A bill to amend title XVIII of the Social Security Act to provide for national standardized payment amounts for inpatient hospital services furnished under the medicare program and to make other rural health care improvements.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Rural Health Care 
Fairness and Medicare Equity Act of 2003''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Equalizing urban and rural standardized payment amounts under 
                            the medicare inpatient hospital prospective 
                            payment system.
Sec. 3. Adjustment to wage index.
Sec. 4. Floor on area wage adjustment factors used under medicare PPS 
                            for inpatient and outpatient hospital 
                            services.
Sec. 5. Establishment of alternative guidelines for geographic 
                            reclassification of certain hospitals 
                            located in sparsely populated States.
Sec. 6. Establishment of floor on work geographic adjustment.

SEC. 2. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT AMOUNTS UNDER 
              THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE PAYMENT 
              SYSTEM.

    (a) In General.--Section 1886(d)(3)(A)(iv) of the Social Security 
Act (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended--
            (1) by striking ``(iv) For discharges'' and inserting 
        ``(iv)(I) Subject to subclause (II), for discharges''; and
            (2) by adding at the end the following new subclause:
            ``(II) For discharges occurring in a fiscal year beginning 
        with fiscal year 2004, the Secretary shall compute a 
        standardized amount for hospitals located in any area within 
        the United States and within each region equal to the 
        standardized amount computed for the previous fiscal year under 
        this subparagraph for hospitals located in a large urban area 
        (or, beginning with fiscal year 2005, for hospitals located in 
        any area) increased by the applicable percentage increase under 
        subsection (b)(3)(B)(i) for the fiscal year involved.''.
    (b) Conforming Amendments.--
            (1) Computing drg-specific rates.--Section 1886(d)(3)(D) of 
        the Social Security Act (42 U.S.C. 1395ww(d)(3)(D)) is 
        amended--
                    (A) in the heading, by striking ``in different 
                areas'';
                    (B) in the matter preceding clause (i), by striking 
                ``each of which is'';
                    (C) in clause (i)--
                            (i) in the matter preceding subclause (I), 
                        by inserting ``for fiscal years before fiscal 
                        year 2004,'' before ``for hospitals''; and
                            (ii) in subclause (II), by striking ``and'' 
                        after the semicolon at the end;
                    (D) in clause (ii)--
                            (i) in the matter preceding subclause (I), 
                        by inserting ``for fiscal years before fiscal 
                        year 2004,'' before ``for hospitals''; and
                            (ii) in subclause (II), by striking the 
                        period at the end and inserting ``; and''; and
                    (E) by adding at the end the following new clause:
                    ``(iii) for a fiscal year beginning after fiscal 
                year 2003, for hospitals located in all areas, to the 
                product of--
                            ``(I) the applicable operating standardized 
                        amount (computed under subparagraph (A)), 
                        reduced under subparagraph (B), and adjusted or 
                        reduced under subparagraph (C) for the fiscal 
                        year; and
                            ``(II) the weighting factor (determined 
                        under paragraph (4)(B)) for that diagnosis-
                        related group.''.
            (2) Technical conforming sunset.--Section 1886(d)(3) of the 
        Social Security Act (42 U.S.C. 1395ww(d)(3)) is amended--
                    (A) in the matter preceding subparagraph (A), by 
                inserting ``, for fiscal years before fiscal year 
                1997,'' before ``a regional adjusted DRG prospective 
                payment rate''; and
                    (B) in subparagraph (D), in the matter preceding 
                clause (i), by inserting ``, for fiscal years before 
                fiscal year 1997,'' before ``a regional DRG prospective 
                payment rate for each region,''.

SEC. 3. ADJUSTMENT TO WAGE INDEX.

    (a) In General.--Section 1886(d)(3)(E) of the Social Security Act 
(42 U.S.C. 1395ww(d)(3)(E)) is amended--
            (1) by striking ``wage levels.--The Secretary'' and 
        inserting ``wage levels.--
            ``(i) In general.--Except as provided in clause (ii), the 
        Secretary''; and
            (2) by adding at the end the following new clause:
            ``(ii) Alternative proportion to be adjusted beginning in 
        fiscal year 2004.--
                    ``(I) In general.--Except as provided in subclause 
                (II), for discharges occurring on or after October 1, 
                2003, the Secretary shall substitute `62 percent' for 
                the proportion described in the first sentence of 
                clause (i).
                    ``(II) Hold harmless for certain hospitals.--If the 
                application of subclause (I) would result in lower 
                payments to a hospital than would otherwise be made, 
                then this subparagraph shall be applied as if this 
                clause had not been enacted.
    (b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) of the Social 
Security Act (42 U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), 
is amended by adding at the end of clause (i) the following new 
sentence: ``The Secretary shall apply the previous sentence for any 
period as if the amendments made by section 3(a) of the Rural Health 
Care Fairness and Medicare Equity Act of 2003 had not been enacted.''.

SEC. 4. FLOOR ON AREA WAGE ADJUSTMENT FACTORS USED UNDER MEDICARE PPS 
              FOR INPATIENT AND OUTPATIENT HOSPITAL SERVICES.

