates will result in increase federal health care expenditures, it may be the only hope rural states have for attaining reimbursement equity short of a complete national health care overhaul. Since representation in the U.S. House is based on population, any legislation that would increase reimbursement rates for rural states while simultaneously lowering rates for urban states would likely not have enough support for passage.

“In the House of Representatives, you have to remember that when Medicare was set up, the people that set it up were from more urban parts of the country,” U.S. Rep. Tom Latham said in an earlier interview with the Iowa Independent. “It has always been designed to pump more money into urban areas than into rural. In the House especially there are a lot more urban people than there are rural people. The way it has been proposed so far as been a zero-sum game. So, higher reimbursements in rural hospitals would take away from urban. They aren’t going to let that happen. That really is the biggest problem. It’s a rural-urban battle.”

Latham, a Republican who represents Iowa’s 4th District, has not yet indicated if he will support the measure Braley has introduced.

The bill has been referred to the House Committee on Energy and Commerce as well as the Committee on Ways and Means.