# Medicare, Medicaid, and SCHIP Extension Act of 2007/Title I
## TITLE I — MEDICARE
### SEC. 101. INCREASE IN PHYSICIAN PAYMENT UPDATE; EXTENSION OF THE PHYSICIAN QUALITY REPORTING SYSTEM.

    (a) Increase in Physician Payment Update.—
       (1) In general.—Section 1848(d) of the Social Security Act (42 U.S.C. 1395w-4(d)) is amended—
          (A) in paragraph (4)(B), by striking ``and paragraphs (5) and (6)´´ and inserting ``and the succeeding paragraphs of this subsection´´; and
          (B) by adding at the end the following new paragraph:
                ``(8) Update for a portion of 2008.—
                   ``(A) In general.—Subject to paragraph (7)(B), in lieu of the update to the single conversion factor established in paragraph (1)(C) that would otherwise apply for 2008, for the period beginning on January 1, 2008, and ending on June 30, 2008, the update to the single conversion factor shall be 0.5 percent.
                   ``(B) No effect on computation of conversion factor for the remaining portion of 2008 and 2009.—The conversion factor under this subsection shall be computed under paragraph (1)(A) for the period beginning on July 1, 2008, and ending on December 31, 2008, and for 2009 and subsequent years as if subparagraph (A) had never applied.´´.
       (2) Revision of the physician assistance and quality initiative fund.—
          (A) Revision.—Section 1848(l)(2) of the Social Security Act (42 U.S.C. 1395w-4(l)(2)) is amended—
             (i) by striking subparagraph (A) and inserting the following:
                   ``(A) Amount available.—
                      ``(i) In general.—Subject to clause (ii), there shall be available to the Fund the following amounts:
                         ``(I) For expenditures during 2008, an amount equal to $150,500,000.
                         ``(II) For expenditures during 2009, an amount equal to $24,500,000.
                         ``(III) For expenditures during 2013, an amount equal to $4,960,000,000.
                      ``(ii) Limitations on expenditures.—
                         ``(I) 2008.—The amount available for expenditures during 2008 shall be reduced as provided by subparagraph (A) of section 225(c)(1) and section 524 of the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2008 (division G of the Consolidated Appropriations Act, 2008).
                         ``(II) 2009.—The amount available for expenditures during 2009 shall be reduced as provided by subparagraph (B) of such section 225(c)(1).
                         ``(III) 2013.—The amount available for expenditures during 2013 shall only be available for an adjustment to the update of the conversion factor under subsection (d) for that year.´´; and
             (ii) in subparagraph (B), by striking ``entire amount specified in the first sentence of subparagraph (A)´´ and all that follows and inserting the following: ``entire amount available for expenditures, after application of subparagraph (A)(ii), during—
                      ``(i) 2008 for payment with respect to physicians' services furnished during 2008;
                      ``(ii) 2009 for payment with respect to physicians' services furnished during 2009; and
                      ``(iii) 2013 for payment with respect to physicians' services furnished during 2013.´´.
          (B) Effective date.—
             (i) In general.—Subject to clause (ii), the amendments made by subparagraph (A) shall take effect on the date of the enactment of this Act.
             (ii) Special rule for coordination with consolidated appropriations act, 2008.—If the date of the enactment of the Consolidated Appropriations Act, 2008, occurs on or after the date described in clause (i), the amendments made by subparagraph (A) shall be deemed to be made on the day after the effective date of sections 225(c)(1) and 524 of the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2008 (division G of the Consolidated Appropriations Act, 2008).
          (C) Transfer of funds to part b trust fund.—Amounts that would have been available to the Physician Assistance and Quality Initiative Fund under section 1848(l)(2) of the Social Security Act (42 U.S.C. 1395w-4(l)(2)) for payment with respect to physicians' services furnished prior to January 1, 2013, but for the amendments made by subparagraph (A), shall be deposited into, and made available for expenditures from, the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t).
    (b) Extension of the Physician Quality Reporting System.—
       (1) System.—Section 1848(k)(2)(B) of the Social Security Act (42 U.S.C. 1395w-4(k)(2)(B)) is amended—
          (A) in the heading, by inserting ``and 2009´´ after ``2008´´;
          (B) in clause (i), by inserting ``and 2009´´ after ``2008´´; and
          (C) in each of clauses (ii) and (iii)—
             (i) by striking ``, 2007´´ and inserting ``of each of 2007 and 2008´´; and
             (ii) by inserting ``or 2009, as applicable´´ after ``2008´´.
       (2) Reporting.—Section 101(c) of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395w-4 note) is amended—
          (A) in the heading, by inserting ``and 2008´´ after ``2007´´;
          (B) in paragraph (5), by adding at the end the following:
                   ``(F) Extension.—For 2008 and 2009, paragraph (3) shall not apply, and the Secretary shall establish alternative criteria for satisfactorily reporting under paragraph (2) and alternative reporting periods under paragraph (6)(C) for reporting groups of measures under paragraph (2)(B) of section 1848(k) of the Social Security Act (42 U.S.C. 1395w-4(k)) and for reporting using the method specified in paragraph (4) of such section.´´; and
          (C) in paragraph (6), by striking subparagraph (C) and inserting the following new subparagraph:
                   ``(C) Reporting period.—The term `reporting period' means—
                      ``(i) for 2007, the period beginning on July 1, 2007, and ending on December 31, 2007; and
                      ``(ii) for 2008, all of 2008.´´.
    (c) Implementation.—For purposes of carrying out the provisions of, and amendments made by subsections (a) and (b), in addition to any amounts otherwise provided in this title, there are appropriated to the Centers for Medicare & Medicaid Services Program Management Account, out of any money in the Treasury not otherwise appropriated, $25,000,000 for the period of fiscal years 2008 and 2009.

