Rural hospitals will see increases in Medicare (search) payments starting Thursday under provisions of the new Medicare law, the government said.

The law is intended to boost hospital payments by $12 billion over 10 years.

The new payment rates will raise Medicare reimbursements for small hospitals in rural areas that serve a disproportionate share of elderly or disabled patients with low incomes. The law that President Bush signed in December also makes permanent a standard minimum level of reimbursement for hospitals, regardless of where they are located.

Rural lawmakers insisted on measures in the Medicare law to reduce the gap in Medicare reimbursement rates (search) between urban hospitals and rural ones.