I

104TH CONGRESS

1ST SESSION H. R. 2486

To amend title XVIII of the Social Security Act to preserve and reform

the medicare program.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 17, 1995

Mr. PETERSON of Minnesota introduced the following bill; which was referred

to the Committee on Ways and Means, and in addition to the Committees

on Commerce, the Judiciary, and Rules, 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 amend title XVIII of the Social Security Act to preserve

and reform the medicare program.

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

3 TITLE XV—MEDICARE

4 SEC. 15000. SHORT TITLE; REFERENCES IN TITLE; TABLE

5 OF CONTENTS.

6 (a) SHORT TITLE OF TITLE.—This title may be cited

7 as the ‘‘Medicare Preservation Act of 1995’’.

8 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex9 cept as otherwise specifically provided, whenever in this
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1 title an amendment is expressed in terms of an amend2 ment to or repeal of a section or other provision, the ref3 erence shall be considered to be made to that section or

4 other provision of the Social Security Act.

5 (c) REFERENCES TO OBRA.—In this title, the terms

6 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’,

7 ‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus

8 Budget Reconciliation Act of 1986 (Public Law 99–509),

9 the Omnibus Budget Reconciliation Act of 1987 (Public

10 Law 100–203), the Omnibus Budget Reconciliation Act

11 of 1989 (Public Law 101–239), the Omnibus Budget Rec12 onciliation Act of 1990 (Public Law 101–508), and the

13 Omnibus Budget Reconciliation Act of 1993 (Public Law

14 103–66), respectively.

15 (c) TABLE OF CONTENTS.—The table of contents of

16 this title is as follows:

TITLE VIII—MEDICARE

Sec. 15000. Short title; references in title; table of contents.

Subtitle A—Medicare Choice Program

PART 1—INCREASING CHOICE UNDER THE MEDICARE PROGRAM

Sec. 15001. Increasing choice under Medicare.

Sec. 15002. Medicare Choice Program.

‘‘PART C—PROVISIONS RELATING TO MEDICARE CHOICE

‘‘Sec. 1851. Requirements for Medicare Choice organizations.

‘‘Sec. 1852. Requirements relating to benefits, provision of services, enrollment, and premiums.

‘‘Sec. 1853. Patient protection standards.

‘‘Sec. 1854. Provider-sponsored organizations.

‘‘Sec. 1855. Payments to Medicare choice organizations.

‘‘Sec. 1856. Establishment of standards for Medicare choice organizations

and products.
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‘‘Sec. 1857. Medicare choice certification.

‘‘Sec. 1858. Contracts with Medicare Choice organizations.

‘‘Sec. 1859. Demonstration project for high deductible/medisave products.

Sec. 15003. Reports.

Sec. 15004. Transitional rules for current Medicare HMO program.

PART 2—SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS

ACCOUNTS

Sec. 15011. Medicare Choice MSA’s.

Sec. 15012. Certain rebates excluded from gross income.

PART 3—SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS

Sec. 15021. Application of antitrust rule of reason to provider service networks.

PART 4—COMMISSIONS

Sec. 15031. Medicare payment review commission.

Sec. 15032. Commission on the Effect of the Baby Boom Generation on the

Medicare Program.

PART 5—PREEMPTION OF STATE ANTI-MANAGED CARE LAWS

Sec. 15041. Preemption of State law restrictions on managed care arrangements.

Sec. 15042. Preemption of State laws restricting utilization review programs.

Subtitle B—Provisions Relating to Regulatory Relief

PART 1—PROVISIONS RELATING TO PHYSICIAN FINANCIAL RELATIONSHIPS

Sec. 15101. Repeal of prohibitions based on compensation arrangements.

Sec. 15102. Revision of designated health services subject to prohibition.

Sec. 15103. Delay in implementation until promulgation of regulations.

Sec. 15104. Exceptions to prohibition.

Sec. 15105. Repeal of reporting requirements.

Sec. 15106. Preemption of State law.

Sec. 15107. Effective date.

PART 2—ANTITRUST REFORM

Sec. 15111. Publication of antitrust guidelines on activities of health plans.

Sec. 15112. Issuance of health care certificates of public advantage.

Sec. 15113. Study of impact on competition.

Sec. 15114. Antitrust exemption.

Sec. 15115. Requirements.

Sec. 15116. Definitions.

PART 3—MALPRACTICE REFORM

SUBPART A—UNIFORM STANDARDS FOR MALPRACTICE CLAIMS

Sec. 15121. Applicability.

Sec. 15122. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 15123. Optional application of practice guidelines.

Sec. 15124. Treatment of noneconomic and punitive damages.

Sec. 15125. Periodic payments for future losses.
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Sec. 15126. Treatment of attorney’s fees and other costs.

Sec. 15127. Uniform statute of limitations.

Sec. 15128. Special provision for certain obstetric services.

Sec. 15129. Jurisdiction of Federal courts.

Sec. 15130. Preemption.

SUBPART B—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION

(ADR) SYSTEMS

Sec. 15131. Basic requirements.

Sec. 15132. Certification of State systems; applicability of alternative Federal

system.

Sec. 15133. Reports on implementation and effectiveness of alternative dispute

resolution systems.

SUBPART C—DEFINITIONS

Sec. 15141. Definitions.

PART 4—PAYMENT AREAS FOR PHYSICIANS’ SERVICES UNDER MEDICARE

Sec. 15151. Modification of payment areas used to determine payments for

physicians’ services under medicare.

Subtitle C—Medicare Payments to Health Care Providers

PART 1—PROVISIONS AFFECTING ALL PROVIDERS

Sec. 15201. One-year freeze in payments to providers.

PART 2—PROVISIONS AFFECTING DOCTORS

Sec. 15211. Updating fees for physicians’ services.

Sec. 15212. Use of real GDP to adjust for volume and intensity.

PART 3—PROVISIONS AFFECTING HOSPITALS

Sec. 15221. Reduction in update for inpatient hospital services.

Sec. 15222. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 15223. Establishment of prospective payment system for outpatient services.

Sec. 15224. Reduction in medicare payments to hospitals for inpatient capitalrelated costs.

Sec. 15225. Moratorium on PPS exemption for long-term care hospitals.

Sec. 15226. Elimination of certain additional payments for outlier cases.

PART 4—PROVISIONS AFFECTING OTHER PROVIDERS

Sec. 15231. Revision of payment methodology for home health services.

Sec. 15232. Limitation of home health coverage under part A.

Sec. 15233. Reduction in fee schedule for durable medical equipment.

Sec. 15234. Nursing home billing.

Sec. 15235. Freeze in payments for clinical diagnostic laboratory tests.

PART 5—GRADUATE MEDICAL EDUCATION AND TEACHING HOSPITALS

Sec. 15241. Teaching Hospital and Graduate Medical Education Trust Fund.
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‘‘TITLE XXI—TEACHING HOSPITAL AND GRADUATE MEDICAL

EDUCATION TRUST FUND

‘‘PART A—ESTABLISHMENT OF FUND

‘‘Sec. 2101. Establishment of fund.

‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

‘‘Sec. 2111. Formula payments to teaching hospitals.

Sec. 15242. Reduction in payment adjustments for indirect medical education.

Subtitle D—Provisions Relating to Medicare Beneficiaries

Sec. 15301. Extending medicare part B premium.

Sec. 15302. Relating medicare part B premium to income for certain high income individuals.

Sec. 15303. Expanded coverage of preventive benefits.

Subtitle E—Medicare Fraud Reduction

Sec. 15401. Increasing beneficiary awareness of fraud and abuse.

Sec. 15402. Beneficiary incentives to report fraud and abuse.

Sec. 15403. Elimination of home health overpayments.

Sec. 15404. Skilled nursing facilities.

Sec. 15405. Direct spending for anti-fraud activities under medicare.

Sec. 15406. Fraud reduction demonstration project.

Sec. 15407. Report on competitive pricing.

Subtitle F—Improving Access to Health Care

PART 1—IMPROVING ACCESS TO HEALTH CARE IN RURAL AREAS

Sec. 15501. Community rural health network grants.

Sec. 15502. Provider incentives.

Sec. 15503. Modifications to the National Health Service Corps.

Sec. 15504. Creation of hospital-affiliated primary care centers.

Sec. 15505. Establishment of rural emergency access care hospitals.

Sec. 15506. Medical education.

Sec. 15507. Telemedicine payment methodology.

Sec. 15508. Demonstration project to increase choice in rural areas.

PART 2—MEDICARE SUBVENTION

Sec. 15511. Medicare program payments for health care services provided in

the military health services system.

Subtitle G—Other Provisions

Sec. 15601. Extension and expansion of existing secondary payer requirements.

Sec. 15602. Clarification of medicare coverage of items and services associated

with certain medical devices approved for investigational use.

Sec. 15603. Additional exclusion from coverage.

Subtitle H—Monitoring Achievement of Medicare Reform Goals

Sec. 15701. Establishment of budgetary and program goals.

Sec. 15702. Medicare Reform Commission.
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Subtitle I—Lock-Box Provisions for Medicare Part B Savings From Growth

Reductions

Sec. 15801. Establishment of Medicare Growth Reduction Trust Fund for part

B savings.

1 Subtitle A—Medicare Choice

2 Program

3 PART 1—INCREASING CHOICE UNDER THE

4 MEDICARE PROGRAM

5 SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

6 (a) IN GENERAL.—Title XVIII is amended by insert7 ing after section 1804 the following new section:

8 ‘‘PROVIDING FOR CHOICE OF COVERAGE

9 ‘‘SEC. 1805. (a) CHOICE OF COVERAGE.—

10 ‘‘(1) IN GENERAL.—Subject to the provisions of

11 this section, every individual who is entitled to bene12 fits under part A and enrolled under part B shall

13 elect to receive benefits under this title through one

14 of the following:

15 ‘‘(A) THROUGH FEE-FOR-SERVICE SYS16 TEM.—Through the provisions of parts A and

17 B.

18 ‘‘(B) THROUGH A MEDICARE CHOICE

19 PRODUCT.—Through a Medicare Choice prod20 uct (as defined in paragraph (2)), which may

21 be—

22 ‘‘(i) a product offered by a provider23 sponsored organization,
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1 ‘‘(ii) a product offered by an organiza2 tion that is a union, Taft-Hartley plan, or

3 association, or

4 ‘‘(iii) a product providing for benefits

5 on a fee-for-service or other basis.

6 Such a product may be a high deductible/

7 medisave product (and a contribution into a

8 Medicare Choice medical savings account

9 (MSA)) under the demonstration project pro10 vided under section 1859.

11 ‘‘(2) MEDICARE CHOICE PRODUCT DEFINED.—

12 For purposes this section and part C, the term

13 ‘Medicare Choice product’ means health benefits cov14 erage offered under a policy, contract, or plan by a

15 Medicare Choice organization (as defined in section

16 1851(a)) pursuant to and in accordance with a con17 tract under section 1858.

18 ‘‘(3) TERMINOLOGY RELATING TO OPTIONS.—

19 For purposes of this section and part C—

20 ‘‘(A) NON-MEDICARE-CHOICE OPTION.—An

21 individual who has made the election described

22 in paragraph (1)(A) is considered to have elect23 ed the ‘Non-Medicare Choice option’.

24 ‘‘(B) MEDICARE CHOICE OPTION.—An in25 dividual who has made the election described in
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1 paragraph (1)(B) to obtain coverage through a

2 Medicare Choice product is considered to have

3 elected the ‘Medicare Choice option’ for that

4 product.

5 ‘‘(b) SPECIAL RULES.—

6 ‘‘(1) RESIDENCE REQUIREMENT.—Except as

7 the Secretary may otherwise provide, an individual is

8 eligible to elect a Medicare Choice product offered by

9 a Medicare Choice organization only if the organiza10 tion in relation to the product serves the geographic

11 area in which the individual resides.

12 ‘‘(2) AFFILIATION REQUIREMENTS FOR CER13 TAIN PRODUCTS.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B), an individual is eligible to elect a

16 Medicare Choice product offered by a limited

17 enrollment Medicare Choice organization (as de18 fined in section 1852(c)(4)(D)) only if—

19 ‘‘(i) the individual is eligible under

20 section 1852(c)(4) to make such election,

21 and

22 ‘‘(ii) in the case of a Medicare Choice

23 organization that is a union sponsor or

24 Taft-Hartley sponsor (as defined in section

25 1852(c)(4)), the individual elected under
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1 this section a Medicare Choice product of2 fered by the sponsor during the first en3 rollment period in which the individual was

4 eligible to make such election with respect

5 to such sponsor.

6 ‘‘(B) NO REELECTION AFTER

7 DISENROLLMENT FOR CERTAIN PRODUCTS.—

8 An individual is not eligible to elect a Medicare

9 Choice product offered by a Medicare Choice

10 organization that is a union sponsor or Taft11 Hartley sponsor if the individual previously had

12 elected a Medicare Choice product offered by

13 the organization and had subsequently discon14 tinued to elect such a product offered by the or15 ganization.

16 ‘‘(c) PROCESS FOR EXERCISING CHOICE.—

17 ‘‘(1) IN GENERAL.—The Secretary shall estab18 lish a process through which elections described in

19 subsection (a) are made and changed, including the

20 form and manner in which such elections are made

21 and changed. Such elections shall be made or

22 changed only during coverage election periods speci23 fied under subsection (e) and shall become effective

24 as provided in subsection (f).
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1 ‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec2 retary shall establish the process of electing coverage

3 under this section during the transition period (as

4 defined in subsection (e)(1)(B)) in such an expedited

5 manner as will permit such an election for Medicare

6 Choice products in an area as soon as such products

7 become available in that area.

8 ‘‘(3) COORDINATION THROUGH MEDICARE

9 CHOICE ORGANIZATIONS.—

10 ‘‘(A) ENROLLMENT.—Such process shall

11 permit an individual who wishes to elect a Med12 icare Choice product offered by a Medicare

13 Choice organization to make such election

14 through the filing of an appropriate election

15 form with the organization.

16 ‘‘(B) DISENROLLMENT.—Such process

17 shall permit an individual, who has elected a

18 Medicare Choice product offered by a Medicare

19 Choice organization and who wishes to termi20 nate such election, to terminate such election

21 through the filing of an appropriate election

22 form with the organization.

23 ‘‘(4) DEFAULT.—

24 ‘‘(A) INITIAL ELECTION.—
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1 ‘‘(i) IN GENERAL.—Subject to clause

2 (ii), an individual who fails to make an

3 election during an initial election period

4 under subsection (e)(1) is deemed to have

5 chosen the Non-Medicare Choice option.

6 ‘‘(ii) SEAMLESS CONTINUATION OF

7 COVERAGE.—The Secretary shall establish

8 procedures under which individuals who

9 are enrolled with a Medicare Choice orga10 nization at the time of the initial election

11 period and who fail to elect to receive cov12 erage other than through the organization

13 are deemed to have elected an appropriate

14 Medicare Choice product offered by the or15 ganization.

16 ‘‘(B) CONTINUING PERIODS.—An individ17 ual who has made (or deemed to have made) an

18 election under this section is considered to have

19 continued to make such election until such time

20 as—

21 ‘‘(i) the individual changes the elec22 tion under this section, or

23 ‘‘(ii) a Medicare Choice product is dis24 continued, if the individual had elected
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1 such product at the time of the discontinu2 ation.

3 ‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO4 CIAL SECURITY TO PROMOTE EFFICIENT ADMINIS5 TRATION.—In order to promote the efficient admin6 istration of this section and the Medicare Choice

7 program under part C, the Secretary may enter into

8 an agreement with the Commissioner of Social Secu9 rity under which the Commissioner performs admin10 istrative responsibilities relating to enrollment and

11 disenrollment in Medicare Choice products under

12 this section.

13 ‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO

14 PROMOTE INFORMED CHOICE.—

15 ‘‘(1) IN GENERAL.—The Secretary shall provide

16 for activities under this subsection to disseminate

17 broadly information to medicare beneficiaries (and

18 prospective medicare beneficiaries) on the coverage

19 options provided under this section in order to pro20 mote an active, informed selection among such op21 tions. Such information shall be made available on

22 such a timely basis (such as 6 months before the

23 date an individual would first attain eligibility for

24 medicare on the basis of age) as to permit individ-
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1 uals to elect the Medicare Choice option during the

2 initial election period described in subsection (e)(1).

3 ‘‘(2) USE OF NONFEDERAL ENTITIES.—The

4 Secretary shall, to the maximum extent feasible,

5 enter into contracts with appropriate non-Federal

6 entities to carry out activities under this subsection.

7 ‘‘(3) SPECIFIC ACTIVITIES.—In carrying out

8 this subsection, the Secretary shall provide for at

9 least the following activities in all areas in which

10 Medicare Choice products are offered:

11 ‘‘(A) INFORMATION BOOKLET.—

12 ‘‘(i) IN GENERAL.—The Secretary

13 shall publish an information booklet and

14 disseminate the booklet to all individuals

15 eligible to elect the Medicare Choice option

16 under this section during coverage election

17 periods.

18 ‘‘(ii) INFORMATION INCLUDED.—The

19 booklet shall include information presented

20 in plain English and in a standardized for21 mat regarding—

22 ‘‘(I) the benefits (including cost23 sharing) and premiums for the var24 ious Medicare Choice products in the

25 areas involved;
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1 ‘‘(II) the quality of such prod2 ucts, including consumer satisfaction

3 information; and

4 ‘‘(III) rights and responsibilities

5 of medicare beneficiaries under such

6 products.

7 ‘‘(iii) PERIODIC UPDATING.—The

8 booklet shall be updated on a regular basis

9 (not less often than once every 12 months)

10 to reflect changes in the availability of

11 Medicare Choice products and the benefits

12 and premiums for such products.

13 ‘‘(B) TOLL-FREE NUMBER.—The Secretary

14 shall maintain a toll-free number for inquiries

15 regarding Medicare Choice options and the op16 eration of part C.

17 ‘‘(C) GENERAL INFORMATION IN MEDI18 CARE HANDBOOK.—The Secretary shall include

19 information about the Medicare Choice option

20 provided under this section in the annual notice

21 of medicare benefits under section 1804.

22 ‘‘(e) COVERAGE ELECTION PERIODS.—

23 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO

24 MAKE ELECTION.—
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1 ‘‘(A) IN GENERAL.—In the case of an indi2 vidual who first becomes entitled to benefits

3 under part A and enrolled under part B after

4 the beginning of the transition period (as de5 fined in subparagraph (B)), the individual shall

6 make the election under this section during a

7 period (of a duration and beginning at a time

8 specified by the Secretary) at the first time the

9 individual both is entitled to benefits under part

10 A and enrolled under part B. Such period shall

11 be specified in a manner so that, in the case of

12 an individual who elects a Medicare Choice

13 product during the period, coverage under the

14 product becomes effective as of the first date on

15 which the individual may receive such coverage.

16 ‘‘(B) TRANSITION PERIOD DEFINED.—In

17 this subsection, the term ‘transition period’

18 means, with respect to an individual in an area,

19 the period beginning on the first day of the first

20 month in which a Medicare Choice product is

21 first made available to individuals in the area

22 and ending with the month preceding the begin23 ning of the first annual, coordinated election

24 period under paragraph (3).
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1 ‘‘(2) DURING TRANSITION PERIOD.—Subject to

2 paragraph (6)—

3 ‘‘(A) CONTINUOUS OPEN ENROLLMENT

4 INTO A MEDICARE CHOICE OPTION.—During

5 the transition period, an individual who is eligi6 ble to make an election under this section and

7 who has elected the non-Medicare Choice option

8 may change such election to a Medicare Choice

9 option at any time.

10 ‘‘(B) OPEN DISENROLLMENT BEFORE END

11 OF TRANSITION PERIOD.—During the transition

12 period, an individual who has elected a Medi13 care Choice option for a Medicare Choice prod14 uct may change such election to another Medi15 care Choice product or to the non-Medicare

16 Choice option.

17 ‘‘(3) ANNUAL, COORDINATED ELECTION PE18 RIOD.—

19 ‘‘(A) IN GENERAL.—Subject to paragraph

20 (5), each individual who is eligible to make an

21 election under this section may change such

22 election during annual, coordinated election pe23 riods.

24 ‘‘(B) ANNUAL, COORDINATED ELECTION

25 PERIOD.—For purposes of this section, the
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1 term ‘annual, coordinated election period’

2 means, with respect to a calendar year (begin3 ning with 1998), the month of October before

4 such year.

5 ‘‘(C) MEDICARE CHOICE HEALTH FAIR

6 DURING OCTOBER, 1996.—In the month of Octo7 ber, 1996, the Secretary shall provide for a na8 tionally coordinated educational and publicity

9 campaign to inform individuals, who are eligible

10 to elect Medicare Choice products, about such

11 products and the election process provided

12 under this section (including the annual, coordi13 nated election periods that occur in subsequent

14 years).

15 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OP16 TION.—

17 ‘‘(A) IN GENERAL.—In the case of the first

18 time an individual elects a Medicare Choice op19 tion under this section, the individual may dis20 continue such election through the filing of an

21 appropriate notice during the 90-day period be22 ginning on the first day on which the individ23 ual’s coverage under the Medicare Choice prod24 uct under such option becomes effective.
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1 ‘‘(B) EFFECT OF DISCONTINUATION OF

2 ELECTION.—An individual who discontinues an

3 election under this paragraph shall be deemed

4 at the time of such discontinuation to have

5 elected the Non-Medicare Choice option.

6 ‘‘(5) SPECIAL ELECTION PERIODS.—An individ7 ual may discontinue an election of a Medicare

8 Choice product offered by a Medicare Choice organi9 zation other than during an annual, coordinated

10 election period and make a new election under this

11 section if—

12 ‘‘(A) the organization’s or product’s certifi13 cation under part C has been terminated or the

14 organization has terminated or otherwise dis15 continued providing the product;

16 ‘‘(B) in the case of an individual who has

17 elected a Medicare Choice product offered by a

18 Medicare Choice organization, the individual is

19 no longer eligible to elect the product because

20 of a change in the individual’s place of resi21 dence or other change in circumstances (speci22 fied by the Secretary, but not including termi23 nation of membership in a qualified association

24 in the case of a product offered by a qualified

25 association or termination of the individual’s
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1 enrollment on the basis described in clause (i)

2 or (ii) section 1852(c)(3)(B));

3 ‘‘(C) the individual demonstrates (in ac4 cordance with guidelines established by the Sec5 retary) that—

6 ‘‘(i) the organization offering the

7 product substantially violated a material

8 provision of the organization’s contract

9 under part C in relation to the individual

10 and the product; or

11 ‘‘(ii) the organization (or an agent or

12 other entity acting on the organization’s

13 behalf) materially misrepresented the prod14 uct’s provisions in marketing the product

15 to the individual; or

16 ‘‘(D) the individual meets such other con17 ditions as the Secretary may provide.

18 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—

19 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE20 RIOD.—An election of coverage made during the ini21 tial coverage election period under subsection

22 (e)(1)(A) shall take effect upon the date the individ23 ual becomes entitled to benefits under part A and

24 enrolled under part B, except as the Secretary may
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1 provide (consistent with section 1838) in order to

2 prevent retroactive coverage.

3 ‘‘(2) DURING TRANSITION; 90-DAY

4 DISENROLLMENT OPTION.—An election of coverage

5 made under subsection (e)(2) and an election to dis6 continue a Medicare Choice option under subsection

7 (e)(4) at any time shall take effect with the first cal8 endar month following the date on which the election

9 is made.

10 ‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD

11 AND MEDISAVE ELECTION.—An election of coverage

12 made during an annual, coordinated election period

13 (as defined in subsection (e)(3)(B)) in a year shall

14 take effect as of the first day of the following year.

15 ‘‘(4) OTHER PERIODS.—An election of coverage

16 made during any other period under subsection

17 (e)(5) shall take effect in such manner as the Sec18 retary provides in a manner consistent (to the extent

19 practicable) with protecting continuity of health ben20 efit coverage.

21 ‘‘(g) EFFECT OF ELECTION OF MEDICARE CHOICE

22 OPTION.—Subject to the provisions of section 1855(f),

23 payments under a contract with a Medicare Choice organi24 zation under section 1858(a) with respect to an individual

25 electing a Medicare Choice product offered by the organi-
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1 zation shall be instead of the amounts which (in the ab2 sence of the contract) would otherwise be payable under

3 parts A and B for items and services furnished to the indi4 vidual.

5 ‘‘(h) DEMONSTRATION PROJECTS.—The Secretary

6 shall conduct demonstration projects to test alternative

7 approahces to coordinated open enrollments in different

8 markets, including different annual enrollment periods

9 and models of rolling open enrollment periods. The Sec10 retary may waive previous provisions of this section in

11 order to carry out such projects.’’.

12 SEC. 15002. MEDICARE CHOICE PROGRAM.

13 (a) IN GENERAL.—Title XVIII is amended by redes14 ignating part C as part D and by inserting after part B

15 the following new part:

16 ‘‘PART C—PROVISIONS RELATING TO MEDICARE

17 CHOICE

18 ‘‘REQUIREMENTS FOR MEDICARE CHOICE ORGANIZATIONS

19 ‘‘SEC. 1851. (a) MEDICARE CHOICE ORGANIZATION

20 DEFINED.—In this part, subject to the succeeding provi21 sions of this section, the term ‘Medicare Choice organiza22 tion’ means a public or private entity that is certified

23 under section 1857 as meeting the requirements and

24 standards of this part for such an organization.
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1 ‘‘(b) ORGANIZED AND LICENSED UNDER STATE

2 LAW.—

3 ‘‘(1) IN GENERAL.—A Medicare Choice organi4 zation shall be organized and licensed under State

5 law to offer health insurance or health benefits cov6 erage in each State in which it offers a Medicare

7 Choice product.

8 ‘‘(2) EXCEPTION FOR UNION AND TAFT-HART9 LEY SPONSORS.—Paragraph (1) shall not apply to a

10 Medicare Choice organization that is a union spon11 sor or Taft-Hartley sponsor (as defined in section

12 1852(c)(4)).

13 ‘‘(3) EXCEPTION FOR PROVIDER-SPONSORED

14 ORGANIZATIONS.—Paragraph (1) shall not apply to

15 a Medicare Choice organization that is a provider16 sponsored organization (as defined in section

17 1854(a)) except to the extent provided under section

18 1857(b).

19 ‘‘(4) EXCEPTION FOR QUALIFIED ASSOCIA20 TIONS.—Paragraph (1) shall not apply to a Medi21 care Choice organization that is a qualified associa22 tion (as defined in section 1852(c)(4)(B)).

23 ‘‘(c) PREPAID PAYMENT.—A Medicare Choice orga24 nization shall be compensated (except for deductibles, co25 insurance, and copayments) for the provision of health
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1 care services to enrolled members by a payment which is

2 paid on a periodic basis without regard to the date the

3 health care services are provided and which is fixed with4 out regard to the frequency, extent, or kind of health care

5 service actually provided to a member.

6 ‘‘(d) ASSUMPTION OF FULL FINANCIAL RISK.—The

7 Medicare Choice organization shall assume full financial

8 risk on a prospective basis for the provision of the health

9 care services (other than hospice care) for which benefits

10 are required to be provided under section 1852(a)(1), ex11 cept that the organization—

12 ‘‘(1) may obtain insurance or make other ar13 rangements for the cost of providing to any enrolled

14 member such services the aggregate value of which

15 exceeds $5,000 in any year,

16 ‘‘(2) may obtain insurance or make other ar17 rangements for the cost of such services provided to

18 its enrolled members other than through the organi19 zation because medical necessity required their pro20 vision before they could be secured through the orga21 nization,

22 ‘‘(3) may obtain insurance or make other ar23 rangements for not more than 90 percent of the

24 amount by which its costs for any of its fiscal years
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1 exceed 115 percent of its income for such fiscal year,

2 and

3 ‘‘(4) may make arrangements with physicians

4 or other health professionals, health care institu5 tions, or any combination of such individuals or in6 stitutions to assume all or part of the financial risk

7 on a prospective basis for the provision of basic

8 health services by the physicians or other health pro9 fessionals or through the institutions.

