I 

108TH CONGRESS 

1ST SESSION H. R. 1743

To allow applications for the preferred provider organization (PPO) 

demonstration project under the Medicare+Choice program. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 10, 2003

Mr. LEACH (for himself and Mr. LATHAM) introduced the following bill; which 

was referred to the Committee on Ways and Means, and in addition to 

the Committee on Energy and Commerce, for a period to be subsequently 

determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To allow applications for the preferred provider organization 

(PPO) demonstration project under the 

Medicare+Choice program.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Iowa Medicare PPO 

5 Demonstration Act of 2003’’. 

6 SEC. 2. FINDINGS AND PURPOSE. 

7 (a) FINDINGS.—Congress finds the following: 
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1 (1) When the reimbursement system under the 

2 Medicare program, which evolved into the Prospec3 tive Payment System, was created in 1965, Iowa 

4 had pioneered in cost containment techniques and 

5 therefore received lower initial reimbursement rates. 

6 As inflation adjustments occurred over the years, the 

7 differential between reimbursement rates in the var8 ious states widened even though many medical costs 

9 are themselves similar. 

10 (2) Despite the fact that Iowa ranks first 

11 among all states in percent of citizens over 85, and 

12 fourth in citizens over 65, Medicare beneficiaries in 

13 Iowa access the health care system less frequently 

14 and experience shorter hospitalizations than resi15 dents of many other States. 

16 (3) The inflation in general health care costs 

17 for which Iowa has been relatively undercom18 pensated coupled with the unique problems of serv19 ing a disproportionately aging population in a decen20 tralized rural setting has created a crisis for Iowa’s 

21 health care providers and the Medicare beneficiaries 

22 they serve. 

23 (4) The inequity inherent in the Medicare reim24 bursement differential is symbolized by the fact that 

25 Medicare reimbursements per beneficiary for Iowa is 
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1 $3414, the lowest in the nation, while the figure for 

2 Louisiana, the highest, is $8033, or about two and 

3 one half times as great. 

4 (5) The average cost of living in the two states 

5 taken as a percent of that in the entire United 

6 States, by contrast, is almost the same, 92.5 for 

7 Iowa and 97.4 for Louisiana. 

8 (6) If the inequity in Medicare reimbursements 

9 did not exist, the modest cost of living differential 

10 which exists between Iowa and states such as Lou11 isiana would be even closer than indicated by the 

12 statistics described in paragraph (5) because health 

13 care spending represents approximately 12 percent 

14 of the Gross Domestic Product (GDP), and when an 

15 entitlement program of Federal government, such as 

16 the Medicare program, provides disproportionately 

17 more resources to individuals in one State over an18 other State, generalized economic, and specific 

19 health care cost, differentials occur. 

20 (7) Because of low Medicare rates, Iowa coun21 ties, particularly but not exclusively the smaller 

22 ones, are experiencing shortages of doctors and 

23 other health care providers, which in the near future 

24 could cause a significant access to health care crisis 

25 for many Iowa citizens. 
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1 (8) All citizens pay into Social Security under 

2 a uniform set of national standards. 

3 (9) Simple fairness and equity in the delivery of 

4 government services dictate that the differences in 

5 Medicare reimbursement received by each of the sev6 eral States should not fall far below the differences 

7 in the cost of living therein. 

8 (10) Low payment rates and a shortage of pro9 viders discourage Medicare+Choice organizations 

10 from offering plans in rural areas, and this unavail11 ability of a Medicare+Choice option in such areas is 

12 unfair to Medicare residents who would like to take 

13 advantage of the additional services and other bene14 fits offered through Medicare+Choice plans. 

15 (11) In order to encourage the establishment of 

16 Medicare+Choice plans in rural States, the Medi17 care program needs to provide incentives to States, 

18 insurers, and other entities interested in sponsoring 

19 Medicare+Choice plans in such States. Given Iowa’s 

20 low Medicare reimbursement rate, it is unlikely that 

21 any new health care delivery model can attract suffi22 cient providers unless current Medicare fee-for-serv23 ice payment rates for those providers are exceeded. 

24 (12) Preferred provider organizations are 

25 uniquely positioned to provide improved care man-
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1 agement and clinical outcomes in part due to the 

2 wide-ranging involvement of health care profes3 sionals at each stage of a patient-oriented care proc4 ess.

5 (13) State governments should be encouraged 

6 to support and, where appropriate, oversee the es7 tablishment of organizations which make available 

8 health care services to individuals residing in under9 served areas in the State. 