### SEC. 102. EXTENSION OF MEDICARE INCENTIVE PAYMENT PROGRAM FOR PHYSICIAN SCARCITY AREAS.

    Section 1833(u) of the Social Security Act (42 U.S.C. 1395l(u)) is amended—
       (1) in paragraph (1), by striking ``before January 1, 2008´´ and inserting ``before July 1, 2008´´; and
       (2) in paragraph (4)—
          (A) by redesignating subparagraph (D) as subparagraph (E); and
          (B) by inserting after subparagraph (C) the following new subparagraph:
                   ``(D) Special rule.—With respect to physicians' services furnished on or after January 1, 2008, and before July 1, 2008, for purposes of this subsection, the Secretary shall use the primary care scarcity counties and the specialty care scarcity counties (as identified under the preceding provisions of this paragraph) that the Secretary was using under this subsection with respect to physicians' services furnished on December 31, 2007.´´.

### SEC. 103. EXTENSION OF FLOOR ON WORK GEOGRAPHIC ADJUSTMENT UNDER THE MEDICARE PHYSICIAN FEE SCHEDULE.

    Section 1848(e)(1)(E) of the Social Security Act (42 U.S.C. 1395w-4(e)(1)(E)), as amended by section 102 of division B of the Tax Relief and Health Care Act of 2006, is amended by striking ``before January 1, 2008´´ and inserting ``before July 1, 2008´´.

### SEC. 104. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES UNDER MEDICARE.

    Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (as enacted into law by section 1(a)(6) of Public Law 106-554), as amended by section 732 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (42 U.S.C. 1395w-4 note) and section 104 of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395w-4 note), is amended by striking ``and 2007´´ and inserting ``2007, and the first 6 months of 2008´´.

### SEC. 105. EXTENSION OF EXCEPTIONS PROCESS FOR MEDICARE THERAPY CAPS.

    Section 1833(g)(5) of the Social Security Act (42 U.S.C. 1395l(g)(5)) is amended by striking ``December 31, 2007´´ and inserting ``June 30, 2008´´.

### SEC. 106. EXTENSION OF PAYMENT RULE FOR BRACHYTHERAPY; EXTENSION TO THERAPEUTIC RADIOPHARMACEUTICALS.

    (a) Extension of Payment Rule for Brachytherapy.—Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C. 1395l(t)(16)(C)), as amended by section 107(a) of division B of the Tax Relief and Health Care Act of 2006, is amended by striking ``January 1, 2008´´ and inserting ``July 1, 2008´´.
    (b) Payment for Therapeutic Radiopharmaceuticals.—Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C. 1395l(t)(16)(C)), as amended by subsection (a), is amended—
       (1) in the heading, by inserting ``and therapeutic radiopharmaceuticals´´ before ``at charges´´;
       (2) in the first sentence—
          (A) by inserting ``and for therapeutic radiopharmaceuticals furnished on or after January 1, 2008, and before July 1, 2008,´´ after ``July 1, 2008,´´;
          (B) by inserting ``or therapeutic radiopharmaceutical´´ after ``the device´´; and
          (C) by inserting ``or therapeutic radiopharmaceutical´´ after ``each device´´; and
       (3) in the second sentence, by inserting ``or therapeutic radiopharmaceuticals´´ after ``such devices´´.

### SEC. 107. EXTENSION OF MEDICARE REASONABLE COSTS PAYMENTS FOR CERTAIN CLINICAL DIAGNOSTIC LABORATORY TESTS FURNISHED TO HOSPITAL PATIENTS IN CERTAIN RURAL AREAS.

    Section 416(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (42 U.S.C. 1395l-4), as amended by section 105 of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395l note), is amended by striking ``the 3-year period beginning on July 1, 2004´´ and inserting ``the period beginning on July 1, 2004, and ending on June 30, 2008´´.

### SEC. 108. EXTENSION OF AUTHORITY OF SPECIALIZED MEDICARE ADVANTAGE PLANS FOR SPECIAL NEEDS INDIVIDUALS TO RESTRICT ENROLLMENT.