10 In the case of a Medicare Choice organization that is a

11 union sponsor or Taft-Hartley sponsor (as defined in sec12 tion 1852(c)(4)) or a qualified association (as defined in

13 section 1852(c)(4)(B)), this subsection shall not apply

14 with respect to Medicare Choice products offered by such

15 organization and issued by an organization to which sub16 section (b)(1) applies or by a provider-sponsored organiza17 tion (as defined in section 1854(a)).

18 ‘‘(e) PROVISION AGAINST RISK OF INSOLVENCY.—

19 ‘‘(1) IN GENERAL.—Each Medicare Choice or20 ganization shall meet standards under section 1856

21 relating to the financial solvency and capital ade22 quacy of the organization. Such standards shall take

23 into account the nature and type of Medicare Choice

24 products offered by the organization.
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1 ‘‘(2) TREATMENT OF TAFT-HARTLEY SPON2 SORS.—An entity that is a Taft-Hartley sponsor is

3 deemed to meet the requirement of paragraph (1).

4 ‘‘(3) TREATMENT OF CERTAIN QUALIFIED ASSOCIA5 TIONS.—An entity that is a qualified association is deemed

6 to meet the requirement of paragraph (1) with respect to

7 Medicare Choice products offered by such association and

8 issued by an organization to which subsection (b)(1) ap9 plies or by a provider-sponsored organization.

10 ‘‘(f) ORGANIZATIONS TREATED AS MEDICAREPLUS

11 ORGANIZATIONS DURING TRANSITION.—Any of the fol12 lowing organizations shall be considered to qualify as a

13 MedicarePlus organization for contract years beginning

14 before January 1, 1997:

15 ‘‘(1) HEALTH MAINTENANCE ORGANIZA16 TIONS.—An organization that is organized under the

17 laws of any State and that is a qualified health

18 maintenance organization (as defined in section

19 1310(d) of the Public Health Service Act), an orga20 nization recognized under State law as a health

21 maintenance organization, or a similar organization

22 regulated under State law for solvency in the same

23 manner and to the same extent as such a health

24 maintenance organization.
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1 ‘‘(2) LICENSED INSURERS.—An organization

2 that is organized under the laws of any State and—

3 ‘‘(A) is licensed by a State agency as an

4 insurer for the offering of health benefit cov5 erage, or

6 ‘‘(B) is licensed by a State agency as a

7 service benefit plan,

8 but only for individuals residing in an area in which

9 the organization is licensed to offer health insurance

10 coverage.

11 ‘‘(3) CURRENT RISK-CONTRACTORS.—An orga12 nization that is an eligible organization (as defined

13 in section 1876(b)) and that has a risk-sharing con14 tract in effect under section 1876 as of the date of

15 the enactment of this section.

16 ‘‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF

17 SERVICES, ENROLLMENT, AND PREMIUMS

18 ‘‘SEC. 1852. (a) BENEFITS COVERED.—

19 ‘‘(1) IN GENERAL.—Each Medicare Choice

20 product offered under this part shall provide benefits

21 for at least the items and services for which benefits

22 are available under parts A and B consistent with

23 the standards for coverage of such items and serv24 ices applicable under this title.

25 ‘‘(2) ORGANIZATION AS SECONDARY PAYER.—

26 Notwithstanding any other provision of law, a Medi-
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1 care Choice organization may (in the case of the

2 provision of items and services to an individual

3 under this part under circumstances in which pay4 ment under this title is made secondary pursuant to

5 section 1862(b)(2)) charge or authorize the provider

6 of such services to charge, in accordance with the

7 charges allowed under such law or policy—

8 ‘‘(A) the insurance carrier, employer, or

9 other entity which under such law, plan, or pol10 icy is to pay for the provision of such services,

11 or

12 ‘‘(B) such individual to the extent that the

13 individual has been paid under such law, plan,

14 or policy for such services.

15 ‘‘(3) SATISFACTION OF REQUIREMENT.—A

16 Medicare Choice product offered by a Medicare

17 Choice organization satisfies paragraph (1) with re18 spect to benefits for items and services if the follow19 ing requirements are met:

20 ‘‘(A) FEE FOR SERVICE PROVIDERS.—In

21 the case of benefits furnished through a pro22 vider that does not have a contract with the or23 ganization, the product provides for at least the

24 dollar amount of payment for such items and
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1 services as would otherwise be provided under

2 parts A and B.

3 ‘‘(B) PARTICIPATING PROVIDERS.—In the

4 case of benefits furnished through a provider

5 that has such a contract, the individual’s liabil6 ity for payment for such items and services

7 does not exceed (after taking into account any

8 deductible, which does not exceed any deduct9 ible under parts A and B) the lesser of the fol10 lowing:

11 ‘‘(i) NON-MEDICARE CHOICE LIABIL12 ITY.—The amount of the liability that the

13 individual would have had (based on the

14 provider being a participating provider) if

15 the individual had elected the non-Medi16 care Choice option.

17 ‘‘(ii) MEDICARE COINSURANCE AP18 PLIED TO PRODUCT PAYMENT RATES.—

19 The applicable coinsurance or copayment

20 rate (that would have applied under the

21 non-Medicare Choice option) of the pay22 ment rate provided under the contract.

23 ‘‘(b) ANTIDISCRIMINATION.—A Medicare Choice or24 ganization may not deny, limit, or condition the coverage

25 or provision of benefits under this part based on the health
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1 status, claims experience, receipt of health care, medical

2 history, or lack of evidence of insurability, of an individual.

3 ‘‘(c) GUARANTEED ISSUE AND RENEWAL.—

4 ‘‘(1) IN GENERAL.—Except as provided in this

5 subsection, a Medicare Choice organization shall

6 provide that at any time during which elections are

7 accepted under section 1805 with respect to a Medi8 care Choice product offered by the organization, the

9 organization will accept without restrictions individ10 uals who are eligible to make such election.

11 ‘‘(2) PRIORITY.—If the Secretary determines

12 that a Medicare Choice organization, in relation to

13 a Medicare Choice product it offers, has a capacity

14 limit and the number of eligible individuals who elect

15 the product under section 1805 exceeds the capacity

16 limit, the organization may limit the election of indi17 viduals of the product under such section but only

18 if priority in election is provided—

19 ‘‘(A) first to such individuals as have elect20 ed the product at the time of the determination,

21 and

22 ‘‘(B) then to other such individuals in such

23 a manner that does not discriminate among the

24 individuals (who seek to elect the product) on a

25 basis described in subsection (b).
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1 ‘‘(3) LIMITATION ON TERMINATION OF ELEC2 TION.—

3 ‘‘(A) IN GENERAL.—Subject to subpara4 graph (B), a Medicare Choice organization may

5 not for any reason terminate the election of any

6 individual under section 1805 for a Medicare

7 Choice product it offers.

8 ‘‘(B) BASIS FOR TERMINATION OF ELEC9 TION.—A Medicare Choice organization may

10 terminate an individual’s election under section

11 1805 with respect to a Medicare Choice product

12 it offers if—

13 ‘‘(i) any premiums required with re14 spect to such product are not paid on a

15 timely basis (consistent with standards

16 under section 1856 that provide for a

17 grace period for late payment of pre18 miums),

19 ‘‘(ii) the individual has engaged in

20 disruptive behavior (as specified in such

21 standards), or

22 ‘‘(iii) the product is terminated with

23 respect to all individuals under this part.

24 Any individual whose election is so terminated

25 is deemed to have elected the Non-Medicare
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1 Choice option (as defined in section

2 1805(a)(3)(A)).

3 ‘‘(C) ORGANIZATION OBLIGATION WITH RE4 SPECT TO ELECTION FORMS.—Pursuant to a con5 tract under section 1858, each Medicare Choice or6 ganization receiving an election form under section

7 1805(c)(2) shall transmit to the Secretary (at such

8 time and in such manner as the Secretary may

9 specify) a copy of such form or such other informa10 tion respecting the election as the Secretary may

11 specify.

12 ‘‘(4) SPECIAL RULES FOR LIMITED ENROLL13 MENT MEDICARE CHOICE ORGANIZATIONS.—

14 ‘‘(A) TAFT-HARTLEY SPONSORS.—

15 ‘‘(i) IN GENERAL.—Subject to sub16 paragraph (D), a Medicare Choice organi17 zation that is a Taft-Hartley sponsor (as

18 defined in clause (ii)) shall limit eligibility

19 of enrollees under this part for Medicare

20 Choice products it offers to individuals who

21 are entitled to obtain benefits through such

22 products under the terms of an applicable

23 collective bargaining agreement.

24 ‘‘(ii) TAFT-HARTLEY SPONSOR.—In

25 this part and section 1805, the term ‘Taft-
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1 Hartley sponsor’ means, in relation to a

2 group health plan that is established or

3 maintained by two or more employers or

4 jointly by one or more employers and one

5 or more employee organizations, the asso6 ciation, committee, joint board of trustees,

7 or other similar group of representatives of

8 parties who establish or maintain the plan.

9 ‘‘(B) QUALIFIED ASSOCIATIONS.—

10 ‘‘(i) IN GENERAL.—Subject to sub11 paragraph (D), a Medicare Choice organi12 zation that is a qualified association (as

13 defined in clause (iii)) shall limit eligibility

14 of individuals under this part for products

15 it offers to individuals who are members of

16 the association (or who are spouses of such

17 individuals).

18 ‘‘(ii) LIMITATION ON TERMINATION

19 OF COVERAGE.—Such a qualifying associa20 tion offering a Medicare Choice product to

21 an individual may not terminate coverage

22 of the individual on the basis that the indi23 vidual is no longer a member of the asso24 ciation except pursuant to a change of

25 election during an open election period oc-
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1 curring on or after the date of the termi2 nation of membership.

3 ‘‘(iii) QUALIFIED ASSOCIATION.—In

4 this part and section 1805, the term ‘quali5 fied association’ means an association, reli6 gious fraternal organization, or other orga7 nization (which may be a trade, industry,

8 or professional association, a chamber of

9 commerce, or a public entity association)

10 that the Secretary finds—

11 ‘‘(I) has been formed for pur12 poses other than the sale of any

13 health insurance and does not restrict

14 membership based on the health sta15 tus, claims experience, receipt of

16 health care, medical history, or lack of

17 evidence of insurability, of an individ18 ual,

19 ‘‘(II) does not exist solely or

20 principally for the purpose of selling

21 insurance, and

22 ‘‘(III) has at least 1,000 individ23 ual members or 200 employer mem24 bers.
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1 Such term includes a subsidiary or cor2 poration that is wholly owned by one or

3 more qualified organizations.

4 ‘‘(C) UNIONS.—

5 ‘‘(i) IN GENERAL.—Subject to sub6 paragraph (D), a union sponsor (as de7 fined in clause (ii)) shall limit eligibility of

8 enrollees under this part for MedicarePlus

9 products it offers to individuals who are

10 members of the sponsor and affiliated with

11 the sponsor through an employment rela12 tionship with any employer or are the

13 spouses of such members.

14 ‘‘(ii) UNION SPONSOR.—In this part

15 and section 1805, the term ‘union sponsor’

16 means an employee organization in relation

17 to a group health plan that is established

18 or maintained by the organization other

19 than pursuant to a collective bargaining

20 agreement.

21 ‘‘(D) LIMITATION.—Rules of eligibility to

22 carry out the previous subparagraphs of this

23 paragraph shall not have the effect of denying

24 eligibility to individuals on the basis of health

25 status, claims experience, receipt of health care,
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1 medical history, or lack of evidence of insurabil2 ity.

3 ‘‘(E) LIMITED ENROLLMENT MEDICARE

4 CHOICE ORGANIZATION.—In this part and sec5 tion 1805, the term ‘limited enrollment Medi6 care Choice organization’ means a Medicare

7 Choice organization that is a union sponsor, a

8 Taft-Hartley sponsor, or a qualified association.

9 ‘‘(F) EMPLOYER, ETC.—In this paragraph,

10 the terms ‘employer’, ‘employee organization’,

11 and ‘group health plan’ have the meanings

12 given such terms for purposes of part 6 of sub13 title B of title I of the Employee Retirement In14 come Security Act of 1974.

15 ‘‘(d) SUBMISSION AND CHARGING OF PREMIUMS.—

16 ‘‘(1) IN GENERAL.—Each Medicare Choice or17 ganization shall file with the Secretary each year, in

18 a form and manner and at a time specified by the

19 Secretary—

20 ‘‘(A) the amount of the monthly premiums

21 for coverage under each Medicare Choice prod22 uct it offers under this part in each payment

23 area (as determined for purposes of section

24 1855) in which the product is being offered;

25 and
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1 ‘‘(B) the enrollment capacity in relation to

2 the product in each such area.

3 ‘‘(2) AMOUNTS OF PREMIUMS CHARGED.—The

4 amount of the monthly premium charged by a Medi5 care Choice organization for a Medicare Choice

6 product offered in a payment area to an individual

7 under this part shall be equal to the amount (if any)

8 by which—

9 ‘‘(A) the amount of the monthly premium

10 for the product for the period involved, as es11 tablished under paragraph (3) and submitted

12 under paragraph (1), exceeds

‘‘(B) 1 13 ⁄12 of the annual Medicare Choice

14 capitation rate specified in section 1855(b)(2)

15 for the area and period involved.

16 ‘‘(3) UNIFORM PREMIUM.—The premiums

17 charged by a Medicare Choice organization under

18 this part may not vary among individuals who reside

19 in the same payment area.

20 ‘‘(4) TERMS AND CONDITIONS OF IMPOSING

21 PREMIUMS.—Each Medicare Choice organization

22 shall permit the payment of monthly premiums on a

23 monthly basis and may terminate election of individ24 uals for a Medicare Choice product for failure to
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1 make premium payments only in accordance with

2 subsection (c)(3)(B).

3 ‘‘(5) RELATION OF PREMIUMS AND COST-SHAR4 ING TO BENEFITS.—In no case may the portion of

5 a Medicare Choice organization’s premium rate and

6 the actuarial value of its deductibles, coinsurance,

7 and copayments charged (to the extent attributable

8 to the minimum benefits described in subsection

9 (a)(1) and not counting any amount attributable to

10 balance billing) to individuals who are enrolled under

11 this part with the organization exceed the actuarial

12 value of the coinsurance and deductibles that would

13 be applicable on the average to individuals enrolled

14 under this part with the organization (or, if the Sec15 retary finds that adequate data are not available to

16 determine that actuarial value, the actuarial value of

17 the coinsurance and deductibles applicable on the av18 erage to individuals in the area, in the State, or in

19 the United States, eligible to enroll under this part

20 with the organization, or other appropriate data)

21 and entitled to benefits under part A and enrolled

22 under part B if they were not members of a Medi23 care Choice organization.

24 ‘‘(e) REQUIREMENT FOR ADDITIONAL BENEFITS,

25 PART B PREMIUM DISCOUNT REBATES, OR BOTH.—
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1 ‘‘(1) REQUIREMENT.—

2 ‘‘(A) IN GENERAL.—Each Medicare Choice

3 organization (in relation to a Medicare Choice

4 product it offers) shall provide that if there is

5 an excess amount (as defined in subparagraph

6 (B)) for the product for a contract year, subject

7 to the succeeding provisions of this subsection,

8 the organization shall provide to individuals

9 such additional benefits (as the organization

10 may specify), a monetary rebate (paid on a

11 monthly basis) of the part B monthly premium,

12 or a combination thereof, in an total value

13 which is at least equal to the adjusted excess

14 amount (as defined in subparagraph (C)).

15 ‘‘(B) EXCESS AMOUNT.—For purposes of

16 this paragraph, the ‘excess amount’, for an or17 ganization for a product, is the amount (if any)

18 by which—

19 ‘‘(i) the average of the capitation pay20 ments made to the organization under this

21 part for the product at the beginning of

22 contract year, exceeds

23 ‘‘(ii) the actuarial value of the mini24 mum benefits described in subsection

25 (a)(1) under the product for individuals
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1 under this part, as determined based upon

2 an adjusted community rate described in

3 paragraph (5) (as reduced for the actuarial

4 value of the coinsurance and deductibles

5 under parts A and B).

6 ‘‘(C) ADJUSTED EXCESS AMOUNT.—For

7 purposes of this paragraph, the ‘adjusted excess

8 amount’, for an organization for a product, is

9 the excess amount reduced to reflect any

10 amount withheld and reserved for the organiza11 tion for the year under paragraph (3).

12 ‘‘(D) UNIFORM APPLICATION.—This para13 graph shall be applied uniformly for all enroll14 ees for a product in a service area.

15 ‘‘(E) CONSTRUCTION.—Nothing in this

16 subsection shall be construed as preventing a

17 Medicare Choice organization from providing

18 health care benefits that are in addition to the

19 benefits otherwise required to be provided under

20 this paragraph and from imposing a premium

21 for such additional benefits.

22 ‘‘(2) LIMITATION ON AMOUNT OF PART B PRE23 MIUM DISCOUNT REBATE.—In no case shall the

24 amount of a part B premium discount rebate under

25 paragraph (1)(A) exceed, with respect to a month,
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1 the amount of premiums imposed under part B (not

2 taking into account section 1839(b) (relating to pen3 alty for late enrollment) or 1839(h) (relating to af4 fluence testing)), for the individual for the month.

5 Except as provided in the previous sentence, a Medi6 care Choice organization is not authorized to provide

7 for cash or other monetary rebates as an inducement

8 for enrollment or otherwise.

9 ‘‘(3) STABILIZATION FUND.—A Medicare

10 Choice organization may provide that a part of the

11 value of an excess actuarial amount described in

12 paragraph (1) be withheld and reserved in the Fed13 eral Hospital Insurance Trust Fund and in the Fed14 eral Supplementary Medical Insurance Trust Fund

15 (in such proportions as the Secretary determines to

16 be appropriate) by the Secretary for subsequent an17 nual contract periods, to the extent required to sta18 bilize and prevent undue fluctuations in the addi19 tional benefits and rebates offered in those subse20 quent periods by the organization in accordance with

21 such paragraph. Any of such value of amount re22 served which is not provided as additional benefits

23 described in paragraph (1)(A) to individuals electing

24 the Medicare Choice product in accordance with
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1 such paragraph prior to the end of such periods,

2 shall revert for the use of such trust funds.

3 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

4 DATA.—For purposes of this subsection, if the Sec5 retary finds that there is insufficient enrollment ex6 perience (including no enrollment experience in the

7 case of a provider-sponsored organization) to deter8 mine an average of the capitation payments to be

9 made under this part at the beginning of a contract

10 period, the Secretary may determine such an aver11 age based on the enrollment experience of other con12 tracts entered into under this part.

13 ‘‘(5) ADJUSTED COMMUNITY RATE.—

14 ‘‘(A) IN GENERAL.—For purposes of this

15 subsection, subject to subparagraph (B), the

16 term ‘adjusted community rate’ for a service or

17 services means, at the election of a Medicare

18 Choice organization, either—

19 ‘‘(i) the rate of payment for that serv20 ice or services which the Secretary annu21 ally determines would apply to an individ22 ual electing a Medicare Choice product

23 under this part if the rate of payment were

24 determined under a ‘community rating sys25 tem’ (as defined in section 1302(8) of the
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1 Public Health Service Act, other than sub2 paragraph (C)), or

3 ‘‘(ii) such portion of the weighted ag4 gregate premium, which the Secretary an5 nually estimates would apply to such an in6 dividual, as the Secretary annually esti7 mates is attributable to that service or

8 services,

9 but adjusted for differences between the utiliza10 tion characteristics of the individuals electing

11 coverage under this part and the utilization

12 characteristics of the other enrollees with the

13 organization (or, if the Secretary finds that

14 adequate data are not available to adjust for

15 those differences, the differences between the

16 utilization characteristics of individuals select17 ing other Medicare Choice coverage, or individ18 uals in the area, in the State, or in the United

19 States, eligible to elect Medicare Choice cov20 erage under this part and the utilization char21 acteristics of the rest of the population in the

22 area, in the State, or in the United States, re23 spectively).

24 ‘‘(B) SPECIAL RULE FOR PROVIDER-SPON25 SORED ORGANIZATIONS.—In the case of a Med-
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1 icare Choice organization that is a provider2 sponsored organization, the adjusted community

3 rate under subparagraph (A) for a Medicare

4 Choice product may be computed (in a manner

5 specified by the Secretary) using data in the

6 general commercial marketplace or (during a

7 transition period) based on the costs incurred

8 by the organization in providing such a product.

9 ‘‘(f) RULES REGARDING PHYSICIAN PARTICIPA10 TION.—

11 ‘‘(1) PROCEDURES.—Each Medicare Choice or12 ganization shall establish reasonable procedures re13 lating to the participation (under an agreement be14 tween a physician and the organization) of physi15 cians under Medicare Choice products offered by the

16 organization under this part. Such procedures shall

17 include—

18 ‘‘(A) providing notice of the rules regard19 ing participation,

20 ‘‘(B) providing written notice of participa21 tion decisions that are adverse to physicians,

22 and

23 ‘‘(C) providing a process within the organi24 zation for appealing adverse decisions, including
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1 the presentation of information and views of the

2 physician regarding such decision.

3 ‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A

4 Medicare Choice organization shall consult with phy5 sicians who have entered into participation agree6 ments with the organization regarding the organiza7 tion’s medical policy, quality, and medical manage8 ment procedures.

9 ‘‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE

10 PLANS.—

11 ‘‘(A) IN GENERAL.—Each Medicare Choice

12 organization may not operate any physician in13 centive plan (as defined in subparagraph (B))

14 unless the following requirements are met:

15 ‘‘(i) No specific payment is made di16 rectly or indirectly under the plan to a

17 physician or physician group as an induce18 ment to reduce or limit medically necessary

19 services provided with respect to a specific

20 individual enrolled with the organization.

21 ‘‘(ii) If the plan places a physician or

22 physician group at substantial financial

23 risk (as determined by the Secretary) for

24 services not provided by the physician or

25 physician group, the organization—
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1 ‘‘(I) provides stop-loss protection

2 for the physician or group that is ade3 quate and appropriate, based on

4 standards developed by the Secretary

5 that take into account the number of

6 physicians placed at such substantial

7 financial risk in the group or under

8 the plan and the number of individ9 uals enrolled with the organization

10 who receive services from the physi11 cian or the physician group, and

12 ‘‘(II) conducts periodic surveys of

13 both individuals enrolled and individ14 uals previously enrolled with the orga15 nization to determine the degree of

16 access of such individuals to services

17 provided by the organization and sat18 isfaction with the quality of such serv19 ices.

20 ‘‘(iii) The organization provides the

21 Secretary with descriptive information re22 garding the plan, sufficient to permit the

23 Secretary to determine whether the plan is

24 in compliance with the requirements of this

25 subparagraph.
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1 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE2 FINED.—In this paragraph, the term ‘physician

3 incentive plan’ means any compensation ar4 rangement between a Medicare Choice organiza5 tion and a physician or physician group that

6 may directly or indirectly have the effect of re7 ducing or limiting services provided with respect

8 to individuals enrolled with the organization

9 under this part.

10 ‘‘(4) EXCEPTION FOR CERTAIN FEE-FOR-SERV11 ICE PLANS.—The previous provisions of this sub12 section shall not apply in the case of a Medicare

13 Choice organization in relation to a Medicare Choice

14 product if the organization does not have agree15 ments between physicians and the organization for

16 the provision of benefits under the product.

17 ‘‘(g) PROVISION OF INFORMATION.—A Medicare

18 Choice organization shall provide the Secretary with such

19 information on the organization and each Medicare Choice

20 product it offers as may be required for the preparation

21 of the information booklet described in section

22 1805(d)(3)(A).

23 ‘‘(h) COORDINATED ACUTE AND LONG-TERM CARE

24 BENEFITS UNDER A MEDICARE CHOICE PRODUCT.—

25 Nothing in this part shall be construed as preventing a
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1 State from coordinating benefits under its medicaid pro2 gram under title XIX with those provided under a Medi3 care Choice product in a manner that assures continuity

4 of a full-range of acute care and long-term care services

5 to poor elderly or disabled individuals eligible for benefits

6 under this title and under such program.

7 ‘‘PATIENT PROTECTION STANDARDS

8 ‘‘SEC. 1853. (a) DISCLOSURE TO ENROLLEES.—A

9 Medicare Choice organization shall disclose in clear, accu10 rate, and standardized form, information regarding all of

11 the following for each Medicare Choice product it offers:

12 ‘‘(1) Benefits under the Medicare Choice prod13 uct offered, including exclusions from coverage.

14 ‘‘(2) Rules regarding prior authorization or

15 other review requirements that could result in

16 nonpayment.

17 ‘‘(3) Potential liability for cost-sharing for out18 of-network services.

19 ‘‘(4) The number, mix, and distribution of par20 ticipating providers.

21 ‘‘(5) The financial obligations of the enrollee,

22 including premiums, deductibles, co-payments, and

23 maximum limits on out-of-pocket losses for items

24 and services (both in and out of network).
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1 ‘‘(6) Statistics on enrollee satisfaction with the

2 product and organization, including rates of

3 reenrollment.

4 ‘‘(7) Enrollee rights and responsibilities, includ5 ing the grievance process provided under subsection

6 (f).

7 ‘‘(8) A statement that the use of the 911 emer8 gency telephone number is appropriate in emergency

9 situations and an explanation of what constitutes an

10 emergency situation.

11 ‘‘(9) A description of the organization’s quality

12 assurance program under subsection (d).

13 Such information shall be disclosed to each enrollee under

14 this part at the time of enrollment and at least annually

15 thereafter.

16 ‘‘(b) ACCESS TO SERVICES.—

17 ‘‘(1) IN GENERAL.—A Medicare Choice organi18 zation offering a Medicare Choice product may re19 strict the providers from whom the benefits under

20 the product are provided so long as—

21 ‘‘(A) the organization makes such benefits

22 available and accessible to each individual elect23 ing the product within the product service area

24 with reasonable promptness and in a manner
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1 which assures continuity in the provision of

2 benefits;

3 ‘‘(B) when medically necessary the organi4 zation makes such benefits available and acces5 sible 24 hours a day and 7 days a week;

6 ‘‘(C) the product provides for reimburse7 ment with respect to services which are covered

8 under subparagraphs (A) and (B) and which

9 are provided to such an individual other than

10 through the organization, if—

11 ‘‘(i) the services were medically nec12 essary and immediately required because of

13 an unforeseen illness, injury, or condition,

14 and

15 ‘‘(ii) it was not reasonable given the

16 circumstances to obtain the services

17 through the organization; and

18 ‘‘(D) coverage is provided for emergency

19 services (as defined in paragraph (5)) without

20 regard to prior authorization or the emergency

21 care provider’s contractual relationship with the

22 organization.

23 ‘‘(2) MINIMUM PAYMENT LEVELS WHERE PRO24 VIDING POINT-OF-SERVICE COVERAGE.—If a Medi25 care Choice product provides benefits for items and
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1 services (not described in paragraph (1)(C)) through

2 a network of providers and also permits payment to

3 be made under the product for such items and serv4 ices not provided through such a network, the pay5 ment level under the product with respect to such

6 items and services furnished outside the network

7 shall be at least 70 percent (or, if the effective cost8 sharing rate is 50 percent, at least 35 percent) of

9 the lesser of—

10 ‘‘(A) the payment basis (determined with11 out regard to deductibles and cost-sharing) that

12 would have applied for such items and services

13 under parts A and B, or

14 ‘‘(B) the amount charged by the entity fur15 nishing such items and services.