10 (b) PURPOSE.—In order to insure that Iowa’s health 

11 care facilities and providers have access to the most inno12 vative reimbursement options available under the Medi13 care program, the Secretary of Health and Human Serv14 ices may approve a demonstration project to test ways in 

15 which cooperative efforts among insurers, institutional 

16 providers of services, and health care professionals may 

17 provide better access to health care services for Medicare 

18 beneficiaries. The demonstration project would be de19 signed to improve access to health care services through 

20 the Medicare+Choice program. 
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1 SEC. 3. CONSIDERATION OF APPLICATIONS FOR THE PRE2 FERRED PROVIDER ORGANIZATION (PPO) 

3 DEMONSTRATION PROJECT UNDER THE 

4 MEDICARE+CHOICE PROGRAM. 

5 (a) IN GENERAL.—The Secretary of Health and 

6 Human Services shall allow the receipt and approval of 

7 applications described in subsection (b) for a demonstra8 tion project conducted under section 402 of the Social Se9 curity Amendments of 1967 for participation of preferred 

10 provider organizations (PPOs) under the 

11 Medicare+Choice program under part C of title XVIII of 

12 the Social Security Act, with the understanding that the 

13 demonstration program could cause Medicare reimburse14 ment in Iowa to rise to a level more in line with the aver15 age national Medicare reimbursement rate. 

16 (b) APPLICATION DESCRIBED.—

17 (1) IN GENERAL.—An application described in 

18 this subsection is an application by an appropriate 

19 insurer domiciled and licensed to sell health insur20 ance or health benefits coverage in the State of Iowa 

21 (which for purposes of this project shall include the 

22 Illinois, as well as the Iowa, parts of the ‘‘Quad Cit23 ies’’) to offer a Medicare+Choice plan in that State 

24 that meets the requirements described in paragraph 

25 (2). 
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1 (2) ANNUAL PLAN REQUIREMENTS.—The re2 quirements of a plan for each contract year for 

3 which an application is granted under paragraph (1) 

4 are as follows: 

5 (A) All licensed physicians, hospitals, and 

6 practitioners (as defined in section 

7 1842(b)(18)(C) of the Social Security Act) in 

8 the State are eligible to be preferred providers 

9 under the insurer’s network to ensure that the 

10 health care needs of the Medicare beneficiaries 

11 to be served by the network are met. 

12 (B) Appropriate adjustments are made to 

13 the payment rates to hospitals for indirect med14 ical education costs and for being a dispropor15 tionate share hospital in manner similar to 

16 which such payment adjustments are made 

17 under subparagraphs (B) and (F), respectively, 

18 of section 1886(d)(5) of the Social Security 

19 Act. 

20 (C) As a preferred provider, a provider of 

21 services, physician, and health care practitioner 

22 shall be reimbursed for services furnished to 

23 Medicare beneficiaries at a rate no less than 

24 110 percent of the payment rate that would 
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1 otherwise apply for the service under part A or 

2 B, as the case may be. 

3 (D) The Secretary provides partial under4 writing of the financial risk under the plan. 

5 (E) The insurer should provide for health 

6 care benefits in addition to those required 

7 under parts A and B of such title (such as cov8 erage of the costs of some or all outpatient pre9 scription drugs, hearing aids, or eye glasses or 

10 reduced cost-sharing), after taking into account 

11 costs of administration. 

12 (3) ADDITIONAL PAYMENT FOR START UP

13 COSTS.—In addition to payments made to the in14 surer under paragraph (2), the Secretary may pro15 vide for a payment during the initial phase of the 

16 project to reflect additional costs associated with the 

17 establishment of preferred provider organizations 

18 under the plan. 

19 (c) PERIOD OF DEMONSTRATION PROJECT.—A dem20 onstration project carried out under this section shall op21 erate for a period of 5 years. 

22 (d) ADVISORY BOARD.—

23 (1) ESTABLISHMENT.—As a part of the dem24 onstration project conducted under this section, the 

25 insurer shall provide for an advisory board to review 
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1 payment rate changes by the insurer for services 

2 furnished by providers under the demonstration 

3 project before such rates or changes take effect. 

4 (2) COMPOSITION.—The Board shall be com5 posed of 7 members with expertise in the field of 

6 health care as follows: 

7 (A) The Attorney General of Iowa. 

8 (B) 2 members appointed by the insurer 

9 upon the recommendation of the Governor of 

10 Iowa. 

11 (C) 2 members appointed by the insurer 

12 upon the recommendation of the Iowa Hospital 

13 Association. 

14 (D) 2 members appointed by the insurer 

15 upon the recommendation of the Iowa Medical 

16 Society. 

17 (3) TERMS OF APPOINTMENT.—The term of 

18 any appointment under paragraph (2) shall be 5 

19 years. 

20 (4) MEETINGS.—The advisory board shall meet 

21 at the call of its chairman or a majority of its mem22 bers. 

23 (5) VACANCIES.—A vacancy on the advisory 

24 board shall be filled in the same manner in which 

25 the original appointment was made not later than 30 
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1 days after the advisory board is given notice of the 

2 vacancy and shall not affect the power of the re3 maining members to execute the duties of the advi4 sory board . 

5 (6) COMPENSATION.—Members of the advisory 

6 board shall receive no additional pay, allowances, or 

7 benefits by reason of their service.

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