    (a) Extension of Authority To Restrict Enrollment.—Section 1859(f) of the Social Security Act (42 U.S.C. 1395w-28(f)) is amended by striking ``2009´´ and inserting ``2010´´.
    (b) Moratorium.—
       (1) Authority to designate other plans as specialized ma plans.—During the period beginning on January 1, 2008, and ending on December 31, 2009, the Secretary of Health and Human Services shall not exercise the authority provided under section 231(d) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (42 U.S.C. 1395w-21 note) to designate other plans as specialized MA plans for special needs individuals under part C of title XVIII of the Social Security Act. The preceding sentence shall not apply to plans designated as specialized MA plans for special needs individuals under such authority prior to January 1, 2008.
       (2) Enrollment in new plans.—During the period beginning on January 1, 2008, and ending on December 31, 2009, the Secretary of Health and Human Services shall not permit enrollment of any individual residing in an area in a specialized Medicare Advantage plan for special needs individuals under part C of title XVIII of the Social Security Act to take effect unless that specialized Medicare Advantage plan for special needs individuals was available for enrollment for individuals residing in that area on January 1, 2008.

### SEC. 109. EXTENSION OF DEADLINE FOR APPLICATION OF LIMITATION ON EXTENSION OR RENEWAL OF MEDICARE REASONABLE COST CONTRACT PLANS.

    Section 1876(h)(5)(C)(ii) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(ii)), in the matter preceding subclause (I), is amended by striking ``January 1, 2008´´ and inserting ``January 1, 2009´´.

### SEC. 110. ADJUSTMENT TO THE MEDICARE ADVANTAGE STABILIZATION FUND.

    Section 1858(e)(2)(A)(i) of the Social Security Act (42 U.S.C. 1395w-27a(e)(2)(A)(i)), as amended by section 3 of Public Law 110-48, is amended by striking ``the Fund´´ and all that follows and inserting ``the Fund during 2013, $1,790,000,000.´´

### SEC. 111. MEDICARE SECONDARY PAYOR.

    (a) In General.—Section 1862(b) of the Social Security Act (42 U.S.C. 1395y(b)) is amended by adding at the end the following new paragraphs:
                ``(7) Required submission of information by group health plans.—
                   ``(A) Requirement.—On and after the first day of the first calendar quarter beginning after the date that is 1 year after the date of the enactment of this paragraph, an entity serving as an insurer or third party administrator for a group health plan, as defined in paragraph (1)(A)(v), and, in the case of a group health plan that is self-insured and self-administered, a plan administrator or fiduciary, shall—
                      ``(i) secure from the plan sponsor and plan participants such information as the Secretary shall specify for the purpose of identifying situations where the group health plan is or has been a primary plan to the program under this title; and
                      ``(ii) submit such information to the Secretary in a form and manner (including frequency) specified by the Secretary.
                   ``(B) Enforcement.—
                      ``(i) In general.—An entity, a plan administrator, or a fiduciary described in subparagraph (A) that fails to comply with the requirements under such subparagraph shall be subject to a civil money penalty of $1,000 for each day of noncompliance for each individual for which the information under such subparagraph should have been submitted. The provisions of subsections (e) and (k) of section 1128A shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this title with respect to an individual.
                      ``(ii) Deposit of amounts collected.—Any amounts collected pursuant to clause (i) shall be deposited in the Federal Hospital Insurance Trust Fund under section 1817.
                   ``(C) Sharing of information.—Notwithstanding any other provision of law, under terms and conditions established by the Secretary, the Secretary—
                      ``(i) shall share information on entitlement under Part A and enrollment under Part B under this title with entities, plan administrators, and fiduciaries described in subparagraph (A);
                      ``(ii) may share the entitlement and enrollment information described in clause (i) with entities and persons not described in such clause; and
                      ``(iii) may share information collected under this paragraph as necessary for purposes of the proper coordination of benefits.
                   ``(D) Implementation.—Notwithstanding any other provision of law, the Secretary may implement this paragraph by program instruction or otherwise.
                ``(8) Required submission of information by or on behalf of liability insurance (including self-insurance), no fault insurance, and workers' compensation laws and plans.—
                   ``(A) Requirement.—On and after the first day of the first calendar quarter beginning after the date that is 18 months after the date of the enactment of this paragraph, an applicable plan shall—
                      ``(i) determine whether a claimant (including an individual whose claim is unresolved) is entitled to benefits under the program under this title on any basis; and
                      ``(ii) if the claimant is determined to be so entitled, submit the information described in subparagraph (B) with respect to the claimant to the Secretary in a form and manner (including frequency) specified by the Secretary.
                   ``(B) Required information.—The information described in this subparagraph is—
                      ``(i) the identity of the claimant for which the determination under subparagraph (A) was made; and
                      ``(ii) such other information as the Secretary shall specify in order to enable the Secretary to make an appropriate determination concerning coordination of benefits, including any applicable recovery claim.
                   ``(C) Timing.—Information shall be submitted under subparagraph (A)(ii) within a time specified by the Secretary after the claim is resolved through a settlement, judgment, award, or other payment (regardless of whether or not there is a determination or admission of liability).
                   ``(D) Claimant.—For purposes of subparagraph (A), the term `claimant' includes—
                      ``(i) an individual filing a claim directly against the applicable plan; and
                      ``(ii) an individual filing a claim against an individual or entity insured or covered by the applicable plan.
                   ``(E) Enforcement.—
                      ``(i) In general.—An applicable plan that fails to comply with the requirements under subparagraph (A) with respect to any claimant shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant. The provisions of subsections (e) and (k) of section 1128A shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this title with respect to an individual.
                      ``(ii) Deposit of amounts collected.—Any amounts collected pursuant to clause (i) shall be deposited in the Federal Hospital Insurance Trust Fund.
                   ``(F) Applicable plan.—In this paragraph, the term `applicable plan' means the following laws, plans, or other arrangements, including the fiduciary or administrator for such law, plan, or arrangement:
                      ``(i) Liability insurance (including self- insurance).
                      ``(ii) No fault insurance.
                      ``(iii) Workers' compensation laws or plans.
                   ``(G) Sharing of information.—The Secretary may share information collected under this paragraph as necessary for purposes of the proper coordination of benefits.
                   ``(H) Implementation.—Notwithstanding any other provision of law, the Secretary may implement this paragraph by program instruction or otherwise.´´.
    (b) Rule of Construction.—Nothing in the amendments made by this section shall be construed to limit the authority of the Secretary of Health and Human Services to collect information to carry out Medicare secondary payer provisions under title XVIII of the Social Security Act, including under parts C and D of such title.
    (c) Implementation.—For purposes of implementing paragraphs (7) and (8) of section 1862(b) of the Social Security Act, as added by subsection (a), to ensure appropriate payments under title XVIII of such Act, the Secretary of Health and Human Services shall provide for the transfer, from the Federal Hospital Insurance Trust Fund established under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of such Act (42 U.S.C. 1395t), in such proportions as the Secretary determines appropriate, of $35,000,000 to the Centers for Medicare & Medicaid Services Program Management Account for the period of fiscal years 2008, 2009, and 2010.

