A bill to amend title XVIII of the Social Security Act to eliminate the geographic physician work adjustment factor from the geographic indices used to adjust payments under the physician fee schedule, to provide incentives necessary to attract educators and clinical practitioners to underserved areas, and to revise the area wage adjustment applicable under the prospective payment system for skilled nursing facilities.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Equity 
Act of 2003''.
    (b) Table of Contents.--

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. Use of skilled nursing facility wage data under the prospective 
                            payment system for skilled nursing facility 
                            services.

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, 2003, an 
        index''; and
            (2) in paragraph (2), by inserting ``, for services 
        provided before January 1, 2003,'' 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)) is amended--
            (1) in paragraph (1)(A), by striking ``The conversion'' and 
        inserting ``Subject to paragraph (5), the conversion''; and
            (2) by adding at the end the following new paragraph:
            ``(5) 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 Medicare Equity 
        Act of 2003 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) Funding.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall pay the costs of the demonstration project conducted 
        under this section from the Federal Hospital Insurance Trust 
        Fund under section 1817 of the Social Security Act (42 U.S.C. 
        1395i).
            (2) Cap on funding.--The Secretary may not expend more than 
        $20,000,000 to conduct the demonstration project under this 
        section.
            (3) Budget neutrality for demonstration project.--
        Notwithstanding any other provision of law, the Secretary shall 
        provide for an appropriate reduction in the aggregate amount of 
        additional payments made under subsection (d)(5)(B) of section 
        1886 of the Social Security Act (42 U.S.C. 1395ww) for the 
        indirect costs of medical education and for direct graduate 
        medical education costs under subsection (h) of such section to 
        reflect any increase in amounts expended from the Federal 
        Hospital Insurance Trust Fund as a result of the demonstration 
        project conducted 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) 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.
    (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. USE OF SKILLED NURSING FACILITY WAGE DATA UNDER THE PROSPECTIVE 
              PAYMENT SYSTEM FOR SKILLED NURSING FACILITY SERVICES.

    (a) Findings.--Congress finds the following:
            (1) Skilled nursing facilities (as defined in section 
        1819(a) of the Social Security Act (42 U.S.C. 1395i-3(a))) 
        employ a significantly different group of health care 
        professionals than the health care professionals employed by 
        hospitals (as defined in section 1861(e) of such Act (42 U.S.C. 
        1395x(e))).
            (2) Because of the difference described in paragraph (1) 
        the wage variation in skilled nursing facilities also differs 
        from that of hospitals.
            (3) The Centers for Medicare & Medicaid Services is 
        currently collecting skilled nursing facility wage data but has 
        not set a date for implementation of an area wage index for 
        such facilities under the prospective payment system for 
        skilled nursing facility services under section 1888(e) of such 
        Act (42 U.S.C. 1395yy(e)) that is based on such wage data.
    (b) Use of Skilled Nursing Facility Wage Data.--Section 
1888(e)(4)(G)(ii) of the Social Security Act (42 U.S.C. 
1395yy(e)(4)(G)(ii)) is amended--
            (1) in the second sentence, by striking ``Such adjustment'' 
        and inserting ``The area wage adjustment under this clause''; 
        and
            (2) by inserting after the first sentence the following new 
        sentence: ``Beginning on October 1, 2003, the area wage 
        adjustment under this clause shall be based on the wages of 
        individuals employed at skilled nursing facilities.''.

Summary: Medicare Equity Act of 2003 - 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 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 who are residents of underserved areas may host clinical rotations. Amends SSA title XVIII to provide for the use of skilled nursing facility wage data under the prospective payment system for skilled nursing facility services.