Medicare Wage Index: What it is, how it works, and why it is important

The Medicare Wage Index (WI) is one of the factors that adjust a hospital’s overall payment from the Medicare program. Through the wage index, Medicare is able to maintain a consistent payment structure across IPPS hospitals while recognizing that the cost of labor varies in markets across the nation.

This paper explores:

• Aspects of the wage index including how labor markets are defined
• Various adjustments that can impact how the wage index is calculated
• Recent changes to the wage index
• Opportunities that hospitals can take advantage of during their own review process