To amend title XVIII of the Social Security Act to provide geographic equity in fee-for-service reimbursement for providers under the Medicare Program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Equity and Fairness in Fee-
for-Service Reimbursement Act of 2004''.

SEC. 2. IMPROVING FAIRNESS OF PAYMENTS TO PROVIDERS UNDER THE MEDICARE 
              FEE-FOR-SERVICE PROGRAM.

    Title XVIII of the Social Security Act, as amended by section 1016 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Public Law 108-173), is amended by adding at the end the 
following new section:

 ``improving fairness of payments under the original medicare fee-for-
                            service program

    ``Sec. 1898. (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 providers of 
services and health care professionals for services provided under the 
original medicare fee-for-service program under parts A and B.
    ``(b) System Requirements.--
            ``(1) Adjustments.--Under the system described in 
        subsection (a), the Secretary (beginning in fiscal year 2005 or 
        calendar year 2005, as the Secretary determines appropriate for 
        the type of services involved) shall make the following 
        adjustments:
                    ``(A) States above national average.--Subject to 
                subparagraph (C), if a State average per beneficiary 
                amount, but for the application of this section, for a 
                year is greater than 100 percent of the national 
                average per beneficiary amount for such year, then the 
                Secretary shall reduce 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 at 100 percent of 
                the national average per beneficiary amount for such 
                subsequent year.
                    ``(B) States below national average.--Subject to 
                subparagraph (C), if such a State average per 
                beneficiary amount for a year is less than 100 percent 
                of the national average per beneficiary amount for such 
                year, then the Secretary 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 at 100 
                percent of the national average per beneficiary amount 
                for such subsequent year.
                    ``(C) 3-year phase in.--In applying this paragraph 
                for--
                            ``(i) fiscal year 2005 or calendar year 
                        2005, the amount of any increase or decrease 
                        under subparagraph (A) or (B) shall be 25 
                        percent of the amount of the increase or 
                        decrease otherwise provided;
                            ``(ii) fiscal year 2006 or calendar year 
                        2006, the amount of any increase or decrease 
                        under subparagraph (A) or (B) shall be 50 
                        percent of the amount of the increase or 
                        decrease otherwise provided; and
                            ``(iii) fiscal year 2007 or calendar year 
                        2007, the amount of any increase or decrease 
                        under subparagraph (A) or (B) shall be 75 
                        percent of the amount of the increase or 
                        decrease otherwise provided.
            ``(2) Determination of averages.--
                    ``(A) State average per beneficiary amount.--Each 
                year (beginning in 2004), 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 2004), the Secretary shall 
                determine the national average per beneficiary amount 
                which shall be equal to the average of the State 
                average per beneficiary amounts determined under 
                subparagraph (B) for the year.
            ``(3) Applicable payments defined.--In this section, the 
        term `applicable payments' means payments made to providers of 
        services and health care professionals for 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.
    ``(c) Beneficiaries Held Harmless.--The provisions of this section 
shall not effect--
            ``(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.--The Secretary, in consultation with the 
Medicare Payment Advisory Commission, shall promulgate regulations to 
carry out this section.''.

Summary: Medicare Equity and Fairness in Fee-for-Service Reimbursement Act of 2004 - Amends title XVIII (Medicare) of the Social Security Act, as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to direct the Secretary of Health and Human Services to establish a system for making adjustments to the amount of payment made to providers of services and health care professionals for services provided under the original Medicare fee-for-service program, with specified formulae for States whose average per beneficiary amount is: (1) greater than 100 percent of the national average. Or (2) less than 100 percent of the national average. Provides for a three year phase-in of such rates.