    (a) Inpatient PPS.--Section 1886(d)(3)(E) of the Social Security 
Act (42 U.S.C. 1395ww(d)(3)(E)), as amended by section 3(a), is 
amended--
            (1) in clause (i), by striking ``clause (ii)'' and 
        inserting ``clauses (ii) and (iii)''; and
            (2) by adding at the end the following new clause:
                    ``(iii) Floor on area wage adjustment factor.--
                            ``(I) In general.--Notwithstanding clause 
                        (i), in determining payments under this 
                        subsection for discharges occurring on or after 
                        October 1, 2003, the Secretary shall substitute 
                        a factor of 0.85 for any factor that would 
                        otherwise apply under such clause that is less 
                        than 0.85.
                            ``(II) Applicability.--Nothing in this 
                        clause shall be construed as authorizing the 
                        application of subclause (I) to adjustments for 
                        area wage levels made under other payment 
                        systems established under this title (other 
                        than the payment system under section 1833(t)) 
                        to which the factors established under clause 
                        (i) apply.''.
    (b) Outpatient PPS.--Section 1833(t)(2) of the Social Security Act 
(42 U.S.C. 1395l(t)(2)) is amended by adding at the end the following 
new sentence: ``For purposes of subparagraph (D) for items and services 
furnished on or after October 1, 2003, if the factors established under 
clause (i) of section 1886(d)(3)(E) are used to adjust for relative 
differences in labor and labor-related costs under the payment system 
established under this subsection, the provisions of clause (iii) of 
such section (relating to a floor on area wage adjustment factor) shall 
apply to such factors, as used in this subsection, in the same manner 
and to the same extent (including waiving the applicability of the 
requirement for such floor to be applied in a budget neutral manner) as 
they apply to factors under section 1886.''.
    (c) Waiving Budget Neutrality.--The last sentence of section 
1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)), 
as added by section 3(b), is amended by striking ``section 3(a)'' and 
inserting ``sections 3(a) and 4(a)''.

SEC. 5. ESTABLISHMENT OF ALTERNATIVE GUIDELINES FOR GEOGRAPHIC 
              RECLASSIFICATION OF CERTAIN HOSPITALS LOCATED IN SPARSELY 
              POPULATED STATES.

    (a) Alternative Guidelines for Reclassification.--Notwithstanding 
the guidelines published under section 1886(d)(10)(D)(i)(I) of the 
Social Security Act (42 U.S.C. 1395ww(d)(10)(D)(i)(I)), the Secretary 
of Health and Human Services shall publish and use alternative 
guidelines under which--
            (1) a hospital or a group of hospitals described in 
        subsection (b) qualifies for geographic reclassification under 
        such section for a fiscal year beginning with fiscal year 2005 
        for the purposes of using the other area's standardized amount 
        for inpatient operating costs, wage index value, or both, or, 
        in the case of a group of hospitals, for the purposes of using 
        both the other area's standardized amount for inpatient 
        operating costs and wage index value; and
            (2) a hospital or group of hospitals seeking to be 
        reclassified is required to demonstrate that the hospital meets 
        the criteria to be reclassified to the area to which such 
        hospital seeks to be reclassified, except that, in the case of 
        an individual hospital, the hospital does not meet the 
        proximity criteria applicable with respect to such area, or, in 
        the case of a group of hospitals, the group does not meet the 
        adjacency criteria applicable with respect to such area.
    (b) Hospitals Covered.--A hospital or a group of hospitals 
described in this subsection is a hospital or group of hospitals that--
            (1) is located in a State with less than 20 people per 
        square mile (as determined by the Secretary); and
            (2) seeks to be reclassified to an area within the State in 
        which such hospital or group is located.

SEC. 6. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC ADJUSTMENT.

    Section 1848(e)(1) of the Social Security Act (42 U.S.C. 1395w-
4(e)(1)) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Floor at 1.0 on work geographic indices.--
                After calculating the work geographic indices in 
                subparagraph (A)(iii), for purposes of payment for 
                services furnished on or after January 1, 2004, the 
                Secretary shall increase the work geographic index to 
                1.00 for any locality for which such geographic index 
                is less than 1.00.''.

Summary: Rural Health Care Fairness and Medicare Equity Act of 2003 - Amends title XVIII (Medicare) of the Social Security Act (SSA) to direct the Secretary of Health and Human Services, for discharges occurring in a fiscal year beginning with FY 2004, to compute a standardized amount for hospitals in rural and small urban areas that is equal to the standardized amount computed for the previous fiscal year for hospitals located in a large urban area increased by the applicable percentage increase for the fiscal year involved. Sets the wage index at 62 percent for discharges occurring in FY 2004, except that hospitals receiving lower payments as a result of such new wage index would be held harmless. Creates a wage index floor for use in determining payments for discharges occurring in FY 2004 for hospitals with a wage index under 0.85. Directs the Secretary to publish and use alternative guidelines for geographic reclassification of certain hospitals located in sparsely populated States. Establishes a floor of 1.00 for the work geographic cost-of-practice index under the physician payment system.