16 ‘‘(3) PROTECTION OF ENROLLEES FOR CERTAIN

17 OUT-OF-NETWORK SERVICES.—

18 ‘‘(A) PARTICIPATING PROVIDERS.—In the

19 case of physicians’ services or renal dialysis

20 services described in subparagraph (C) which

21 are furnished by a participating physician or

22 provider of services or renal dialysis facility to

23 an individual enrolled with a MedicarePlus or24 ganization under this section, the applicable

25 participation agreement is deemed to provide
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1 that the physician or provider of services or

2 renal dialysis facility will accept as payment in

3 full from the organization the amount that

4 would be payable to the physician or provider of

5 services or renal dialysis facility under part B

6 and from the individual under such part, if the

7 individual were not enrolled with such an orga8 nization under this part.

9 ‘‘(B) NONPARTICIPATING PROVIDERS.—In

10 the case of physicians’ services described in sub11 paragraph (C) which are furnished by a

12 nonparticipating physician, the limitations on

13 actual charges for such services otherwise appli14 cable under part B (to services furnished by in15 dividuals not enrolled with a MedicarePlus or16 ganization under this section) shall apply in the

17 same manner as such limitations apply to serv18 ices furnished to individuals not enrolled with

19 such an organization.

20 ‘‘(C) SERVICES DESCRIBED.—The physi21 cians’ services or renal dialysis services de22 scribed in this subparagraph are physicians’

23 services or renal dialysis services which are fur24 nished to an enrollee of a MedicarePlus organi25 zation under this part by a physician, provider
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1 of services, or renal dialysis facility who is not

2 under a contract with the organization.

3 ‘‘(4) PROTECTION FOR NEEDED SERVICES.—A

4 Medicare Choice organization that provides covered

5 services through a network of providers shall provide

6 coverage of services provided by a provider that is

7 not part of the network if the service cannot be pro8 vided by a provider that is part of the network and

9 the organization authorized the service directly or

10 through referral by the primary care physician who

11 is designated by the organization for the individual

12 involved.

13 ‘‘(5) DEFINITION OF EMERGENCY SERVICES.—

14 In this subsection, the term ‘emergency services’

15 means, with respect to an individual enrolled with an

16 organization, covered inpatient and outpatient serv17 ices that—

18 ‘‘(A) are furnished by an appropriate

19 source other than the organization,

20 ‘‘(B) are needed immediately because of an

21 injury or sudden illness, and

22 ‘‘(C) are needed because the time required

23 to reach the organization’s providers or suppli24 ers would have meant risk of serious damage to

25 the patient’s health.
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1 ‘‘(c) CONFIDENTIALITY AND ACCURACY OF EN2 ROLLEE RECORDS.—Each Medicare Choice organization

3 shall establish procedures—

4 ‘‘(1) to safeguard the privacy of individually

5 identifiable enrollee information, and

6 ‘‘(2) to maintain accurate and timely medical

7 records for enrollees.

8 ‘‘(d) QUALITY ASSURANCE PROGRAM.—

9 ‘‘(1) IN GENERAL.—Each Medicare Choice or10 ganization must have arrangements, established in

11 accordance with regulations of the Secretary, for an

12 ongoing quality assurance program for health care

13 services it provides to such individuals.

14 ‘‘(2) ELEMENTS OF PROGRAM.—The quality as15 surance program shall—

16 ‘‘(A) stress health outcomes;

17 ‘‘(B) provide for the establishment of writ18 ten protocols for utilization review, based on

19 current standards of medical practice;

20 ‘‘(C) provide review by physicians and

21 other health care professionals of the process

22 followed in the provision of such health care

23 services;
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1 ‘‘(D) monitors and evaluates high volume

2 and high risk services and the care of acute and

3 chronic conditions;

4 ‘‘(E) evaluates the continuity and coordi5 nation of care that enrollees receive;

6 ‘‘(F) has mechanisms to detect both under7 utilization and overutilization of services;

8 ‘‘(G) after identifying areas for improve9 ment, establishes or alters practice parameters;

10 ‘‘(H) takes action to improve quality and

11 assesses the effectiveness of such action

12 through systematic follow-up;

13 ‘‘(I) makes available information on quality

14 and outcomes measures to facilitate beneficiary

15 comparison and choice of health coverage op16 tions (in such form and on such quality and

17 outcomes measures as the Secretary determines

18 to be appropriate);

19 ‘‘(J) is evaluated on an ongoing basis as to

20 its effectiveness; and

21 ‘‘(K) provide for external accreditation or

22 review, by a utilization and quality control peer

23 review organization under part B of title XI or

24 other qualified independent review organization,

25 of the quality of services furnished by the orga-
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1 nization meets professionally recognized stand2 ards of health care (including providing ade3 quate access of enrollees to services).

4 ‘‘(3) EXCEPTION FOR CERTAIN FEE-FOR-SERV5 ICE PLANS.—Paragraph (1) and subsection (c)(2)

6 shall not apply in the case of a Medicare Choice or7 ganization in relation to a Medicare Choice product

8 to the extent the organization provides for coverage

9 of benefits without restrictions relating to utilization

10 and without regard to whether the provider has a

11 contract or other arrangement with the plan for the

12 provision of such benefits.

13 ‘‘(4) TREATMENT OF ACCREDITATION.—The

14 Secretary shall provide that a Medicare Choice orga15 nization is deemed to meet the requirements of para16 graphs (1) and (2) of this subsection and subsection

17 (c) if the organization is accredited (and periodically

18 reaccredited) by a private organization under a proc19 ess that the Secretary has determined assures that

20 the organization meets standards that are no less

21 stringent than the standards established under sec22 tion 1856 to carry out this subsection and sub23 section (c).

24 ‘‘(e) COVERAGE DETERMINATIONS.—
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1 ‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A

2 Medicare Choice organization shall make determina3 tions regarding authorization requests for non4 emergency care on a timely basis, depending on the

5 urgency of the situation.

6 ‘‘(2) APPEALS.—

7 ‘‘(A) IN GENERAL.—Appeals from a deter8 mination of an organization denying coverage

9 shall be decided within 30 days of the date of

10 receipt of medical information, but not later

11 than 60 days after the date of the decision.

12 ‘‘(B) PHYSICIAN DECISION ON CERTAIN

13 APPEALS.—Appeal decisions relating to a deter14 mination to deny coverage based on a lack of

15 medical necessity shall be made only by a physi16 cian.

17 ‘‘(C) EMERGENCY CASES.—Appeals from

18 such a determination involving a life-threaten19 ing or emergency situation shall be decided on

20 an expedited basis.

21 ‘‘(f) GRIEVANCES AND APPEALS.—

22 ‘‘(1) GRIEVANCE MECHANISM.—Each Medicare

23 Choice organization must provide meaningful proce24 dures for hearing and resolving grievances between

25 the organization (including any entity or individual
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1 through which the organization provides health care

2 services) and enrollees under this part.

3 ‘‘(2) APPEALS.—An enrollee with an organiza4 tion under this part who is dissatisfied by reason of

5 the enrollee’s failure to receive any health service to

6 which the enrollee believes the enrollee is entitled

7 and at no greater charge than the enrollee believes

8 the enrollee is required to pay is entitled, if the

9 amount in controversy is $100 or more, to a hearing

10 before the Secretary to the same extent as is pro11 vided in section 205(b), and in any such hearing the

12 Secretary shall make the organization a party. If the

13 amount in controversy is $1,000 or more, the indi14 vidual or organization shall, upon notifying the other

15 party, be entitled to judicial review of the Sec16 retary’s final decision as provided in section 205(g),

17 and both the individual and the organization shall be

18 entitled to be parties to that judicial review. In ap19 plying sections 205(b) and 205(g) as provided in

20 this subparagraph, and in applying section 205(l)

21 thereto, any reference therein to the Commissioner

22 of Social Security or the Social Security Administra23 tion shall be considered a reference to the Secretary

24 or the Department of Health and Human Services,

25 respectively.
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1 ‘‘(3) COORDINATION WITH SECRETARY OF

2 LABOR.—The Secretary shall consult with the Sec3 retary of Labor so as to ensure that the require4 ments of this subsection, as they apply in the case

5 of grievances referred to in paragraph (1) to which

6 section 503 of the Employee Retirement Income Se7 curity Act of 1974 applies, are applied in a manner

8 consistent with the requirements of such section

9 503.

10 ‘‘(g) INFORMATION ON ADVANCE DIRECTIVES.—

11 Each Medicare Choice organization shall meet the require12 ment of section 1866(f) (relating to maintaining written

13 policies and procedures respecting advance directives).

14 ‘‘(h) APPROVAL OF MARKETING MATERIALS.—

15 ‘‘(1) SUBMISSION.—Each Medicare Choice or16 ganization may not distribute marketing materials

17 unless—

18 ‘‘(A) at least 45 days before the date of

19 distribution the organization has submitted the

20 material to the Secretary for review, and

21 ‘‘(B) the Secretary has not disapproved the

22 distribution of such material.

23 ‘‘(2) REVIEW.—The standards established

24 under section 1856 shall include guidelines for the

25 review of all such material submitted and under
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1 such guidelines the Secretary shall disapprove such

2 material if the material is materially inaccurate or

3 misleading or otherwise makes a material misrepre4 sentation.

5 ‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—

6 In the case of material that is submitted under para7 graph (1)(A) to the Secretary or a regional office of

8 the Department of Health and Human Services and

9 the Secretary or the office has not disapproved the

10 distribution of marketing materials under paragraph

11 (1)(B) with respect to a Medicare Choice product in

12 an area, the Secretary is deemed not to have dis13 approved such distribution in all other areas covered

14 by the product and organization.

15 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

16 PRACTICES.—Each Medicare Choice organization

17 shall conform to fair marketing standards in relation

18 to Medicare Choice products offered under this part,

19 included in the standards established under section

20 1856. Such standards shall include a prohibition

21 against an organization (or agent of such an organi22 zation) completing any portion of any election form

23 under section 1805 on behalf of any individual.

24 ‘‘(i) ADDITIONAL STANDARDIZED INFORMATION ON

25 QUALITY, OUTCOMES, AND OTHER FACTORS.—
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1 ‘‘(1) IN GENERAL.—In addition to any other in2 formation required to be provided under this part,

3 each Medicare Choice organization shall provide the

4 Secretary (at a time, not less frequently than annu5 ally, and in an electronic, standardized form and

6 manner specified by the Secretary) such information

7 as the Secretary determines to be necessary, consist8 ent with this part, to evaluate the performance of

9 the organization in providing benefits to enrollees.

10 ‘‘(2) INFORMATION TO BE INCLUDED.—Subject

11 to paragraph (3), information to be provided under

12 this subsection shall include at least the following:

13 ‘‘(A) Information on the characteristics of

14 enrollees that may affect their need for or use

15 of health services and the determination of risk16 adjusted payments under section 1855.

17 ‘‘(B) Information on the types of treat18 ments and outcomes of treatments with respect

19 to the clinical health, functional status, and

20 well-being of enrollees.

21 ‘‘(C) Information on health care expendi22 tures and the volume and prices of procedures.

23 ‘‘(D) Information on the flexibility per24 mitted by plans to enrollees in their selection of

25 providers.
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1 ‘‘(3) SPECIAL TREATMENT.—The Secretary

2 may waive the provision of such information under

3 paragraph (2), or require such other information, as

4 the Secretary finds appropriate in the case of a

5 newly established Medicare Choice organization for

6 which such information is not available.

7 ‘‘(j) DEMONSTRATION PROJECTS.—The Secretary

8 shall provide for demonstration projects to determine the

9 effectiveness, cost, and impact of alternative methods of

10 providing comparative information about the performance

11 of Medicare Choice organizations and products and the

12 performance of medicare supplemental policies in relation

13 to such products. Such projects shall include information

14 about health care outcomes resulting from coverage under

15 different products and policies.

16 ‘‘PROVIDER-SPONSORED ORGANIZATIONS

17 ‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA18 TION DEFINED.—

19 ‘‘(1) IN GENERAL.—In this part, the term ‘pro20 vider-sponsored organization’ means a public or pri21 vate entity that (in accordance with standards estab22 lished under subsection (b)) is a provider, or group

23 of affiliated providers, that provides a substantial

24 proportion (as defined by the Secretary under such

25 standards) of the health care items and services
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1 under the contract under this part directly through

2 the provider or affiliated group of providers.

3 ‘‘(2) SUBSTANTIAL PROPORTION.—In defining

4 what is a ‘substantial proportion’ for purposes of

5 paragraph (1), the Secretary—

6 ‘‘(A) shall take into account the need for

7 such an organization to assume responsibility

8 for a substantial proportion of services in order

9 to assure financial stability and the practical

10 difficulties in such an organization integrating

11 a very wide range of service providers; and

12 ‘‘(B) may vary such proportion based upon

13 relevant differences among organizations, such

14 as their location in an urban or rural area.

15 ‘‘(3) AFFILIATION.—For purposes of this sub16 section, a provider is ‘affiliated’ with another pro17 vider if, through contract, ownership, or otherwise—

18 ‘‘(A) one provider, directly or indirectly,

19 controls, is controlled by, or is under common

20 control with the other,

21 ‘‘(B) each provider is a participant in a

22 lawful combination under which each provider

23 shares, directly or indirectly, substantial finan24 cial risk in connection with their operations,
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1 ‘‘(C) both providers are part of a con2 trolled group of corporations under section

3 1563 of the Internal Revenue Code of 1986, or

4 ‘‘(D) both providers are part of an affili5 ated service group under section 414 of such

6 Code.

7 ‘‘(4) CONTROL.—For purposes of paragraph

8 (3), control is presumed to exist if one party, di9 rectly or indirectly, owns, controls, or holds the

10 power to vote, or proxies for, not less than 51 per11 cent of the voting rights or governance rights of an12 other.

13 ‘‘(b) PREEMPTION OF STATE INSURANCE LICENSING

14 REQUIREMENTS.—

15 ‘‘(1) IN GENERAL.—This section supersedes

16 any State law which—

17 ‘‘(A) requires that a provider-sponsored or18 ganization meet requirements for insurers of

19 health services or health maintenance organiza20 tions doing business in the State with respect to

21 initial capitalization and establishment of finan22 cial reserves against insolvency, or

23 ‘‘(B) imposes requirements that would

24 have the effect of prohibiting the organization
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1 from complying with the applicable require2 ments of this part,

3 insofar as such the law applies to individuals en4 rolled with the organization under this part.

5 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

6 apply with respect to any State law to the extent

7 that such law provides standards or requirements, or

8 provides for enforcement thereof, so as to meet the

9 requirements of section 1857(b) with respect to ap10 proval by the Secretary of State certification re11 quirements thereunder.

12 ‘‘(3) CONSTRUCTION.—Nothing in this sub13 section shall be construed as affecting the operation

14 of section 514 of the Employee Retirement Income

15 Security Act of 1974.

16 ‘‘PAYMENTS TO MEDICARE CHOICE ORGANIZATIONS

17 ‘‘SEC. 1855. (a) PAYMENTS.—

18 ‘‘(1) IN GENERAL.—Under a contract under

19 section 1858 the Secretary shall pay to each Medi20 care Choice organization, with respect to coverage of

21 an individual under this part in a payment area for

22 a month, an amount equal to the monthly adjusted

23 Medicare Choice capitation rate (as provided under

24 subsection (b)) with respect to that individual for

25 that area.
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1 ‘‘(2) ANNUAL ANNOUNCEMENT.—The Secretary

2 shall annually determine, and shall announce (in a

3 manner intended to provide notice to interested par4 ties) not later than September 7 before the calendar

5 year concerned—

6 ‘‘(A) the annual Medicare Choice capita7 tion rate for each payment area for the year,

8 and

9 ‘‘(B) the factors to be used in adjusting

10 such rates under subsection (b) for payments

11 for months in that year.

12 ‘‘(3) ADVANCE NOTICE OF METHODOLOGICAL

13 CHANGES.—At least 45 days before making the an14 nouncement under paragraph (2) for a year, the

15 Secretary shall provide for notice to Medicare Choice

16 organizations of proposed changes to be made in the

17 methodology or benefit coverage assumptions from

18 the methodology and assumptions used in the pre19 vious announcement and shall provide such organi20 zations an opportunity to comment on such proposed

21 changes.

22 ‘‘(4) EXPLANATION OF ASSUMPTIONS.—In each

23 announcement made under paragraph (2) for a year,

24 the Secretary shall include an explanation of the as25 sumptions (including any benefit coverage assump-
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1 tions) and changes in methodology used in the an2 nouncement in sufficient detail so that Medicare

3 Choice organizations can compute monthly adjusted

4 Medicare Choice capitation rates for classes of indi5 viduals located in each payment area which is in

6 whole or in part within the service area of such an

7 organization.

8 ‘‘(b) MONTHLY ADJUSTED MEDICARE CHOICE CAPI9 TATION RATE.—

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the ‘monthly adjusted Medicare Choice capita12 tion rate’ under this subsection, for a month in a

13 year for an individual in a payment area (specified

14 under paragraph (3)) and in a class (established

under paragraph (4)), is 1 15 ⁄12 of the annual Medicare

16 Choice capitation rate specified in paragraph (2) for

17 that area for the year, adjusted to reflect the actuar18 ial value of benefits under this title with respect to

19 individuals in such class compared to the national

20 average for individuals in all classes.

21 ‘‘(2) ANNUAL MEDICARE CHOICE CAPITATION

22 RATES.—

23 ‘‘(A) IN GENERAL.—For purposes of this

24 section, the annual Medicare Choice capitation

25 rate for a payment area for a year is equal to
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1 the annual Medicare Choice capitation rate for

2 the area for the previous year (or, in the case

3 of 1996, the average annual per capita rate of

4 payment described in section 1876(a)(1)(C) for

5 the area for 1995) increased by the per capita

6 growth rate for that area and year (as deter7 mined under subsection (c)).

8 ‘‘(B) SPECIAL RULES FOR 1996.—

9 ‘‘(i) FLOOR AT 85 PERCENT OF NA10 TIONAL AVERAGE.—In no case shall the

11 annual Medicare Choice capitation rate for

12 a payment area for 1996 be less than 85

13 percent of the national average of such

14 rates for such year for all payment areas

15 (weighted to reflect the number of medi16 care beneficiaries in each such area).

17 ‘‘(ii) REMOVAL OF MEDICAL EDU18 CATION AND DISPROPORTIONATE SHARE

19 HOSPITAL PAYMENTS FROM CALCULATION

20 OF ADJUSTED AVERAGE PER CAPITA

21 COST.—In determining the annual Medi22 care Choice capitation rate for 1996, the

23 average annual per capita rate of payment

24 described in section 1876(a)(1)(C) for

25 1995 shall be determined as though the
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1 Secretary had excluded from such rate any

2 amounts which the Secretary estimated

3 would have been payable under this title

4 during the year for—

5 ‘‘(I) payment adjustments under

6 section 1886(d)(5)(F) for hospitals

7 serving a disproportionate share of

8 low-income patients; and

9 ‘‘(II) the indirect costs of medical

10 education under section

11 1886(d)(5)(B) or for direct graduate

12 medical education costs under section

13 1886(h).

14 ‘‘(3) PAYMENT AREA DEFINED.—

15 ‘‘(A) IN GENERAL.—In this section, the

16 term ‘payment area’ means—

17 ‘‘(i) a metropolitan statistical area, or

18 ‘‘(ii) all areas of a State outside of such an

19 area.

20 ‘‘(B) SPECIAL RULE FOR ESRD BENE21 FICIARIES.—Such term means, in the case of

22 the population group described in paragraph

23 (5)(C), each State.

24 ‘‘(4) CLASSES.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 section, the Secretary shall define appropriate

3 classes of enrollees, consistent with paragraph

4 (5), based on age, gender, welfare status, insti5 tutionalization, and such other factors as the

6 Secretary determines to be appropriate, so as to

7 ensure actuarial equivalence. The Secretary

8 may add to, modify, or substitute for such

9 classes, if such changes will improve the deter10 mination of actuarial equivalence.

11 ‘‘(B) RESEARCH.—The Secretary shall

12 conduct such research as may be necessary to

13 provide for greater accuracy in the adjustment

14 of capitation rates under this subsection. Such

15 research may include research into the addition

16 or modification of classes under subparagraph

17 (A). The Secretary shall submit to Congress a

18 report on such research by not later than Janu19 ary 1, 1997.

20 ‘‘(5) DIVISION OF MEDICARE POPULATION.—In

21 carrying out paragraph (4) and this section, the Sec22 retary shall recognize the following separate popu23 lation groups:
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1 ‘‘(A) AGED.—Individuals 65 years of age

2 or older who are not described in subparagraph

3 (C).

4 ‘‘(B) DISABLED.—Disabled individuals

5 who are under 65 years of age and not de6 scribed in subparagraph (C).

7 ‘‘(C) INDIVIDUALS WITH END STAGE

8 RENAL DISEASE.—Individuals who are deter9 mined to have end stage renal disease.

10 ‘‘(c) PER CAPITA GROWTH RATES.—

11 ‘‘(1) FOR 1996.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 section and subject to subparagraph (B), the

14 per capita growth rates for 1996, for a payment

15 area assigned to a service utilization cohort

16 under subsection (d), shall be the following:

17 ‘‘(i) BELOW AVERAGE SERVICE UTILI18 ZATION COHORT.—For areas assigned to

19 the below average service utilization cohort,

20 11.5 percent.

21 ‘‘(ii) ABOVE AVERAGE SERVICE UTILI22 ZATION COHORT.—For areas assigned to

23 the above average service utilization co24 hort, 6.4 percent.
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1 ‘‘(iii) HIGHEST SERVICE UTILIZATION

2 COHORT.—For areas assigned to the high3 est service utilization cohort, 3.2 percent.

4 ‘‘(B) BUDGET NEUTRAL ADJUSTMENT.—

5 The Secretary shall adjust the per capita

6 growth rates specified in subparagraph (A) for

7 all the areas by such uniform factor as may be

8 necessary to assure that the total capitation

9 payments under this section during 1996 are

10 the same as the amount such payments would

11 have been if the per capita growth rate for all

12 such areas for 1996 were equal to the national

13 average per capita growth rate, specified in

14 paragraph (3) for 1996.

15 ‘‘(2) FOR SUBSEQUENT YEARS.—

16 ‘‘(A) IN GENERAL.—For purposes of this

17 section and subject to subparagraph (B), the

18 Secretary shall compute a per capita growth

19 rate for each year after 1996, for each payment

20 area as assigned to a service utilization cohort

21 under subsection (d), consistent with the follow22 ing rules:

23 ‘‘(i) BELOW AVERAGE SERVICE UTILI24 ZATION COHORT SET AT 143 PERCENT OF

25 NATIONAL AVERAGE PER CAPITA GROWTH
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1 RATE.—The per capita growth rate for

2 areas assigned to the below average service

3 utilization cohort for the year shall be 143

4 percent of the national average per capita

5 growth rate for the year (as specified

6 under paragraph (3)).

7 ‘‘(ii) ABOVE AVERAGE SERVICE UTILI8 ZATION COHORT SET AT 80 PERCENT OF

9 NATIONAL AVERAGE PER CAPITA GROWTH

10 RATE.—The per capita growth rate for

11 areas assigned to the above average service

12 utilization cohort for the year shall be 80

13 percent of the national average per capita

14 growth rate for the year.

15 ‘‘(iii) HIGHEST SERVICE UTILIZATION

16 COHORT SET AT 40 PERCENT OF NATIONAL

17 AVERAGE PER CAPITA GROWTH RATE.—

18 The per capita growth rate for areas as19 signed to the highest service utilization co20 hort for the year shall be 40 percent of the

21 national average per capita growth rate for

22 the year.

23 ‘‘(B) AVERAGE PER CAPITA GROWTH RATE

24 AT NATIONAL AVERAGE TO ASSURE BUDGET

25 NEUTRALITY.—The Secretary shall compute per
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1 capita growth rates for a year under subpara2 graph (A) in a manner so that the weighted av3 erage per capita growth rate for all areas for

4 the year (weighted to reflect the number of

5 medicare beneficiaries in each area) is equal to

6 the national average per capita growth rate

7 under paragraph (3) for the year.

8 ‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH

9 RATES.—In this subsection, the ‘national average

10 per capita growth rate’ for—

11 ‘‘(A) 1996 is 8.0 percent,

12 ‘‘(B) 1997 is 7.5 percent,

13 ‘‘(C) 1998 is 7.0 percent,

14 ‘‘(D) 1999 is 7.0 percent,

15 ‘‘(E) 2000 is 7.0 percent,

16 ‘‘(F) 2001 is 7.0 percent,

17 ‘‘(G) 2002 is 6.0 percent, and

18 ‘‘(H) each subsequent year is 6.0 percent.

19 ‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE

20 UTILIZATION COHORTS.—

21 ‘‘(1) IN GENERAL.—For purposes of determin22 ing per capita growth rates under subsection (c) for

23 areas for a year, the Secretary shall assign each pay24 ment area to a service utilization cohort (based on
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1 the service utilization index value for that area de2 termined under paragraph (2)) as follows:

3 ‘‘(A) BELOW AVERAGE SERVICE UTILIZA4 TION COHORT.—Areas with a service utilization

5 index value of less than 1.00 shall be assigned

6 to the below average service utilization cohort.

7 ‘‘(B) ABOVE AVERAGE SERVICE UTILIZA8 TION COHORT.—Areas with a service utilization

9 index value of at least 1.00 but less than 1.20

10 shall be assigned to the above average service

11 utilization cohort.

12 ‘‘(C) HIGHEST SERVICE UTILIZATION CO13 HORT.—Areas with a service utilization index

14 value of at least 1.20 shall be assigned to the

15 highest service utilization cohort.

16 ‘‘(2) DETERMINATION OF SERVICE UTILIZATION

17 INDEX VALUES.—In order to determine the per cap18 ita growth rate for a payment area for each year

19 (beginning with 1996), the Secretary shall determine

20 for such area and year a service utilization index

21 value, which is equal to—

22 ‘‘(A) the annual Medicare Choice capita23 tion rate under this section for the area for the

24 year in which the determination is made (or, in

25 the case of 1996, the average annual per capita
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1 rate of payment (described in section

2 1876(a)(1)(C)) for the area for 1995); divided

3 by

4 ‘‘(B) the input-price-adjusted annual na5 tional Medicare Choice capitation rate (as de6 termined under paragraph (3)) for that area for

7 the year in which the determination is made.

8 ‘‘(3) DETERMINATION OF INPUT-PRICE-AD9 JUSTED RATES.—

10 ‘‘(A) IN GENERAL.—For purposes of para11 graph (2), the ‘input-price-adjusted annual na12 tional Medicare Choice capitation rate’ for a

13 payment area for a year is equal to the sum,

14 for all the types of medicare services (as classi15 fied by the Secretary), of the product (for each

16 such type) of—

17 ‘‘(i) the national standardized Medi18 care Choice capitation rate (determined

19 under subparagraph (B)) for the year,

20 ‘‘(ii) the proportion of such rate for

21 the year which is attributable to such type

22 of services, and

23 ‘‘(iii) an index that reflects (for that

24 year and that type of services) the relative

25 input price of such services in the area
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1 compared to the national average input

2 price of such services.

3 In applying clause (iii), the Secretary shall, sub4 ject to subparagraph (C), apply those indices

5 under this title that are used in applying (or

6 updating) national payment rates for specific

7 areas and localities.

8 ‘‘(B) NATIONAL STANDARDIZED MEDICARE

9 CHOICE CAPITATION RATE.—In this paragraph,

10 the ‘national standardized Medicare Choice

11 capitation rate’ for a year is equal to—

12 ‘‘(i) the sum (for all payment areas)

13 of the product of (I) the annual Medicare

14 Choice capitation rate for that year for the

15 area under subsection (b)(2), and (II) the

16 average number of medicare beneficiaries

17 residing in that area in the year; divided

18 by

19 ‘‘(ii) the total average number of med20 icare beneficiaries residing in all the pay21 ment areas for that year.

