SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Home Health Agency 
Efficiency Act of 1998''.

SEC. 2. CHANGES TO INTERIM PAYMENT SYSTEM FOR HOME HEALTH SERVICES.

    (a) Per Visit Cost Limits.--
            (1) Basis for limits.--Section 1861(v)(1)(L)(i) of the 
        Social Security Act (42 U.S.C. 1395x(v)(1)(L)(i)), as amended 
        by section 4602(a) of the Balanced Budget Act of 1997, is 
        amended--
                    (A) by striking ``or'' at the end of subclause 
                (III); and
                    (B) by striking subclause (IV) and inserting the 
                following:
            ``(IV) October 1, 1997, and before October 1, 1998, 110 
        percent of such mean, or
            ``(V) October 1, 1998, 107 percent of such mean.''.
            (2) Elimination of two-year freeze.--Section 1861(v)(1)(L) 
        of such Act (42 U.S.C. 1395x(v)(1)(L)), as amended by section 
        4601 of the Balanced Budget Act of 1997, is amended--
                    (A) by striking clause (iv) and redesignating 
                clause (v) as clause (iv);
                    (B) by redesignating clauses (vi) and (vii) as 
                clauses (viii) and (ix) respectively; and
                    (C) in clause (ix), as so redesignated, by striking 
                ``clause (v)(I)'' and inserting ``clause (iv)(I)''.
    (b) Per Beneficiary Cost Limits.--Section 1861(v)(1)(L) of such Act 
(42 U.S.C. 1395x(v)(1)(L)), as amended by section 4602(c) of the 
Balanced Budget Act of 1997, is amended--
            (1) by amending clause (iv)(I) (as redesignated by 
        subsection (a)(2)(A)) to read as follows:
            ``(I) a per beneficiary annual limitation calculated under 
        clause (v); and'';
            (2) by inserting after clause (iv), as so redesignated, the 
        following new clause:
    ``(v) For purposes of clause (iv)(I), the per beneficiary annual 
limitation calculation under this clause is based--
            ``(I) 25 percent on the average of the reasonable costs 
        (including nonroutine medical supplies) for agencies in the 
        State in which an agency is located for cost reporting periods 
        beginning in fiscal year 1995, such costs updated by the home 
        health market basket index and adjusted for the wage-related 
        portion of such costs by an area wage index that the Secretary 
        determines reflects the relative hospital wage level in the 
        geographic area of the agency (determined without regard to 
        whether the hospitals in such area have been reclassified to a 
        new geographic area pursuant to section 1886(d)(8)(B), a 
        decision of the Medicare Geographic Classification Review 
        Board, or a decision of the Secretary under section 
        1886(d)(10)) compared to the State average hospital wage level; 
        and
            ``(II) 75 percent on the national average of such costs for 
        cost reporting periods beginning in fiscal year 1995, such 
        costs updated by the home health market basket and adjusted for 
        the wage-related portion of such costs by the wage index 
        described in clause (iii).''; and
            (3) by amending subclause (I) of clause (viii), as 
        redesignated by subsection (a)(2)(B), to read as follows:
            ``(I) For new providers and those providers without a cost 
        reporting period beginning in fiscal year 1995, the per 
        beneficiary limitation shall be equal to the per beneficiary 
        limitation determined under clause (v).''.
    (c) Per Beneficiary Efficiency Standard.--Section 1861(v)(1)(L) of 
such Act (42 U.S.C. 1395x (v)(1)(L), as amended by section 4602(c) of 
the Balanced Budget Act of 1997, is amended--
            (1) in clause (iv) (as redesignated by subsection 
        (a)(2)(A)), by striking ``Payment'' and inserting ``Except as 
        provided in clause (vi), payment''; and
            (2) by inserting after clause (v), as added by subsection 
        (b)(2), the following new clauses:
    ``(vi) Notwithstanding the limits imposed by clause (iv), in the 
case of a home health agency that for any cost reporting period 
beginning on or after October 1, 1997, for which the agency's 
reasonable costs (determined without regard to such limits) do not 
exceed the per beneficiary efficiency standard established under clause 
(vii), payment to such home health agency shall equal such reasonable 
costs or, if lower, the limits determined under clause (i).
    ``(vii) For services furnished by home health agencies for cost 
reporting periods beginning on or after October 1, 1997, the Secretary 
shall establish a per beneficiary efficiency standard equal to the 
product of--
            ``(I) the national average per beneficiary reasonable costs 
        (including nonroutine medical supplies) for all home health 
        agencies for cost reporting periods beginning in fiscal year 
        1995, such costs updated by the home health market basket and 
        adjusted for the wage-related portion of such costs by the wage 
        index described in clause (iii); and
            ``(II) the agency's unduplicated census count of patients 
        (entitled to benefits under this title) for the cost reporting 
        period to which the standard relates.''.
    (d) Elimination of Default Reduction of Interim Limits.--Section 
4603(e) of the Balanced Budget Act of 1997 is amended by striking 
``reduction'' and all that follows through ``1999'' and inserting 
``reduction of the cost limits and per beneficiary limits described in 
section 1861(v)(1)(L) of such Act (as those limits would otherwise be 
in effect on September 30, 1999) by such uniform percentage as is 
necessary to achieve the budgetary savings attributed by the 
Congressional Budget Office to this subsection (or to the 15 percent 
reduction under the prospective payment system) for such cost reporting 
periods in its final cost estimate of the conference agreement on this 
Act''.
    (e) Effective Date.--The amendments made by this section shall be 
effective as if included in the enactment of the Balanced Budget Act of 
1997.
Medicare Home Health Agency Efficiency Act of 1998 - Amends title XVIII (Medicare) of the Social Security Act, as amended by the Balanced Budget Act of 1997, with respect to the interim payment system for home health services.  Replaces the current reasonable cost limit under the system (105 percent of the median of per visit costs of freestanding home health agencies) with:  (1) 110 percent of the mean of such costs (during FY 1998); and (2) 107 percent of such mean (for cost reporting periods beginning on or after October 1, 1998). 
Repeals the two-year freeze on payment increases for such services. 
Revises the formula for the per beneficiary annual limitation. 
Requires the Secretary of Health and Human Services to establish, according to a specified formula, a per beneficiary efficiency standard for services furnished by home health agencies for cost reporting periods beginning on or after October 1, 1997. 
Repeals the default reduction of interim limits.
Medicare Home Health Agency Efficiency Act of 1998