Rural Health Care Protection and Improvement Act of 1997

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rural Health Care Protection and 
Improvement Act of 1997''.

SEC. 2. EXTENSION OF RURAL HEALTH TRANSITION GRANT PROGRAM.

    Section 4005(e) of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 1395ww note) is amended--
            (1) in paragraph (6), by adding at the end the following: 
        ``The Administrator may adjust the amount of a grant to a 
        hospital under this subsection, or terminate the grant, if the 
        Administrator determines that the hospital is using the grant 
        for an inappropriate use under this subsection.''; and
            (2) in paragraph (9), by striking ``1997'' and inserting 
        ``1997, and such sums as are necessary for each of fiscal years 
        1998 through 2002''.

SEC. 3. IMPROVING FAIRNESS OF PAYMENTS TO HEALTH MAINTENANCE 
              ORGANIZATIONS AND COMPETITIVE MEDICAL PLANS.

    (a) In General.--Section 1876(a) of the Social Security Act (42 
U.S.C. 1395mm(a)) is amended to read as follows:
    ``(a)(1)(A) The Secretary shall annually determine, and shall 
announce (in a manner intended to provide notice to interested parties) 
not later than April 30 before the calendar year concerned--
            ``(i) a per capita rate of payment for individuals who are 
        enrolled under this section with an eligible organization that 
        has entered into a risk-sharing contract and who are entitled 
        to benefits under part A and enrolled under part B;
            ``(ii) a per capita rate of payment for individuals who are 
        so enrolled with such an organization and who are enrolled 
        under part B only; and
            ``(iii) the factors to be used by the Secretary in 
        adjusting the annual capitation rate under subparagraph 
        (B)(ii).
For purposes of this section, the term `risk-sharing contract' means a 
contract entered into under subsection (g) and the term `reasonable 
cost reimbursement contract' means a contract entered into under 
subsection (h).
    ``(B) The annual per capita rate of payment for each payment area 
(as defined in paragraph (5)) shall be equal to the annual capitation 
rate (as defined in paragraph (4)), adjusted by the Secretary for--
            ``(i) individuals who are enrolled under this section with 
        an eligible organization that has entered into a risk-sharing 
        contract and who are enrolled under part B only; and
            ``(ii) such risk factors as age, disability status, gender, 
        institutional status, end-stage renal disease status, and such 
        other factors as the Secretary determines to be appropriate so 
        as to ensure actuarial equivalence. The Secretary may add to, 
        modify, or substitute for such factors, if such changes will 
        improve the determination of actuarial equivalence.
    ``(C) In the case of an eligible organization with a risk-sharing 
contract, the Secretary shall make monthly payments in advance and, 
except as provided in subsection (g)(2), in accordance with the rate 
determined under subparagraph (B), to the organization for each 
individual enrolled with the organization under this section.
    ``(D) The Secretary shall establish a separate rate of payment to 
an eligible organization with respect to any individual determined to 
have end-stage renal disease and enrolled with the organization. Such 
rate of payment shall be actuarially equivalent to rates paid to other 
enrollees in the payment area (or such other area as specified by the 
Secretary).
    ``(E)(i) The amount of payment under this paragraph may be 
retroactively adjusted to take into account any difference between the 
actual number of individuals enrolled in the plan under this section 
and the number of such individuals estimated to be so enrolled in 
determining the amount of the advance payment.
    ``(ii)(I) Subject to subclause (II), the Secretary may make 
retroactive adjustments under clause (i) to take into account 
individuals enrolled during the period beginning on the date on which 
the individual enrolls with an eligible organization (which has a risk-
sharing contract under this section) under a health benefit plan 
operated, sponsored, or contributed to by the individual's employer or 
former employer (or the employer or former employer of the individual's 
spouse) and ending on the date on which the individual is enrolled in 
the plan under this section, except that for purposes of making such 
retroactive adjustments under this clause, such period may not exceed 
90 days.
    ``(II) No adjustment may be made under subclause (I) with respect 
to any individual who does not certify that the organization provided 
the individual with the explanation described in subsection (c)(3)(E) 
at the time the individual enrolled with the organization.
    ``(F) Not later than March 1, the Secretary shall provide for 
notice to eligible organizations of proposed changes to be made in the 
methodology from the methodology and assumptions used in the previous 
announcement under subparagraph (A) and shall provide eligible 
organizations with an opportunity to comment on the proposed changes.