22 ‘‘(C) SPECIAL RULES FOR 1996.—In apply23 ing this paragraph for 1996—
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1 ‘‘(i) medicare services shall be divided

2 into 2 types of services: part A services

3 and part B services;

4 ‘‘(ii) the proportions described in sub5 paragraph (A)(ii) for such types of services

6 shall be—

7 ‘‘(I) for part A services, the ratio

8 (expressed as a percentage) of the av9 erage annual per capita rate of pay10 ment for the area for part A for 1995

11 to the total average annual per capita

12 rate of payment for the area for parts

13 A and B for 1995, and

14 ‘‘(II) for part B services, 100

15 percent minus the ratio described in

16 subclause (I);

17 ‘‘(iii) for the part A services, 70 per18 cent of payments attributable to such serv19 ices shall be adjusted by the index used

20 under section 1886(d)(3)(E) to adjust pay21 ment rates for relative hospital wage levels

22 for hospitals located in the payment area

23 involved;

24 ‘‘(iv) for part B services—
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1 ‘‘(I) 66 percent of payments at2 tributable to such services shall be ad3 justed by the index of the geographic

4 area factors under section 1848(e)

5 used to adjust payment rates for phy6 sicians’ services furnished in the pay7 ment area, and

8 ‘‘(II) of the remaining 34 percent

9 of the amount of such payments, 70

10 percent shall be adjusted by the index

11 described in clause (iii);

12 ‘‘(v) the index values shall be com13 puted based only on the beneficiary popu14 lation described in subsection (b)(5)(A).

15 The Secretary may continue to apply the rules

16 described in this subparagraph (or similar

17 rules) for 1997.

18 ‘‘(e) PAYMENT PROCESS.—

19 ‘‘(1) IN GENERAL.—Subject to section 1859(f),

20 the Secretary shall make monthly payments under

21 this section in advance and in accordance with the

22 rate determined under subsection (a) to the plan for

23 each individual enrolled with a Medicare Choice or24 ganization under this part.
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1 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF

2 ENROLLEES.—

3 ‘‘(A) IN GENERAL.—The amount of pay4 ment under this subsection may be retroactively

5 adjusted to take into account any difference be6 tween the actual number of individuals enrolled

7 with an organization under this part and the

8 number of such individuals estimated to be so

9 enrolled in determining the amount of the ad10 vance payment.

11 ‘‘(B) SPECIAL RULE FOR CERTAIN EN12 ROLLEES.—

13 ‘‘(i) IN GENERAL.—Subject to clause

14 (ii), the Secretary may make retroactive

15 adjustments under subparagraph (A) to

16 take into account individuals enrolled dur17 ing the period beginning on the date on

18 which the individual enrolls with a Medi19 care Choice organization under a product

20 operated, sponsored, or contributed to by

21 the individual’s employer or former em22 ployer (or the employer or former employer

23 of the individual’s spouse) and ending on

24 the date on which the individual is enrolled

25 in the organization under this part, except
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1 that for purposes of making such retro2 active adjustments under this subpara3 graph, such period may not exceed 90

4 days.

5 ‘‘(ii) EXCEPTION.—No adjustment

6 may be made under clause (i) with respect

7 to any individual who does not certify that

8 the organization provided the individual

9 with the disclosure statement described in

10 section 1853(a) at the time the individual

11 enrolled with the organization.

12 ‘‘(f) PAYMENTS FROM TRUST FUND.—The payment

13 to a Medicare Choice organization under this section for

14 individuals enrolled under this part with the organization,

15 and payments to a Medicare Choice MSA under subsection

16 (f)(1)(B), shall be made from the Federal Hospital Insur17 ance Trust Fund and the Federal Supplementary Medical

18 Insurance Trust Fund in such proportion as the Secretary

19 determines reflects the relative weight that benefits under

20 part A and under part B represents of the actuarial value

21 of the total benefits under this title.

22 ‘‘(g) SPECIAL RULE FOR CERTAIN INPATIENT HOS23 PITAL STAYS.—In the case of an individual who is receiv24 ing inpatient hospital services from a subsection (d) hos-
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1 pital (as defined in section 1886(d)(1)(B)) as of the effec2 tive date of the individual’s—

3 ‘‘(1) election under this part of a Medicare

4 Choice product offered by a Medicare Choice organi5 zation—

6 ‘‘(A) payment for such services until the

7 date of the individual’s discharge shall be made

8 under this title through the Medicare Choice

9 product or Non-Medicare Choice option (as the

10 case may be) elected before the election with

11 such organization,

12 ‘‘(B) the elected organization shall not be

13 financially responsible for payment for such

14 services until the date after the date of the indi15 vidual’s discharge, and

16 ‘‘(C) the organization shall nonetheless be

17 paid the full amount otherwise payable to the

18 organization under this part; or

19 ‘‘(2) termination of election with respect to a

20 Medicare Choice organization under this part—

21 ‘‘(A) the organization shall be financially

22 responsible for payment for such services after

23 such date and until the date of the individual’s

24 discharge,
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1 ‘‘(B) payment for such services during the

2 stay shall not be made under section 1886(d) or

3 by any succeeding Medicare Choice organiza4 tion, and

5 ‘‘(C) the terminated organization shall not

6 receive any payment with respect to the individ7 ual under this part during the period the indi8 vidual is not enrolled.

9 ‘‘ESTABLISHMENT OF STANDARDS FOR MEDICARE

10 CHOICE ORGANIZATIONS AND PRODUCTS

11 ‘‘SEC. 1856. (a) INTERIM STANDARDS.—

12 ‘‘(1) IN GENERAL.—The Secretary shall issue

13 regulations regarding standards for Medicare Choice

14 organizations and products within 180 days after

15 the date of the enactment of this section. Such regu16 lations shall be issued on an interim basis, but shall

17 become effective upon publication and shall be effec18 tive through the end of 1999.

19 ‘‘(2) SOLICITATION OF VIEWS.—In developing

20 standards under this subsection relating to solvency

21 of Medicare Choice organizations, the Secretary shall

22 solicit the views of the American Academy of Actu23 aries.

24 ‘‘(3) EFFECT ON STATE REGULATIONS.—Regu25 lations under this subsection shall not preempt State
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1 regulations for Medicare Choice organizations for

2 products not offered under this part.

3 ‘‘(b) PERMANENT STANDARDS.—

4 ‘‘(1) IN GENERAL.—The Secretary shall develop

5 permanent standards under this subsection.

6 ‘‘(2) CONSULTATION.—In developing standards

7 under this subsection, the Secretary shall consult

8 with the National Association of Insurance Commis9 sioners, associations representing the various types

10 of Medicare Choice organizations, and medicare

11 beneficiaries.

12 ‘‘(3) EFFECTIVENESS.—The standards under

13 this subsection shall take effect for periods begin14 ning on or after January 1, 2000.

15 ‘‘(c) SOLVENCY.—In establishing interim and perma16 nent standards under this section relating to solvency of

17 organizations, the Secretary shall recognize the multiple

18 means of demonstrating solvency, including—

19 ‘‘(1) reinsurance purchased through a recog20 nized commerce company or through a capitive com21 pany owned directly or indirectly by 3 or more pro22 vider-sponsored organizations,

23 ‘‘(2) unrestricted surplus,

24 ‘‘(3) guarantees, and

25 ‘‘(4) letters of credit.
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1 In such standards, the Secretary may treat as admitted

2 assets the assets used by a provider-sponsored organiza3 tion in delivering covered services.

4 ‘‘(d) APPLICATION OF NEW STANDARDS TO ENTI5 TIES WITH A CONTRACT.—In the case of a Medicare

6 Choice organization with a contract in effect under this

7 part at the time standards applicable to the organization

8 under this section are changed, the organization may elect

9 not to have such changes apply to the organization until

10 the end of the current contract year (or, if there is less

11 than 6 months remaining in the contract year, until 1 year

12 after the end of the current contract year).

13 ‘‘(e) RELATION TO STATE LAWS.—The standards es14 tablished under this section shall supersede any State law.

15 The standard or regulation with respect to Medicare

16 Choice products which are offered by Medicare Choice or17 ganizations and are issued by organizations to which sec18 tion 1851(b)(1) applies, to the extent such law or regula19 tion is inconsistent with such standards.

20 ‘‘MEDICARE CHOICE CERTIFICATION

21 ‘‘SEC. 1857. (a) IN GENERAL.—

22 ‘‘(1) ESTABLISHMENT.—The Secretary shall es23 tablish a process for the certification of organiza24 tions and products offered by organizations as meet25 ing the applicable standards for Medicare Choice or-
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1 ganizations and Medicare Choice products estab2 lished under section 1856.

3 ‘‘(2) INVOLVEMENT OF SECRETARY OF

4 LABOR.—Such process shall be established and oper5 ated in cooperation with the Secretary of Labor with

6 respect to union sponsors and Taft-Hartley spon7 sors.

8 ‘‘(3) USE OF STATE LICENSING AND PRIVATE

9 ACCREDITATION PROCESSES.—

10 ‘‘(A) IN GENERAL.—The process under

11 this subsection shall, to the maximum extent

12 practicable, provide that Medicare Choice orga13 nizations and products that are licensed or cer14 tified through a qualified private accreditation

15 process that the Secretary finds applies stand16 ards that are no less stringent than the require17 ments of this part are deemed to meet the cor18 responding requirements of this part for such

19 an organization or product.

20 ‘‘(B) PERIODIC ACCREDITATION.—The use

21 of an accreditation under subparagraph (A)

22 shall be valid only for such period as the Sec23 retary specifies.

24 ‘‘(4) USER FEES.—The Secretary may impose

25 user fees on entities seeking certification under this
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1 subsection in such amounts as the Secretary deems

2 sufficient to finance the costs of such certification.

3 ‘‘(b) STATE CERTIFICATION PROCESS.—

4 ‘‘(1) APPROVAL OF STATE PROCESS.—Effective

5 for periods beginning on or after January 1, 2000,

6 the Secretary shall approve a Medicare Choice cer7 tification and enforcement program established by a

8 State for applying the standards established under

9 section 1856 to Medicare Choice organizations and

10 Medicare Choice products offered by such organiza11 tions if the Secretary determines that the program

12 fairly and efficiently provides for the application and

13 enforcement of such standards in the State with re14 spect to such organizations and products and such

15 program does not provide for the imposition (for or16 ganizations only offering products under this part)

17 of any standards in addition to the standards pro18 vided under section 1856. Such program shall pro19 vide for certification of compliance of Medicare

20 Choice organizations and products with the applica21 ble requirements of this part not less often than

22 once every 3 years.

23 ‘‘(2) EFFECT OF CERTIFICATION UNDER STATE

24 PROCESS.—A Medicare Choice organization and

25 Medicare Choice product offered by such an organi-
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1 zation that is certified under such program is con2 sidered to have been certified under this subsection

3 with respect to the offering of the product to individ4 uals residing in the State.

5 ‘‘(3) USER FEES.—The State may impose user

6 fees on organizations seeking certification under this

7 subsection in such amounts as the State deems suffi8 cient to finance the costs of such certification. Noth9 ing in this paragraph shall be construed as restrict10 ing a State’s authority to impose premium taxes,

11 other taxes, or other levies.

12 ‘‘(4) REVIEW.—The Secretary periodically shall

13 review State programs approved under paragraph

14 (1) to determine if they continue to provide for the

15 fair and efficient certification and enforcement de16 scribed in such paragraph. If the Secretary finds

17 that a State program no longer so provides, before

18 making a final determination, the Secretary shall

19 provide the State an opportunity to adopt such a

20 plan of correction as would permit the State pro21 gram to meet the requirements of paragraph (1). If

22 the Secretary makes a final determination that the

23 State program, after such an opportunity, fails to

24 meet such requirements, the provisions of paragraph
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1 (2) shall no longer apply to Medicare Choice organi2 zations and products in the State.

3 ‘‘(5) PUBLICATION OF LIST OF APPROVED

4 STATE PROGRAMS.—The Secretary shall publish

5 (and periodically update) a list of those State pro6 grams which are approved for purposes of this sub7 section.

8 ‘‘(c) NOTICE TO ENROLLEES IN CASE OF DECERTI9 FICATION.—If a Medicare Choice organization or product

10 is decertified under this section, the organization shall no11 tify each enrollee with the organization and product under

12 this part of such decertification.

13 ‘‘(d) QUALIFIED ASSOCIATIONS.—In the case of Med14 icare Choice products offered by a Medicare Choice orga15 nization that is a qualified association (as defined in sec16 tion 1854(c)(4)(C)) and issued by an organization to

17 which section 1851(b)(1) applies or by a provider-spon18 sored organization (as defined in section 1854(a)), nothing

19 in this section shall be construed as limiting the authority

20 of States to regulate such products.

21 ‘‘CONTRACTS WITH MEDICARE CHOICE ORGANIZATIONS

22 ‘‘SEC. 1858. (a) IN GENERAL.—The Secretary shall

23 not permit the election under section 1805 of a Medicare

24 Choice product offered by a Medicare Choice organization

25 under this part, and no payment shall be made under sec26 tion 1856 to an organization, unless the Secretary has en-
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1 tered into a contract under this section with an organiza2 tion with respect to the offering of such product. Such

3 a contract with an organization may cover more than one

4 Medicare Choice product. Such contract shall provide that

5 the organization agrees to comply with the applicable re6 quirements and standards of this part and the terms and

7 conditions of payment as provided for in this part.

8 ‘‘(b) ENROLLMENT REQUIREMENTS.—

9 ‘‘(A) MINIMUM ENROLLMENT REQUIRE10 MENT.—Subject to subparagraphs (B) and (C),

11 the Secretary may not enter into a contract

12 under this section with a Medicare Choice orga13 nization (other than a union sponsor or Taft14 Hartley sponsor) unless the organization has at

15 least 5,000 individuals (or 1,500 individuals in

16 the case of an organization that is a provider17 sponsored organization) who are receiving

18 health benefits through the organization, except

19 that the standards under section 1856 may per20 mit the organization to have a lesser number of

21 beneficiaries (but not less than 500 in the case

22 of an organization that is a provider-sponsored

23 organization) if the organization primarily

24 serves individuals residing outside of urbanized

25 areas.
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1 ‘‘(B) ALLOWING TRANSITION.—The Sec2 retary may waive the requirement of subpara3 graph (A) during the first 3 contract years with

4 respect to an organization.

5 ‘‘(C) TREATMENT OF AREAS WITH LOW

6 MANAGED CARE PENETRATION.—The Secretary

7 may waive the requirement of subparagraph (A)

8 in the case of organizations operating in areas

9 in which there is a low proportion of medicare

10 beneficiaries who have made the Medicare

11 Choice election.

12 ‘‘(2) REQUIREMENT FOR ENROLLMENT OF

13 NON-MEDICARE BENEFICIARIES.—

14 ‘‘(A) IN GENERAL.—Each Medicare Choice

15 organization with which the Secretary enters

16 into a contract under this section shall have, for

17 the duration of such contract, an enrolled mem18 bership at least one-half of which consists of in19 dividuals who are not entitled to benefits under

20 this title or under a State plan approved under

21 title XIX.

22 ‘‘(B) EXCEPTION.—Subparagraph (A)

23 shall not apply to—

24 ‘‘(i) an organization that has been

25 certified by a national organization recog-
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1 nized by the Secretary and has been found

2 to have met performance standards estab3 lished by the Secretary for at least 2 years,

4 or

5 ‘‘(ii) a provider-sponsored organiza6 tion for which commercial payments to

7 providers participating in the organization

8 exceed the payments to the organization

9 under this part.

10 ‘‘(C) MODIFICATION AND WAIVER.—The

11 Secretary may modify or waive the requirement

12 imposed by subparagraph (A)—

13 ‘‘(i) to the extent that more than 50

14 percent of the population of the area

15 served by the organization consists of indi16 viduals who are entitled to benefits under

17 this title or under a State plan approved

18 under title XIX, or

19 ‘‘(ii) in the case of an organization

20 that is owned and operated by a govern21 mental entity, only with respect to a period

22 of three years beginning on the date the

23 organization first enters into a contract

24 under this section, and only if the organi25 zation has taken and is making reasonable
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1 efforts to enroll individuals who are not en2 titled to benefits under this title or under

3 a State plan approved under title XIX.

4 ‘‘(D) ENFORCEMENT.—If the Secretary

5 determines that an organization has failed to

6 comply with the requirements of this para7 graph, the Secretary may provide for the sus8 pension of enrollment of individuals under this

9 part or of payment to the organization under

10 this part for individuals newly enrolled with the

11 organization, after the date the Secretary noti12 fies the organization of such noncompliance.

13 ‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—

14 ‘‘(1) PERIOD.—Each contract under this sec15 tion shall be for a term of at least one year, as de16 termined by the Secretary, and may be made auto17 matically renewable from term to term in the ab18 sence of notice by either party of intention to termi19 nate at the end of the current term.

20 ‘‘(2) TERMINATION AUTHORITY.—In accord21 ance with procedures established under subsection

22 (h), the Secretary may at any time terminate any

23 such contract or may impose the intermediate sanc24 tions described in an applicable paragraph of sub-
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1 section (g) on the Medicare Choice organization if

2 the Secretary determines that the organization—

3 ‘‘(A) has failed substantially to carry out

4 the contract;

5 ‘‘(B) is carrying out the contract in a man6 ner inconsistent with the efficient and effective

7 administration of this part;

8 ‘‘(C) is operating in a manner that is not

9 in the best interests of the individuals covered

10 under the contract; or

11 ‘‘(D) no longer substantially meets the ap12 plicable conditions of this part.

13 ‘‘(3) EFFECTIVE DATE OF CONTRACTS.—The

14 effective date of any contract executed pursuant to

15 this section shall be specified in the contract.

16 ‘‘(4) PREVIOUS TERMINATIONS.—The Secretary

17 may not enter into a contract with a Medicare

18 Choice organization if a previous contract with that

19 organization under this section was terminated at

20 the request of the organization within the preceding

21 five-year period, except in circumstances which war22 rant special consideration, as determined by the Sec23 retary.

24 ‘‘(5) NO CONTRACTING AUTHORITY.—The au25 thority vested in the Secretary by this part may be
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1 performed without regard to such provisions of law

2 or regulations relating to the making, performance,

3 amendment, or modification of contracts of the

4 United States as the Secretary may determine to be

5 inconsistent with the furtherance of the purpose of

6 this title.

7 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BENE8 FICIARY PROTECTIONS.—

9 ‘‘(1) INSPECTION AND AUDIT.—Each contract

10 under this section shall provide that the Secretary,

11 or any person or organization designated by the Sec12 retary—

13 ‘‘(A) shall have the right to inspect or oth14 erwise evaluate (i) the quality, appropriateness,

15 and timeliness of services performed under the

16 contract and (ii) the facilities of the organiza17 tion when there is reasonable evidence of some

18 need for such inspection, and

19 ‘‘(B) shall have the right to audit and in20 spect any books and records of the Medicare

21 Choice organization that pertain (i) to the abil22 ity of the organization to bear the risk of poten23 tial financial losses, or (ii) to services performed

24 or determinations of amounts payable under the

25 contract.
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1 ‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI2 NATION.—Each contract under this section shall re3 quire the organization to provide (and pay for) writ4 ten notice in advance of the contract’s termination,

5 as well as a description of alternatives for obtaining

6 benefits under this title, to each individual enrolled

7 with the organization under this part.

8 ‘‘(3) DISCLOSURE.—

9 ‘‘(A) IN GENERAL.—Each Medicare Choice

10 organization shall, in accordance with regula11 tions of the Secretary, report to the Secretary

12 financial information which shall include the

13 following:

14 ‘‘(i) Such information as the Sec15 retary may require demonstrating that the

16 organization has a fiscally sound operation.

17 ‘‘(ii) A copy of the report, if any, filed

18 with the Health Care Financing Adminis19 tration containing the information required

20 to be reported under section 1124 by dis21 closing entities.

22 ‘‘(iii) A description of transactions, as

23 specified by the Secretary, between the or24 ganization and a party in interest. Such

25 transactions shall include—
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1 ‘‘(I) any sale or exchange, or

2 leasing of any property between the

3 organization and a party in interest;

4 ‘‘(II) any furnishing for consider5 ation of goods, services (including

6 management services), or facilities be7 tween the organization and a party in

8 interest, but not including salaries

9 paid to employees for services pro10 vided in the normal course of their

11 employment and health services pro12 vided to members by hospitals and

13 other providers and by staff, medical

14 group (or groups), individual practice

15 association (or associations), or any

16 combination thereof; and

17 ‘‘(III) any lending of money or

18 other extension of credit between an

19 organization and a party in interest.

20 The Secretary may require that information re21 ported respecting an organization which con22 trols, is controlled by, or is under common con23 trol with, another entity be in the form of a

24 consolidated financial statement for the organi25 zation and such entity.
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1 ‘‘(B) PARTY IN INTEREST DEFINED.—For

2 the purposes of this paragraph, the term ‘party

3 in interest’ means—

4 ‘‘(i) any director, officer, partner, or

5 employee responsible for management or

6 administration of a Medicare Choice orga7 nization, any person who is directly or in8 directly the beneficial owner of more than

9 5 percent of the equity of the organization,

10 any person who is the beneficial owner of

11 a mortgage, deed of trust, note, or other

12 interest secured by, and valuing more than

13 5 percent of the organization, and, in the

14 case of a Medicare Choice organization or15 ganized as a nonprofit corporation, an in16 corporator or member of such corporation

17 under applicable State corporation law;

18 ‘‘(ii) any entity in which a person de19 scribed in clause (i)—

20 ‘‘(I) is an officer or director;

21 ‘‘(II) is a partner (if such entity

22 is organized as a partnership);

23 ‘‘(III) has directly or indirectly a

24 beneficial interest of more than 5 per25 cent of the equity; or
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1 ‘‘(IV) has a mortgage, deed of

2 trust, note, or other interest valuing

3 more than 5 percent of the assets of

4 such entity;

5 ‘‘(iii) any person directly or indirectly

6 controlling, controlled by, or under com7 mon control with an organization; and

8 ‘‘(iv) any spouse, child, or parent of

9 an individual described in clause (i).

10 ‘‘(C) ACCESS TO INFORMATION.—Each

11 Medicare Choice organization shall make the in12 formation reported pursuant to subparagraph

13 (A) available to its enrollees upon reasonable

14 request.

15 ‘‘(4) LOAN INFORMATION.—The contract shall

16 require the organization to notify the Secretary of

17 loans and other special financial arrangements which

18 are made between the organization and subcontrac19 tors, affiliates, and related parties.

20 ‘‘(f) ADDITIONAL CONTRACT TERMS.—The contract

21 shall contain such other terms and conditions not incon22 sistent with this part (including requiring the organization

23 to provide the Secretary with such information) as the

24 Secretary may find necessary and appropriate.

25 ‘‘(g) INTERMEDIATE SANCTIONS.—
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1 ‘‘(1) IN GENERAL.—If the Secretary determines

2 that a Medicare Choice organization with a contract

3 under this section—

4 ‘‘(A) fails substantially to provide medi5 cally necessary items and services that are re6 quired (under law or under the contract) to be

7 provided to an individual covered under the con8 tract, if the failure has adversely affected (or

9 has substantial likelihood of adversely affecting)

10 the individual;

11 ‘‘(B) imposes premiums on individuals en12 rolled under this part in excess of the premiums

13 permitted;

14 ‘‘(C) acts to expel or to refuse to re-enroll

15 an individual in violation of the provisions of

16 this part;

17 ‘‘(D) engages in any practice that would

18 reasonably be expected to have the effect of de19 nying or discouraging enrollment (except as

20 permitted by this part) by eligible individuals

21 with the organization whose medical condition

22 or history indicates a need for substantial fu23 ture medical services;

24 ‘‘(E) misrepresents or falsifies information

25 that is furnished—
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1 ‘‘(i) to the Secretary under this part,

2 or

3 ‘‘(ii) to an individual or to any other

4 entity under this part;

5 ‘‘(F) fails to comply with the requirements

6 of section 1852(f)(3); or

7 ‘‘(G) employs or contracts with any indi8 vidual or entity that is excluded from participa9 tion under this title under section 1128 or

10 1128A for the provision of health care, utiliza11 tion review, medical social work, or administra12 tive services or employs or contracts with any

13 entity for the provision (directly or indirectly)

14 through such an excluded individual or entity of

15 such services;

16 the Secretary may provide, in addition to any other

17 remedies authorized by law, for any of the remedies

18 described in paragraph (2).

19 ‘‘(2) REMEDIES.—The remedies described in

20 this paragraph are—

21 ‘‘(A) civil money penalties of not more

22 than $25,000 for each determination under

23 paragraph (1) or, with respect to a determina24 tion under subparagraph (D) or (E)(i) of such

25 paragraph, of not more than $100,000 for each
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1 such determination, plus, with respect to a de2 termination under paragraph (1)(B), double the

3 excess amount charged in violation of such

4 paragraph (and the excess amount charged

5 shall be deducted from the penalty and returned

6 to the individual concerned), and plus, with re7 spect to a determination under paragraph

8 (1)(D), $15,000 for each individual not enrolled

9 as a result of the practice involved,

10 ‘‘(B) suspension of enrollment of individ11 uals under this part after the date the Sec12 retary notifies the organization of a determina13 tion under paragraph (1) and until the Sec14 retary is satisfied that the basis for such deter15 mination has been corrected and is not likely to

16 recur, or

17 ‘‘(C) suspension of payment to the organi18 zation under this part for individuals enrolled

19 after the date the Secretary notifies the organi20 zation of a determination under paragraph (1)

21 and until the Secretary is satisfied that the

22 basis for such determination has been corrected

23 and is not likely to recur.

24 ‘‘(3) OTHER INTERMEDIATE SANCTIONS.—In

25 the case of a Medicare Choice organization for which
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1 the Secretary makes a determination under sub2 section (c)(2) the basis of which is not described in

3 paragraph (1), the Secretary may apply the follow4 ing intermediate sanctions:

5 ‘‘(A) civil money penalties of not more

6 than $25,000 for each determination under

7 subsection (c)(2) if the deficiency that is the

8 basis of the determination has directly adversely

9 affected (or has the substantial likelihood of ad10 versely affecting) an individual covered under

11 the organization’s contract;

12 ‘‘(B) civil money penalties of not more

13 than $10,000 for each week beginning after the

14 initiation of procedures by the Secretary under

15 subsection (h) during which the deficiency that

16 is the basis of a determination under subsection

17 (c)(2) exists; and

18 ‘‘(C) suspension of enrollment of individ19 uals under this part after the date the Sec20 retary notifies the organization of a determina21 tion under subsection (c)(2) and until the Sec22 retary is satisfied that the deficiency that is the

23 basis for the determination has been corrected

24 and is not likely to recur.
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1 ‘‘(4) PROCEDURES FOR IMPOSING SANC2 TIONS.—The provisions of section 1128A (other

3 than subsections (a) and (b)) shall apply to a civil

4 money penalty under paragraph (1) or (2) in the

5 same manner as they apply to a civil money penalty

6 or proceeding under section 1128A(a).

7 ‘‘(h) PROCEDURES FOR IMPOSING SANCTIONS.—The

8 Secretary may terminate a contract with a Medicare

9 Choice organization under this section or may impose the

10 intermediate sanctions described in subsection (g) on the

11 organization in accordance with formal investigation and

12 compliance procedures established by the Secretary under

13 which—

14 ‘‘(1) the Secretary provides the organization

15 with the opportunity to develop and implement a

16 corrective action plan to correct the deficiencies that

17 were the basis of the Secretary’s determination

18 under subsection (c)(2);

19 ‘‘(2) the Secretary shall impose more severe

20 sanctions on organizations that have a history of de21 ficiencies or that have not taken steps to correct de22 ficiencies the Secretary has brought to their atten23 tion;
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1 ‘‘(3) there are no unreasonable or unnecessary

2 delays between the finding of a deficiency and the

3 imposition of sanctions; and

4 ‘‘(4) the Secretary provides the organization

5 with reasonable notice and opportunity for hearing

6 (including the right to appeal an initial decision) be7 fore imposing any sanction or terminating the con8 tract.

