SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Children's 
Hospitals Education and Research Act of 1998''.
    (b) Findings.--Congress finds the following:
            (1) Freestanding children's teaching hospitals receive 
        almost no Federal graduate medical education funding.
            (2) Increasingly, Federal graduate medical education 
        funding, through the medicare program, has become the major 
        source of support for the academic missions of all teaching 
        hospitals as the medical marketplace has led to a growing 
        inability to gain such support from other payers.
            (3) With few medicare patients, these children's teaching 
        hospitals receive less than $400 in Federal funds for each 
        medical resident they train, while other teaching hospitals 
        receive on average more than $79,000 for each resident they 
        train, creating a very serious inequity in the competitive 
        market for these children's hospitals.
            (4) Children's teaching hospitals make an essential 
        contribution to training our children's doctors. Although less 
        than one percent of all hospitals, they train 5 percent of all 
        physicians, 25 percent of all pediatricians, and the majority 
        of most pediatric specialists.
            (5) They serve as regional and national pediatric referral 
        centers and provide research discoveries and technological 
        advancements which benefit all children, conducting along with 
        their affiliated departments of pediatrics almost 20 percent of 
        all pediatric research sponsored by the National Institutes of 
        Health.
            (6) Their ability to sustain their academic and patient 
        care missions is increasingly threatened by the lack of 
        graduate medical education funding, which represents the major 
        source of shortfall between patient costs and patient revenues 
        for many children's hospitals with significant teaching 
        programs, even as these hospital strive to reduce their costs.

SEC. 2. PROGRAM OF PAYMENTS TO CHILDREN'S HOSPITALS THAT OPERATE 
              GRADUATE MEDICAL EDUCATION PROGRAMS.

    (a) Payments.--The Secretary shall make payment under this section 
to each children's hospital for each hospital cost reporting period 
beginning during fiscal year 1999 or fiscal year 2000 for the direct 
and indirect expenses associated with operating approved medical 
residency training programs.
    (b) Amount of Payment.--
            (1) In general.--Subject to paragraph (3), the amount 
        payable under this section to a children's hospital for direct 
        and indirect expenses relating to approved medical residency 
        training programs for a cost reporting period is equal to the 
        product of--
                    (A) the per resident rate, as determined under 
                paragraph (2); and
                    (B) the weighted average number of full-time 
                equivalent residents in the hospital's approved medical 
                residency training programs (as determined under 
                section 1886(h)(4) of the Social Security Act) for the 
                cost reporting period.
            (2) Per resident rate.--
                    (A) In general.--The per resident rate under this 
                paragraph for a cost reporting period is equal to the 
                sum of the direct medical education component (computed 
                under subparagraph (B)), and the indirect medical 
                education component (computed under subparagraph 
                (C)(iii).
                    (B) Direct medical education component.--The 
                Secretary shall compute the direct medical education 
                component described in this subparagraph for a hospital 
                as follows:
                            (i) Computation of base national dme 
                        average per resident rate.--The Secretary shall 
compute a base national DME average per resident rate equal to the 
simple average of the per resident rates computed under section 
1886(h)(2) of the Social Security Act for cost reporting periods ending 
during fiscal year 1997.
                            (ii) Updating rate.--The Secretary shall 
                        update such rate by the estimated percentage 
                        increase in the consumer price index for all 
                        urban consumers during the period beginning 
                        October 1997 and ending with the midpoint of 
                        the hospital's cost reporting period that 
                        begins during fiscal year 1999.
                            (iii) Adjustment for variations in labor-
                        related costs.--For each hospital the Secretary 
                        shall adjust the portion of such updated rate 
                        that is related to labor and labor-related 
                        costs to account for variations in wage costs 
                        in the geographic area in which the hospital is 
                        located using the factor determined under 
                        section 1886(d)(4)(E) of the Social Security 
                        Act for discharges occurring during fiscal year 
                        1998.
                            (iv) Direct medical education component.--
                        The direct medical education component 
                        described in this subparagraph for a hospital 
                        is the updated rate, computed under clause 
                        (ii), as adjusted under clause (iii) for the 
                        hospital.
                    (C) Indirect medical education component.--The 
                Secretary shall compute the indirect medical education 
                component described in this subparagraph for a hospital 
                as follows:
                            (i) Computation of hospital average ime per 
                        resident payments.--The Secretary shall 
                        determine, for each hospital with a graduate 
                        medical education program which is paid under 
                        section 1886(d) of the Social Security Act, the 
                        amount paid to that hospital pursuant to 
                        section 1886(d)(5)(B) of such Act for its cost 
                        reporting period ending during fiscal year 
                        1997, and shall divide such amount by the 
                        number of FTE residents participating in its 
                        approved residency programs and used to 
                        calculate the amount of payment under such 
                        section in that cost reporting period.