### SEC. 112. PAYMENT FOR PART B DRUGS.

    (a) Application of Alternative Volume Weighting in Computation of ASP.—Section 1847A(b) of the Social Security Act (42 U.S.C. 1395w-3a(b)) is amended—
       (1) in paragraph (1)(A), by inserting ``for a multiple source drug furnished before April 1, 2008, or 106 percent of the amount determined under paragraph (6) for a multiple source drug furnished on or after April 1, 2008´´ after ``paragraph (3)´´;
       (2) in each of subparagraphs (A) and (B) of paragraph (4), by inserting ``for single source drugs and biologicals furnished before April 1, 2008, and using the methodology applied under paragraph (6) for single source drugs and biologicals furnished on or after April 1, 2008,´´ after ``paragraph (3)´´; and
       (3) by adding at the end the following new paragraph:
                ``(6) Use of volume-weighted average sales prices in calculation of average sales price.—
                   ``(A) In general.—For all drug products included within the same multiple source drug billing and payment code, the amount specified in this paragraph is the volume-weighted average of the average sales prices reported under section 1927(b)(3)(A)(iii) determined by—
                      ``(i) computing the sum of the products (for each National Drug Code assigned to such drug products) of—
                         ``(I) the manufacturer's average sales price (as defined in subsection (c)), determined by the Secretary without dividing such price by the total number of billing units for the National Drug Code for the billing and payment code; and
                         ``(II) the total number of units specified under paragraph (2) sold; and
                      ``(ii) dividing the sum determined under clause (i) by the sum of the products (for each National Drug Code assigned to such drug products) of—
                         ``(I) the total number of units specified under paragraph (2) sold; and
                         ``(II) the total number of billing units for the National Drug Code for the billing and payment code.
                   ``(B) Billing unit defined.—For purposes of this subsection, the term `billing unit' means the identifiable quantity associated with a billing and payment code, as established by the Secretary.´´.
    (b) Treatment of Certain Drugs.—Section 1847A(b) of the Social Security Act (42 U.S.C. 1395w-3a(b)), as amended by subsection (a), is amended—
       (1) in paragraph (1), by inserting ``paragraph (7) and´´ after ``Subject to´´; and
       (2) by adding at the end the following new paragraph:
                ``(7) Special rule.—Beginning with April 1, 2008, the payment amount for—
                   ``(A) each single source drug or biological described in section 1842(o)(1)(G) that is treated as a multiple source drug because of the application of subsection (c)(6)(C)(ii) is the lower of—
                      ``(i) the payment amount that would be determined for such drug or biological applying such subsection; or
                      ``(ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied; and
                   ``(B) a multiple source drug described in section 1842(o)(1)(G) (excluding a drug or biological that is treated as a multiple source drug because of the application of such subsection) is the lower of—
                      ``(i) the payment amount that would be determined for such drug or biological taking into account the application of such subsection; or
                      ``(ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied.´´.