9 ‘‘DEMONSTRATION PROJECT FOR HIGH DEDUCTIBLE/

10 MEDISAVE PRODUCTS

11 ‘‘SEC. 1859. (a) IN GENERAL.—The Secretary shall

12 permit, on a demonstration project basis, the offering of

13 high deductible/medisave products under this part, subject

14 to the special rules provided under this section.

15 ‘‘(b) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DE16 FINED.—

17 ‘‘(1) IN GENERAL.—In this part, the term ‘high

18 deductible/medisave product’ means a Medicare

19 Choice product that—

20 ‘‘(A) provides reimbursement for at least

21 the items and services described in section

22 1852(a)(1) in a year but only after the enrollee

23 incurs countable expenses (as specified under

24 the product) equal to the amount of a deduct25 ible (described in paragraph (2));
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1 ‘‘(B) counts as such expenses (for purposes

2 of such deductible) at least all amounts that

3 would have been payable under parts A and B

4 or by the enrollee if the enrollee had elected to

5 receive benefits through the provisions of such

6 parts; and

7 ‘‘(C) provides, after such deductible is met

8 for a year and for all subsequent expenses for

9 benefits referred to in subparagraph (A) in the

10 year, for a level of reimbursement that is not

11 less than—

12 ‘‘(i) 100 percent of such expenses, or

13 ‘‘(ii) 100 percent of the amounts that

14 would have been paid (without regard to

15 any deductibles or coinsurance) under

16 parts A and B with respect to such ex17 penses,

18 whichever is less. Such term does not include

19 the Medicare Choice MSA itself or any con20 tribution into such account.

21 ‘‘(2) DEDUCTIBLE.—The amount of deductible

22 under a high deductible/medisave product—

23 ‘‘(A) for contract year 1997 shall be not

24 more than $10,000; and
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1 ‘‘(B) for a subsequent contract year shall

2 be not more than the maximum amount of such

3 deductible for the previous contract year under

4 this paragraph increased by the national aver5 age per capita growth rate under section

6 1855(c)(3) for the year.

7 If the amount of the deductible under subparagraph

8 (B) is not a multiple of $50, the amount shall be

9 rounded to the nearest multiple of $50.

10 ‘‘(c) SPECIAL RULES RELATING TO ENROLLMENT.—

11 The rule under section 1805 relating to election of Medi12 care Choice products shall apply to election of high deduct13 ible/medisave products offered under the demonstration

14 project under this section, except as follows:

15 ‘‘(1) SPECIAL RULE FOR CERTAIN ANNU16 ITANTS.—An individual is not eligible to elect a high

17 deductible/medisave product under section 1805 if

18 the individual is entitled to benefits under chapter

19 89 of title 5, United States Code, as an annuitant

20 or spouse of an annuitant.

21 ‘‘(2) TRANSITION PERIOD RULE.—During the

22 transition period (as defined in section

23 1805(e)(1)(B)), an individual who has elected a high

24 deductible/medisave product may not change such

25 election to a Medicare Choice product that is not a
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1 high deductible/medisave product unless the individ2 ual has had such election in effect for 12 months.

3 ‘‘(3) NO 90-DAY DISENROLLMENT OPTION.—

4 Paragraph (4)(A) of section 1805(e) shall not apply

5 to an individual who elects a high deductible/

6 medisave product.

7 ‘‘(4) TIMING OF ELECTION.—An individual may

8 elect a high deductible/medisave product only during

9 an annual, coordinated election period described in

10 section 1805(e)(3)(B) or during the month of Octo11 ber, 1996.

12 ‘‘(5) EFFECTIVENESS OF ELECTION.—An elec13 tion of coverage for a high deductible/medisave prod14 uct made in a year shall take effect as of the first

15 day of the following year.

16 ‘‘(d) SPECIAL RULES RELATING TO BENEFITS.—

17 ‘‘(1) IN GENERAL.—Paragraphs (1) and (3) of

18 section 1852(a) shall not apply to high deductible/

19 medisave products.

20 ‘‘(2) PREMIUMS.—

21 ‘‘(A) APPLICATION OF ALTERNATIVE PRE22 MIUM.—In applying section 1852(d)(2) in the

23 case of a high deductible/medisave product, in24 stead of the amount specified in subparagraph

25 (B) there shall be substituted the monthly ad-
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1 justed Medicare Choice capitation rate specified

2 in section 1855(b)(1) for the individual and pe3 riod involved.

4 ‘‘(B) CLASS ADJUSTED PREMIUMS.—Not5 withstanding section 1852(d)(3), a Medicare

6 Choice organization shall establish premiums

7 for any high deductible/medisave product it of8 fers in a payment area based on each of the

9 risk adjustment categories established for pur10 poses of determining the amount of the pay11 ment to Medicare Choice organizations under

12 section 1855(b)(1) and using the identical de13 mographic and other adjustments among such

14 categories as are used for such purposes.

15 ‘‘(C) REQUIREMENT FOR ADDITIONAL

16 BENEFITS NOT APPLICABLE.—Section

17 1852(e)(1)(A) shall not apply to a high deduct18 ible/medisave product.

19 ‘‘(e) ADDITIONAL DISCLOSURE.—In any disclosure

20 made pursuant to section 1853(a)(1) for a high deduct21 ible/medisave product, the disclosure shall include a com22 parison of benefits under such a product with benefits

23 under other Medicare Choice products.

24 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

25 HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—
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1 ‘‘(1) IN GENERAL.—In the case of an individual

2 who has elected a high deductible/medisave product,

3 notwithstanding the provisions of section 1855—

4 ‘‘(A) the amount of the payment to the

5 Medicare Choice organization offering the high

6 deductible/medisave product shall not exceed

7 the premium for the product, and

8 ‘‘(B) subject to paragraph (2), the dif9 ference between the amount of payment that

10 would otherwise be made and the amount of

11 payment to such organization shall be made di12 rectly into a Medicare Choice MSA established

13 (and, if applicable, designated) by the individual

14 under paragraph (2).

15 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

16 MEDICARE CHOICE MEDICAL SAVINGS ACCOUNT AS

17 REQUIREMENT FOR PAYMENT OF CONTRIBUTION.—

18 In the case of an individual who has elected coverage

19 under a high deductible/medisave product, no pay20 ment shall be made under paragraph (1)(B) on be21 half of an individual for a month unless the individ22 ual—

23 ‘‘(A) has established before the beginning

24 of the month (or by such other deadline as the

25 Secretary may specify) a Medicare Choice MSA
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1 (as defined in section 137(b) of the Internal

2 Revenue Code of 1986), and

3 ‘‘(B) if the individual has established more

4 than one Medicare Choice MSA, has designated

5 one of such accounts as the individual’s Medi6 care Choice MSA for purposes of this part.

7 Under rules under this section, such an individual

8 may change the designation of such account under

9 subparagraph (B) for purposes of this part.

10 ‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS

11 ACCOUNT CONTRIBUTION.—In the case of an indi12 vidual electing a high deductible/medisave product

13 effective beginning with a month in a year, the

14 amount of the contribution to the Medicare Choice

15 MSA on behalf of the individual for that month and

16 all successive months in the year shall be deposited

17 during that first month. In the case of a termination

18 of such an election as of a month before the end of

19 a year, the Secretary shall provide for a procedure

20 for the recovery of deposits attributable to the re21 maining months in the year.

22 ‘‘(g) SPECIAL CONTRACT RULES.—

23 ‘‘(1) ENROLLMENT REQUIREMENTS WAIVED.—

24 Subsection (b) of section 1858 shall not apply with
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1 respect to a contract that relates only to one or more

2 high deductible/medisave products.

3 ‘‘(2) EFFECTIVE DATE OF CONTRACTS.—In no

4 case shall a contract under section 1858 which pro5 vides for coverage under a high deductible/medisave

6 account be effective before January 1997 with re7 spect to such coverage.’’.

8 (b) CONFORMING REFERENCES TO PREVIOUS PART

9 C.—Any reference in law (in effect before the date of the

10 enactment of this Act) to part C of title XVIII of the So11 cial Security Act is deemed a reference to part D of such

12 title (as in effect after such date).

13 (c) USE OF INTERIM, FINAL REGULATIONS.—In

14 order to carry out the amendment made by subsection (a)

15 in a timely manner, the Secretary of Health and Human

16 Services may promulgate regulations that take effect on

17 an interim basis, after notice and pending opportunity for

18 public comment.

19 (d) ADVANCE DIRECTIVES.—Section 1866(f)(1) (42

20 U.S.C. 1395cc(f)(1)) is amended—

21 (1) in paragraph (1)—

22 (A) by inserting ‘‘1853(g),’’ after

23 ‘‘1833(s),’’, and

24 (B) by inserting ‘‘, Medicare Choice orga25 nization,’’ after ‘‘provider of services’’, and
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1 (2) by adding at the end the following new

2 paragraph:

3 ‘‘(4) Nothing in this subsection shall be construed to

4 require the provision of information regarding assisted

5 suicide, euthanasia, or mercy killing.’’.

6 (e) CONFORMING AMENDMENT.—Section

7 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended

8 by inserting before the semicolon at the end the following:

9 ‘‘and in the case of hospitals to accept as payment in full

10 for inpatient hospital services that are covered under this

11 title and are furnished to any individual enrolled under

12 part C with a Medicare Choice organization which does

13 not have a contract establishing payment amounts for

14 services furnished to members of the organization the

15 amounts that would be made as a payment in full under

16 this title if the individuals were not so enrolled’’.

17 SEC. 15003. REPORTS.

18 (a) ALTERNATIVE PAYMENT APPROACHES.—By not

19 later than ll, the Secretary of Health and Human Serv20 ices (in this title referred to as the ‘‘Secretary’’) shall sub21 mit to Congress a report on alternative provider payment

22 approaches under the medicare program, including—

23 (1) combined hospital and physician payments

24 per admission,
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1 (2) partial capitation models for subsets of

2 medicare benefits, and

3 (3) risk-sharing arrangements in which the Sec4 retary defines the risk corridor and shares in gains

5 and losses.

6 Such report shall include recommendations for implement7 ing and testing such approaches and legislation that may

8 be required to implement and test such approaches.

9 (b) COVERAGE OF RETIRED WORKERS.—

10 (1) IN GENERAL.—The Secretary shall work

11 with employers and health benefit plans to develop

12 standards and payment methodologies to allow re13 tired workers to continue to participate in employer

14 health plans instead of participating in the medicare

15 program. Such standards shall also cover workers

16 covered under the Federal Employees Health Bene17 fits Program under chapter 89 of title 5, United

18 States Code.

19 (2) REPORT.—Not later than 18 months after

20 the date of the enactment of this Act, the Secretary

21 shall submit to Congress a report on the develop22 ment of such standards and payment methodologies.

23 The report shall include recommendations relating to

24 such legislation as may be necessary.
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1 SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI2 CARE HMO PROGRAM.

3 (a) TRANSITION FROM CURRENT CONTRACTS.—

4 (1) LIMITATION ON NEW CONTRACTS.—

5 (A) NO NEW RISK-SHARING CONTRACTS

6 AFTER NEW STANDARDS ESTABLISHED.—The

7 Secretary of Health and Human Services (in

8 this section referred to as the ‘‘Secretary’’)

9 shall not enter into any risk-sharing contract

10 under section 1876 of the Social Security Act

11 with an eligible organization for any contract

12 year beginning on or after the date standards

13 for Medicare Choice organizations and products

14 are first established under section 1856(a) of

15 such Act with respect to Medicare Choice orga16 nizations that are insurers or health mainte17 nance organizations unless such a contract had

18 been in effect under section 1876 of such Act

19 for the organization for the previous contract

20 year.

21 (B) NO NEW COST REIMBURSEMENT CON22 TRACTS.—The Secretary shall not enter into

23 any cost reimbursement contract under section

24 1876 of the Social Security Act beginning for

25 any contract year beginning on or after the

26 date of the enactment of this Act.
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1 (2) TERMINATION OF CURRENT CONTRACTS.—

2 (A) RISK-SHARING CONTRACTS.—Notwith3 standing any other provision of law, the Sec4 retary shall not extend or continue any risk5 sharing contract with an eligible organization

6 under section 1876 of the Social Security Act

7 (for which a contract was entered into consist8 ent with paragraph (1)(A)) for any contract

9 year beginning on or after 1 year after the date

10 standards described in paragraph (1)(A) are es11 tablished.

12 (B) COST REIMBURSEMENT CONTRACTS.—

13 The Secretary shall not extend or continue any

14 reasonable cost reimbursement contract with an

15 eligible organization under section 1876 of the

16 Social Security Act for any contract year begin17 ning on or after January 1, 1998.

18 (b) CONFORMING PAYMENT RATES.—

19 (1) RISK-SHARING CONTRACTS.—Notwithstand20 ing any other provision of law, the Secretary shall

21 provide that payment amounts under risk-sharing

22 contracts under section 1876(a) of the Social Secu23 rity Act for months in a year (beginning with Janu24 ary 1996) shall be computed—
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1 (A) with respect to individuals entitled to

2 benefits under both parts A and B of title

3 XVIII of such Act, by substituting payment

4 rates under section 1855(a) of such Act for the

5 payment rates otherwise established under sec6 tion 1876(a) of such Act, and

7 (B) with respect to individuals only enti8 tled to benefits under part B of such title, by

9 substituting an appropriate proportion of such

10 rates (reflecting the relative proportion of pay11 ments under such title attributable to such

12 part) for the payment rates otherwise estab13 lished under section 1876(a) of such Act.

14 For purposes of carrying out this paragraph for pay15 ment for months in 1996, the Secretary shall com16 pute, announce, and apply the payment rates under

17 section 1855(a) of such Act (notwithstanding any

18 deadlines specified in such section) in as timely a

19 manner as possible and may (to the extent nec20 essary) provide for retroactive adjustment in pay21 ments made not in accordance with such rates.

22 (2) COST CONTRACTS.—Notwithstanding any

23 other provision of law, the Secretary shall provide

24 that payment amounts under cost reimbursement

25 contracts under section 1876(a) of the Social Secu-
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1 rity Act shall take into account adjustments in pay2 ment amounts made in parts A and B of title XVIII

3 of such Act pursuant to the amendments made by

4 this title.

5 PART 2—SPECIAL RULES FOR MEDICARE CHOICE

6 MEDICAL SAVINGS ACCOUNTS

7 SEC. 15011. MEDICARE CHOICE MSA’S.

8 (a) IN GENERAL.—Part III of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to

10 amounts specifically excluded from gross income) is

11 amended by redesignating section 137 as section 138 and

12 by inserting after section 136 the following new section:

13 ‘‘SEC. 137. MEDICARE CHOICE MSA’S.

14 ‘‘(a) EXCLUSION.—Gross income shall not include

15 any payment to the Medicare Choice MSA of an individual

16 by the Secretary of Health and Human Services under

17 section 1859(f)(1)(B) of the Social Security Act.

18 ‘‘(b) MEDICARE CHOICE MSA.—For purposes of this

19 section—

20 ‘‘(1) MEDICARE CHOICE MSA.—The term ‘Medi21 care Choice MSA’ means a trust created or orga22 nized in the United States exclusively for the pur23 pose of paying the qualified medical expenses of the

24 account holder, but only if the written governing in-
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1 strument creating the trust meets the following re2 quirements:

3 ‘‘(A) Except in the case of a trustee-to4 trustee transfer described in subsection (d)(4),

5 no contribution will be accepted unless it is

6 made by the Secretary of Health and Human

7 Services under section 1859(f)(1)(B) of the So8 cial Security Act.

9 ‘‘(B) The trustee is a bank (as defined in

10 section 408(n)), an insurance company (as de11 fined in section 816), or another person who

12 demonstrates to the satisfaction of the Sec13 retary that the manner in which such person

14 will administer the trust will be consistent with

15 the requirements of this section.

16 ‘‘(C) No part of the trust assets will be in17 vested in life insurance contracts.

18 ‘‘(D) The assets of the trust will not be

19 commingled with other property except in a

20 common trust fund or common investment

21 fund.

22 ‘‘(E) The interest of an individual in the

23 balance in his account is nonforfeitable.
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1 ‘‘(F) Trustee-to-trustee transfers described

2 in subsection (d)(4) may be made to and from

3 the trust.

4 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 medical expenses’ means, with respect to an ac7 count holder, amounts paid by such holder—

8 ‘‘(i) for medical care (as defined in

9 section 213(d)) for the account holder, but

10 only to the extent such amounts are not

11 compensated for by insurance or otherwise,

12 or

13 ‘‘(ii) for long-term care insurance for

14 the account holder.

15 ‘‘(B) HEALTH INSURANCE MAY NOT BE

16 PURCHASED FROM ACCOUNT.—Subparagraph

17 (A)(i) shall not apply to any payment for insur18 ance.

19 ‘‘(3) ACCOUNT HOLDER.—The term ‘account

20 holder’ means the individual on whose behalf the

21 Medicare Choice MSA is maintained.

22 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

23 to the rules of subsections (g) and (h) of section 408

24 shall apply for purposes of this section.

25 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—
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1 ‘‘(1) IN GENERAL.—A Medicare Choice MSA is

2 exempt from taxation under this subtitle unless such

3 MSA has ceased to be a Medicare Choice MSA by

4 reason of paragraph (2). Notwithstanding the pre5 ceding sentence, any such MSA is subject to the

6 taxes imposed by section 511 (relating to imposition

7 of tax on unrelated business income of charitable,

8 etc. organizations).

9 ‘‘(2) ACCOUNT ASSETS TREATED AS DISTRIB10 UTED IN THE CASE OF PROHIBITED TRANSACTIONS

11 OR ACCOUNT PLEDGED AS SECURITY FOR LOAN.—

12 Rules similar to the rules of paragraphs (2) and (4)

13 of section 408(e) shall apply to Medicare Choice

14 MSA’s, and any amount treated as distributed under

15 such rules shall be treated as not used to pay quali16 fied medical expenses.

17 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

18 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

19 QUALIFIED MEDICAL EXPENSES.—No amount shall

20 be included in the gross income of the account hold21 er by reason of a payment or distribution from a

22 Medicare Choice MSA which is used exclusively to

23 pay the qualified medical expenses of the account

24 holder. Any amount paid or distributed from a Medi-
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1 care Choice MSA which is not so used shall be in2 cluded in the gross income of such holder.

3 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

4 FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM

5 BALANCE NOT MAINTAINED.—

6 ‘‘(A) IN GENERAL.—The tax imposed by

7 this chapter for any taxable year in which there

8 is a payment or distribution from a Medicare

9 Choice MSA which is not used exclusively to

10 pay the qualified medical expenses of the ac11 count holder shall be increased by 50 percent of

12 the excess (if any) of—

13 ‘‘(i) the amount of such payment or

14 distribution, over

15 ‘‘(ii) the excess (if any) of—

16 ‘‘(I) the fair market value of the

17 assets in the Medicare Choice MSA as

18 of the close of the calendar year pre19 ceding the calendar year in which the

20 taxable year begins, over

21 ‘‘(II) an amount equal to 60 per22 cent of the deductible under the cata23 strophic health plan covering the ac24 count holder as of January 1 of the
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1 calendar year in which the taxable

2 year begins.

3 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

4 shall not apply if the payment or distribution is

5 made on or after the date the account holder—

6 ‘‘(i) becomes disabled within the

7 meaning of section 72(m)(7), or

8 ‘‘(ii) dies.

9 ‘‘(C) SPECIAL RULES.—For purposes of

10 subparagraph (A)—

11 ‘‘(i) all Medicare Choice MSA’s of the

12 account holder shall be treated as 1 ac13 count,

14 ‘‘(ii) all payments and distributions

15 not used exclusively to pay the qualified

16 medical expenses of the account holder

17 during any taxable year shall be treated as

18 1 distribution, and

19 ‘‘(iii) any distribution of property

20 shall be taken into account at its fair mar21 ket value on the date of the distribution.

22 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU23 TIONS.—Paragraphs (1) and (2) shall not apply to

24 any payment or distribution from a Medicare Choice

25 MSA to the Secretary of Health and Human Serv-
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1 ices of an erroneous contribution to such MSA and

2 of the net income attributable to such contribution.

3 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—

4 Paragraphs (1) and (2) shall not apply to any trust5 ee-to-trustee transfer from a Medicare Choice MSA

6 of an account holder to another Medicare Choice

7 MSA of such account holder.

8 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

9 DEDUCTION.—For purposes of section 213, any pay10 ment or distribution out of a Medicare Choice MSA

11 for qualified medical expenses shall not be treated as

12 an expense paid for medical care.

13 ‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF

14 ACCOUNT HOLDER.—

15 ‘‘(1) TREATMENT IF DESIGNATED BENEFICIARY

16 IS SPOUSE.—

17 ‘‘(A) IN GENERAL.—In the case of an ac18 count holder’s interest in a Medicare Choice

19 MSA which is payable to (or for the benefit of)

20 such holder’s spouse upon the death of such

21 holder, such Medicare Choice MSA shall be

22 treated as a Medicare Choice MSA of such

23 spouse as of the date of such death.

24 ‘‘(B) SPECIAL RULES IF SPOUSE NOT MED25 ICARE ELIGIBLE.—If, as of the date of such
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1 death, such spouse is not entitled to benefits

2 under title XVIII of the Social Security Act,

3 then after the date of such death—

4 ‘‘(i) the Secretary of Health and

5 Human Services may not make any pay6 ments to such Medicare Choice MSA, other

7 than payments attributable to periods be8 fore such date,

9 ‘‘(ii) in applying subsection (b)(2)

10 with respect to such Medicare Choice

11 MSA, references to the account holder

12 shall be treated as including references to

13 any dependent (as defined in section 152)

14 of such spouse and any subsequent spouse

15 of such spouse, and

16 ‘‘(iii) in lieu of applying subsection

17 (d)(2), the rules of section 220(f)(2) shall

18 apply.

19 ‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY

20 IS NOT SPOUSE.—In the case of an account holder’s

21 interest in a Medicare Choice MSA which is payable

22 to (or for the benefit of) any person other than such

23 holder’s spouse upon the death of such holder—

24 ‘‘(A) such account shall cease to be a Med25 icare Choice MSA as of the date of death, and
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1 ‘‘(B) an amount equal to the fair market

2 value of the assets in such account on such date

3 shall be includible—

4 ‘‘(i) if such person is not the estate of

5 such holder, in such person’s gross income

6 for the taxable year which includes such

7 date, or

8 ‘‘(ii) if such person is the estate of

9 such holder, in such holder’s gross income

10 for last taxable year of such holder.

11 ‘‘(f) REPORTS.—

12 ‘‘(1) IN GENERAL.—The trustee of a Medicare

13 Choice MSA shall make such reports regarding such

14 account to the Secretary and to the account holder

15 with respect to—

16 ‘‘(A) the fair market value of the assets in

17 such Medicare Choice MSA as of the close of

18 each calendar year, and

19 ‘‘(B) contributions, distributions, and other

20 matters,

21 as the Secretary may require by regulations.

22 ‘‘(2) TIME AND MANNER OF REPORTS.—The re23 ports required by this subsection—
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1 ‘‘(A) shall be filed at such time and in

2 such manner as the Secretary prescribes in

3 such regulations, and

4 ‘‘(B) shall be furnished to the account

5 holder—

6 ‘‘(i) not later than January 31 of the

7 calendar year following the calendar year

8 to which such reports relate, and

9 ‘‘(ii) in such manner as the Secretary

10 prescribes in such regulations.’’

11 (b) EXCLUSION OF MEDICARE CHOICE MSA’S FROM

12 ESTATE TAX.—Part IV of subchapter A of chapter 11 of

13 such Code is amended by adding at the end the following

14 new section:

15 ‘‘SEC. 2057. MEDICARE CHOICE MSA’S.

16 ‘‘For purposes of the tax imposed by section 2001,

17 the value of the taxable estate shall be determined by de18 ducting from the value of the gross estate an amount

19 equal to the value of any Medicare Choice MSA (as de20 fined in section 137(b)) included in the gross estate.’’

21 (c) TAX ON PROHIBITED TRANSACTIONS.—

22 (1) Section 4975 of such Code (relating to tax

23 on prohibited transactions) is amended by adding at

24 the end of subsection (c) the following new para25 graph:
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1 ‘‘(5) SPECIAL RULE FOR MEDICARE CHOICE

2 MSA’S.—An individual for whose benefit a Medicare

3 Choice MSA (within the meaning of section 137(b))

4 is established shall be exempt from the tax imposed

5 by this section with respect to any transaction con6 cerning such account (which would otherwise be tax7 able under this section) if, with respect to such

8 transaction, the account ceases to be a Medicare

9 Choice MSA by reason of the application of section

10 137(c)(2) to such account.’’

11 (2) Paragraph (1) of section 4975(e) of such

12 Code is amended to read as follows:

13 ‘‘(1) PLAN.—For purposes of this section, the

14 term ‘plan’ means—

15 ‘‘(A) a trust described in section 401(a)

16 which forms a part of a plan, or a plan de17 scribed in section 403(a), which trust or plan is

18 exempt from tax under section 501(a),

19 ‘‘(B) an individual retirement account de20 scribed in section 408(a),

21 ‘‘(C) an individual retirement annuity de22 scribed in section 408(b),

23 ‘‘(D) a medical savings account described

24 in section 220(d),
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1 ‘‘(E) a Medicare Choice MSA described in

2 section 137(b), or

3 ‘‘(F) a trust, plan, account, or annuity

4 which, at any time, has been determined by the

5 Secretary to be described in any preceding sub6 paragraph of this paragraph.’’

7 (d) FAILURE TO PROVIDE REPORTS ON MEDICARE

8 CHOICE MSA’S.—

9 (1) Subsection (a) of section 6693 of such Code

10 (relating to failure to provide reports on individual

11 retirement accounts or annuities) is amended to read

12 as follows:

13 ‘‘(a) REPORTS.—

14 ‘‘(1) IN GENERAL.—If a person required to file

15 a report under a provision referred to in paragraph

16 (2) fails to file such report at the time and in the

17 manner required by such provision, such person

18 shall pay a penalty of $50 for each failure unless it

19 is shown that such failure is due to reasonable

20 cause.

21 ‘‘(2) PROVISIONS.—The provisions referred to

22 in this paragraph are—

23 ‘‘(A) subsections (i) and (l) of section 408

24 (relating to individual retirement plans),
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1 ‘‘(B) section 220(h) (relating to medical

2 savings accounts), and

3 ‘‘(C) section 137(f) (relating to Medicare

4 Choice MSA’s).’’

5 (2) The section heading for section 6693 of

6 such Code is amended to read as follows:

7 ‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE8 TIREMENT PLANS AND CERTAIN OTHER TAX9 FAVORED ACCOUNTS; PENALTIES RELATING

10 TO DESIGNATED NONDEDUCTIBLE CON11 TRIBUTIONS.’’

12 (e) CLERICAL AMENDMENTS.—

13 (1) The table of sections for part III of sub14 chapter B of chapter 1 of such Code is amended by

15 striking the last item and inserting the following:

‘‘Sec. 137. Medicare Choice MSA’s.

‘‘Sec. 138. Cross references to other Acts.’’

16 (2) The table of sections for subchapter B of

17 chapter 68 of such Code is amended by striking the

18 item relating to section 6693 and inserting the fol19 lowing new item:

‘‘Sec. 6693. Failure to file reports on individual retirement plans

and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’’

20 (3) The table of sections for part IV of sub21 chapter A of chapter 11 of such Code is amended by

22 adding at the end the following new item:

‘‘Sec. 2057. Medicare Choice MSA’s.’’
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1996.

