Implementing area wage index adjustments

(a) Codification of low-Wage index hospital policy Section 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) is amended by adding at the end the following new clause: (v) Low-wage hospitals For discharges occurring on or after October 1, 2025, the area wage index applicable under this subparagraph for a fiscal year to a hospital with an area wage index below the 25th percentile area wage index shall be increased by ½ of the difference between the otherwise applicable final area wage index for such fiscal year for such hospital and the 25th percentile area wage index for such fiscal year across all hospitals. Pursuant to the fourth sentence of clause (i), the preceding sentence shall be applied in a budget neutral manner.. (b) Area wage adjustment for hospitals not located in frontier States (1) Hospital inpatient services Section 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), is further amended by adding at the end the following new clause: (vi) Floor on area wage index for hospitals in certain other areas (I) In general For discharges occurring on or after October 1, 2025, the area wage index applicable under this subparagraph to any hospital which is not located in a frontier State (as defined in clause (iii)(II)) may not be less than 0.85. (II) Ensuring budget neutrality In order to ensure that the aggregate payments made under this subsection for a fiscal year (beginning with fiscal year 2026) are not greater than the aggregate payments that would have been made under this subsection for such fiscal year without the application of subclause (I), as estimated by the Secretary, the Secretary shall establish pursuant to rulemaking a maximum area wage index to apply under this subparagraph to any hospital which is not located in a frontier State (as defined in clause (iii)(II)). (III) No impact for hospitals with an area wage index between the floor and the maximum index Subclauses (I) and (II) shall have no effect on the area wage index applicable in a fiscal year to a hospital with an area wage index that is greater than the floor under subclause (I) but less than the maximum area wage index established under subclause (II) for the fiscal year.. (2) Hospital outpatient department services Section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)), is amended— (A) in paragraph (2)(D), by striking paragraph (19) and inserting paragraphs (19) and (23); and (B) by adding at the end the following new paragraph: (23) Floor on area wage adjustment factor for hospital outpatient department services in areas other than in frontier states (A) In general With respect to covered OPD services furnished on or after January 1, 2026, the area wage adjustment factor applicable under the payment system established under this subsection to any hospital outpatient department which is not located in a frontier State (as defined in section 1886(d)(3)(E)(iii)(II)) may not be less than 0.85. (B) Ensuring budget neutrality In order to ensure that the aggregate payments made under this subsection for a year (beginning with 2026) are not greater than the aggregate payments that would have been made under this subsection for such year without the application of subparagraph (A), as estimated by the Secretary, the Secretary shall establish pursuant to rulemaking a maximum area wage adjustment factor to apply under the payment system established under this subsection to any hospital outpatient department which is not located in a frontier State (as defined in clause (iii)(II)). (C) No impact for hospitals with an area wage adjustment factor between the floor and the maximum factor Subparagraphs (A) and (B) shall have no effect on the area wage adjustment factor applicable in a year to a hospital with an area wage adjustment factor that is greater than the floor under subparagraph (A) but less than the maximum area wage adjustment factor established under subparagraph (B) for the year.. (c) Conforming amendments Section 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)), as amended by subsections (a) and (b), is further amended— (1) in clause (i), by striking or (iv) and inserting (iv), (v), or (vi); (2) in clause (iii), by adjusting the margins of such clause 2 ems to the left; and (3) in clause (iv), by adjusting the margins of such clause 2 ems to the left.