To amend title XVIII of the Social Security Act to transition to the use of metropolitan statistical areas as fee schedule areas for the physician fee schedule in California under the Medicare Program.

Summary: GPCI Justice Act of 2009 - Amends title XVIII (Medicare) of the Social Security Act, with respect to the geographic practice cost index (GPCI) for adjustments to physician fee schedule areas, to direct the Secretary of Health and Human Services to revise the fee schedule areas for California to use the Metropolitan Statistical Area (MSA) iterative Geographic Adjustment Factor methodology, in accordance with specified requirements.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``GPCI Justice Act of 2009''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) From 1966 through 1991, the Medicare program paid 
        physicians based on what they charged for services. The Omnibus 
        Reconciliation Act of 1989 required the establishment of a 
        national Medicare physician fee schedule, which was implemented 
        in 1992, replacing the charge-based system.
            (2) The Medicare physician fee schedule currently includes 
        more than 7,000 services together with their corresponding 
        payment rates. In addition, each service on the fee schedule 
        has three relative value units (RVUs) that correspond to the 
        three physician payment components of physician work, practice 
        expense, and malpractice expense.
            (3)(A) Each geographically adjusted RVU measures the 
        relative costliness of providing a particular service in a 
        particular location referred to as a locality. Physician 
        payment localities are primarily consolidations of the carrier-
        defined localities that were established in 1966.
            (B) When physician payment localities were redesignated in 
        1997, Administrator of the Centers for Medicare & Medicaid 
        Services acknowledged that the new payment locality 
        configuration had not been established on a consistent 
        geographic basis. Some were based on zip codes or Metropolitan 
        Statistical Areas (MSAs) while others were based on political 
        boundaries, such as cities, counties, or States.
            (C) The Medicare program has not revised the geographic 
        boundaries of the physician payment localities since the 1997 
        revision.
            (4) Medicare's geographic adjustment for a particular 
        physician payment locality is determined using three GPCIs 
        (Geographic Practice Cost Indices) that also correspond to the 
        three Medicare physician payment components of physician work, 
        practice expense, and malpractice expense.
            (5) The major data source used in calculating the GPCIs is 
        the decennial census which provides new data only once every 10 
        years.
            (6) This system of geographic payment designation has 
        resulted in more than half of the current physician payment 
        localities having counties within them with a large payment 
        difference of 5 percent or more. A disproportionate number of 
        these underpaid counties are located in California, Georgia, 
        Minnesota, Ohio, and Virginia.
            (7) For purposes of payment under the Medicare program, 
        hospitals are organized and reimbursed for geographic costs 
        according to MSAs.
            (8) Studies by the Medicare Payment Advisory Commission 
        (MedPAC) in 2007, the Government Accountability Office (GAO) in 
        2007, the Urban Institute in 2008, and Acumen LLC in 2008 have 
        all documented this physician GPCI payment discrepancy--
        specifically that more than half of the current physician 
        payment localities had counties within them with a large 
        payment difference (that is, a payment difference of 5 percent 
        or more) between GAO's measure of physicians' costs and 
        Medicare's geographic adjustment for an area. All these 
        objective studies have recommended changes to the locality 
        system to correct the payment discrepancies.
            (9) A common recommendation among the GPCI payment 
        discrepancy studies referred to in paragraph (8) is to 
        eliminate the county-based locality and replace it with one 
        determined by Metropolitan Statistical Area.

SEC. 3. REDESIGNATING THE GEOGRAPHICAL PRACTICE COST INDEX (GPCI) 
              LOCALITIES IN CALIFORNIA.