    ``(2) With respect to any eligible organization that has entered 
into a reasonable cost reimbursement contract, payments shall be made 
to such plan in accordance with subsection (h)(2) rather than paragraph 
(1).
    ``(3) Subject to paragraphs (2)(B)(ii) and (7) of subsection (c), 
payments under a contract to an eligible organization under paragraph 
(1) or (2) shall be instead of the amounts which (in the absence of the 
contract) would be otherwise payable, pursuant to sections 1814(b) and 
1833(a), for services furnished by or through the organization to 
individuals enrolled with the organization under this section.
    ``(4)(A) For purposes of this section, the `annual capitation rate' 
for a payment area for a calendar year is equal to the greatest of the 
following (adjusted as provided by subparagraphs (F) through (H)):
            ``(i) The sum of--
                    ``(I) the area-specific percentage (as specified 
                under subparagraph (B) for the year) of the area-
                specific capitation rate for the year for the payment 
                area, as determined under subparagraph (C); and
                    ``(II) the national percentage (as specified under 
                subparagraph (B) for the year) of the input-price-
                adjusted national capitation rate for the year, as 
                determined under subparagraph (D);
        multiplied by a budget neutrality factor adjustment factor 
        determined under subparagraph (E).
            ``(ii) An amount equal to--
                    ``(I) for 1998, 85 percent of the input-price-
                adjusted national capitation rate for the year, as 
                determined under subparagraph (D); and
                    ``(II) for any succeeding year, the amount 
                determined under this clause for the preceding year 
                increased by the national average per capita growth 
                percentage specified under subparagraph (F) for that 
                succeeding year.
            ``(iii) An amount equal to--
                    ``(I) for 1998, 100 percent of the annual per 
                capita rate of payment for 1997 for the payment area 
                (determined under this section, as in effect on the day 
                before the date of enactment of the Rural Health Care 
                Protection and Improvement Act of 1997); and
                    ``(II) for any succeeding subsequent year, 102 
                percent of the annual capitation rate under this 
                paragraph for the payment area for the previous year.
    ``(B) For purposes of subparagraph (A)(i)--
            ``(i) for 1998, the `area-specific percentage' is 85 
        percent and the `national percentage' is 15 percent;
            ``(ii) for 1999, the `area-specific percentage' is 75 
        percent and the `national percentage' is 25 percent;
            ``(iii) for 2000, the `area-specific percentage' is 65 
        percent and the `national percentage' is 35 percent;
            ``(iv) for 2001, the `area-specific percentage' is 55 
        percent and the `national percentage' is 45 percent; and
            ``(v) for any year after 2001, the `area-specific 
        percentage' is 50 percent and the `national percentage' is 50 
        percent.
    ``(C) For purposes of subparagraph (A)(i)(I), the area-specific 
capitation rate for a payment area--
            ``(i) for 1998, is the average of the annual per capita 
        rates of payment for the area for 1995 through 1997, after 
        adjusting the 1995 and 1996 rates of payment to 1997 dollars, 
        increased by the national average per capita growth percentage 
        for 1998 (specified in subparagraph (F)); and
            ``(ii) for any subsequent year, is the area-specific 
        capitation rate for the previous year determined under this 
        subparagraph for the payment area, increased by the national 
        average per capita growth percentage for that subsequent year.
    ``(D)(i) For purposes of clauses (i)(II) and (ii)(I) of 
subparagraph (A), the input-price-adjusted national capitation rate for 
a year for a payment area is equal to the sum, for all the types of 
services under this title (as classified by the Secretary), of the 
product (for each such type of service) of--
            ``(I) the national standardized capitation rate (determined 
        under clause (ii)) for the year;
            ``(II) the proportion of that rate for the year that is 
        attributable to that type of services; and
            ``(III) an index that reflects (for that year and that type 
        of services) the relative input price of the services in the 
        area compared with the national input price of the services.
In applying subclause (III), the Secretary shall, subject to clause 
(iii), apply those indices under this title that are used in applying 
(or updating) national payment rates for specific areas and localities.
    ``(ii) In clause (i)(I), the `national standardized capitation 
rate' for a year is equal to--
            ``(I) the sum (for all payment areas) of the product of--
                    ``(aa) the area-specific capitation rate for the 