4 SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS IN5 COME.

6 (a) IN GENERAL.—Section 105 of the Internal Reve7 nue Code of 1986 (relating to amounts received under ac8 cident and health plans) is amended by adding at the end

9 the following new subsection:

10 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY

11 ACT.—Gross income does not include any rebate received

12 under section 1852(e)(1)(A) of the Social Security Act

13 during the taxable year.’’

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to amounts received after the

16 date of the enactment of this Act.

17 PART 3—SPECIAL ANTITRUST RULE FOR

18 PROVIDER SERVICE NETWORKS

19 SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON

20 TO PROVIDER SERVICE NETWORKS.

21 (a) RULE OF REASON STANDARD.—In any action

22 under the antitrust laws, or under any State law similar

23 to the antitrust laws—

24 (1) the conduct of a provider service network in

25 negotiating, making, or performing a contract (in-
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1 cluding the establishment and modification of a fee

2 schedule and the development of a panel of physi3 cians), to the extent such contract is for the purpose

4 of providing health care services to individuals under

5 the terms of a Medicare Choice PSO product, and

6 (2) the conduct of any member of such network

7 for the purpose of providing such health care serv8 ices under such contract to such extent,

9 shall not be deemed illegal per se. Such conduct shall be

10 judged on the basis of its reasonableness, taking into ac11 count all relevant factors affecting competition, including

12 the effects on competition in properly defined markets.

13 (b) DEFINITIONS.—For purposes of subsection (a):

14 (1) ANTITRUST LAWS.—The term ‘‘antitrust

15 laws’’ has the meaning given it in subsection (a) of

16 the first section of the Clayton Act (15 U.S.C. 12),

17 except that such term includes section 5 of the Fed18 eral Trade Commission Act (15 U.S.C. 45) to the

19 extent that such section 5 applies to unfair methods

20 of competition.

21 (2) HEALTH CARE PROVIDER.—The term

22 ‘‘health care provider’’ means any individual or en23 tity that is engaged in the delivery of health care

24 services in a State and that is required by State law

25 or regulation to be licensed or certified by the State
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1 to engage in the delivery of such services in the

2 State.

3 (3) HEALTH CARE SERVICE.—The term ‘‘health

4 care service’’ means any service for which payment

5 may be made under a Medicare Choice PSO product

6 including services related to the delivery or adminis7 tration of such service.

8 (4) MEDICARE CHOICE PROGRAM.—The term

9 ‘‘Medicare Choice program’’ means the program

10 under part C of title XVIII of the Social Security

11 Act.

12 (5) MEDICARE CHOICE PSO PRODUCT.—The

13 term ‘‘Medicare Choice PSO product’’ means a Med14 icare Choice product offered by a provider-sponsored

15 organization under part C of title XVIII of the So16 cial Security Act.

17 (6) PROVIDER SERVICE NETWORK.—The term

18 ‘‘provider service network’’ means an organization

19 that—

20 (A) is organized by, operated by, and com21 posed of members who are health care providers

22 and for purposes that include providing health

23 care services,
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1 (B) is funded in part by capital contribu2 tions made by the members of such organiza3 tion,

4 (C) with respect to each contract made by

5 such organization for the purpose of providing

6 a type of health care service to individuals

7 under the terms of a Medicare Choice PSO

8 product—

9 (i) requires all members of such orga10 nization who engage in providing such type

11 of health care service to agree to provide

12 health care services of such type under

13 such contract,

14 (ii) receives the compensation paid for

15 the health care services of such type pro16 vided under such contract by such mem17 bers, and

18 (iii) provides for the distribution of

19 such compensation,

20 (D) has established, consistent with the re21 quirements of the Medicare Choice program for

22 provider-sponsored organizations, a program to

23 review, pursuant to written guidelines, the qual24 ity, efficiency, and appropriateness of treatment

25 methods and setting of services for all health
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1 care providers and all patients participating in

2 such product, along with internal procedures to

3 correct identified deficiencies relating to such

4 methods and such services,

5 (E) has established, consistent with the re6 quirements of the Medicare Choice program for

7 provider-sponsored organizations, a program to

8 monitor and control utilization of health care

9 services provided under such product, for the

10 purpose of improving efficient, appropriate care

11 and eliminating the provision of unnecessary

12 health care services,

13 (F) has established a management pro14 gram to coordinate the delivery of health care

15 services for all health care providers and all pa16 tients participating in such product, for the

17 purpose of achieving efficiencies and enhancing

18 the quality of health care services provided, and

19 (G) has established, consistent with the re20 quirements of the Medicare Choice program for

21 provider-sponsored organizations, a grievance

22 and appeal process for such organization de23 signed to review and promptly resolve bene24 ficiary or patient grievances and complaints.
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1 Such term may include a provider-sponsored organi2 zation.

3 (7) PROVIDER-SPONSORED ORGANIZATION.—

4 The term ‘‘provider-sponsored organization’’ means

5 a Medicare Choice organization under the Medicare

6 Choice program that is a provider-sponsored organi7 zation (as defined in section ll of the Social Se8 curity Act).

9 (8) STATE.—The term ‘‘State’’ has the mean10 ing given it in section 4G(2) of the Clayton Act (15

11 U.S.C. 15g(2)).

12 (c) ISSUANCE OF GUIDELINES.—Not later than 120

13 days after the date of the enactment of this Act, the Attor14 ney General and the Federal Trade Commission shall

15 issue jointly guidelines specifying the enforcement policies

16 and analytical principles that will be applied by the De17 partment of Justice and the Commission with respect to

18 the operation of subsection (a).

19 PART 4—COMMISSIONS

20 SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

21 (a) IN GENERAL.—Title XVIII, as amended by sec22 tion 8001(a), is amended by inserting after section 1805

23 the following new section:
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1 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

2 ‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby

3 established the Medicare Payment Review Commission (in

4 this section referred to as the ‘Commission’).

5 ‘‘(b) DUTIES.—

6 ‘‘(1) GENERAL DUTIES AND REPORTS.—The

7 Commission shall review, and make recommenda8 tions to Congress concerning, payment policies under

9 this title. By not later than June 1 of each year, the

10 Commission shall submit a report to Congress con11 taining an examination of issues affecting the medi12 care program, including the implications of changes

13 in health care delivery in the United States and in

14 the market for health care services on the medicare

15 program. The Commission may submit to Congress

16 from time to time such other reports as the Commis17 sion deems appropriate. The Secretary shall respond

18 to recommendations of the Commission in notices of

19 rulemaking proceedings under this title.

20 ‘‘(2) SPECIFIC DUTIES RELATING TO MEDICARE

21 CHOICE PROGRAM.—Specifically, the Commission

22 shall review, with respect to the Medicare Choice

23 program under part C—

24 ‘‘(A) the appropriateness of the methodol25 ogy for making payment to plans under such
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1 program, including the making of differential

2 payments and the distribution of differential

3 updates among different payment areas,

4 ‘‘(B) the appropriateness of the mecha5 nisms used to adjust payments for risk and the

6 need to adjust such mechanisms to take into ac7 count health status of beneficiaries,

8 ‘‘(C) the implications of risk selection both

9 among Medicare Choice organizations and be10 tween the Medicare Choice option and the non11 Medicare Choice option,

12 ‘‘(D) in relation to payment under part C,

13 the development and implementation of mecha14 nisms to assure the quality of care for those en15 rolled with Medicare Choice organizations,

16 ‘‘(F) the impact of the Medicare Choice

17 program on access to care for medicare bene18 ficiaries, and

19 ‘‘(G) other major issues in implementation

20 and further development of the Medicare Choice

21 program.

22 ‘‘(3) SPECIFIC DUTIES RELATING TO THE FEE23 FOR-SERVICE SYSTEM.—Specifically, the Commission

24 shall review payment policies under parts A and B,

25 including—
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1 ‘‘(A) the factors affecting expenditures for

2 services in different sectors, including the proc3 ess for updating hospital, physician, and other

4 fees,

5 ‘‘(B) payment methodologies; and

6 ‘‘(C) the impact of payment policies on ac7 cess and quality of care for medicare bene8 ficiaries.

9 ‘‘(4) SPECIFIC DUTIES RELATING TO INTER10 ACTION OF PAYMENT POLICIES WITH HEALTH CARE

11 DELIVERY GENERALLY.—Specifically the Commis12 sion shall review the effect of payment policies under

13 this title on the delivery of health care services

14 under this title and assess the implications of

15 changes in the health services market on the medi16 care program.

17 ‘‘(c) MEMBERSHIP.—

18 ‘‘(1) NUMBER AND APPOINTMENT.—The Com19 mission shall be composed of 15 members appointed

20 by the Comptroller General.

21 ‘‘(2) QUALIFICATIONS.—The membership of the

22 Commission shall include individuals with national

23 recognition for their expertise in health finance and

24 economics, actuarial science, health facility manage25 ment, health plans and integrated delivery systems,
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1 reimbursement of health facilities, physicians, and

2 other providers of services, and other related fields,

3 who provide a mix of different professionals, broad

4 geographic representation, and a balance between

5 urban and rural representatives, including physicians

6 and other health professionals, employers, third

7 party payors, individuals skilled in the conduct and

8 interpretation of biomedical, health services, and

9 health economics research and expertise in outcomes

10 and effectiveness research and technology assess11 ment. Such membership shall also include represent12 atives of consumers and the elderly.

13 ‘‘(3) CONSIDERATIONS IN INITIAL APPOINT14 MENT.—To the extent possible, in first appointing

15 members to the Commission the Comptroller Gen16 eral shall consider appointing individuals who (as of

17 the date of the enactment of this section) were serv18 ing on the Prospective Payment Assessment Com19 mission or the Physician Payment Review Commis20 sion.

21 ‘‘(4) TERMS.—

22 ‘‘(A) IN GENERAL.—The terms of mem23 bers of the Commission shall be for 3 years ex24 cept that the Comptroller General shall des-
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1 ignate staggered terms for the members first

2 appointed.

3 ‘‘(B) VACANCIES.—Any member appointed

4 to fill a vacancy occurring before the expiration

5 of the term for which the member’s predecessor

6 was appointed shall be appointed only for the

7 remainder of that term. A member may serve

8 after the expiration of that member’s term until

9 a successor has taken office. A vacancy in the

10 Commission shall be filled in the manner in

11 which the original appointment was made.

12 ‘‘(5) COMPENSATION.—While serving on the

13 business of the Commission (including traveltime), a

14 member of the Commission shall be entitled to com15 pensation at the per diem equivalent of the rate pro16 vided for level IV of the Executive Schedule under

17 section 5315 of title 5, United States Code; and

18 while so serving away from home and member’s reg19 ular place of business, a member may be allowed

20 travel expenses, as authorized by the Chairman of

21 the Commission. Physicians serving as personnel of

22 the Commission may be provided a physician com23 parability allowance by the Commission in the same

24 manner as Government physicians may be provided

25 such an allowance by an agency under section 5948
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1 of title 5, United States Code, and for such purpose

2 subsection (i) of such section shall apply to the Com3 mission in the same manner as it applies to the Ten4 nessee Valley Authority. For purposes of pay (other

5 than pay of members of the Commission) and em6 ployment benefits, rights, and privileges, all person7 nel of the Commission shall be treated as if they

8 were employees of the United States Senate.

9 ‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp10 troller General shall designate a member of the

11 Commission, at the time of appointment of the mem12 ber, as Chairman and a member as Vice Chairman

13 for that term of appointment.

14 ‘‘(7) MEETINGS.—The Commission shall meet

15 at the call of the Chairman.

16 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON17 SULTANTS.—Subject to such review as the Comptroller

18 General deems necessary to assure the efficient adminis19 tration of the Commission, the Commission may—

20 ‘‘(1) employ and fix the compensation of an Ex21 ecutive Director (subject to the approval of the

22 Comptroller General) and such other personnel as

23 may be necessary to carry out its duties (without re24 gard to the provisions of title 5, United States Code,

25 governing appointments in the competitive service);
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1 ‘‘(2) seek such assistance and support as may

2 be required in the performance of its duties from ap3 propriate Federal departments and agencies;

4 ‘‘(3) enter into contracts or make other ar5 rangements, as may be necessary for the conduct of

6 the work of the Commission (without regard to sec7 tion 3709 of the Revised Statutes (41 U.S.C. 5));

8 ‘‘(4) make advance, progress, and other pay9 ments which relate to the work of the Commission;

10 ‘‘(5) provide transportation and subsistence for

11 persons serving without compensation; and

12 ‘‘(6) prescribe such rules and regulations as it

13 deems necessary with respect to the internal organi14 zation and operation of the Commission.

15 ‘‘(e) POWERS.—

16 ‘‘(1) OBTAINING OFFICIAL DATA.—The Com17 mission may secure directly from any department or

18 agency of the United States information necessary

19 to enable it to carry out this section. Upon request

20 of the Chairman, the head of that department or

21 agency shall furnish that information to the Com22 mission on an agreed upon schedule.

23 ‘‘(2) DATA COLLECTION.—In order to carry out

24 its functions, the Commission shall collect and as25 sess information to—
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1 ‘‘(A) utilize existing information, both pub2 lished and unpublished, where possible, collected

3 and assessed either by its own staff or under

4 other arrangements made in accordance with

5 this section,

6 ‘‘(B) carry out, or award grants or con7 tracts for, original research and experimen8 tation, where existing information is inad9 equate, and

10 ‘‘(C) adopt procedures allowing any inter11 ested party to submit information for the Com12 mission’s use in making reports and rec13 ommendations.

14 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

15 Comptroller General shall have unrestricted access

16 to all deliberations, records, and data of the Com17 mission, immediately upon request.

18 ‘‘(4) PERIODIC AUDIT.—The Commission shall

19 be subject to periodic audit by the General Account20 ing Office.

21 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—

22 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

23 Commission shall submit requests for appropriations

24 in the same manner as the Comptroller General sub25 mits requests for appropriations, but amounts ap-
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1 propriated for the Commission shall be separate

2 from amounts appropriated for the Comptroller Gen3 eral.

4 ‘‘(2) AUTHORIZATION.—There are authorized to

5 be appropriated such sums as may be necessary to

6 carry out the provisions of this section. 60 percent

7 of such appropriation shall be payable from the Fed8 eral Hospital Insurance Trust Fund, and 40 percent

9 of such appropriation shall be payable from the Fed10 eral Supplementary Medical Insurance Trust

11 Fund.’’.

12 (b) ABOLITION OF PROPAC AND PPRC.—

13 (1) PROPAC.—

14 (A) IN GENERAL.—Section 1886(e) (42

15 U.S.C. 1395ww(e)) is amended—

16 (i) by striking paragraphs (2) and (6);

17 and

18 (ii) in paragraph (3), by striking ‘‘(A)

19 The Commission’’ and all that follows

20 through ‘‘(B)’’.

21 (B) CONFORMING AMENDMENT.—Section

22 1862 (42 U.S.C. 1395y) is amended by striking

23 ‘‘Prospective Payment Assessment Commis24 sion’’ each place it appears in subsection
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1 (a)(1)(D) and subsection (i) and inserting

2 ‘‘Medicare Payment Review Commission’’.

3 (2) PPRC.—

4 (A) IN GENERAL.—Title XVIII is amended

5 by striking section 1845 (42 U.S.C. 1395w–1).

6 (B) CONFORMING AMENDMENTS.—

7 (i) Section 1834(b)(2) (42 U.S.C.

8 1395m(b)(2)) is amended by striking

9 ‘‘Physician Payment Review Commission’’

10 and inserting ‘‘Medicare Payment Review

11 Commission’’.

12 (ii) Section 1842(b) (42 U.S.C.

13 1395u(b)) is amended by striking ‘‘Physi14 cian Payment Review Commission’’ each

15 place it appears in paragraphs (2)(C),

16 (9)(D), and (14)(C)(i) and inserting ‘‘Med17 icare Payment Review Commission’’.

18 (iii) Section 1848 (42 U.S.C. 1395w–

19 4) is amended by striking ‘‘Physician Pay20 ment Review Commission’’ and inserting

21 ‘‘Medicare Payment Review Commission’’

22 each place it appears in paragraph

23 (2)(A)(ii), (2)(B)(iii), and (5) of subsection

24 (c), subsection (d)(2)(F), paragraphs

25 (1)(B), (3), and (4)(A)of subsection (f),
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1 and paragraphs (6)(C) and (7)(C) of sub2 section (g).

3 (c) EFFECTIVE DATE; TRANSITION.—

4 (1) IN GENERAL.—The Comptroller General

5 shall first provide for appointment of members to

6 the Medicare Payment Review Commission (in this

7 subsection referred to as ‘‘MPRC’’) by not later

8 than March 31, 1996.

9 (2) TRANSITION.—Effective on a date (not later

10 than 30 days after the date a majority of members

11 of the MPRC have first been appointed, the Pro12 spective Payment Assessment Commission (in this

13 subsection referred to as ‘‘ProPAC’’) and the Physi14 cian Payment Review Commission (in this subsection

15 referred to as ‘‘PPRC’’), and amendments made by

16 subsection (b), are terminated. The Comptroller

17 General, to the maximum extent feasible, shall pro18 vide for the transfer to the MPRC of assets and

19 staff of ProPAC and PPRC, without any loss of

20 benefits or seniority by virtue of such transfers.

21 Fund balances available to the ProPAC or PPRC

22 for any period shall be available to the MPRC for

23 such period for like purposes.

24 (3) CONTINUING RESPONSIBILITY FOR RE25 PORTS.—The MPRC shall be responsible for the
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1 preparation and submission of reports required by

2 law to be submitted (and which have not been sub3 mitted by the date of establishment of the MPRC)

4 by the ProPAC and PPRC, and, for this purpose,

5 any reference in law to either such Commission is

6 deemed, after the appointment of the MPRC, to

7 refer to the MPRC.

8 SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY

9 BOOM GENERATION ON THE MEDICARE PRO10 GRAM.

11 (a) ESTABLISHMENT.—There is established a com12 mission to be known as the Commission on the Effect of

13 the Baby Boom Generation on the Medicare Program (in

14 this section referred to as the ‘‘Commission’’).

15 (b) DUTIES.—

16 (1) IN GENERAL.—The Commission shall—

17 (A) examine the financial impact on the

18 medicare program of the significant increase in

19 the number of medicare eligible individuals

20 which will occur beginning approximately dur21 ing 2010 and lasting for approximately 25

22 years, and

23 (B) make specific recommendations to the

24 Congress respecting a comprehensive approach

25 to preserve the medicare program for the period
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1 during which such individuals are eligible for

2 medicare.

3 (2) CONSIDERATIONS IN MAKING REC4 OMMENDATIONS.—In making its recommendations,

5 the Commission shall consider the following:

6 (A) The amount and sources of Federal

7 funds to finance the medicare program, includ8 ing the potential use of innovative financing

9 methods.

10 (B) The most efficient and effective man11 ner of administering the program, including the

12 appropriateness of continuing the application of

13 the failsafe budget mechanism under section

14 1895 of the Social Security Act for fiscal years

15 after fiscal year 2002 and the appropriate long16 term growth rates for contributions electing

17 coverage under Medicare Choice under part C

18 of title XVIII of such Act.

19 (C) Methods used by other nations to re20 spond to comparable demographic patterns in

21 eligibility for health care benefits for elderly

22 and disabled individuals.

23 (D) Modifying age-based eligibility to cor24 respond to changes in age-based eligibility

25 under the OASDI program.
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1 (E) Trends in employment-related health

2 care for retirees, including the use of medical

3 savings accounts and similar financing devices.

4 (c) MEMBERSHIP.—

5 (1) APPOINTMENT.—The Commission shall be

6 composed of 15 members appointed as follows:

7 (A) The President shall appoint 3 mem8 bers.

9 (B) The Majority Leader of the Senate

10 shall appoint, after consultation with the minor11 ity leader of the Senate, 6 members, of whom

12 not more than 4 may be of the same political

13 party.

14 (C) The Speaker of the House of Rep15 resentatives shall appoint, after consultation

16 with the minority leader of the House of Rep17 resentatives, 6 members, of whom not more

18 than 4 may be of the same political party.

19 (2) CHAIRMAN AND VICE CHAIRMAN.—The

20 Commission shall elect a Chairman and Vice Chair21 man from among its members.

22 (3) VACANCIES.—Any vacancy in the member23 ship of the Commission shall be filled in the manner

24 in which the original appointment was made and
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1 shall not affect the power of the remaining members

2 to execute the duties of the Commission.

3 (4) QUORUM.—A quorum shall consist of 8

4 members of the Commission, except that 4 members

5 may conduct a hearing under subsection (e).

6 (5) MEETINGS.—The Commission shall meet at

7 the call of its Chairman or a majority of its mem8 bers.

9 (6) COMPENSATION AND REIMBURSEMENT OF

10 EXPENSES.—Members of the Commission are not

11 entitled to receive compensation for service on the

12 Commission. Members may be reimbursed for travel,

13 subsistence, and other necessary expenses incurred

14 in carrying out the duties of the Commission.

15 (d) STAFF AND CONSULTANTS.—

16 (1) STAFF.—The Commission may appoint and

17 determine the compensation of such staff as may be

18 necessary to carry out the duties of the Commission.

19 Such appointments and compensation may be made

20 without regard to the provisions of title 5, United

21 States Code, that govern appointments in the com22 petitive services, and the provisions of chapter 51

23 and subchapter III of chapter 53 of such title that

24 relate to classifications and the General Schedule

25 pay rates.
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1 (2) CONSULTANTS.—The Commission may pro2 cure such temporary and intermittent services of

3 consultants under section 3109(b) of title 5, United

4 States Code, as the Commission determines to be

5 necessary to carry out the duties of the Commission.

6 (e) POWERS.—

7 (1) HEARINGS AND OTHER ACTIVITIES.—For

8 the purpose of carrying out its duties, the Commis9 sion may hold such hearings and undertake such

10 other activities as the Commission determines to be

11 necessary to carry out its duties.

12 (2) STUDIES BY GAO.—Upon the request of the

13 Commission, the Comptroller General shall conduct

14 such studies or investigations as the Commission de15 termines to be necessary to carry out its duties.

16 (3) COST ESTIMATES BY CONGRESSIONAL

17 BUDGET OFFICE.—

18 (A) Upon the request of the Commission,

19 the Director of the Congressional Budget Office

20 shall provide to the Commission such cost esti21 mates as the Commission determines to be nec22 essary to carry out its duties.

23 (B) The Commission shall reimburse the

24 Director of the Congressional Budget Office for

25 expenses relating to the employment in the of-
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1 fice of the Director of such additional staff as

2 may be necessary for the Director to comply

3 with requests by the Commission under sub4 paragraph (A).

5 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon

6 the request of the Commission, the head of any Fed7 eral agency is authorized to detail, without reim8 bursement, any of the personnel of such agency to

9 the Commission to assist the Commission in carry10 ing out its duties. Any such detail shall not interrupt

11 or otherwise affect the civil service status or privi12 leges of the Federal employee.

13 (5) TECHNICAL ASSISTANCE.—Upon the re14 quest of the Commission, the head of a Federal

15 agency shall provide such technical assistance to the

16 Commission as the Commission determines to be

17 necessary to carry out its duties.

18 (6) USE OF MAILS.—The Commission may use

19 the United States mails in the same manner and

20 under the same conditions as Federal agencies and

21 shall, for purposes of the frank, be considered a

22 commission of Congress as described in section 3215

23 of title 39, United States Code.

24 (7) OBTAINING INFORMATION.—The Commis25 sion may secure directly from any Federal agency
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1 information necessary to enable it to carry out its

2 duties, if the information may be disclosed under

3 section 552 of title 5, United States Code. Upon re4 quest of the Chairman of the Commission, the head

5 of such agency shall furnish such information to the

6 Commission.

7 (8) ADMINISTRATIVE SUPPORT SERVICES.—

8 Upon the request of the Commission, the Adminis9 trator of General Services shall provide to the Com10 mission on a reimbursable basis such administrative

11 support services as the Commission may request.

12 (9) ACCEPTANCE OF DONATIONS.—The Com13 mission may accept, use, and dispose of gifts or do14 nations of services or property.

15 (10) PRINTING.—For purposes of costs relating

16 to printing and binding, including the cost of per17 sonnel detailed from the Government Printing Of18 fice, the Commission shall be deemed to be a com19 mittee of the Congress.

20 (f) REPORT.—Not later than May 1, 1997, the Com21 mission shall submit to Congress a report containing its

22 findings and recommendations regarding how to protect

23 and preserve the medicare program in a financially solvent

24 manner until 2030 (or, if later, throughout the period of

25 projected solvency of the Federal Old-Age and Survivors
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1 Insurance Trust Fund). The report shall include detailed

2 recommendations for appropriate legislative initiatives re3 specting how to accomplish this objective.

4 (g) TERMINATION.—The Commission shall terminate

5 60 days after the date of submission of the report required

6 in subsection (f).

7 (h) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated $1,500,000 to carry out

9 this section. Amounts appropriated to carry out this sec10 tion shall remain available until expended.

11 PART 5—PREEMPTION OF STATE ANTI-MANAGED

12 CARE LAWS

13 SEC. 15041. PREEMPTION OF STATE LAW RESTRICTIONS ON

14 MANAGED CARE ARRANGEMENTS.

15 (a) LIMITATION ON RESTRICTIONS ON NETWORK

16 PLANS.—Effective as of January 1, 1997—

17 (1) a State may not prohibit or limit a carrier

18 or group health plan providing health coverage from

19 including incentives for enrollees to use the services

20 of participating providers;

21 (2) a State may not prohibit or limit such a

22 carrier or plan from limiting coverage of services to

23 those provided by a participating provider, except as

24 provided in section 1013;
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1 (3) a State may not prohibit or limit the nego2 tiation of rates and forms of payments for providers

3 by such a carrier or plan with respect to health cov4 erage;

5 (4) a State may not prohibit or limit such a

6 carrier or plan from limiting the number of partici7 pating providers;

8 (5) a State may not prohibit or limit such a

9 carrier or plan from requiring that services be pro10 vided (or authorized) by a practitioner selected by

11 the enrollee from a list of available participating pro12 viders or, except for services of a physician who spe13 cializes in obstetrics and gynecology, from requiring

14 enrollees to obtain referral in order to have coverage

15 for treatment by a specialist or health institution;

16 and

17 (6) a State may not prohibit or limit the cor18 porate practice of medicine.

19 (b) DEFINITIONS.—In this section:

20 (1) MANAGED CARE COVERAGE.—The term

21 ‘‘managed care coverage’’ means health coverage to

22 the extent the coverage is provided through a man23 aged care arrangement (as defined in paragraph (3))

24 that meets the applicable requirements of such sec25 tion.
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1 (2) PARTICIPATING PROVIDER.—The term

2 ‘‘participating provider’’ means an entity or individ3 ual which provides, sells, or leases health care serv4 ices as part of a provider network (as defined in

5 paragraph (4)).

6 (3) MANAGED CARE ARRANGEMENT.—The term

7 ‘‘managed care arrangement’’ means, with respect to

8 a group health plan or under health insurance cov9 erage, an arrangement under such plan or coverage

10 under which providers agree to provide items and

11 services covered under the arrangement to individ12 uals covered under the plan or who have such cov13 erage.

14 (4) PROVIDER NETWORK.—The term ‘‘provider

15 network’’ means, with respect to a group health plan

16 or health insurance coverage, providers who have en17 tered into an agreement described in paragraph (3).

18 SEC. 15042. PREEMPTION OF STATE LAWS RESTRICTING

19 UTILIZATION REVIEW PROGRAMS.

20 (a) IN GENERAL.—Effective January 1, 1997, no

21 State law or regulation shall prohibit or regulate activities

22 under a utilization review program (as defined in sub23 section (b)).

24 (b) UTILIZATION REVIEW PROGRAM DEFINED.—In

25 this section, the term ‘‘utilization review program’’ means
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1 a system of reviewing the medical necessity and appro2 priateness of patient services (which may include inpatient

3 and outpatient services) using specified guidelines. Such

4 a system may include preadmission certification, the appli5 cation of practice guidelines, continued stay review, dis6 charge planning, preauthorization of ambulatory proce7 dures, and retrospective review.