### SEC. 113. PAYMENT RATE FOR CERTAIN DIAGNOSTIC LABORATORY TESTS.

    Section 1833(h) of the Social Security Act (42 U.S.C. 1395l(h)) is amended by adding at the end the following new paragraph:
                ``(9) Notwithstanding any other provision in this part, in the case of any diagnostic laboratory test for HbA1c that is labeled by the Food and Drug Administration for home use and is furnished on or after April 1, 2008, the payment rate for such test shall be the payment rate established under this part for a glycated hemoglobin test (identified as of October 1, 2007, by HCPCS code 83036 (and any succeeding codes)).´´.

### SEC. 114. LONG-TERM CARE HOSPITALS.

    (a) Definition of Long-Term Care Hospital.—Section 1861 of the Social Security Act (42 U.S.C. 1395x) is amended by adding at the end the following new subsection:
          ``Long-Term Care Hospital
             ``(ccc) The term `long-term care hospital' means a hospital which—
                ``(1) is primarily engaged in providing inpatient services, by or under the supervision of a physician, to Medicare beneficiaries whose medically complex conditions require a long hospital stay and programs of care provided by a long-term care hospital;
                ``(2) has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days, or meets the requirements of clause (II) of section 1886(d)(1)(B)(iv);
                ``(3) satisfies the requirements of subsection (e); and
                ``(4) meets the following facility criteria:
                   ``(A) the institution has a patient review process, documented in the patient medical record, that screens patients prior to admission for appropriateness of admission to a long-term care hospital, validates within 48 hours of admission that patients meet admission criteria for long-term care hospitals, regularly evaluates patients throughout their stay for continuation of care in a long-term care hospital, and assesses the available discharge options when patients no longer meet such continued stay criteria;
                   ``(B) the institution has active physician involvement with patients during their treatment through an organized medical staff, physician-directed treatment with physician on-site availability on a daily basis to review patient progress, and consulting physicians on call and capable of being at the patient's side within a moderate period of time, as determined by the Secretary; and
                   ``(C) the institution has interdisciplinary team treatment for patients, requiring interdisciplinary teams of health care professionals, including physicians, to prepare and carry out an individualized treatment plan for each patient.´´.
    (b) Study and Report on Long-Term Care Hospital Facility and Patient Criteria.—
       (1) In general.—The Secretary of Health and Human Services (in this section referred to as the ``Secretary´´) shall conduct a study on the establishment of national long-term care hospital facility and patient criteria for purposes of determining medical necessity, appropriateness of admission, and continued stay at, and discharge from, long-term care hospitals.
       (2) Report.—Not later than 18 months after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study conducted under paragraph (1), together with recommendations for such legislation and administrative actions, including timelines for implementation of patient criteria or other actions, as the Secretary determines appropriate.
       (3) Considerations.—In conducting the study and preparing the report under this subsection, the Secretary shall consider—
          (A) recommendations contained in a report to Congress by the Medicare Payment Advisory Commission in June 2004 for long-term care hospital-specific facility and patient criteria to ensure that patients admitted to long-term care hospitals are medically complex and appropriate to receive long-term care hospital services; and
          (B) ongoing work by the Secretary to evaluate and determine the feasibility of such recommendations.
    (c) Payment for Long-Term Care Hospital Services.—
       (1) No application of 25 percent patient threshold payment adjustment to freestanding and grandfathered ltchs.—The Secretary shall not apply, for cost reporting periods beginning on or after the date of the enactment of this Act for a 3-year period—
          (A) section 412.536 of title 42, Code of Federal Regulations, or any similar provision, to freestanding long-term care hospitals; and
          (B) such section or section 412.534 of title 42, Code of Federal Regulations, or any similar provisions, to a long-term care hospital identified by the amendment made by section 4417(a) of the Balanced Budget Act of 1997 (Public Law 105-33).
       (2) Payment for hospitals-within-hospitals.—
          (A) In general.—Payment to an applicable long-term care hospital or satellite facility which is located in a rural area or which is co-located with an urban single or MSA dominant hospital under paragraphs (d)(1), (e)(1), and (e)(4) of section 412.534 of title 42, Code of Federal Regulations, shall not be subject to any payment adjustment under such section if no more than 75 percent of the hospital's Medicare discharges (other than discharges described in paragraph (d)(2) or (e)(3) of such section) are admitted from a co-located hospital.
          (B) Co-located long-term care hospitals and satellite facilities.—
             (i) In general.—Payment to an applicable long-term care hospital or satellite facility which is co-located with another hospital shall not be subject to any payment adjustment under section 412.534 of title 42, Code of Federal Regulations, if no more than 50 percent of the hospital's Medicare discharges (other than discharges described in paragraph (c)(3) of such section) are admitted from a co-located hospital.
             (ii) Applicable long-term care hospital or satellite facility defined.—In this paragraph, the term ``applicable long-term care hospital or satellite facility´´ means a hospital or satellite facility that is subject to the transition rules under section 412.534(g) of title 42, Code of Federal Regulations.
          (C) Effective date.—Subparagraphs (A) and (B) shall apply to cost reporting periods beginning on or after the date of the enactment of this Act for a 3-year period.
       (3) No application of very short-stay outlier policy.—The Secretary shall not apply, for the 3-year period beginning on the date of the enactment of this Act, the amendments finalized on May 11, 2007 (72 Federal Register 26904, 26992) made to the short-stay outlier payment provision for long-term care hospitals contained in section 412.529(c)(3)(i) of title 42, Code of Federal Regulations, or any similar provision.
       (4) No application of one-time adjustment to standard amount.—The Secretary shall not, for the 3-year period beginning on the date of the enactment of this Act, make the one-time prospective adjustment to long-term care hospital prospective payment rates provided for in section 412.523(d)(3) of title 42, Code of Federal Regulations, or any similar provision.
    (d) Moratorium on the Establishment of Long-Term Care Hospitals, Long-Term Care Satellite Facilities and on the Increase of Long-Term Care Hospital Beds in Existing Long-Term Care Hospitals or Satellite Facilities.—