                year for the area under subparagraph (C); and
                    ``(bb) the average number of individuals entitled 
                to benefits under this title who reside in that area in 
                the year; divided by
            ``(II) the total average number of individuals entitled to 
        benefits under this title who reside in all payment areas for 
        that year.
    ``(iii) In applying this subparagraph for 1998--
            ``(I) services under this title shall be divided into 
        services under part A and services under part B;
            ``(II) the proportions described in clause (i)(II) for 
        those types of services shall be--
                    ``(aa) for services under part A, the ratio 
                (expressed as a percentage) of the average annual per 
                capita rate of payment for the area for part A for 1997 
                to the total average annual per capita rate of payment 
                for the area for parts A and B for 1997; and
                    ``(bb) for services under part B, 100 percent minus 
                the ratio described in item (aa);
            ``(III) for services under part A, 70 percent of payments 
        attributable to such services shall be adjusted by the index 
        used under section 1886(d)(3)(E) to adjust payment rates for 
        relative hospital wage levels for hospitals located in the 
        payment area involved; and
            ``(IV) for services under part B--
                    ``(aa) 66 percent of payments attributable to such 
                services shall be adjusted by the index of the 
                geographic area factors used under section 1848(e) used 
                to adjust payment rates for physicians' services 
                furnished in the payment area; and
                    ``(bb) of the remaining 34 percent of the amount of 
                such payments, 70 percent shall be adjusted by the 
                index described in subclause (III).
The index values applied under this subparagraph shall be computed 
based only on the population of individuals entitled to benefits under 
this title by reason of section 1811(1) who have not been determined to 
have end-stage renal disease. The Secretary may continue to apply the 
rules described in the preceding subclauses (or similar rules) in 1999.
    ``(E) For each year, the Secretary shall determine a budget 
neutrality adjustment factor so that the aggregate of the payments 
under this section shall equal the aggregate payments that would have 
been made under this section if the area-specific percentage for the 
year had been 100 percent and the national percentage had been 0 
percent.
    ``(F) For purposes of subparagraphs (A)(ii)(II) and (C), the 
national average per capita growth percentage shall be the percentage 
determined by the Secretary on an annual basis (not later than April 30 
before the year concerned) to reflect the Secretary's estimate of the 
projected per capita rate of growth in expenditures under this title. 
Separate determinations shall be made for individuals entitled to 
benefits under this title by reason of paragraphs (1), (2), and (3) of 
section 1811. Such percentage shall include an adjustment for over-or-
under projection in the growth percentage for previous years.
    ``(5)(A) For purposes of this section, except as provided by 
subparagraph (B), the term `payment area' means a county, or equivalent 
area specified by the Secretary.
    ``(B) In the case of individuals who are determined to have end-
stage renal disease, the payment area is a State or other area 
specified by the Secretary.
    ``(6) The payment to an eligible organization under this section 
for individuals enrolled under this section with the organization and 
entitled to benefits under part A and enrolled under part B shall be 
made from the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund. The monthly portion of that 
payment to the organization to be paid by each trust fund shall be 
determined as follows:
            ``(A) In regard to expenditures by eligible organizations 
        having risk-sharing contracts, the allocation shall be 
        determined each year by the Secretary based on the relative 
        weight that benefits from each fund contribute to the adjusted 
        average per capita cost.
            ``(B) In regard to expenditures by eligible organizations 
        operating under a reasonable cost reimbursement contract, the 
        initial allocation shall be based on the plan's most recent 
        budget, such allocation to be adjusted, as needed, after cost 
        settlement to reflect the distribution of actual expenditures.
The remainder of that payment shall be paid by the former trust fund.
    ``(7) Subject to paragraphs (2)(B)(ii) and (7) of subsection (c), 
if an individual is enrolled under this section with an eligible 
organization having a risk-sharing contract, only the eligible 
organization shall be entitled to receive payments from the Secretary 
under this title for services furnished to the individual.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to contracts entered into under section 1876 (42 U.S.C. 1395mm) 
on or after October 1, 1997.

