A bill to amend title XVIII of the Social Security Act to improve the Medicare program for beneficiaries residing in rural areas.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Rural Medicare 
Equity Act of 2007''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Elimination of geographic physician work adjustment factor from 
                            geographic indices used to adjust payments 
                            under the physician fee schedule.
Sec. 3. Clinical rotation demonstration project.
Sec. 4. Medicare rural health care quality improvement demonstration 
                            projects.
Sec. 5. Ensuring proportional representation of interests of rural 
                            areas on the Medicare Payment Advisory 
                            Commission.
Sec. 6. Implementation of GAO recommendations regarding geographic 
                            adjustment indices under the Medicare 
                            physician fee schedule.

SEC. 2. ELIMINATION OF GEOGRAPHIC PHYSICIAN WORK ADJUSTMENT FACTOR FROM 
              GEOGRAPHIC INDICES USED TO ADJUST PAYMENTS UNDER THE 
              PHYSICIAN FEE SCHEDULE.

    (a) Findings.--Congress finds the following:
            (1) Variations in the geographic physician work adjustment 
        factors under section 1848(e) of the Social Security Act (42 
        U.S.C. 1395w-4(e)) result in inequity between localities in 
        payments under the Medicare physician fee schedule.
            (2) Beneficiaries under the Medicare program that reside in 
        areas where such adjustment factors are high have relatively 
        more access to services that are paid based on such fee 
        schedule.
            (3) There are a number of studies indicating that the 
        market for health care professionals has become nationalized 
        and historically low labor costs in rural and small urban areas 
        have disappeared.
            (4) Elimination of the adjustment factors described in 
        paragraph (1) would equalize the reimbursement rate for 
        services reimbursed under the Medicare physician fee schedule 
        while remaining budget-neutral.
    (b) Elimination.--Section 1848(e) of the Social Security Act (42 
U.S.C. 1395w-4(e)) is amended--
            (1) in paragraph (1)(A)(iii), by striking ``an index'' and 
        inserting ``for services provided before January 1, 2008, an 
        index''; and
            (2) in paragraph (2), by inserting ``, for services 
        provided before January 1, 2008,'' after ``paragraph (4)), 
        and''.
    (c) Budget Neutrality Adjustment for Elimination of Geographic 
Physician Work Adjustment Factor.--Section 1848(d) of the Social 
Security Act (42 U.S.C. 1395w-4(d)), as amended by section 101 of the 
Medicare Improvement and Extension Act of 2006, is amended--
            (1) in paragraph (1)(A), by striking ``The conversion'' and 
        inserting ``Subject to paragraph (8), the conversion''; and
            (2) by adding at the end the following new paragraph:
            ``(8) Budget neutrality adjustment for elimination of 
        geographic physician work adjustment factor.--Before applying 
        an update for a year under this subsection, the Secretary shall 
        (if necessary) provide for an adjustment to the conversion 
        factor for that year to ensure that the aggregate payments 
        under this part in that year shall be equal to aggregate 
        payments that would have been made under such part in that year 
        if the amendments made by section 2(b) of the Rural Medicare 
        Equity Act of 2007 had not been enacted.''.

SEC. 3. CLINICAL ROTATION DEMONSTRATION PROJECT.

    (a) Establishment.--Not later than 6 months after the date of 
enactment of this Act, the Secretary shall establish a demonstration 
project that provides for demonstration grants designed to provide 
financial or other incentives to hospitals to attract educators and 
clinical practitioners so that hospitals that serve beneficiaries under 
the Medicare program under title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.) who are residents of underserved areas may host 
clinical rotations.
    (b) Duration of Project.--The demonstration project shall be 
conducted over a 5-year period.
    (c) Waiver.--The Secretary shall waive such provisions of titles XI 
and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 
et seq.) as may be necessary to conduct the demonstration project under 
this section.
    (d) Reports.--The Secretary shall submit to the appropriate 
committees of Congress interim reports on the demonstration project and 
a final report on such project within 6 months after the conclusion of 
the project together with recommendations for such legislative or 
administrative action as the Secretary determines appropriate.
    (e) Funding.--There are appropriated to the Secretary $20,000,000 
to carry out this section.
    (f) Definitions.--In this section:
            (1) Hospital.--The term ``hospital'' means any subsection 
        (d) hospital (as defined in section 1886(d)(1)(B) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(1)(B)) that had indirect or 
        direct costs of medical education during the most recent cost 
        reporting period preceding the date of enactment of this Act.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (3) Underserved area.--The term ``underserved area'' means 
        such medically underserved urban areas and medically 
        underserved rural areas as the Secretary may specify.

