SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Substitute Adult Day Care 
Services Act of 1998''.

SEC. 2. COVERAGE OF SUBSTITUTE ADULT DAY CARE SERVICES UNDER MEDICARE.

    (a) Substitute Adult Day Care Services Benefit.--
            (1) In general.--Section 1861(m) of the Social Security Act 
        (42 U.S.C. 1395x(m)) is amended--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``or paragraph (8)'' after ``paragraph (7)'';
                    (B) in paragraph (6), by striking ``and'' at the 
                end;
                    (C) in paragraph (7), by adding ``and'' at the end; 
                and
                    (D) by inserting after paragraph (7), the following 
                new paragraph:
            ``(8) substitute adult day care services (as defined in 
        subsection (uu));''.
            (2) Substitute adult day care services defined.--Section 
        1861 of such Act (42 U.S.C. 1395x) is amended by adding at the 
        end the following new subsection:

     ``Substitute Adult Day Care Services; Adult Day Care Facility

    ``(uu)(1)(A) The term `substitute adult day care services' means 
the items and services described in subparagraph (B) furnished to an 
individual by an adult day care facility as a part of a plan under 
subsection (m) substituting such services for a portion of the items 
and services described in subparagraph (B)(i) furnished by a home 
health agency under the plan, as determined by the physician 
establishing the plan.
    ``(B) The items and services described in this subparagraph are the 
following items and services:
            ``(i) Items and services described in paragraphs (1) 
        through (7) of subsection (m).
            ``(ii) Transportation of the individual to and from the 
        adult day care facility in connection with any such item or 
        service.
            ``(iii) Meals.
            ``(iv) A program of supervised activities designed to 
        promote physical and mental health and furnished to the 
        individual by the adult day care facility in a group setting 
        for a period of not fewer than four and not greater than twelve 
        hours per day.
    ``(2)(A) Except as provided in subparagraph (B), the term `adult 
day care facility' means a public agency or private organization, or a 
subdivision of such an agency or organization, that--
            ``(i) is engaged in providing skilled nursing services and 
        other therapeutic services; and
            ``(ii) meets the requirements of paragraphs (2) through (8) 
        of subsection (o).
    ``(B) The Secretary may waive the requirement of a surety bond 
under paragraph (7) of subsection (o) in the case of an agency or 
organization that provides a comparable surety bond under State law.
    ``(C) For purposes of payment for home health services consisting 
of substitute adult day care services furnished under this title, any 
reference to a home health agency is deemed to be a reference to an 
adult day care facility.''.
            (3) Conforming amendments.--Sections 1814(a)(2)(C) and 
        1835(a)(2)(A)(i) of such Act (42 U.S.C. 1395f(a)(2)(C) and 42 
        U.S.C. 1395f(a)(2)(C)) are each amended by striking ``section 
        1861(m)(7)'' and inserting ``paragraph (7) or (8) of section 
        1861(m)''.
    (b) Payment for Substitute Adult Day Care Services.--
            (1) Reasonable cost.--Section 1861(v)(1)(L) of such Act (42 
        U.S.C. 1395x(v)(1)(L)) is amended by adding at the end the 
        following new clause:
    ``(viii) In the case home health services consisting of substitute 
adult day care services, the following rules apply:
            ``(I) The Secretary shall determine each component (as 
        defined by the Secretary) of substitute adult day care services 
        (under subsection (uu)(1)(B)(i)) furnished to an individual 
        under the plan of care established under subsection (m) with 
        respect to such services.
            ``(II) The Secretary shall estimate the amount that would 
        otherwise be payable under this subparagraph for all home 
        health services under that plan of care other than substitute 
        adult day care services for a week or other period specified by 
        the Secretary.
            ``(III) The total amount payable for home health services 
        consisting of substitute adult day care services may not exceed 
        95 percent of the amount estimated to be payable under 
        subclause (II) furnished under the plan by a home health 
        agency.
            ``(IV) No payment may be made under this title for home 
        health services consisting of substitute adult day care 
        services described in clauses (ii), (iii), and (iv) of 
        subsection (uu)(1)(B).''.
            (2) Prospective payment system.--Section 1895 of such Act 
        (42 U.S.C. 1395fff) is amended by adding at the end the 
        following new subsection:
    ``(e) Payment Rate for Substitue Adult Day Care Services.--In the 
case home health services consisting of substitute adult day care 
services, the following rules apply:
            ``(1) The Secretary shall determine each component (as 
        defined by the Secretary) of substitute adult day care services 
        (under section 1861(uu)(1)(B)(i)) furnished to an individual 
        under the plan of care established under section 1861(m) with 
        respect to such services.
            ``(2) The Secretary shall estimate the amount that would 
        otherwise be payable under this section for all home health 
        services under that plan of care other than substitute adult 
        day care services for a week or other period specified by the 
        Secretary.
            ``(3) The total amount payable for home health services 
        consisting of substitute adult day care services may not exceed 
        95 percent of the amount estimated to be payable under 
        paragraph (2) furnished under the plan by a home health agency.
            ``(4) No payment may be made under this title for home 
        health services consisting of substitute adult day care 
        services described in clauses (ii), (iii), and (iv) of section 
        1861(uu)(1)(B).''.
    (c) Adjustment in Case of Overutilization of Substitute Adult Day 
Care Services.--
            (1) Monitoring expenditures.--The Secretary of Health and 
        Human Services shall monitor the expenditures made under the 
        Medicare Program under title XVIII of the Social Security Act 
        for home health services furnished under section 1861(m) of 
        such Act for a fiscal year beginning with fiscal year 2000, 
        including substitute adult day care services under paragraph 
        (8) of such section (as added by subsection (a)), and compare 
        such expenditures to expenditures that the Secretary estimates 
        would have been made for home health services for that fiscal 
        year if subsection (a) had not been enacted.
            (2) Required reduction in payment rate.--If the Secretary 
        determines, after making the comparison under paragraph (1) and 
        making such adjustments for changes in demographics and age of 
        the Medicare beneficiary population as the Secretary determines 
        appropriate, that expenditures for home health services 
        including such substitute adult day care services exceed 
        expenditures that would have been made for home health services 
        furnished under section 1861(m) of such Act for a year if 
        subsection (a) had not been enacted, then the Secretary shall 
        adjust the rate of payment so that total expenditures for home 
        health services furnished under such section in a fiscal year 
        does not exceed the Secretary's estimate of such expenditures 
        if subsection (a) had not been enacted.
    (d) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after January 1, 1999.
Medicare Substitute Adult Day Care Services Act of 1998 - Amends title XVIII (Medicare) of the Social Security Act to provide for coverage of substitute adult day care services. 
Directs the Secretary of Health and Human Services to monitor Medicare expenditures for home health services for a fiscal year, including substitute adult day care services, and compare them to expenditures that the Secretary estimates would have been made for home health services for that fiscal year if there had been no coverage of substitute adult day care services.  Requires the Secretary, if home health service expenditures exceed such estimates, to adjust the rate of payment for home health services so that total expenditures do not exceed such estimates.
Medicare Substitute Adult Day Care Services Act of 1998