SEC. 4. IMPROVING FAIRNESS OF MEDICARE FEE-FOR-SERVICE PAYMENTS.

    (a) In General.--Subject to subsection (b), the Secretary of Health 
and Human Services shall increase or decrease payments to providers of 
services, physicians, and other health care professionals under the 
medicare fee-for-service program under title XVIII of the Social 
Security Act (42 U.S.C. 1395 et seq.) in each payment area (as defined 
in section 1876(a)(5) of such Act (42 U.S.C. 1395mm(a)(5)) (as amended 
by section 3 of this Act) to reflect, to the greatest extent possible, 
the proportionate increase or decrease, whichever is applicable, in 
payments to eligible organizations under section 1876 of such Act in 
payment areas by reason of the amendment made to such section by 
section 3 of this Act in order to ensure that payments to such 
providers of services, physicians, and other health care professionals 
are made on a fair and equitable basis.
    (b) Budget Neutral.--The total amount expended under title XVIII of 
the Social Security Act (42 U.S.C. 1395 et seq.) shall not be increased 
or decreased by reason of the modification described in subsection (a).
    (c) Methodology.--Not later than October 1, 1997, the Secretary 
shall submit a report to Congress that contains the methodology to be 
used in determining the increase or decrease in payments described in 
subsection (a).
    (d) Effective Date.--This section shall apply to payments made 
under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
on and after October 1, 1997.

SEC. 5. ASSURING INCREASED PAYMENTS FOR ADDITIONAL BENEFITS AND 
              IMPROVED INFRASTRUCTURE.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as are necessary to ensure, to the greatest extent 
possible, that an increase in payments to eligible organizations under 
section 1876 of the Social Security Act (42 U.S.C. 1395mm) by reason of 
the provisions of this Act are used by such organizations to--
            (1) increase the provision of health care services to 
        beneficiaries under the medicare program under title XVIII of 
        such Act (42 U.S.C. 1395 et seq.); or
            (2) to improve health care services infrastructure.
    (b) Report.--Not later than 1 year after the date of enactment of 
this Act, and annually thereafter, the Secretary of Health and Human 
Services shall submit a report to the appropriate committees of 
jurisdiction of Congress that contains a detailed description of the 
steps taken by the Secretary pursuant to subsection (a) and the results 
of such steps.

Summary: Rural Health Care Protection and Improvement Act of 1997 - Amends the Omnibus Budget Reconciliation Act of 1987 to reauthorize and extend the Rural Health Care Transition Grant Program, as well as to authorize the Administrator of the Health Care Financing Administration to adjust program grants to hospitals, or terminate them, if the Administrator determines that the hospital is using grant funds inappropriately. Amends title XVIII (Medicare) of the Social Security Act to revise the formulae for payments to health maintenance organizations and competitive medical plans for the stated purpose of improving fairness of payments to such entities. Requires the Secretary of Health and Human Services to determine the annual per capita rate of payment for each payment area by adjusting the annual capitation rate for: (1) individuals who are enrolled with an eligible organization that has entered into a risk-sharing contract and who are enrolled under Medicare part B only. And (2) such risk factors as age, disability status, gender, institutional status, end-stage renal disease, and other appropriate factors so as to ensure actuarial equivalence. Requires the Secretary to establish a separate rate of payment to an eligible organization with respect to any individual determined to have end-stage renal disease and enrolled with the organization. Prescribes a general formula for the annual capitation rate of a payment area based on an area-specific capitation rate and an input-price-adjusted national capitation rate. Specifies area-specific and national percentages for contract years 1998 through 2001 and after. Requires the Secretary to increase or decrease payments to service providers, physicians, and other health care professionals under the Medicare fee-for-service program in each payment area to reflect, to the greatest extent possible, the proportionate increase or decrease in payments to eligible organizations under Medicare in payment areas by reason of this Act in order to ensure that payments to such health care professionals are made on a fair and equitable basis. Prohibits the total amount expended under Medicare from being increased or decreased by reason of such requirement. Directs the Secretary to report to the Congress on the methodology to be used in determining the increase or decrease in such payments. Requires the Secretary to take necessary steps to ensure, to the greatest extent possible, that eligible organizations use any increase in Medicare payments by reason of this Act to increase the provision of health care services to Medicare beneficiaries or to improve health care services infrastructure.