    (a) In General.--Section 1848(e) of the Social Security Act (42 
U.S.C.1395w-4(e)) is amended by adding at the end the following new 
paragraph:
            ``(6) Transition to use of msas as fee schedule areas in 
        california.--
                    ``(A) In general.--
                            ``(i) Revision.--Subject to clause (ii) and 
                        notwithstanding the previous provisions of this 
                        subsection, for services furnished on or after 
                        January 1, 2010, the Secretary shall revise the 
                        fee schedule areas used for payment under this 
                        section applicable to the State of California 
                        using the Metropolitan Statistical Area (MSA) 
                        iterative Geographic Adjustment Factor 
                        methodology as follows:
                                    ``(I) The Secretary shall configure 
                                the physician fee schedule areas using 
                                the Core-Based Statistical Areas--
                                Metropolitan Statistical Areas (each in 
                                this paragraph referred to as an 
                                `MSA'), as defined by the Director of 
                                the Office of Management and Budget, as 
                                the basis for the fee schedule areas. 
                                The Secretary shall employ an iterative 
                                process to transition fee schedule 
                                areas. First, the Secretary shall list 
                                all MSAs within the State by Geographic 
                                Adjustment Factor described in 
                                paragraph (2) (in this paragraph 
                                referred to as a `GAF') in descending 
                                order. In the first iteration, the 
                                Secretary shall compare the GAF of the 
                                highest cost MSA in the State to the 
                                weighted-average GAF of the group of 
                                remaining MSAs in the State. If the 
                                ratio of the GAF of the highest cost 
                                MSA to the weighted-average GAF of the 
                                rest of State is 1.05 or greater then 
                                the highest cost MSA becomes a separate 
                                fee schedule area.
                                    ``(II) In the next iteration, the 
                                Secretary shall compare the MSA of the 
                                second-highest GAF to the weighted-
                                average GAF of the group of remaining 
                                MSAs. If the ratio of the second-
                                highest MSA's GAF to the weighted-
                                average of the remaining lower cost 
                                MSAs is 1.05 or greater, the second-
                                highest MSA becomes a separate fee 
                                schedule area. The iterative process 
                                continues until the ratio of the GAF of 
                                the highest-cost remaining MSA to the 
                                weighted-average of the remaining 
                                lower-cost MSAs is less than 1.05, and 
                                the remaining group of lower cost MSAs 
                                form a single fee schedule area, If two 
                                MSAs have identical GAFs, they shall be 
                                combined in the iterative comparison.
                            ``(ii) Transition.--For services furnished 
                        on or after January 1, 2010, in the State of 
                        California, after calculating the work, 
                        practice expense, and malpractice geographic 
                        indices described in clauses (i), (ii), and 
                        (iii) of paragraph (1)(A) that would otherwise 
                        apply through application of this paragraph, 
                        the Secretary shall increase any such index to 
                        the county-based fee schedule area value on 
                        December 31, 2009, if such index would 
                        otherwise be less than the value on January 1, 
                        2010.
                    ``(B) Subsequent revisions.--
                            ``(i) Periodic review and adjustments in 
                        fee schedule areas.--Subsequent to the process 
                        outlined in paragraph (1)(C), not less often 
                        than every three years, the Secretary shall 
                        review and update the California Rest-of-State 
                        fee schedule area using MSAs as defined by the 
                        Director of the Office of Management and Budget 
                        and the iterative methodology described in 
                        subparagraph (A)(i).
                            ``(ii) Link with geographic index data 
                        revision.--The revision described in clause (i) 
                        shall be made effective concurrently with the 
                        application of the periodic review of the 
                        adjustment factors required under paragraph 
                        (1)(C) for California for 2012 and subsequent 
                        periods. Upon request, the Secretary shall make 
                        available to the public any county-level or MSA 
                        derived data used to calculate the geographic 
                        practice cost index.
                    ``(C) References to fee schedule areas.--Effective 
                for services furnished on or after January 1, 2010, for 
                the State of California, any reference in this section 
                to a fee schedule area shall be deemed a reference to 
                an MSA in the State.''.
    (b) Conforming Amendment to Definition of Fee Schedule Area.--
Section 1848(j)(2) of the Social Security Act (42 U.S.C. 1395w(j)(2)) 
is amended by striking ``The term'' and inserting ``Except as provided 
in subsection (e)(6)(C), the term''.