8 (c) EXEMPTION OF LAWS PREVENTING DENIAL OF

9 LIFESAVING MEDICAL TREATMENT PENDING TRANSFER

10 TO ANOTHER HEALTH CARE PROVIDER.—Nothing in this

11 subtitle shall be construed to invalidate any State law that

12 has the effect of preventing involuntary denial of life-pre13 serving medical treatment when such denial would cause

14 the involuntary death of the patient pending transfer of

15 the patient to a health care provider willing to provide

16 such treatment.

17 Subtitle B—Provisions Relating to

18 Regulatory Relief

19 PART 1—PROVISIONS RELATING TO PHYSICIAN

20 FINANCIAL RELATIONSHIPS

21 SEC. 15101. REPEAL OF PROHIBITIONS BASED ON COM22 PENSATION ARRANGEMENTS.

23 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

24 1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that

25 follows through ‘‘equity,’’ and inserting the following: ‘‘is
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1 (except as provided in subsection (c)) an ownership or in2 vestment interest in the entity through equity,’’.

3 (b) CONFORMING AMENDMENTS.—Section 1877 (42

4 U.S.C. 1395nn) is amended as follows:

5 (1) In subsection (b)—

6 (A) in the heading, by striking ‘‘TO BOTH

7 OWNERSHIP AND COMPENSATION ARRANGE8 MENT PROVISIONS’’ and inserting ‘‘WHERE FI9 NANCIAL RELATIONSHIP EXISTS’’; and

10 (B) by redesignating paragraph (4) as

11 paragraph (7).

12 (2) In subsection (c)—

13 (A) by amending the heading to read as

14 follows: ‘‘EXCEPTION FOR OWNERSHIP OR IN15 VESTMENT INTEREST IN PUBLICLY TRADED

16 SECURITIES AND MUTUAL FUNDS’’; and

17 (B) in the matter preceding paragraph (1),

18 by striking ‘‘subsection (a)(2)(A)’’ and inserting

19 ‘‘subsection (a)(2)’’.

20 (3) In subsection (d)—

21 (A) by striking the matter preceding para22 graph (1);

23 (B) in paragraph (3), by striking ‘‘para24 graph (1)’’ and inserting ‘‘paragraph (4)’’; and
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1 (C) by redesignating paragraphs (1), (2),

2 and (3) as paragraphs (4), (5), and (6), and by

3 transferring and inserting such paragraphs

4 after paragraph (3) of subsection (b).

5 (4) By striking subsection (e).

6 (5) In subsection (f)(2), as amended by section

7 152(a) of the Social Security Act Amendments of

8 1994—

9 (A) in the matter preceding paragraph (1),

10 by striking ‘‘ownership, investment, and com11 pensation’’ and inserting ‘‘ownership and in12 vestment’’;

13 (B) in paragraph (2), by striking ‘‘sub14 section (a)(2)(A)’’ and all that follows through

15 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub16 section (a)(2),’’; and

17 (C) in paragraph (2), by striking ‘‘or who

18 have such a compensation relationship with the

19 entity’’.

20 (6) In subsection (h)—

21 (A) by striking paragraphs (1), (2), and

22 (3);

23 (B) in paragraph (4)(A), by striking

24 clauses (iv) and (vi);
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1 (C) in paragraph (4)(B), by striking

2 ‘‘RULES.—’’ and all that follows through ‘‘(ii)

3 FACULTY’’ and inserting ‘‘RULES FOR FAC4 ULTY; and

5 (D) by adding at the end of paragraph (4)

6 the following new subparagraph:

7 ‘‘(C) MEMBER OF A GROUP.—A physician

8 is a ‘member’ of a group if the physician is an

9 owner or a bona fide employee, or both, of the

10 group.’’.

11 SEC. 15102. REVISION OF DESIGNATED HEALTH SERVICES

12 SUBJECT TO PROHIBITION.

13 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

14 1395nn(h)(6)) is amended by striking subparagraphs (B)

15 through (K) and inserting the following:

16 ‘‘(B) Items and services furnished by a

17 community pharmacy (as defined in paragraph

18 (1)).

19 ‘‘(C) Magnetic resonance imaging and

20 computerized tomography services.

21 ‘‘(D) Outpatient physical therapy serv22 ices.’’.

23 (b) COMMUNITY PHARMACY DEFINED.—Section

24 1877(h) (42 U.S.C. 1395nn(h)), as amended by section
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1 15101(b)(6), is amended by inserting before paragraph

2 (4) the following new paragraph:

3 ‘‘(1) COMMUNITY PHARMACY.—The term ‘com4 munity pharmacy’ means any entity licensed or cer5 tified to dispense prescription drugs by the State in

6 which the entity is located (including an entity which

7 dispenses such drugs by mail order).’’.

8 (c) CONFORMING AMENDMENTS.—

9 (1) Section 1877(b)(2) (42 U.S.C.

10 1395nn(b)(2)) is amended in the matter preceding

11 subparagraph (A) by striking ‘‘services’’ and all that

12 follows through ‘‘supplies)—’’ and inserting ‘‘serv13 ices—’’.

14 (2) Section 1877(h)(5)(C) (42 U.S.C.

15 1395nn(h)(5)(C)) is amended—

16 (A) by striking ‘‘, a request by a radiolo17 gist for diagnostic radiology services, and a re18 quest by a radiation oncologist for radiation

19 therapy,’’ and inserting ‘‘and a request by a ra20 diologist for magnetic resonance imaging or for

21 computerized tomography’’, and

22 (B) by striking ‘‘radiologist, or radiation

23 oncologist’’ and inserting ‘‘or radiologist’’.
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1 SEC. 15103. DELAY IN IMPLEMENTATION UNTIL PROMUL2 GATION OF REGULATIONS.

3 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

4 (42 U.S.C. 1395nn note) is amended—

5 (1) in paragraph (1), by striking ‘‘paragraph

6 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

7 (2) by adding at the end the following new

8 paragraph:

9 ‘‘(3) PROMULGATION OF REGULATIONS.—Not10 withstanding paragraphs (1) and (2), the amend11 ments made by this section shall not apply to any

12 referrals made before the effective date of final regu13 lations promulgated by the Secretary of Health and

14 Human Services to carry out such amendments.’’.

15 (b) EFFECTIVE DATE.—The amendments made by

16 subsection (a) shall take effect as if included in the enact17 ment of OBRA–1993.

18 SEC. 15104. EXCEPTIONS TO PROHIBITION.

19 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN20 CILLARY SERVICES.—

21 (1) REPEAL OF SITE-OF-SERVICE REQUIRE22 MENT.—Section 1877 (42 U.S.C. 1395nn) is amend23 ed—

24 (A) by amending subparagraph (A) of sub25 section (b)(2) to read as follows:
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1 ‘‘(A) that are furnished personally by the

2 referring physician, personally by a physician

3 who is a member of the same group practice as

4 the referring physician, or personally by individ5 uals who are under the general supervision of

6 the physician or of another physician in the

7 group practice, and’’, and

8 (B) by adding at the end of subsection (h)

9 the following new paragraph:

10 ‘‘(7) GENERAL SUPERVISION.—An individual is

11 considered to be under the ‘general supervision’ of a

12 physician if the physician (or group practice of

13 which the physician is a member) is legally respon14 sible for the services performed by the individual and

15 for ensuring that the individual meets licensure and

16 certification requirements, if any, applicable under

17 other provisions of law, regardless of whether or not

18 the physician is physically present when the individ19 ual furnishes an item or service.’’.

20 (2) CLARIFICATION OF TREATMENT OF PHYSI21 CIAN OWNERS OF GROUP PRACTICE.—Section

22 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is

23 amended by striking ‘‘physician or such group prac24 tice’’ and inserting ‘‘physician, such group practice,

25 or the physician owners of such group practice’’.
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1 (3) CONFORMING AMENDMENT.—Section

2 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

3 amending the heading to read as follows: ‘‘ANCIL4 LARY SERVICES FURNISHED PERSONALLY OR

5 THROUGH GROUP PRACTICE.—’’.

6 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

7 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

8 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

9 15101(b)(3)(C), is amended by striking ‘‘substantially all’’

10 and inserting ‘‘not less than 75 percent’’.

11 (c) REVISION OF EXCEPTION FOR CERTAIN MAN12 AGED CARE ARRANGEMENTS.—Section 1877(b)(3) (42

13 U.S.C. 1395nn(b)(3)) is amended—

14 (1) in the heading by inserting ‘‘MANAGED

15 CARE ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;

16 (2) in the matter preceding subparagraph (A),

17 by striking ‘‘organization—’’ and inserting ‘‘organi18 zation, directly or through contractual arrangements

19 with other entities, to individuals enrolled with the

20 organization—’’;

21 (3) in subparagraph (A), by inserting ‘‘or part

22 C’’ after ‘‘section 1876’’;

23 (4) by striking ‘‘or’’ at the end of subparagraph

24 (C);
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1 (5) by striking the period at the end of sub2 paragraph (D) and inserting a comma; and

3 (6) by adding at the end the following new sub4 paragraphs:

5 ‘‘(E) with a contract with a State to pro6 vide services under the State plan under title

7 XIX (in accordance with section 1903(m)) or a

8 State MediGrant plan under title XXI; or

9 ‘‘(F) which—

10 ‘‘(i) provides health care items or

11 services directly or through one or more

12 subsidiary entities or arranges for the pro13 vision of health care items or services sub14 stantially through the services of health

15 care providers under contract with the or16 ganization, and

17 ‘‘(ii)(I) assumes financial risk for the

18 provision of health services through mecha19 nisms (such as capitation, risk pools, with20 holds, and per diem payments) or offers its

21 network of contract health providers to an

22 entity (including self-insured employers

23 and indemnity plans) which assumes finan24 cial risk for the provision of such health

25 services, or
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1 ‘‘(II) has in effect a written agree2 ment with the provider of services under

3 which the provider is at significant finan4 cial risk (whether through a withhold, capi5 tation, incentive pool, per diem payments,

6 or similar risk sharing arrangement) for

7 the cost or utilization of services that the

8 provider is obligated to provide.’’.

9 (d) NEW EXCEPTION FOR SHARED FACILITY SERV10 ICES.—

11 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

12 1395nn(b)), as amended by section 15101(b)(3)(C),

13 is amended—

14 (A) by redesignating paragraphs (4)

15 through (7) as paragraphs (5) through (8); and

16 (B) by inserting after paragraph (3) the

17 following new paragraph:

18 ‘‘(4) SHARED FACILITY SERVICES.—In the case

19 of a designated health service consisting of a shared

20 facility service of a shared facility—

21 ‘‘(A) that is furnished—

22 ‘‘(i) personally by the referring physi23 cian who is a shared facility physician or

24 personally by an individual directly em-
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1 ployed or under the general supervision of

2 such a physician,

3 ‘‘(ii) by a shared facility in a building

4 in which the referring physician furnishes

5 substantially all of the services of the phy6 sician that are unrelated to the furnishing

7 of shared facility services, and

8 ‘‘(iii) to a patient of a shared facility

9 physician; and

10 ‘‘(B) that is billed by the referring physi11 cian or a group practice of which the physician

12 is a member.’’.

13 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

14 1395nn(h)), as amended by section 15101(b)(6) and

15 section 15102(b), is amended by inserting after

16 paragraph (1) the following new paragraph:

17 ‘‘(2) SHARED FACILITY RELATED DEFINI18 TIONS.—

19 ‘‘(A) SHARED FACILITY SERVICE.—The

20 term ‘shared facility service’ means, with re21 spect to a shared facility, a designated health

22 service furnished by the facility to patients of

23 shared facility physicians.

24 ‘‘(B) SHARED FACILITY.—The term

25 ‘shared facility’ means an entity that furnishes
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1 shared facility services under a shared facility

2 arrangement.

3 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

4 term ‘shared facility physician’ means, with re5 spect to a shared facility, a physician (or a

6 group practice of which the physician is a mem7 ber) who has a financial relationship under a

8 shared facility arrangement with the facility.

9 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

10 The term ‘shared facility arrangement’ means,

11 with respect to the provision of shared facility

12 services in a building, a financial arrange13 ment—

14 ‘‘(i) which is only between physicians

15 who are providing services (unrelated to

16 shared facility services) in the same build17 ing,

18 ‘‘(ii) in which the overhead expenses

19 of the facility are shared, in accordance

20 with methods previously determined by the

21 physicians in the arrangement, among the

22 physicians in the arrangement, and

23 ‘‘(iii) which, in the case of a corpora24 tion, is wholly owned and controlled by

25 shared facility physicians.’’.
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1 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

2 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—

3 Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by

4 section 15101(b)(3)(C) and subsection (d)(1), is amend5 ed—

6 (1) by redesignating paragraphs (5) through

7 (8) as paragraphs (6) through (9); and

8 (2) by inserting after paragraph (4) the follow9 ing new paragraph:

10 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—

11 In the case of a designated health service furnished

12 in any area with respect to which the Secretary de13 termines that individuals residing in the area do not

14 have reasonable access to such a designated health

15 service for which subsection (a)(1) does not apply.’’.

16 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

17 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

18 U.S.C. 1395nn(b)), as amended by section

19 15101(b)(3)(C), subsection (d)(1), and subsection (e)(1),

20 is amended—

21 (1) by redesignating paragraphs (6) through

22 (9) as paragraphs (7) through (10); and

23 (2) by inserting after paragraph (5) the follow24 ing new paragraph:
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1 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

2 SURGICAL CENTERS.—In the case of a designated

3 health service furnished in an ambulatory surgical

4 center described in section 1832(a)(2)(F)(i).’’.

5 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

6 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42

7 U.S.C. 1395nn(b)), as amended by section

8 15101(b)(3)(C), subsection (d)(1), subsection (e)(1), and

9 subsection (f), is amended—

10 (1) by redesignating paragraphs (7) through

11 (10) as paragraphs (8) through (11); and

12 (2) by inserting after paragraph (6) the follow13 ing new paragraph:

14 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

15 FACILITIES.—In the case of a designated health

16 service furnished in a renal dialysis facility under

17 section 1881.’’.

18 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN

19 A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

20 amended by section 15101(b)(3)(C), subsection (d)(1),

21 subsection (e)(1), subsection (f), and subsection (g), is

22 amended—

23 (1) by redesignating paragraphs (8) through

24 (11) as paragraphs (9) through (12); and
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1 (2) by inserting after paragraph (7) the follow2 ing new paragraph:

3 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO4 GRAM.—In the case of a designated health service

5 furnished by a hospice program under section

6 1861(dd)(2).’’.

7 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN

8 A COMPREHENSIVE OUTPATIENT REHABILITATION FA9 CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

10 amended by section 15101(b)(3)(C), subsection (d)(1),

11 subsection (e)(1), subsection (f), subsection (g), and sub12 section (h), is amended—

13 (1) by redesignating paragraphs (9) through

14 (12) as paragraphs (10) through (13); and

15 (2) by inserting after paragraph (8) the follow16 ing new paragraph:

17 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN18 SIVE OUTPATIENT REHABILITATION FACILITY.—In

19 the case of a designated health service furnished in

20 a comprehensive outpatient rehabilitation facility (as

21 defined in section 1861(cc)(2)).’’.

22 (i) DEFINITION OF REFERRAL.—Section

23 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amend24 ed—
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1 (1) by striking ‘‘an item or service’’ and insert2 ing ‘‘a designated health service’’, and

3 (2) by striking ‘‘the item or service’’ and insert4 ing ‘‘the designated health service’’.

5 SEC. 15105. REPEAL OF REPORTING REQUIREMENTS.

6 Section 1877 (42 U.S.C. 1395nn) is amended—

7 (1) by striking subsection (f); and

8 (2) by striking subsection (g)(5).

9 SEC. 15106. PREEMPTION OF STATE LAW.

10 Section 1877 (42 U.S.C. 1395nn) is amended by add11 ing at the end the following new subsection:

12 ‘‘(i) PREEMPTION OF STATE LAW.—This section pre13 empts State law to the extent State law is inconsistent

14 with this section.’’.

15 SEC. 15107. EFFECTIVE DATE.

16 Except as provided in section 15103(b), the amend17 ments made by this part shall apply to referrals made on

18 or after August 14, 1995, regardless of whether or not

19 regulations are promulgated to carry out such amend20 ments.

21 PART 2—ANTITRUST REFORM

22 SEC. 15111. PUBLICATION OF ANTITRUST GUIDELINES ON

23 ACTIVITIES OF HEALTH PLANS.

24 (a) IN GENERAL.—The Attorney General shall pro25 vide for the development and publication of explicit guide-
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1 lines on the application of antitrust laws to the activities

2 of health plans. The guidelines shall be designed to facili3 tate development and operation of plans, consistent with

4 the antitrust laws.

5 (b) REVIEW PROCESS.—The Attorney General shall

6 establish a review process under which the administrator

7 or sponsor of a health plan (or organization that proposes

8 to administer or sponsor a health plan) may submit a re9 quest to the Attorney General to obtain a prompt opinion

10 (but in no event later than 90 days after the Attorney

11 General receives the request) from the Department of Jus12 tice on the plan’s conformity with the Federal antitrust

13 laws.

14 SEC. 15112. ISSUANCE OF HEALTH CARE CERTIFICATES OF

15 PUBLIC ADVANTAGE.

16 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

17 Attorney General, after consultation with the Secretary,

18 shall issue in accordance with this section a certificate of

19 public advantage to each eligible health care collaborative

20 activity that complies with the requirements in effect

21 under this section on or after the expiration of the 1-year

22 period that begins on the date of the enactment of this

23 Act (without regard to whether or not the Attorney Gen24 eral has promulgated regulations to carry out this section

25 by such date). Such activity, and the parties to such activ-
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1 ity, shall not be liable under any of the antitrust laws for

2 conduct described in such certificate and engaged in by

3 such activity if such conduct occurs while such certificate

4 is in effect.

5 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

6 CERTIFICATES.—

7 (1) STANDARDS TO BE MET.—The Attorney

8 General shall issue a certificate to an eligible health

9 care collaborative activity if the Attorney General

10 finds that—

11 (A) the benefits that are likely to result

12 from carrying out the activity outweigh the re13 duction in competition (if any) that is likely to

14 result from the activity, and

15 (B) such reduction in competition is nec16 essary to obtain such benefits.

17 (2) FACTORS TO BE CONSIDERED.—

18 (A) WEIGHING OF BENEFITS AGAINST RE19 DUCTION IN COMPETITION.—For purposes of

20 making the finding described in paragraph

21 (1)(A), the Attorney General shall consider

22 whether the activity is likely—

23 (i) to maintain or to increase the

24 quality of health care by providing new
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1 services not currently offered in the rel2 evant market,

3 (ii) to increase access to health care,

4 (iii) to achieve cost efficiencies that

5 will be passed on to health care consumers,

6 such as economies of scale, reduced trans7 action costs, and reduced administrative

8 costs, that cannot be achieved by the provi9 sion of available services and facilities in

10 the relevant market,

11 (iv) to preserve the operation of

12 health care facilities located in underserved

13 geographical areas,

14 (v) to improve utilization of health

15 care resources, and

16 (vi) to reduce inefficient health care

17 resource duplication.

18 (B) NECESSITY OF REDUCTION IN COM19 PETITION.—For purposes of making the finding

20 described in paragraph (1)(B), the Attorney

21 General shall consider—

22 (i) the ability of the providers of

23 health care services that are (or likely to

24 be) affected by the health care collabo25 rative activity and the entities responsible
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1 for making payments to such providers to

2 negotiate societally optimal payment and

3 service arrangements,

4 (ii) the effects of the health care col5 laborative activity on premiums and other

6 charges imposed by the entities described

7 in clause (i), and

8 (iii) the availability of equally effi9 cient, less restrictive alternatives to achieve

10 the benefits that are intended to be

11 achieved by carrying out the activity.

12 (c) ESTABLISHMENT OF CRITERIA AND PROCE13 DURES.—Subject to subsections (d) and (e), not later than

14 1 year after the date of the enactment of this Act, the

15 Attorney General and the Secretary shall establish jointly

16 by rule the criteria and procedures applicable to the issu17 ance of certificates under subsection (a). The rules shall

18 specify the form and content of the application to be sub19 mitted to the Attorney General to request a certificate,

20 the information required to be submitted in support of

21 such application, the procedures applicable to denying and

22 to revoking a certificate, and the procedures applicable to

23 the administrative appeal (if such appeal is authorized by

24 rule) of the denial and the revocation of a certificate. Such

25 information may include the terms of the health care col-
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1 laborative activity (in the case of an activity in existence

2 as of the time of the application) and implementation plan

3 for the collaborative activity.

4 (d) ELIGIBLE HEALTH CARE COLLABORATIVE AC5 TIVITY.—To be an eligible health care collaborative activ6 ity for purposes of this section, a health care collaborative

7 activity shall submit to the Attorney General an applica8 tion that complies with the rules in effect under subsection

9 (c) and that includes—

10 (1) an agreement by the parties to the activity

11 that the activity will not foreclose competition by en12 tering into contracts that prevent health care provid13 ers from providing health care in competition with

14 the activity,

15 (2) an agreement that the activity will submit

16 to the Attorney General annually a report that de17 scribes the operations of the activity and information

18 regarding the impact of the activity on health care

19 and on competition in health care, and

20 (3) an agreement that the parties to the activity

21 will notify the Attorney General and the Secretary of

22 the termination of the activity not later than 30

23 days after such termination occurs.

24 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

25 Not later than 90 days after an eligible health care col-
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1 laborative activity submits to the Attorney General an ap2 plication that complies with the rules in effect under sub3 section (c) and with subsection (d), the Attorney General

4 shall issue or deny the issuance of such certificate. If, be5 fore the expiration of such 90-day period, the Attorney

6 General may extend the time for issuance for good cause.

7 (f) REVOCATION OF CERTIFICATE.—Whenever the

8 Attorney General finds that a health care collaborative ac9 tivity with respect to which a certificate is in effect does

10 not meet the standards specified in subsection (b), the At11 torney General shall revoke such certificate.

12 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

13 (1) DENIAL AND REVOCATION OF CERTIFI14 CATES.—If the Attorney General denies an applica15 tion for a certificate or revokes a certificate, the At16 torney General shall include in the notice of denial

17 or revocation a statement of the reasons relied upon

18 for the denial or revocation of such certificate.

19 (2) JUDICIAL REVIEW.—

20 (A) AFTER ADMINISTRATIVE PROCEED21 ING.—(i) If the Attorney General denies an ap22 plication submitted or revokes a certificate is23 sued under this section after an opportunity for

24 hearing on the record, then any party to the

25 health care collaborative activity involved may
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1 commence a civil action, not later than 60 days

2 after receiving notice of the denial or revoca3 tion, in an appropriate district court of the

4 United States for review of the record of such

5 denial or revocation.

6 (ii) As part of the Attorney General’s an7 swer, the Attorney General shall file in such

8 court a certified copy of the record on which

9 such denial or revocation is based. The findings

10 of fact of the Attorney General may be set aside

11 only if found to be unsupported by substantial

12 evidence in such record taken as a whole.

13 (B) DENIAL OR REVOCATION WITHOUT AD14 MINISTRATIVE PROCEEDING.—If the Attorney

15 General denies an application submitted or re16 vokes a certificate issued under this section

17 without an opportunity for hearing on the

18 record, then any party to the health care col19 laborative activity involved may commence a

20 civil action, not later than 60 days after receiv21 ing notice of the denial or revocation, in an ap22 propriate district court of the United States for

23 de novo review of such denial or revocation.

24 (h) EXEMPTION.—A person shall not be liable under

25 any of the antitrust laws for conduct necessary—
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1 (1) to prepare, agree to prepare, or attempt to

2 agree to prepare an application to request a certifi3 cate under this section, or

4 (2) to attempt to enter into any health care col5 laborative activity with respect to which such a cer6 tificate is in effect.

7 (i) DEFINITIONS.—In this section:

8 (1) The term ‘‘certificate’’ means a certificate

9 of public advantage authorized to be issued under

10 subsection (a).

11 (2) The term ‘‘health care collaborative activ12 ity’’ means an agreement (whether existing or pro13 posed) between 2 or more providers of health care

14 services that is entered into solely for the purpose of

15 sharing in the provision and coordination of health

16 care services and that involves substantial integra17 tion and financial risk-sharing between the parties,

18 but does not include the exchanging of information,

19 the entering into of any agreement, or the engage20 ment in any other conduct that is not reasonably re21 quired to carry out such agreement.

22 (3) The term ‘‘health care services’’ includes

23 services related to the delivery or administration of

24 health care services.
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1 (4) The term ‘‘liable’’ means liable for any civil

2 or criminal violation of the antitrust laws.

3 (5) The term ‘‘provider of health care services’’

4 means any individual or entity that is engaged in the

5 delivery of health care services in a State and that

6 is required by State law or regulation to be licensed

7 or certified by the State to engage in the delivery of

8 such services in the State.

9 SEC. 15113. STUDY OF IMPACT ON COMPETITION.

10 The Attorney General, in consultation with the Chair11 man of the Federal Trade Commission, annually shall sub12 mit to the Congress a report as part of the annual budget

13 oversight proceedings concerning the Antitrust Division of

14 the Department of Justice. The report shall enable the

15 Congress to determine how enforcement of antitrust laws

16 is affecting the formation of efficient, cost-saving joint

17 ventures and if the certificate of public advantage proce18 dure set forth in section 15112 has resulted in undesirable

19 reduction in competition in the health care marketplace.

20 The report shall include an evaluation of the factors set

21 forth in paragraphs (2)(A) and (2)(B) of section

22 15112(b).

23 SEC. 15114. ANTITRUST EXEMPTION.

24 The antitrust laws shall not apply with respect to—
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1 (1) the merger of, or the attempt to merge, 2

2 or more hospitals,

3 (2) a contract entered into solely by 2 or more

4 hospitals to allocate hospital services, or

5 (3) the attempt by only 2 or more hospitals to

6 enter into a contract to allocate hospital services,

7 if each of such hospitals satisfies all of the requirements

8 of section 15115 at the time such hospitals engage in the

9 conduct described in paragraph (1), (2), or (3), as the case

10 may be.

11 SEC. 15115. REQUIREMENTS.

12 The requirements referred to in section 15114 are as

13 follows:

14 (1) The hospital is located outside of a city, or

15 in a city that has less than 150,000 inhabitants, as

16 determined in accordance with the most recent data

17 available from the Bureau of the Census.

18 (2) In the most recently concluded calendar

19 year, the hospital received more than 40 percent of

20 its gross revenue from payments made under Fed21 eral programs.

22 (3) There is in effect with respect to the hos23 pital a certificate issued by the Health Care Financ24 ing Administration specifying that such Administra25 tion has determined that Federal expenditures would
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1 be reduced, consumer costs would not increase, and

2 access to health care services would not be reduced,

3 if the hospital and the other hospitals that requested

4 such certificate merge, or allocate the hospital serv5 ices specified in such request, as the case may be.

6 SEC. 15116. DEFINITION.

7 For purposes of this subtitle, the term ‘antitrust

8 laws’ has the meaning given such term in subsection (a)

9 of the first section of the Clayton Act (15 U.S.C. 12), ex10 cept that such term includes section 5 of the Federal

11 Trade Commission Act (15 U.S.C. 45) to the extent that

12 such section 5 applies with respect to unfair methods of

13 competition.

