WASHINGTON, D.C. – Iowa inched closer to gaining equity in Medicare reimbursement with the Senate Finance Committee’s approval of landmark legislation, the pinnacle of the Greater Des Moines Partnership’s annual lobbying trip to Washington, D.C., June 11-13.

Iowa ranks last among states in Medicare reimbursement, and the equity issue topped the Partnership’s lobbying agenda for the second consecutive year. Last year, Thomas Scully, the director of the Centers for Medicare and Medicaid Services, offered little hope the reimbursement issue would be resolved. This year, lobbyists for various health-care providers in Central Iowa had a front-row seat for a historic moment: the markup of Medicare reimbursement reform legislation that pundits last year said was both too costly and politically impractical.

The difference a year makes? With Republicans again controlling the Senate, Iowa Sen. Charles Grassley has returned to his position as chairman of the Finance Committee.

“It’s the difference between a ranking member and chairman,” said James Zahnd, vice president of public affairs for Iowa Health System. “We can’t overestimate the importance of Sen. Grassley in this process. Where we are today is simply somewhere we couldn’t be without his work and without his role as chairman.”

The legislation appropriates $25 billion to correct the disparity in reimbursement to urban and rural hospitals, $377 million of which will go to Iowa over 10 years. Urban hospitals are defined as those serving metropolitan areas of 1 million or more people, which means that all Iowa hospitals are defined as rural and are shortchanged under the current reimbursement formula. The $25 billion package that would even out reimbursement disparities is part of a $400 billion bill that would extend prescription drug benefits to the 40 million Medicare enrollees.

Under the current formula, hospitals in Iowa and other rural states are paid 1.6 percent less upon the discharge of Medicare patients than are urban hospitals, amounting to an annual loss of $14 million to Iowa hospitals. Business leaders have said the economic loss to Iowa is around $1 billion a year when the effect on payments to physicians, higher insurance premiums and other health-care costs are considered.

The bill doesn’t completely correct the urban-rural disparity, said C. Edward Brown, CEO at The Iowa Clinic, a Des Moines physicians’ group.

“Realistically, it’s what we could get through the Senate in light of some of the budget constraints the administration is facing,” he said, “but it’s an improvement for Iowa physicians and a great step.”

Partnership delegates claimed 12 of the 30 seats available to the public during the committee meeting that marked up the legislation, which would make the most significant changes ever in the history of the federal health insurance program for the nation’s seniors.

“If you understand and follow this stuff, it is the biggest change in Medicare since it was established in 1965,” Zahnd said. “It was indeed a historic moment, and, as an Iowan, it made you feel very proud and in the middle of it as Sen. Grassley’s colleagues praised his development of it.”

The reimbursement issue has been a nagging problem for years in Iowa, but business leaders in the state didn’t make it a priority economic development issue until last year. All the member organizations in the Iowa Chamber Alliance, a group of the 16 largest chambers of commerce in the state, have put correcting the Medicare reimbursement disparity at or near the top of their lobbying agendas.

“What’s also made the difference is the support and understanding of both the business community and the public at large in Iowa, who have made it a full-blown political issue,” Zahnd said. “For many years, it was primarily viewed as an issue for the medical community, but what has occurred as people in Iowa began to understand the equity issue is that they have seen how underpayment of Medicare negatively impacts private insurance.”

Iowa is one of 30 states whose reimbursement rates are below the national average, but Grassley said his Senate colleagues from those states haven’t sounded as loud a call for reimbursement reform. “Without a doubt, Iowa has carried the water on this issue,” he said. “I haven’t heard from too many of my colleagues that we have to do something, and it sure doesn’t come with the same drumbeat.”

Senate debate on the bill, which Grassley wrote with Democratic Sen. Max Barcus of Montana, began June 16 and is expected to last through this week. Grassley expects it to be approved in the Senate with up to 30 votes to spare, something he couldn’t have predicted in May when he attached an amendment to the Bush administration’s economic stimulus package that would have provided increased federal assistance to rural Medicare providers. He later dropped the amendment in exchange for a promise President Bush made in a May 22 letter to “support the increased Medicare funding for rural providers … as part of a bill that implements our shared goal for Medicare reform.”

Grassley met with the president again on Wednesday. “We’ve got the president on board,” Grassley said, “but we have plenty of work to do in the House.”

In the House of Representatives, delegations from populous states have in the past opposed any reform legislation that would take Medicare money from their constituents.

House Ways and Means Committee Chairman Bill Thomas, R-California, thinks the urban-rural equity issue should be addressed, but it’s unlikely his proposal would hike rural payments as the Grassley-Barcus bill.

Though Scully, the CMS administrator, still opposes reimbursement equity, “but he can’t get in the way of the president,” Grassley said. “The CMS is for it because the president is for it, but down in his heart, Tom Scully’s not for this.”

According to Brown, the CMS views the Medicare equity issue as a short-term problem. “They feel like a complete revamping of the entire reimbursement system is ultimately needed, and believe a focus on a reimbursement method that rewards quality performance is something the country should consider,” he said.

The problem with that, he said, is that an objective measure of the quality of a health-care delivery system is difficult to achieve. For example, Iowa ranks among the top one-fourth of states in quality, significantly higher than Massachusetts.

“It’s hard to deny that Harvard and Massachusetts General Hospital are not one of the finer medical delivery systems in the United States,” Brown said.

A reimbursement system that rewards states for quality health-care delivery systems is “something we should be striving for and a noble objective,” Brown said, “but achievement of that will be challenging.”

“Right now, since we’re currently using a reimbursement method by which we are disadvantaged, we’re somewhat skeptical,” he said.