No, companies which are ready to pay high (above median) salaries would be able to hire H1Bs. No matter where the office is. Even now many companies offer compensation without regard to geography, when the compensation is high enough; if you live in Alabama but still qualify, the better to you.

That's not actually all that unreasonable, despite how it sounds on the surface. High COL areas are high COL because people working there are more productive. If it's worth it to import an H1-B worker even in the high COL area, they're contributing that much more to the economy than someone in a low COL area.

If this still sounds crazy, I think your objection is more to there being a cap at all. If there is going to be a cap, it makes sense to order it by total comp even notwithstanding the COL.