       (1) In general.—During the 3-year period beginning on the date of the enactment of this Act, the Secretary shall impose a moratorium for purposes of the Medicare program under title XVIII of the Social Security Act—
          (A) subject to paragraph (2), on the establishment and classification of a long-term care hospital or satellite facility, other than an existing long-term care hospital or facility; and
          (B) subject to paragraph (3), on an increase of long-term care hospital beds in existing long-term care hospitals or satellite facilities.
       (2) Exception for certain long-term care hospitals.—The moratorium under paragraph (1)(A) shall not apply to a long-term care hospital that as of the date of the enactment of this Act—
          (A) began its qualifying period for payment as a long-term care hospital under section 412.23(e) of title 42, Code of Federal Regulations, on or before the date of the enactment of this Act;
          (B) has a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for a long-term care hospital, and has expended, before the date of the enactment of this Act, at least 10 percent of the estimated cost of the project (or, if less, $2,500,000); or
          (C) has obtained an approved certificate of need in a State where one is required on or before the date of the enactment of this Act.
       (3) Exception for bed increases during moratorium.—
          (A) In general.—Subject to subparagraph (B), the moratorium under paragraph (1)(B) shall not apply to an increase in beds in an existing hospital or satellite facility if the hospital or facility—
             (i) is located in a State where there is only one other long-term care hospital; and
             (ii) requests an increase in beds following the closure or the decrease in the number of beds of another long-term care hospital in the State.
          (B) No effect on certain limitation.—The exception under subparagraph (A) shall not effect the limitation on increasing beds under sections 412.22(h)(3) and 412.22(f) of title 42, Code of Federal Regulations.
       (4) Existing hospital or satellite facility defined.—For purposes of this subsection, the term ``existing´´ means, with respect to a hospital or satellite facility, a hospital or satellite facility that received payment under the provisions of subpart O of part 412 of title 42, Code of Federal Regulations, as of the date of the enactment of this Act.
       (5) Judicial review.—There shall be no administrative or judicial review under section 1869 of the Social Security Act (42 U.S.C. 1395ff), section 1878 of such Act (42 U.S.C. 1395oo), or otherwise, of the application of this subsection by the Secretary.
    (e) Long-Term Care Hospital Payment Update.—
       (1) In general.—Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end the following new subsection:
             ``(m) Prospective Payment for Long-Term Care Hospitals.—
                ``(1) Reference to establishment and implementation of system.—For provisions related to the establishment and implementation of a prospective payment system for payments under this title for inpatient hospital services furnished by a long-term care hospital described in subsection (d)(1)(B)(iv), see section 123 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000.
                ``(2) Update for rate year 2008.—In implementing the system described in paragraph (1) for discharges occurring during the rate year ending in 2008 for a hospital, the base rate for such discharges for the hospital shall be the same as the base rate for discharges for the hospital occurring during the rate year ending in 2007.´´.
       (2) Delayed effective date.—
          Subsection (m)(2) of section 1886 of the Social Security Act, as added by paragraph (1), shall not apply to discharges occurring on or after July 1, 2007, and before April 1, 2008.
    (f) Expanded Review of Medical Necessity.—
       (1) In general.—The Secretary of Health and Human Services shall provide, under contracts with one or more appropriate fiscal intermediaries or medicare administrative contractors under section 1874A(a)(4)(G) of the Social Security Act (42 U.S.C. 1395kk-1(a)(4)(G)), for reviews of the medical necessity of admissions to long-term care hospitals (described in section 1886(d)(1)(B)(iv) of such Act) and continued stay at such hospitals, of individuals entitled to, or enrolled for, benefits under part A of title XVIII of such Act consistent with this subsection. Such reviews shall be made for discharges occurring on or after October 1, 2007.
       (2) Review methodology.—The medical necessity reviews under paragraph (1) shall be conducted on an annual basis in accordance with rules specified by the Secretary. Such reviews shall—
          (A) provide for a statistically valid and representative sample of admissions of such individuals sufficient to provide results at a 95 percent confidence interval; and
          (B) guarantee that at least 75 percent of overpayments received by long-term care hospitals for medically unnecessary admissions and continued stays of individuals in long-term care hospitals will be identified and recovered and that related days of care will not be counted toward the length of stay requirement contained in section 1886(d)(1)(B)(iv) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iv)).
       (3) Continuation of reviews.—Under contracts under this subsection, the Secretary shall establish an error rate with respect to such reviews that could require further review of the medical necessity of admissions and continued stay in the hospital involved and other actions as determined by the Secretary.
       (4) Termination of required reviews.—
          (A) In general.—Subject to subparagraph (B), the previous provisions of this subsection shall cease to apply for discharges occurring on or after October 1, 2010.
          (B) Continuation.—As of the date specified in subparagraph (A), the Secretary shall determine whether to continue to guarantee, through continued medical review and sampling under this paragraph, recovery of at least 75 percent of overpayments received by long-term care hospitals due to medically unnecessary admissions and continued stays.
       (5) Funding.—The costs to fiscal intermediaries or medicare administrative contractors conducting the medical necessity reviews under paragraph (1) shall be funded from the aggregate overpayments recouped by the Secretary of Health and Human Services from long-term care hospitals due to medically unnecessary admissions and continued stays. The Secretary may use an amount not in excess of 40 percent of the overpayments recouped under this paragraph to compensate the fiscal intermediaries or Medicare administrative contractors for the costs of services performed.
    (g) Implementation.—For purposes of carrying out the provisions of, and amendments made by, this title, in addition to any amounts otherwise provided in this title, there are appropriated to the Centers for Medicare & Medicaid Services Program Management Account, out of any money in the Treasury not otherwise appropriated, $35,000,000 for the period of fiscal years 2008 and 2009.

