SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Ambulance Payment Reform 
and Rural Equity Act of 2004''.

SEC. 2. AMBULANCE PAYMENT RATES.

    (a) Payment Rates.--Section 1834(l)(3) of the Social Security Act 
(42 U.S.C. 1395m(l)(3)) is amended to read as follows:
            ``(3) Payment rates.--Subject to any adjustment under 
        subparagraph (B) and paragraph (13) and the full payment of a 
        national mileage rate pursuant to paragraph (2)(E), the 
        Secretary shall modify the fee schedule established under 
        paragraph (1) as follows:
                    ``(A) Payment rates in 2006.--
                            ``(i) Ground ambulance services.--In the 
                        case of ground ambulance services furnished 
                        under this part in 2006, the Secretary shall 
                        set the payment rates under the fee schedule 
                        for such services at a rate based on the 
                        average costs (as determined by the Secretary 
                        on the basis of the most recent and reliable 
                        information available) incurred by full cost 
                        ambulance suppliers in providing nonemergency 
                        basic life support ambulance services covered 
                        under this title, with adjustments to the rates 
                        for other ground ambulance service levels to be 
                        determined based on the rule established under 
                        paragraph (1). For the purposes of the 
                        preceding sentence, the term `full cost 
                        ambulance supplier' means a supplier for which 
                        volunteers or other unpaid staff comprise less 
                        than 20 percent of the supplier's total staff 
                        and which receives less than 20 percent of 
                        space and other capital assets free of charge.
                            ``(ii) Other ambulance services.--In the 
                        case of ambulance services not described in 
                        subclause (i) that are furnished under this 
                        part in 2006, the Secretary shall set the 
                        payment rates under the fee schedule for such 
                        services based on the rule established under 
                        paragraph (1).
                    ``(B) Payment rates in subsequent years for all 
                ambulance services.--In the case of any ambulance 
                service furnished under this part in 2007 or any 
                subsequent year, the Secretary shall set the payment 
                rates under the fee schedule for such service at 
                amounts equal to the payment rate under the fee 
                schedule for that service furnished during the previous 
                year, increased by the percentage increase in the 
                Consumer Price Index for all urban consumers (United 
                States city average) for the 12-month period ending 
                with June of the previous year.''.
    (b) Conforming Amendment.--(1) Section 221(c) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(114 Stat. 2763A-487), as enacted into law by section 1(a)(6) of Public 
Law 106-554, is repealed.
    (2) The amendment made by paragraph (1) shall take effect on 
January 1, 2006, and shall apply to payments for ambulance services 
furnished on or after such date.

SEC. 3. IMPROVEMENT IN PAYMENTS TO RETAIN EMERGENCY AND OTHER CAPACITY 
              FOR AMBULANCES IN RURAL AREAS.

