Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( 🔒 ) or https:// means you've safely connected to the .gov website. Share sensitive information only on official, secure websites.

Need Help

Effects of Medicare's wage index on patient access and hospital care quality for older Medicare beneficiaries

Award Number: R01AG094634
ORGANIZATION: NATIONAL INSTITUTE ON AGING
OPDIV: NIH
AWARD CLASS: DISCRETIONARY
AWARD ACTIVITY TYPE: SCIENTIFIC/HEALTH RESEARCH (INCLUDES SURVEYS)
PERIOD OF PERFORMANCE START DATE: 05/15/2026
PERIOD OF PERFORMANCE END DATE: 03/31/2031

Group Awards By:

View Award Description

Effects of Medicare's wage index on patient access and hospital care quality for older Medicare beneficiaries - ABSTRACT Each year, nearly $350 billion in Medicare spending is distributed across approximately 3,500 acute US hospitals based on a complex set of administrative technicalities. One important technicality is the hospital wage index, which standardizes hospital payments by local labor costs. However, hospitals can obtain exceptions to the wage index formula, resulting in ~$2 billion in additional hospital payments, which are considered by many to be economically unjustified. Compounding these distortionary effects is the wage index’s budget neutrality mandate, such that higher spending from increasing numbers of wage index exceptions is offset by lower payments to all hospitals. Together, the exceptions and offsets may either improve or erode some hospitals’ ability to hire staff and provide high-quality care, with implications for sicker and poorer patient populations who may receive poorer quality of care, thus making the wage index regressive and harmful. Moreover, hospitals receiving exceptions may use additional revenue to shift existing patients or admit new ones into higher-paying services, thereby shifting the composition of services and potentially restricting access to lower-paying services. We will explore the effects of Medicare’s hospital wage index, by examining (1) financial, (2) staffing and quality and health outcomes, and (3) access and costs (because of changes in the mix of hospital services) associated with exceptions and offsets, using 100% Medicare claims and wage index data. Innovation: While of equal or greater impact on hospital revenue, relative to other Medicare payment policies and reforms, the wage index has had limited study. Our econometric analyses can thus offer novel insights beyond current work that primarily consists of reports from contractors and agencies that have not assessed staffing, access, and health effects of the wage index exceptions and budget neutrality offsets. Impact: While theoretically a reasonable accounting tactic, when coupled with unjustified exceptions, budget neutrality may lead to undesirable and unintended effects related to hospital investments and quality, with important implications for older adults’ health. Fewer or lower-quality services, and lower nursing staffing ratios under these remediable payment distortions could diminish patient safety and increase adverse events. Given the push to address the adequacy of payments to ensure patient care access and quality, and growing understanding that Medicare policies may harm less resourced providers, our work can inform future wage index technical choices. Decision makers could use our findings to help understand and redirect reimbursements (without wage index exception distortions) to improve access to certain types of care.


Issue Date FY	Funding FY	Legal Entity Name	Legal Entity Address	Legal Entity City	Legal Entity State	Legal Entity Zip Code	Legal Entity COUNTY	Legal Entity COUNTRY	Assistance Listing	Award Code	Budget Year	Action Date	Action Type	Action Amount

Issue Date FY: 2026 ( Subtotal = $680,301 )
2026	2026	REGENTS OF THE UNIVERSITY OF MICHIGAN	1109 GEDDES AVE STE 3300	ANN ARBOR	MI	48109	WASHTENAW	USA	Aging Research	000	1	5/12/2026	NEW	$680,301
														Subtotal = $680,301

Grand Total All Awards = $680,301

Top

All Categories

About

Search

Reports

Data Submission

Award Information

Effects of Medicare's wage index on patient access and hospital care quality for older Medicare beneficiaries

Award Number: R01AG094634

ORGANIZATION: NATIONAL INSTITUTE ON AGING

OPDIV: NIH

AWARD CLASS: DISCRETIONARY

AWARD ACTIVITY TYPE: SCIENTIFIC/HEALTH RESEARCH (INCLUDES SURVEYS)

PERIOD OF PERFORMANCE START DATE: 05/15/2026

PERIOD OF PERFORMANCE END DATE: 03/31/2031

Federal Websites

Department of Health & Human Services

HHS Operating Divisions

HHS Staff Divisions

Download A Document Viewer