### SEC. 115. PAYMENT FOR INPATIENT REHABILITATION FACILITY (IRF) SERVICES.

    (a) Payment Update.—
       (1) In general.—Section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by adding at the end the following: ``The increase factor to be applied under this subparagraph for each of fiscal years 2008 and 2009 shall be 0 percent.´´.
       (2) Delayed effective date.—
          The amendment made by paragraph (1) shall not apply to payment units occurring before April 1, 2008.
    (b) Inpatient Rehabilitation Facility Classification Criteria.—
       (1) In general.—Section 5005 of the Deficit Reduction Act of 2005 (Public Law 110-54; 42 U.S.C. 1395ww note) is amended—
          (A) in subsection (a), by striking ``apply the applicable percent specified in subsection (b)´´ and inserting ``require a compliance rate that is no greater than the 60 percent compliance rate that became effective for cost reporting periods beginning on or after July 1, 2006,´´; and
          (B) by amending subsection (b) to read as follows:
             ``(b) Continued Use of Comorbidities.—For cost reporting periods beginning on or after July 1, 2007, the Secretary shall include patients with comorbidities as described in section 412.23(b)(2)(i) of title 42, Code of Federal Regulations (as in effect as of January 1, 2007), in the inpatient population that counts toward the percent specified in subsection (a).´´.
       (2) Effective date.—The amendment made by paragraph (1)(A) shall apply for cost reporting periods beginning on or after July 1, 2007.
    (c) Recommendations for Classifying Inpatient Rehabilitation Hospitals and Units.—
       (1) Report to congress.—Not later than 18 months after the date of the enactment of this Act, the Secretary of Health and Human Services, in consultation with physicians (including geriatricians and physiatrists), administrators of inpatient rehabilitation, acute care hospitals, skilled nursing facilities, and other settings providing rehabilitation services, Medicare beneficiaries, trade organizations representing inpatient rehabilitation hospitals and units and skilled nursing facilities, and the Medicare Payment Advisory Commission, shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report that includes the following:
          (A) An analysis of Medicare beneficiaries' access to medically necessary rehabilitation services, including the potential effect of the 75 percent rule (as defined in paragraph (2)) on access to care.
          (B) An analysis of alternatives or refinements to the 75 percent rule policy for determining criteria for inpatient rehabilitation hospital and unit designation under the Medicare program, including alternative criteria which would consider a patient's functional status, diagnosis, co-morbidities, and other relevant factors.
          (C) An analysis of the conditions for which individuals are commonly admitted to inpatient rehabilitation hospitals that are not included as a condition described in section 412.23(b)(2)(iii) of title 42, Code of Federal Regulations, to determine the appropriate setting of care, and any variation in patient outcomes and costs, across settings of care, for treatment of such conditions.
       (2) 75 percent rule defined.—For purposes of this subsection, the term ``75 percent rule´´ means the requirement of section 412.23(b)(2) of title 42, Code of Federal Regulations, that 75 percent of the patients of a rehabilitation hospital or converted rehabilitation unit are in 1 or more of 13 listed treatment categories.