SEC. 4. MEDICARE RURAL HEALTH CARE QUALITY IMPROVEMENT DEMONSTRATION 
              PROJECTS.

    (a) Establishment.--
            (1) In general.--Not later than 6 months after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall establish not more that 10 demonstration projects to 
        provide for improvements, as recommended by the Institute of 
        Medicine, in the quality of health care provided to individuals 
        residing in rural areas.
            (2) Activities.--Activities under the projects may include 
        public health surveillance, emergency room videoconferencing, 
        virtual libraries, telemedicine, electronic health records, 
        data exchange networks, and any other activities determined 
        appropriate by the Secretary.
            (3) Consultation.--The Secretary shall consult with the 
        Rural Health Quality Advisory Commission, the Office of Rural 
        Health Policy of the Health Resources and Services 
        Administration, the Agency for Healthcare Research and Quality, 
        and the Centers for Medicare & Medicaid Services in carrying 
        out the provisions of this section.
    (b) Duration.--Each demonstration project under this section shall 
be conducted over a 4-year period.
    (c) Demonstration Project Sites.--The Secretary shall ensure that 
the demonstration projects under this section are conducted at a 
variety of sites representing the diversity of rural communities in the 
Nation.
    (d) Waiver.--The Secretary shall waive such provisions of titles XI 
and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 
et seq.) as may be necessary to conduct the demonstration projects 
under this section.
    (e) Independent Evaluation.--The Secretary shall enter into an 
arrangement with an entity that has experience working directly with 
rural health systems for the conduct of an independent evaluation of 
the projects conducted under this section.
    (f) Reports.--The Secretary shall submit to the appropriate 
committees of Congress interim reports on each demonstration project 
and a final report on such project within 6 months after the conclusion 
of the project. Such reports shall include recommendations regarding 
the expansion of the project to other areas and recommendations for 
such other legislative or administrative action as the Secretary 
determines appropriate.
    (g) Funding.--There are appropriated to the Secretary $50,000,000 
to carry out this section.

SEC. 5. ENSURING PROPORTIONAL REPRESENTATION OF INTERESTS OF RURAL 
              AREAS ON THE MEDICARE PAYMENT ADVISORY COMMISSION.

    (a) In General.--Section 1805(c)(2) of the Social Security Act (42 
U.S.C. 1395b-6(c)(2)) is amended--
            (1) in subparagraph (A), by inserting ``consistent with 
        subparagraph (E)'' after ``rural representatives''; and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Proportional representation of interests of 
                rural areas.--In order to provide a balance between 
                urban and rural representatives under subparagraph (A), 
                the proportion of members who represent the interests 
                of health care providers and Medicare beneficiaries 
                located in rural areas shall be no less than the 
                proportion, of the total number of Medicare 
                beneficiaries, who reside in rural areas.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to appointments made to the Medicare Payment 
Advisory Commission after the date of the enactment of this Act.

SEC. 6. IMPLEMENTATION OF GAO RECOMMENDATIONS REGARDING GEOGRAPHIC 
              ADJUSTMENT INDICES UNDER THE MEDICARE PHYSICIAN FEE 
              SCHEDULE.

    Not later than 180 days after the date of enactment of this Act, 
the Secretary of Health and Human Services shall implement the 
recommendations contained in the March 2005 GAO report 05-119 entitled 
``Medicare Physician Fees: Geographic Adjustment Indices are Valid in 
Design, but Data and Methods Need Refinement.''.

Summary: Rural Medicare Equity Act of 2007 - Amends title XVIII (Medicare) of the Social Security Act (SSA) to eliminate the geographic physician work adjustment factor from the geographic indices used to adjust payments under the physician fee schedule. Directs the Secretary of Health and Human Services to establish a demonstration grants project designed to provide financial or other incentives to hospitals to attract educators and clinical practitioners so that hospitals that serve Medicare beneficiaries residing in underserved areas may host clinical rotations. Directs the Secretary to establish up to 10 demonstration projects to provide for improvements, as recommended by the Institute of Medicine, in the quality of health care provided to individuals residing in rural areas. Amends SSA title XVIII to require proportional representation of rural area interests on the Medicare Payment Advisory Commission (MEDPAC). Directs the Secretary to implement the recommendations contained in the March 2005 GAO report 05-119 entitled Medicare Physician Fees: Geographic Adjustment Indices are Valid in Design, but Data and Methods Need Refinement.