                            (ii) Computing national average.--The 
                        Secretary shall take the sum of the amounts 
                        determined under clause (i) for all the 
                        hospitals described in such clause and divide 
                        that sum by the number of hospitals so 
                        described.
                            (iii) Updating.--The Secretary shall update 
                        the amount computed under clause (ii) for a 
                        hospital by applicable percentage increase (as 
                        defined in section 1886(b)(3)(B)(i) of the 
                        Social Security Act) during the period between 
                        October 1997 and ending with the midpoint of 
                        the hospital's cost reporting period that 
                        begins during fiscal year 1999.
                            (iv) Indirect medical education 
                        component.--The indirect medical education 
                        component described in this subparagraph for a 
                        hospital is the average computed under clause 
                        (ii), updated under clause (iii).
                    (3) Pro rata reductions.--If the Secretary 
                determines that the amount of funds provided under 
                subsection (d) for cost reporting periods ending in a 
                fiscal year is insufficient to provide the total amount 
of payments otherwise due for such periods, the Secretary shall reduce 
the amount payable under this section for such period on a pro rata 
basis to the extent to assure that the aggregate of such payments does 
not exceed the amount of funds provided under subsection (d) for such 
cost reporting periods.
    (c) Making of Payments.--
            (1) Interim payments.--The Secretary shall estimate, before 
        the beginning of each cost reporting period for a hospital for 
        which a payment may be made under this section, the amount of 
        payment to be made under this section to the hospital for such 
        period and shall make payment, in 26 equal interim installments 
        during such period, of the amounts obligated to be paid.
            (2) Final payment.--At the end of each such period, the 
        hospital shall submit to the Secretary such information as the 
        Secretary determines to be necessary to determine the final 
        payment amount due under this section for the hospital for the 
        period. Based on such determination, the Secretary shall recoup 
        any overpayments made, or payment balances due. The final 
        amount so determined shall be considered a final intermediary 
        determination for purposes of applying section 1878 of the 
        Social Security Act and shall be subject to review under that 
        section in the same manner as the amount of payment under 
        section 1886(d) of such Act is subject to review under such 
        section.
    (d) Limitation on Expenditures.--
            (1) In general.--Subject to paragraph (2), there are hereby 
        appropriated, out of any money in the Treasury not otherwise 
        appropriated, for payments under this section for cost 
        reporting periods ending in each of fiscal years 1999 and 2000 
        $285,000,000.
            (2) Carryover of excess.--If the amount of payments under 
        this section for cost reporting periods ending in fiscal year 
        1999 is less than the amount provided under this subsection for 
        such payments for such periods, then the amount available under 
        this subsection for cost reporting periods ending in fiscal 
        year 2000 shall be increased by the amount of such difference.
    (e) Relation to Medicare and Medicaid Payments.--Notwithstanding 
any other provision of law, payments under this section to a hospital 
for a cost reporting period--
            (1) are in lieu of any amounts otherwise payable to the 
        hospital under section 1886(h) or 1886(d)(5)(F) of the Social 
        Security Act to the hospital for such cost reporting period, 
        but
            (2) shall not affect the amounts otherwise payable to such 
        hospitals under a State medicaid plan under title XIX of such 
        Act.
    (f) Definitions.--In this section:
            (1) Approved medical residency training program.--The term 
        ``approved medical residency training program'' has the meaning 
        given such term in section 1886(h)(5)(A) of the Social Security 
        Act (42 U.S.C. 1395ww(h)(5)(A)).
            (2) Children's hospital.--The term ``children's hospital'' 
        means a hospital described in section 1886(d)(1)(B)(iii) of the 
        Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iii)).
            (3) Direct graduate medical education costs.--The term 
        ``direct graduate medical education costs'' has the meaning 
        given such term in section 1886(h)(5)(C) of the Social Security 
        Act (42 U.S.C. 1395ww(h)(5)(C)).
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
Children's Hospitals Education and Research Act of 1998 - Directs the Secretary of Health and Human Services to make payment as specified to each children's hospital for each hospital cost reporting period beginning during FY 1999 or 2000 for the direct and indirect expenses associated with operating approved medical residency training programs.  States that such payments are in lieu of certain Medicare payments to hospitals for inpatient hospital services, but shall not affect the amounts otherwise payable to such hospitals under a State Medicaid plan.  Makes appropriations for such payments for such fiscal years.
Children's Hospitals Education and Research Act of 1998