To amend title XVIII of the Social Security Act to improve the provision of items and services provided to Medicare beneficiaries residing in rural areas.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``MediFair Act of 2002''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Regional inequities in medicare reimbursement has 
        created barriers to care for seniors and the disabled.
            (2) The regional inequities in medicare reimbursement 
        penalize States that have cost-effective health care delivery 
        systems and rewards those States with high utilization rates 
        and that provide inefficient care.
            (3) Over a lifetime, those inequities can mean as much as a 
        $50,000 difference in the cost of care provided per 
        beneficiary.
            (4) Regional inequities have resulted in creating very 
        different medicare programs for seniors and the disabled based 
        on where they live.
            (5) Because the Medicare+Choice rate is based on the fee-
        for-service reimbursement rate, regional inequities have 
        allowed some medicare beneficiaries access to plans with 
        significantly more benefits including prescription drugs. 
        Beneficiaries in States with lower reimbursement rates have not 
        benefited to the same degree as beneficiaries in other parts of 
        the country.
            (6) Regional inequities in medicare reimbursement have 
        created an unfair competitive advantage for hospitals and other 
        health care providers in States that receive above average 
        payments. Higher payments mean that those providers can pay 
        higher salaries in a tight, competitive market.
            (7) Regional inequities in medicare reimbursement can limit 
        timely access to new technology for beneficiaries in States 
        with lower reimbursement rates.
            (8) Regional inequities in medicare reimbursement, if left 
        unchecked, will reduce access to medicare services and impact 
        healthy outcomes for beneficiaries.
            (9) Regional inequities in medicare reimbursement are not 
        just a rural versus urban problem. Many States with large urban 
        centers are at the bottom of the national average for per 
        beneficiary costs.

SEC. 3. IMPROVING FAIRNESS OF PAYMENTS TO PROVIDERS UNDER THE MEDICARE 
              FEE-FOR-SERVICE PROGRAM.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is 
amended by adding at the end the following new section:

``improving payment equity under the original medicare fee-for-service 
                                program

    ``Sec. 1897. (a) Establishment of System.--Notwithstanding any 
other provision of law, the Secretary shall establish a system for 
making adjustments to the amount of payment made to entities and 
individuals for items and services provided under the original medicare 
fee-for-service program under parts A and B.
    ``(b) System Requirements.--
            ``(1) Increase for states below the national average.--
        Under the system established under subsection (a), if a State 
        average per beneficiary amount for a year is less than the 
        national average per beneficiary amount for such year, then the 
        Secretary (beginning in 2003) shall increase the amount of 
        applicable payments in such a manner as will result (as 
        estimated by the Secretary) in the State average per 
        beneficiary amount for the subsequent year being equal to the 
        national average per beneficiary amount for such subsequent 
        year.
            ``(2) Reduction for certain states above the national 
        average to enhance quality care and maintain budget 
        neutrality.--
                    ``(A) In general.--The Secretary shall ensure that 
                the increase in payments under paragraph (1) does not 
                cause the estimated amount of expenditures under this 
                title for a year to increase or decrease from the 
                estimated amount of expenditures under this title 
that would have been made in such year if this section had not been 
enacted by reducing the amount of applicable payments in each State 
that the Secretary determines has--
                            ``(i) a State average per beneficiary 
                        amount for a year that is greater than the 
                        national average per beneficiary amount for 
                        such year; and
                            ``(ii) healthy outcome measurements or 
                        quality care measurements that indicate that a 
                        reduction in applicable payments would 
                        encourage more efficient use of, and reduce 
                        overuse of, items and services for which 
                        payment is made under this title.
                    ``(B) Limitation.--The Secretary shall not reduce 
                applicable payments under subparagraph (A) to a State 
                that--
                            ``(i) has a State average per beneficiary 
                        amount for a year that is greater than the 
                        national average per beneficiary amount for 
                        such year; and
                            ``(ii) has healthy outcome measurements or 
                        quality care measurements that indicate that 
                        the applicable payments are being used to 
                        improve the access of beneficiaries to quality 
                        care.
            ``(3) Determination of averages.--
                    ``(A) State average per beneficiary amount.--Each 
                year (beginning in 2002), the Secretary shall determine 
                a State average per beneficiary amount for each State 
                which shall be equal to the Secretary's estimate of the 
                average amount of expenditures under the original 
                medicare fee-for-service program under parts A and B 
                for the year for a beneficiary enrolled under such 
                parts that resides in the State.
                    ``(B) National average per beneficiary amount.--
                Each year (beginning in 2002), the Secretary shall 
                determine the national average per beneficiary amount 
                which shall be equal to the average of the State 
                average per beneficiary amount determined under 
                subparagraph (A) for the year.
            ``(4) Definitions.--In this section:
                    ``(A) Applicable payments.--The term `applicable 
                payments' means payments made to entities and 
                individuals for items and services provided under the 
                original medicare fee-for-service program under parts A 
                and B to beneficiaries enrolled under such parts that 
                reside in the State.
                    ``(B) State.--The term `State' has the meaning 
                given such term in section 210(h).
    ``(c) Beneficiaries Held Harmless.--The provisions of this section 
shall not affect--
            ``(1) the entitlement to items and services of a 
        beneficiary under this title, including the scope of such items 
        and services; or
            ``(2) any liability of the beneficiary with respect to such 
        items and services.
    ``(d) Regulations.--
            ``(1) In general.--The Secretary, in consultation with the 
        Medicare Payment Advisory Commission, shall promulgate 
        regulations to carry out this section.
            ``(2) Protecting rural communities.--In promulgating the 
        regulations pursuant to paragraph (1), the Secretary shall give 
        special consideration to rural areas.''.

SEC. 4. MEDPAC RECOMMENDATIONS ON HEALTHY OUTCOMES AND QUALITY CARE.

    (a) Recommendations.--The Medicare Payment Advisory Commission 
established under section 1805 of the Social Security Act (42 U.S.C. 
1395b-6) shall develop recommendations on policies and practices that, 
if implemented, would encourage--
            (1) healthy outcomes and quality care under the medicare 
        program in States with respect to which payments are reduced 
        under section 1897(b)(2) of such Act (as added by section 3); 
        and
            (2) the efficient use of payments made under the medicare 
        program in such States.
    (b) Submission.--Not later than the date that is 9 months after the 
date of enactment of this Act, the Commission shall submit to Congress 
the recommendations developed under subsection (a).

Summary: MediFair Act of 2002 - Amends title XVIII (Medicare) of the Social Security Act to direct the Secretary of Health and Human Services to establish a system for making adjustments to the amount of payment to entities and individuals for items and services provided under the original Medicare fee-for-service program under Medicare parts A and B for the stated purpose of improving payment equity under such program. Directs the Medicare Payment Advisory Commission to develop recommendations for Congress on policies and practices that, if implemented, would encourage: (1) healthy outcomes and quality care under the Medicare program in States with respect to which payments are reduced under the system under this Act. And (2) the efficient use of payments made under the Medicare program in such States.