    (a) In General.--Section 1834(l) of the Social Security Act (42 
U.S.C. 1395m(l)), as amended by section 415(a) of the Medicare 
Prescription Drug, Modernization, and Improvement Act of 2003, is 
amended by adding at the end the following new paragraph:
            ``(15) Additional payments for providers furnishing 
        ambulances services in rural areas.--
                    ``(A) In general.--In the case of ground ambulance 
                services furnished on or after January 1, 2006, for 
                which the transportation originates in a rural area (as 
                determined under subparagraph (B)), the Secretary shall 
                provide for a percent increase in the base rate of the 
                fee schedule for a trip identified under this 
                subsection.
                    ``(B) Identification of rural areas.--The 
                Secretary, in consultation with the Office of Rural 
                Health Policy, shall use the Rural-Urban Commuting 
                Areas (RUCA) coding system, adopted by that Office, to 
                designate rural areas for the purposes of this 
                paragraph. A rural area is any area in RUCA level 2 
                through 10 and any unclassified area.
                    ``(C) Tiering of rural areas.--The Secretary shall 
                designate 4 tiers of rural areas, using a zip code 
                population-based methodology generated by the RUCA 
                coding system, as follows:
                            ``(i) Tier 1.--A rural area that is a high 
                        metropolitan commuting area, in which 30 
                        percent or more of the commuting flow is to an 
                        urban area, as designated by the Bureau of the 
                        Census (RUCA level 2).
                            ``(ii) Tier 2.--A rural area that is a low 
                        metropolitan commuting area, in which less than 
                        30 percent of the commuting flow is to an urban 
                        area or to a large town, as designated by the 
                        Bureau of the Census (RUCA levels 3-6).
                            ``(iii) Tier 3.--A rural area that is a 
                        small town core, as designated by the Bureau of 
                        the Census, in which no significant portion of 
                        the commuting flow is to an area of population 
                        greater than 10,000 people (RUCA levels 7-9).
                            ``(iv) Tier 4.--A rural area in which there 
                        is no dominant commuting flow (RUCA level 10) 
                        and any unclassified area.
                The Secretary shall consult with the Office of Rural 
                Health Policy not less often than every 2 years to 
                update the designation of rural areas in accordance 
                with any changes that are made to the RUCA system.
                    ``(D) Payment adjustments for trips in rural 
                areas.--The Secretary shall adjust the payment rate 
                under this section for ambulance trips that originate 
                in each of the tiers established in subparagraph (C). 
                The adjustment shall be a percentage increase in the 
                base payment rate as follows:
                            ``(i) Tier 1.--5.5 percent.
                            ``(ii) Tier 2.--11 percent.
                            ``(iii) Tier 3.--16.5 percent.
                            ``(iv) Tier 4.--22 percent.''.
    (b) Review of Payments for Rural Ambulance Services and Report to 
Congress.--
            (1) Review.--Not later than July 1, 2008, the Secretary of 
        Health and Human Services shall review the system for adjusting 
        payments for rural ambulance services under section 1834(l)(15) 
        of the Social Security Act (42 U.S.C. 1395m(l)(15)), as added 
        by subsection (a), to determine the adequacy and 
        appropriateness of such adjustments. In conducting such review 
        the Secretary shall consult with providers and suppliers 
        affected by such adjustments and with representatives of the 
        ambulance industry generally to determine--
                    (A) whether such adjustments adequately cover the 
                additional costs incurred in serving areas of low 
                population density; and
                    (B) whether the tiered structure for making such 
                adjustments appropriately reflects the difference in 
                costs of providing services in different types of rural 
                areas.
            (2) Report.--Not later than January 1, 2009, the Secretary 
        shall submit to Congress a report setting forth the results of 
        such review and any recommendations for revision to the systems 
        for adjusting payments for ambulance services in rural areas.
    (c) Conforming Amendments.--(1) Section 1834(l) of the Social 
Security Act (42 U.S.C. 1395m(l)), as amended by subsection (a), is 
further amended by adding at the end the following new paragraph:
            ``(16) Designation of rural areas for mileage payment 
        purposes.--In establishing any differential in the amount of 
        payment for mileage between rural and urban areas in the fee 
        schedule established under paragraph (1), the Secretary shall 
        identify rural areas in the same manner as provided in 
        paragraph (15)(B).''.
    (2) Section 1834(l)(12)(A) of the Social Security Act (42 U.S.C. 
1395m(l)(12)(A)), as added by section 414(c) of the Medicare 
Prescription Drug, Modernization, and Improvement Act of 2003, is 
amended by striking ``January 1, 2010'' and inserting ``January 1, 
2006''.
    (3) Section 1834(l)(13)(A)(i) of the Social Security Act (42 U.S.C. 
1395m(l)(13)(A)(i)), as added by section 414(d) of the Medicare 
Prescription Drug, Modernization, and Improvement Act of 2003, is 
amended by striking ``paragraph (9)'' and inserting ``paragraph 
(15)(B)''.

SEC. 4. USE OF MEDICAL CONDITIONS FOR CODING AMBULANCE SERVICES.

    Section 1834(l)(7) of the Social Security Act (42 U.S.C. 
1395m(l)(7)) is amended to read as follows:
            ``(7) Coding system.--
                    ``(A) In general.--The Secretary shall, in 
                accordance with section 1173(c)(1)(B) and not later 
                than July 1, 2005, establish a system or systems for 
                the coding of claims for ambulance services for which 
                payment is made under this subsection, including a code 
                set specifying the medical condition of the individual 
                who is transported and the level of service that is 
                appropriate for the transportation of an individual 
                with that medical condition.
                    ``(B) Medical conditions.--The code set established 
                under subparagraph (A) shall take into account the list 
                of medical conditions developed in the course of the 
                negotiated rulemaking process conducted under paragraph 
                (1).''.
Medicare Ambulance Payment Reform and Rural Equity Act of 2004 - Amends title XVIII (Medicare) of the Social Security Act to: (1) revise ambulance payment rates; and (2) provide additional payments for providers furnishing ambulance services in rural areas.

Directs the Secretary of Health and Human Services to review the system for adjusting payments for rural ambulance services to determine their adequacy and appropriateness.

Amends SSA title XVIII with respect to a Secretary-specified uniform coding system identifying furnished ambulance services for purposes of a fee schedule. Directs the Secretary to establish a system or systems for the coding of claims for ambulance services for which payment is made, including a code set specifying the medical condition of the individual who is transported and the level of service that is appropriate for the transportation of an individual with that medical condition. Requires the code set to take into account the list of medical conditions developed in the course of the negotiated rulemaking process. (Current law authorizes the Secretary to require the claim for any ambulance services to include a code (or codes) under a uniform coding system specified by the Secretary, but does not require the establishment of such a coding system.)
To amend title XVIII of the Social Security Act to provide payments to Medicare ambulance suppliers of the full cost or furnishing such services, to provide payments to rural ambulance providers and suppliers to account for the cost of serving areas with low population density, and for other purposes.