To amend title XVIII of the Social Security Act to provide additional reimbursements for Medicare providers in low-reimbursement States and to provide financial incentives for high quality, low-cost health care.

Summary: Protecting Medicare Investments for Seniors Everywhere Act (ProMISE Act) - Amends title XVIII (Medicare) of the Social Security Act to provide for: (1) additional reimbursements for Medicare providers in low-reimbursement States (where the Medicare reimbursement ratio of the adjusted average State per capita cost for part A and partr B benefits to the U.S. per capita cost is under 95 percent); and (2) a financial incentive program of bonus payments to providers in States with high quality, low-cost health care.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protecting Medicare Investments for 
Seniors Everywhere Act (ProMISE Act)''.

SEC. 2. ADDITIONAL REIMBURSEMENTS FOR MEDICARE PROVIDERS IN LOW-
              REIMBURSEMENT STATES.

    Title XVIII of the Social Security Act is amended by adding at the 
end the following new section:

 ``additional reimbursements for providers in low-reimbursement states

    ``Sec. 1897. (a) Additional Reimbursement.--
            ``(1) In general.--Subject to section 1898(c), in the case 
        of an affected health care provider (as defined in subsection 
        (c)) that is located in a low-reimbursement State (as defined 
        in subsection (b)) and that furnishes items or services for 
        which payment may be made under part A or part B, in addition 
        to the amount otherwise paid under such part, there also shall 
        be paid to the provider under such part from the Federal 
        Hospital Insurance Trust Fund (in the case of payments under 
        part A) or from the Federal Supplementary Medical Insurance 
        Fund (in the case of payments under part B) an amount equal to 
        the payment adjustment percentage (specified in paragraph (2)) 
        of the payment amount for the service under such part.
            ``(2) Payment adjustment percentage.--In the case of a 
        provider located in a State for which the medicare 
        reimbursement ratio--
                    ``(A) is at least 94 percent, the payment 
                adjustment percentage is 1 percent;
                    ``(B) is at least 93 percent, but less than 94 
                percent, the payment adjustment percentage is 2 
                percent;
                    ``(C) is at least 92 percent, but less than 93 
                percent, the payment adjustment percentage is 3 
                percent;
                    ``(D) is at least 91 percent, but less than 92 
                percent, the payment adjustment percentage is 4 
                percent; or
                    ``(E) is less than 91 percent, the payment 
                adjustment percentage is 5 percent.
    ``(b) Low-Reimbursement State; Medicare Reimbursement Ratio 
Defined.--For purposes of this section:
            ``(1) Low-reimbursement state.--The term `low-reimbursement 
        State' means one of the 50 States or the District of Columbia 
        in which the medicare reimbursement ratio (as defined in 
        paragraph (2)) is less than 95 percent.
            ``(2) Medicare reimbursement ratio.--The term `medicare 
        reimbursement ratio' means, with respect to a State or the 
        District of Columbia, the ratio (expressed as a percentage) 
        of--
                    ``(A) the adjusted average per capita cost (as 
                determined under section 1876(a)(4)) for benefits under 
                parts A and B of this title (without regard to any 
                payment under this section) in the State or District; 
                to
                    ``(B) the United States per capita cost (as so 
                determined) for the 50 States and the District of 
                Columbia.
    ``(c) Affected Health Care Providers Covered.--For purposes of this 
section the term `affected health care provider' means a facility or 
professional that is within one of the following classes of health care 
providers or organizations:
            ``(1) Hospitals.
            ``(2) Physicians.
            ``(3) Skilled nursing facilities.
            ``(4) Home health agencies.
            ``(5) Medicare+Choice organizations offering 
        Medicare+Choice plans.
    ``(d) Effective Period.--This section shall apply to payments--
            ``(1) for hospitals, skilled nursing facilities, and home 
        health agencies, for fiscal years beginning with fiscal year 
        2004; or
            ``(2) for physicians and Medicare+Choice organizations, for 
        calendar years beginning with 2004.
    ``(e) Relation to Managed Care: Avoiding Duplication of 
Increases.--Payments under this section to affected health care 
providers other than Medicare+Choice organizations in an area shall not 
be taken into account for purposes of applying part C in that area.''.

SEC. 3. MEDICARE FINANCIAL INCENTIVE PROGRAM FOR HIGH QUALITY, LOW-COST 
              HEALTH CARE.

    Title XVIII of the Social Security Act is further amended by adding 
at the end the following new section:

  ``financial incentive program for high quality, low-cost health care

    ``Sec. 1898. (a) Ranking of States by Quality and Cost.--
            ``(1) In general.--The Secretary shall provide for the 
        ranking of States on measures of both quality and cost of 
        health care services under this title.
            ``(2) Process.--
                    ``(A) In general.--Within 1 year after the date of 
                the enactment of this section, the Secretary shall 
                submit to Congress a proposal for establishing such 
                measures of quality. The Secretary shall consult with 
                stakeholders in developing such proposal.
                    ``(B) Action.--If the Congress does not enact a law 
                within 90 legislative days after receiving such 
                proposal, the proposal shall become effective.
            ``(3) Cost.--In developing the measure based on cost, the 
        Secretary shall rely on the Secretary's measure of average 
        medicare spending per recipient in each State.
            ``(4) Annual evaluations.--The Secretary shall conduct 
        annually evaluations of States quality and cost of health care 
        services under this title.
    ``(b) Additional Bonus Payment.--
            ``(1) In general.--Subject to subsection (c), in the case 
        of a hospital or physician that is located in a State that is 
        ranked under subsection (a) among the top quartile of States in 
        quality and cost and that furnishes items or services for which 
        payment may be made under part A or part B, in addition to the 
        amount otherwise paid under such part, there also shall be paid 
        to the provider under such part from the Federal Hospital 
        Insurance Trust Fund (in the case of payments under part A) or 
        from the Federal Supplementary Medical Insurance Fund (in the 
        case of payments under part B) an amount equal to 5 percent of 
        the payment amount for the service under such part.
            ``(2) Authority to cover other providers.--The Secretary 
        may expand paragraph (1) to apply to other health care 
        providers and practitioners under this title, but shall not 
        effect such an expansion without reporting to Congress.
    ``(c) Aggregate Percentage Adjustment Limitation.--In no case shall 
the sum of the percentage increase under subsection (b) and the payment 
adjustment percentage under section 1897(a)(2) with respect to a State 
exceed 100 percent minus the medicare reimbursement ratio (as defined 
in section 1897(b)(2)) for that State. Any such percentage increase or 
adjustment shall be reduced on a pro-rata basis to the extent required 
to comply with the previous sentence.''.