### SEC. 116. EXTENSION OF ACCOMMODATION OF PHYSICIANS ORDERED TO ACTIVE DUTY IN THE ARMED SERVICES.

    Section 1842(b)(6)(D)(iii) of the Social Security Act (42 U.S.C. 1395u(b)(6)(D)(iii)), as amended by Public Law 110-54 (121 Stat. 551) is amended by striking ``January 1, 2008´´ and inserting ``July 1, 2008´´.

### SEC. 117. TREATMENT OF CERTAIN HOSPITALS.

    (a) Extending Certain Medicare Hospital Wage Index Reclassifications Through Fiscal Year 2008.—
       (1) In general.—Section 106(a) of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395 note) is amended by striking ``September 30, 2007´´ and inserting ``September 30, 2008´´.
       (2) Special exception reclassifications.—The Secretary of Health and Human Services shall extend for discharges occurring through September 30, 2008, the special exception reclassifications made under the authority of section 1886(d)(5)(I)(i) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(I)(i)) and contained in the final rule promulgated by the Secretary in the Federal Register on August 11, 2004 (69 Fed. Reg. 49105, 49107).
       (3) Use of particular wage index.—For purposes of implementation of this subsection, the Secretary shall use the hospital wage index that was promulgated by the Secretary in the Federal Register on October 10, 2007 (72 Fed. Reg. 57634), and any subsequent corrections.
    (b) Disregarding Section 508 Hospital Reclassifications for Purposes of Group Reclassifications.—Section 508 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173, 42 U.S.C. 1395ww note) is amended by adding at the end the following new subsection:
             ``(g) Disregarding Hospital Reclassifications for Purposes of Group Reclassifications.—For purposes of the reclassification of a group of hospitals in a geographic area under section 1886(d) of the Social Security Act for purposes of discharges occurring during fiscal year 2008, a hospital reclassified under this section (including any such reclassification which is extended under section 106(a) of the Medicare Improvements and Extension Act of 2006) shall not be taken into account and shall not prevent the other hospitals in such area from continuing such a group for such purpose.´´.
    (c) Correction of Application of Wage Index During Tax Relief and Health Care Act Extension.—In the case of a subsection (d) hospital (as defined for purposes of section 1886 of the Social Security Act (42 U.S.C. 1395ww)) with respect to which—
       (1) a reclassification of its wage index for purposes of such section was extended for the period beginning on April 1, 2007, and ending on September 30, 2007, pursuant to subsection (a) of section 106 of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395 note); and
       (2) the wage index applicable for such hospital during such period was lower than the wage index applicable for such hospital during the period beginning on October 1, 2006, and ending on March 31, 2007,
the Secretary shall apply the higher wage index that was applicable for such hospital during the period beginning on October 1, 2006, and ending on March 31, 2007, for the entire fiscal year 2007. If the Secretary determines that the application of the preceding sentence to a hospital will result in a hospital being owed additional reimbursement, the Secretary shall make such payments within 90 days after the settlement of the applicable cost report.

### SEC. 118. ADDITIONAL FUNDING FOR STATE HEALTH INSURANCE ASSISTANCE PROGRAMS, AREA AGENCIES ON AGING, AND AGING AND DISABILITY RESOURCE CENTERS.

    (a) State Health Insurance Assistance Programs.—
       (1) In general.—The Secretary of Health and Human Services shall use amounts made available under paragraph (2) to make grants to States for State health insurance assistance programs receiving assistance under section 4360 of the Omnibus Budget Reconciliation Act of 1990.
       (2) Funding.—For purposes of making grants under this subsection, the Secretary shall provide for the transfer, from the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t), in the same proportion as the Secretary determines under section 1853(f) of such Act (42 U.S.C. 1395w-23(f)), of $15,000,000 to the Centers for Medicare & Medicaid Services Program Management Account for fiscal year 2008.
    (b) Area Agencies on Aging and Aging and Disability Resource Centers.—
       (1) In general.—The Secretary of Health and Human Services shall use amounts made available under paragraph (2) to make grants—
          (A) to States for area agencies on aging (as defined in section 102 of the Older Americans Act of 1965 (42 U.S.C. 3002)); and
          (B) to Aging and Disability Resource Centers under the Aging and Disability Resource Center grant program.
       (2) Funding.—For purposes of making grants under this subsection, the Secretary shall provide for the transfer, from the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t), in the same proportion as the Secretary determines under section 1853(f) of such Act (42 U.S.C. 1395w-23(f)), of $5,000,000 to the Centers for Medicare & Medicaid Services Program Management Account for the period of fiscal years 2008 through 2009.