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WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) and Health and Human Services (HHS) Secretary Robert Kennedy, Jr., today agreed that it will take both Congress and the administration to fix a Medicare reimbursement formula that is destabilizing hospitals and rural healthcare in low-wage states like Mississippi.
Hyde-Smith questioned Kennedy about the Centers for Medicare and Medicaid Service (CMS) Area Wage Index (AWI) during a Senate Labor, HHS, and Education Appropriations Subcommittee hearing to review the HHS FY2027 budget request.
“AWI disadvantages rural hospitals, because they are locking them into a system that suppresses reimbursement and limits their ability to recruit and retain medical staff and specialists,” Hyde-Smith said. “Hospitals like Forrest General, a Level 2 trauma center in Hattiesburg, Mississippi, are expected to deliver complex, specialist-driven care but are reimbursed as if costs are low – absorbing an $8 million annual loss due to this disparity. Obviously, that gap is just unsustainable. If this continues, it won’t just affect one hospital. It will weaken the entire 19-county rural network serving roughly 700,000 Mississippians.”
In response, Kennedy concurred that the current AWI formula disadvantages hospitals in low-wage states like Mississippi and indicated the administration is willing to work with Congress to find a budget-neutral solution to provide relief to states with low AWIs.
“The wage area index is destroying rural areas in this country, and we know it’s a problem,” Kennedy said. “As you know, under the Social Security Act, any changes we make in it have to be budget neutral. So, if you give more to one area, you have to take from another. And the political blowback, even if we could do it, the political blowback is very loud.”
“Let me say this. The change has to come from Congress, and we want to work with you to make changes that we think make sense, which means getting more money to rural areas,” the Secretary continued.
In 2019, during the first Trump administration, CMS issued a final rule to address AWI disparities and began implementing a policy to support hospitals with persistently low wage index values, which Hyde-Smith called “huge for rural healthcare.” However, high-wage states sued the administration, and the policy ended up being struck down by the courts, which ruled HHS had exceeded its statutory authority.
At the hearing, Hyde-Smith also advocated for keeping the Office of Rural Health within the Centers for Disease Control and Prevention (CDC) as the Trump administration plans to reorganize the CDC under a new Administration for a Healthy America. Hyde-Smith and U.S. Senator Jeff Merkley (D-Ore.) worked to establish the CDC Office of Rural Health in 2023. They have also worked to provide annual appropriations for the office to coordinate rural health efforts across CDC programs and develop a strategic plan for rural health.
“The CDC congressional justification in the budget requests lists accomplishments related to the CDC Office of Rural Health,” Hyde-Smith said. “But despite this work to benefit the health of rural Americans, the future of the Office of Rural Health is unclear given proposed HHS reorganization plans and the president’s FY27 budget request. This concerns a lot of people, including me, and for stakeholders like National Rural Health Association.”
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