This bill expands the definition of a critical access hospital under Medicare to include certain qualifying hospitals located on Indian reservations.
Dan Newhouse
Representative
WA-4
This bill amends the Social Security Act to expand eligibility for Critical Access Hospital (CAH) status under Medicare for certain hospitals located on Indian reservations. It allows qualifying reservation hospitals to receive special Medicare payment rates, even if they don't meet all standard CAH criteria. Furthermore, it permits these newly designated CAHs to operate psychiatric or rehabilitation units without typical bed-size limitations.
New Medicare Rule Expands Critical Access Status for Remote Hospitals on Indian Reservations Starting August 2025
This legislation creates a new path for certain hospitals located on Indian reservations to qualify as Critical Access Hospitals (CAHs) under Medicare, a status that comes with more favorable payment rates. Starting August 1, 2025, a state can designate a hospital on a reservation as a CAH even if it doesn’t meet all the standard criteria, provided it meets a new geographic isolation test. The core requirement is that the hospital must be located more than a 35-mile drive away from another hospital or facility run by the Indian Health Service (IHS), a tribe, or an urban Indian organization.
The Financial Lifeline for Remote Care
For hospitals serving remote communities, getting CAH status is a big deal. Medicare typically pays CAHs based on their actual operating costs, rather than the standard prospective payment system used for larger hospitals. This change is designed to stabilize the finances of essential healthcare providers in isolated areas. Think of it this way: if a hospital is struggling to keep its doors open due to low patient volume and high operating costs in a remote area—like many on reservations—this new designation could be the difference between staying open and closing down. The goal is to ensure that these communities maintain local access to emergency and inpatient care.
Special Rules for Mental Health and Rehab
One of the most significant practical changes in this bill involves specialized care units. If a reservation hospital qualifies for this new CAH status, it can establish specialized units for psychiatric or rehabilitation services without being subject to the usual limits on how many beds those units can have. Normally, Medicare imposes strict bed limits on specialized units within CAHs. By removing this restriction, the bill directly addresses the severe lack of mental health and rehabilitation access often found in these communities. For a patient needing long-term mental health support, this provision means they might finally be able to receive care closer to home rather than being forced to travel hundreds of miles away.
Who Bears the Cost?
While this is a clear win for healthcare access on reservations, the change does have implications for the Medicare system. Because CAHs are paid based on costs, expanding this status means Medicare’s total expenditures will likely increase. This higher reimbursement rate is the mechanism that provides financial stability to the hospitals, but it does place a greater burden on the Medicare trust funds. Additionally, this creates a specific set of rules for reservation hospitals that are more flexible than the rules existing CAHs must follow, particularly regarding the 35-mile isolation rule and the bed limits. This special treatment acknowledges the unique challenges of healthcare infrastructure in reservation settings, but it does mean two similar-sized hospitals might be operating under different financial rules based on their location.