14 PART 3—MALPRACTICE REFORM

15 Subpart A—Uniform Standards for Malpractice

16 Claims

17 SEC. 15121. APPLICABILITY.

18 Except as provided in section 15131, this subpart

19 shall apply to any medical malpractice liability action

20 brought in a Federal or State court, and to any medical

21 malpractice claim subject to an alternative dispute resolu22 tion system, that is initiated on or after January 1, 1996.
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1 SEC. 15122. REQUIREMENT FOR INITIAL RESOLUTION OF

2 ACTION THROUGH ALTERNATIVE DISPUTE

3 RESOLUTION.

4 (a) IN GENERAL.—

5 (1) STATE CASES.—A medical malpractice li6 ability action may not be brought in any State court

7 during a calendar year unless the medical mal8 practice liability claim that is the subject of the ac9 tion has been initially resolved under an alternative

10 dispute resolution system certified for the year by

11 the Secretary under section 15132(a), or, in the case

12 of a State in which such a system is not in effect

13 for the year, under the alternative Federal system

14 established under section 15132(b).

15 (2) FEDERAL DIVERSITY ACTIONS.—A medical

16 malpractice liability action may not be brought in

17 any Federal court under section 1332 of title 28,

18 United States Code, during a calendar year unless

19 the medical malpractice liability claim that is the

20 subject of the action has been initially resolved

21 under the alternative dispute resolution system re22 ferred to in paragraph (1) that applied in the State

23 whose law applies in such action.

24 (3) CLAIMS AGAINST UNITED STATES.—

25 (A) ESTABLISHMENT OF PROCESS FOR

26 CLAIMS.—The Attorney General shall establish
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1 an alternative dispute resolution process for the

2 resolution of tort claims consisting of medical

3 malpractice liability claims brought against the

4 United States under chapter 171 of title 28,

5 United States Code. Under such process, the

6 resolution of a claim shall occur after the com7 pletion of the administrative claim process ap8 plicable to the claim under section 2675 of such

9 title.

10 (B) REQUIREMENT FOR INITIAL RESOLU11 TION UNDER PROCESS.—A medical malpractice

12 liability action based on a medical malpractice

13 liability claim described in subparagraph (A)

14 may not be brought in any Federal court unless

15 the claim has been initially resolved under the

16 alternative dispute resolution process estab17 lished by the Attorney General under such sub18 paragraph.

19 (b) INITIAL RESOLUTION OF CLAIMS UNDER

20 ADR.—For purposes of subsection (a), an action is ‘‘ini21 tially resolved’’ under an alternative dispute resolution

22 system if—

23 (1) the ADR reaches a decision on whether the

24 defendant is liable to the plaintiff for damages; and
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1 (2) if the ADR determines that the defendant

2 is liable, the ADR reaches a decision on the amount

3 of damages assessed against the defendant.

4 (c) PROCEDURES FOR FILING ACTIONS.—

5 (1) NOTICE OF INTENT TO CONTEST DECI6 SION.—Not later than 60 days after a decision is is7 sued with respect to a medical malpractice liability

8 claim under an alternative dispute resolution system,

9 each party affected by the decision shall submit a

10 sealed statement to a court of competent jurisdiction

11 indicating whether or not the party intends to con12 test the decision.

13 (2) DEADLINE FOR FILING ACTION.—A medical

14 malpractice liability action may not be brought by a

15 party unless—

16 (A) the party has filed the notice of intent

17 required by paragraph (1); and

18 (B) the party files the action in a court of

19 competent jurisdiction not later than 90 days

20 after the decision resolving the medical mal21 practice liability claim that is the subject of the

22 action is issued under the applicable alternative

23 dispute resolution system.
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1 (3) COURT OF COMPETENT JURISDICTION.—

2 For purposes of this subsection, the term ‘‘court of

3 competent jurisdiction’’ means—

4 (A) with respect to actions filed in a State

5 court, the appropriate State trial court; and

6 (B) with respect to actions filed in a Fed7 eral court, the appropriate United States dis8 trict court.

9 (d) LEGAL EFFECT OF UNCONTESTED ADR DECI10 SION.—The decision reached under an alternative dispute

11 resolution system shall, for purposes of enforcement by a

12 court of competent jurisdiction, have the same status in

13 the court as the verdict of a medical malpractice liability

14 action adjudicated in a State or Federal trial court. The

15 previous sentence shall not apply to a decision that is con16 tested by a party affected by the decision pursuant to sub17 section (c)(1).

18 SEC. 15123. OPTIONAL APPLICATION OF PRACTICE GUIDE19 LINES.

20 (a) DEVELOPMENT AND CERTIFICATION OF GUIDE21 LINES.—Each State may develop, for certification by the

22 Secretary, a set of specialty clinical practice guidelines,

23 based on recommended guidelines from national specialty

24 societies, to be updated annually. In the absence of rec25 ommended guidelines from such societies, each State may
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1 develop such guidelines based on such criteria as the State

2 considers appropriate (including based on recommended

3 guidelines developed by the Agency for Health Care Policy

4 and Research).

5 (b) PROVISION OF HEALTH CARE UNDER GUIDE6 LINES.—Notwithstanding any other provision of law, in

7 any medical malpractice liability action arising from the

8 conduct of a health care provider or health care profes9 sional, if such conduct was in accordance with a guideline

10 developed by the State in which the conduct occurred and

11 certified by the Secretary under subsection (a), the guide12 line—

13 (1) may be introduced by any party to the ac14 tion (including a health care provider, health care

15 professional, or patient); and

16 (2) if introduced, shall establish a rebuttable

17 presumption that the conduct was in accordance

18 with the appropriate standard of medical care, which

19 may only be overcome by the presentation of clear

20 and convincing evidence on behalf of the party

21 against whom the presumption operates.

22 SEC. 15124. TREATMENT OF NONECONOMIC AND PUNITIVE

23 DAMAGES.

24 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

25 total amount of noneconomic damages that may be award-
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1 ed to a claimant and the members of the claimant’s family

2 for losses resulting from the injury which is the subject

3 of a medical malpractice liability action may not exceed

4 $250,000, regardless of the number of parties against

5 whom the action is brought or the number of actions

6 brought with respect to the injury.

7 (b) NO AWARD OF PUNITIVE DAMAGES AGAINST

8 MANUFACTURER OF MEDICAL PRODUCT.—In the case of

9 a medical malpractice liability action in which the plaintiff

10 alleges a claim against the manufacturer of a medical

11 product, no punitive or exemplary damages may be award12 ed against such manufacturer.

13 (c) JOINT AND SEVERAL LIABILITY FOR NON14 ECONOMIC DAMAGES.—The liability of each defendant for

15 noneconomic damages shall be several only and shall not

16 be joint, and each defendant shall be liable only for the

17 amount of noneconomic damages allocated to the defend18 ant in direct proportion to the defendant’s percentage of

19 responsibility (as determined by the trier of fact).

20 (d) USE OF PUNITIVE DAMAGE AWARDS FOR OPER21 ATION OF ADR SYSTEMS IN STATES.—

22 (1) IN GENERAL.—The total amount of any pu23 nitive damages awarded in a medical malpractice li24 ability action shall be paid to the State in which the

25 action is brought (or, in a case brought in Federal
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1 court, in the State in which the health care services

2 that caused the injury that is the subject of the ac3 tion were provided), and shall be used by the State

4 solely to implement and operate the State alternative

5 dispute resolution system certified by the Secretary

6 under section 15132 (except as provided in para7 graph (2)).

8 (2) USE OF REMAINING AMOUNTS FOR PRO9 VIDER LICENSING AND DISCIPLINARY ACTIVITIES.—

10 If the amount of punitive damages paid to a State

11 under paragraph (1) for a year is greater than the

12 State’s costs of implementing and operating the

13 State alternative dispute resolution system during

14 the year, the balance of such punitive damages paid

15 to the State shall be used solely to carry out activi16 ties to assure the safety and quality of health care

17 services provided in the State, including (but not

18 limited to)—

19 (A) licensing or certifying health care pro20 fessionals and health care providers in the

21 State; and

22 (B) carrying out programs to reduce mal23 practice-related costs for providers volunteering

24 to provide services in medically underserved

25 areas.
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1 (3) MAINTENANCE OF EFFORT.—A State shall

2 use any amounts paid pursuant to paragraph (1) to

3 supplement and not to replace amounts spent by the

4 State for implementing and operating the State al5 ternative dispute resolution system or carrying out

6 the activities described in paragraph (2).

7 (e) DRUGS AND DEVICES.—

8 (1)(A) Punitive damages shall not be awarded

9 against a manufacturer or product seller of a drug

10 (as defined in section 201(g)(1) of the Federal

11 Food, Drug, and Cosmetic Act (21 U.S.C.

12 321(g)(1)) or medical device (as defined in section

13 201(h) of the Federal Food, Drug, and Cosmetic

14 Act (21 U.S.C. 321(h)) which caused the claimant’s

15 harm where—

16 (i) such drug or device was subject to pre17 market approval by the Food and Drug Admin18 istration with respect to the safety of the for19 mulation or performance of the aspect of such

20 drug or device which caused the claimant’s

21 harm or the adequacy of the packaging or label22 ing of such drug or device, and such drug was

23 approved by the Food and Drug Administra24 tion; or
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1 (ii) the drug is generally recognized as safe

2 and effective pursuant to conditions established

3 by the Food and Drug Administration and ap4 plicable regulations, including packaging and la5 beling regulations.

6 (B) Subparagraph (A) shall not apply in any

7 case in which the defendant, before or after pre8 market approval of a drug or device—

9 (i) intentionally and wrongfully withheld

10 from or misrepresented to the Food and Drug

11 Administration information concerning such

12 drug or device required to be submitted under

13 the Federal Food, Drug, and Cosmetic Act (21

14 U.S.C. 301 et seq.) or section 351 of the Public

15 Health Service Act (42 U.S.C. 262) that is ma16 terial and relevant to the harm suffered by the

17 claimant, or

18 (ii) made an illegal payment to an official

19 or employee of the Food and Drug Administra20 tion for the purpose of securing or maintaining

21 approval of such drug or device.

22 (2) PACKAGING.—In a product liability action

23 for harm which is alleged to relate to the adequacy

24 of the packaging (or labeling relating to such pack25 aging) of a drug which is required to have tamper-
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1 resistant packaging under regulations of the Sec2 retary of Health and Human Services (including la3 beling regulations related to such packaging), the

4 manufacturer of the drug shall not be held liable for

5 punitive damages unless the drug is found by the

6 court by clear and convincing evidence to be sub7 stantially out of compliance with such regulations.

8 SEC. 15125. PERIODIC PAYMENTS FOR FUTURE LOSSES.

9 (a) IN GENERAL.—In any medical malpractice liabil10 ity action in which the damages awarded for future eco11 nomic loss exceeds $100,000, a defendant may not be re12 quired to pay such damages in a single, lump-sum pay13 ment, but may be permitted to make such payments on

14 a periodic basis. The periods for such payments shall be

15 determined by the court, based upon projections of when

16 such expenses are likely to be incurred.

17 (b) WAIVER.—A court may waive the application of

18 subsection (a) with respect to a defendant if the court de19 termines that it is not in the best interests of the plaintiff

20 to receive payments for damages on such a periodic basis.

21 SEC. 15126. TREATMENT OF ATTORNEY’S FEES AND OTHER

22 COSTS.

23 (a) REQUIRING PARTY CONTESTING ADR RULING

24 TO PAY ATTORNEY’S FEES AND OTHER COSTS.—
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1 (1) IN GENERAL.—The court in a medical mal2 practice liability action shall require the party that

3 (pursuant to section 15122(c)(1)) contested the rul4 ing of the alternative dispute resolution system with

5 respect to the medical malpractice liability claim

6 that is the subject of the action to pay to the oppos7 ing party the costs incurred by the opposing party

8 under the action, including attorney’s fees, fees paid

9 to expert witnesses, and other litigation expenses

10 (but not including court costs, filing fees, or other

11 expenses paid directly by the party to the court, or

12 any fees or costs associated with the resolution of

13 the claim under the alternative dispute resolution

14 system), but only if—

15 (A) in the case of an action in which the

16 party that contested the ruling is the claimant,

17 the amount of damages awarded to the party

18 under the action is less than the amount of

19 damages awarded to the party under the ADR

20 system; and

21 (B) in the case of an action in which the

22 party that contested the ruling is the defendant,

23 the amount of damages assessed against the

24 party under the action is greater than the
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1 amount of damages assessed under the ADR

2 system.

3 (2) EXCEPTIONS.—Paragraph (1) shall not

4 apply if—

5 (A) the party contesting the ruling made

6 under the previous alternative dispute resolu7 tion system shows that—

8 (i) the ruling was procured by corrup9 tion, fraud, or undue means,

10 (ii) there was partiality or corruption

11 under the system,

12 (iii) there was other misconduct under

13 the system that materially prejudiced the

14 party’s rights, or

15 (iv) the ruling was based on an error

16 of law;

17 (B) the party contesting the ruling made

18 under the alternative dispute resolution system

19 presents new evidence before the trier of fact

20 that was not available for presentation under

21 the ADR system;

22 (C) the medical malpractice liability action

23 raised a novel issue of law; or

24 (D) the court finds that the application of

25 such paragraph to a party would constitute an
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1 undue hardship, and issues an order waiving or

2 modifying the application of such paragraph

3 that specifies the grounds for the court’s deci4 sion.

5 (3) LIMIT ON ATTORNEYS’ FEES PAID.—Attor6 neys’ fees that are required to be paid under para7 graph (1) by the contesting party shall not exceed

8 the amount of the attorneys’ fees incurred by the

9 contesting party in the action. If the attorneys’ fees

10 of the contesting party are based on a contingency

11 fee agreement, the amount of attorneys’ fees for

12 purposes of the preceding sentence shall not exceed

13 the reasonable value of those services.

14 (4) RECORDS.—In order to receive attorneys’

15 fees under paragraph (1), counsel of record in the

16 medical malpractice liability action involved shall

17 maintain accurate, complete records of hours worked

18 on the action, regardless of the fee arrangement

19 with the client involved.

20 (b) CONTINGENCY FEE DEFINED.—As used in this

21 section, the term ‘‘contingency fee’’ means any fee for pro22 fessional legal services which is, in whole or in part, con23 tingent upon the recovery of any amount of damages,

24 whether through judgment or settlement.
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1 SEC. 15127. UNIFORM STATUTE OF LIMITATIONS.

2 (a) IN GENERAL.—Except as provided in subsection

3 (b), no medical malpractice claim may be initiated after

4 the expiration of the 2-year period that begins on the date

5 on which the alleged injury that is the subject of such

6 claim was discovered, but in no event may such a claim

7 be initiated after the expiration of the 4-year period that

8 begins on the date on which the alleged injury that is the

9 subject of such claim occurred.

10 (b) EXCEPTION FOR MINORS.—In the case of an al11 leged injury suffered by a minor who has not attained 6

12 years of age, a medical malpractice claim may not be initi13 ated after the expiration of the 2-year period that begins

14 on the date on which the alleged injury that is the subject

15 of such claim was discovered or should reasonably have

16 been discovered, but in no event may such a claim be initi17 ated after the date on which the minor attains 12 years

18 of age.

19 SEC. 15128. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

20 SERVICES.

21 (a) IN GENERAL.—In the case of a medical mal22 practice claim relating to services provided during labor

23 or the delivery of a baby, if the health care professional

24 or health care provider against whom the claim is brought

25 did not previously treat the claimant for the pregnancy,

26 the trier of fact may not find that such professional or
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1 provider committed malpractice and may not assess dam2 ages against such professional or provider unless the mal3 practice is proven by clear and convincing evidence.

4 (b) APPLICABILITY TO GROUP PRACTICES OR

5 AGREEMENTS AMONG PROVIDERS.—For purposes of sub6 section (a), a health care professional shall be considered

7 to have previously treated an individual for a pregnancy

8 if the professional is a member of a group practice whose

9 members previously treated the individual for the preg10 nancy or is providing services to the individual during

11 labor or the delivery of a baby pursuant to an agreement

12 with another professional.

13 SEC. 15129. JURISDICTION OF FEDERAL COURTS.

14 Nothing in this subpart shall be construed to estab15 lish any jurisdiction over any medical malpractice liability

16 action in the district courts of the United States on the

17 basis of sections 1331 or 1337 of title 28, United States

18 Code.

19 SEC. 15130. PREEMPTION.

20 (a) IN GENERAL.—The provisions of this subpart

21 shall preempt any State law to the extent such law is in22 consistent with such provisions, except that the provisions

23 of this subpart shall not preempt any State law that pro24 vides for defenses or places limitations on a person’s liabil25 ity in addition to those contained in this part, places great-
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1 er limitations on the amount of attorneys’ fees that can

2 be collected, or otherwise imposes greater restrictions than

3 those provided in this part.

4 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

5 OF LAW OR VENUE.—Nothing in this subpart shall be

6 construed to—

7 (1) waive or affect any defense of sovereign im8 munity asserted by any State under any provision of

9 law;

10 (2) waive or affect any defense of sovereign im11 munity asserted by the United States;

12 (3) affect the applicability of any provision of

13 the Foreign Sovereign Immunities Act of 1976;

14 (4) preempt State choice-of-law rules with re15 spect to claims brought by a foreign nation or a citi16 zen of a foreign nation; or

17 (5) affect the right of any court to transfer

18 venue or to apply the law of a foreign nation or to

19 dismiss a claim of a foreign nation or of a citizen

20 of a foreign nation on the ground in inconvenient

21 forum.
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1 Subpart B—Requirements for State Alternative

2 Dispute Resolution Systems (ADR)

3 SEC. 15131. BASIC REQUIREMENTS.

4 (a) IN GENERAL.—A State’s alternative dispute reso5 lution system meets the requirements of this section if the

6 system—

7 (1) applies to all medical malpractice liability

8 claims under the jurisdiction of the courts of that

9 State;

10 (2) requires that a written opinion resolving the

11 dispute be issued not later than 6 months after the

12 date by which each party against whom the claim is

13 filed has received notice of the claim (other than in

14 exceptional cases for which a longer period is re15 quired for the issuance of such an opinion), and that

16 the opinion contain—

17 (A) findings of fact relating to the dispute,

18 and

19 (B) a description of the costs incurred in

20 resolving the dispute under the system (includ21 ing any fees paid to the individuals hearing and

22 resolving the claim), together with an appro23 priate assessment of the costs against any of

24 the parties;

25 (3) requires individuals who hear and resolve

26 claims under the system to meet such qualifications
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1 as the State may require (in accordance with regula2 tions of the Secretary);

3 (4) is approved by the State or by local govern4 ments in the State;

5 (5) with respect to a State system that consists

6 of multiple dispute resolution procedures—

7 (A) permits the parties to a dispute to se8 lect the procedure to be used for the resolution

9 of the dispute under the system, and

10 (B) if the parties do not agree on the pro11 cedure to be used for the resolution of the dis12 pute, assigns a particular procedure to the

13 parties;

14 (6) provides for the transmittal to the State

15 agency responsible for monitoring or disciplining

16 health care professionals and health care providers

17 of any findings made under the system that such a

18 professional or provider committed malpractice, un19 less, during the 90-day period beginning on the date

20 the system resolves the claim against the profes21 sional or provider, the professional or provider

22 brings an action contesting the decision made under

23 the system; and

24 (7) provides for the regular transmittal to the

25 Administrator for Health Care Policy and Research
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1 of information on disputes resolved under the sys2 tem, in a manner that assures that the identity of

3 the parties to a dispute shall not be revealed.

4 (b) APPLICATION OF MALPRACTICE LIABILITY

5 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

6 The provisions of subpart A (other than section 15122)

7 shall apply with respect to claims brought under a State

8 alternative dispute resolution system or the alternative

9 Federal system in the same manner as such provisions

10 apply with respect to medical malpractice liability actions

11 brought in the State.

12 SEC. 15132. CERTIFICATION OF STATE SYSTEMS; APPLICA13 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

14 (a) CERTIFICATION.—

15 (1) IN GENERAL.—Not later than October 1 of

16 each year (beginning with 1995), the Secretary, in

17 consultation with the Attorney General, shall deter18 mine whether a State’s alternative dispute resolution

19 system meets the requirements of this subpart for

20 the following calendar year.

21 (2) BASIS FOR CERTIFICATION.—The Secretary

22 shall certify a State’s alternative dispute resolution

23 system under this subsection for a calendar year if

24 the Secretary determines under paragraph (1) that

25 the system meets the requirements of section 15131,
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1 including the requirement described in section 15124

2 that punitive damages awarded under the system are

3 paid to the State for the uses described in such

4 section.

5 (b) APPLICABILITY OF ALTERNATIVE FEDERAL

6 SYSTEM.—

7 (1) ESTABLISHMENT AND APPLICABILITY.—

8 Not later than October 1, 1995, the Secretary, in

9 consultation with the Attorney General, shall estab10 lish by rule an alternative Federal ADR system for

11 the resolution of medical malpractice liability claims

12 during a calendar year in States that do not have

13 in effect an alternative dispute resolution system

14 certified under subsection (a) for the year.

15 (2) REQUIREMENTS FOR SYSTEM.—Under the

16 alternative Federal ADR system established under

17 paragraph (1)—

18 (A) paragraphs (1), (2), (6), and (7) of

19 section 15131(a) shall apply to claims brought

20 under the system;

21 (B) if the system provides for the resolu22 tion of claims through arbitration, the claims

23 brought under the system shall be heard and

24 resolved by arbitrators appointed by the Sec-
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1 retary in consultation with the Attorney Gen2 eral; and

3 (C) with respect to a State in which the

4 system is in effect, the Secretary may (at the

5 State’s request) modify the system to take into

6 account the existence of dispute resolution pro7 cedures in the State that affect the resolution

8 of medical malpractice liability claims.

9 (3) TREATMENT OF STATES WITH ALTER10 NATIVE SYSTEM IN EFFECT.—If the alternative Fed11 eral ADR system established under this subsection is

12 applied with respect to a State for a calendar year,

13 the State shall make a payment to the United States

14 (at such time and in such manner as the Secretary

15 may require) in an amount equal to 110 percent of

16 the costs incurred by the United States during the

17 year as a result of the application of the system with

18 respect to the State.

19 SEC. 15133. REPORTS ON IMPLEMENTATION AND EFFEC20 TIVENESS OF ALTERNATIVE DISPUTE RESO21 LUTION SYSTEMS.

22 (a) IN GENERAL.—Not later than 5 years after the

23 date of the enactment of this Act, the Secretary shall pre24 pare and submit to the Congress a report describing and

25 evaluating State alternative dispute resolution systems op-
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1 erated pursuant to this subpart and the alternative Fed2 eral system established under section 15132(b).

3 (b) CONTENTS OF REPORT.—The Secretary shall in4 clude in the report prepared and submitted under sub5 section (a)—

6 (1) information on—

7 (A) the effect of the alternative dispute

8 resolution systems on the cost of health care

9 within each State,

10 (B) the impact of such systems on the ac11 cess of individuals to health care within the

12 State, and

13 (C) the effect of such systems on the qual14 ity of health care provided within the State; and

15 (2) to the extent that such report does not pro16 vide information on no-fault systems operated by

17 States as alternative dispute resolution systems pur18 suant to this part, an analysis of the feasibility and

19 desirability of establishing a system under which

20 medical malpractice liability claims shall be resolved

21 on a no-fault basis.

22 Subpart C—Definitions

23 SEC. 15141. DEFINITIONS.

24 As used in this part:
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1 (1) ALTERNATIVE DISPUTE RESOLUTION SYS2 TEM.—The term ‘‘alternative dispute resolution sys3 tem’’ means a system that is enacted or adopted by

4 a State to resolve medical malpractice claims other

5 than through a medical malpractice liability action.

6 (2) CLAIMANT.—The term ‘‘claimant’’ means

7 any person who brings a health care liability action

8 and, in the case of an individual who is deceased, in9 competent, or a minor, the person on whose behalf

10 such an action is brought.

11 (3) CLEAR AND CONVINCING EVIDENCE.—The

12 term ‘‘clear and convincing evidence’’ is that meas13 ure or degree of proof that will produce in the mind

14 of the trier of fact a firm belief or conviction as to

15 the truth of the allegations sought to be established,

16 except that such measure or degree of proof is more

17 than that required under preponderance of the evi18 dence, but less than that required for proof beyond

19 a reasonable doubt.

20 (4) ECONOMIC DAMAGES.—The term ‘‘economic

21 damages’’ means damages paid to compensate an in22 dividual for losses for hospital and other medical ex23 penses, lost wages, lost employment, and other pecu24 niary losses.
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1 (5) HEALTH CARE PROFESSIONAL.—The term

2 ‘‘health care professional’’ means any individual who

3 provides health care services in a State and who is

4 required by State law or regulation to be licensed or

5 certified by the State to provide such services in the

6 State.

7 (6) HEALTH CARE PROVIDER.—The term

8 ‘‘health care provider’’ means any organization or

9 institution that is engaged in the delivery of health

10 care services in a State that is required by State law

11 or regulation to be licensed or certified by the State

12 to engage in the delivery of such services in the

13 State.

14 (7) INJURY.—The term ‘‘injury’’ means any ill15 ness, disease, or other harm that is the subject of

16 a medical malpractice claim.

17 (8) MEDICAL MALPRACTICE LIABILITY AC18 TION.—The term ‘‘medical malpractice liability ac19 tion’’ means any civil action brought pursuant to

20 State law in which a plaintiff alleges a medical mal21 practice claim against a health care provider or

22 health care professional, but does not include any

23 action in which the plaintiff’s sole allegation is an al24 legation of an intentional tort.
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1 (9) MEDICAL MALPRACTICE CLAIM.—The term

2 ‘‘medical malpractice claim’’ means any claim relat3 ing to the provision of (or the failure to provide)

4 health care services or the use of a medical product,

5 without regard to the theory of liability asserted,

6 and includes any third-party claim, cross-claim,

7 counterclaim, or contribution claim in a medical

8 malpractice liability action.

9 (10) MEDICAL PRODUCT.—

10 (A) IN GENERAL.—The term ‘‘medical

11 product’’ means, with respect to the allegation

12 of a claimant, a drug (as defined in section

13 201(g)(1) of the Federal Food, Drug, and Cos14 metic Act (21 U.S.C. 321(g)(1)) or a medical

15 device (as defined in section 201(h) of the Fed16 eral Food, Drug, and Cosmetic Act (21 U.S.C.

17 321(h)) if—

18 (i) such drug or device was subject to

19 premarket approval under section 505,

20 507, or 515 of the Federal Food, Drug,

21 and Cosmetic Act (21 U.S.C. 355, 357, or

22 360e) or section 351 of the Public Health

23 Service Act (42 U.S.C. 262) with respect

24 to the safety of the formulation or per25 formance of the aspect of such drug or de-
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1 vice which is the subject of the claimant’s

2 allegation or the adequacy of the packag3 ing or labeling of such drug or device, and

4 such drug or device is approved by the

5 Food and Drug Administration; or

6 (ii) the drug or device is generally rec7 ognized as safe and effective under regula8 tions issued by the Secretary of Health

9 and Human Services under section 201(p)

10 of the Federal Food, Drug, and Cosmetic

11 Act (21 U.S.C. 321(p)).

12 (B) EXCEPTION IN CASE OF MISREPRE13 SENTATION OR FRAUD.—Notwithstanding sub14 paragraph (A), the term ‘‘medical product’’

15 shall not include any product described in such

16 subparagraph if the claimant shows that the

17 product is approved by the Food and Drug Ad18 ministration for marketing as a result of with19 held information, misrepresentation, or an ille20 gal payment by manufacturer of the product.

21 (11) NONECONOMIC DAMAGES.—The term

22 ‘‘noneconomic damages’’ means damages paid to

23 compensate an individual for losses for physical and

24 emotional pain, suffering, inconvenience, physical

25 impairment, mental anguish, disfigurement, loss of
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1 enjoyment of life, loss of consortium, and other

2 nonpecuniary losses, but does not include punitive

3 damages.

4 (12) PUNITIVE DAMAGES.—The term ‘‘punitive

5 damages’’ means compensation, in addition to com6 pensation for actual harm suffered, that is awarded

7 for the purpose of punishing a person for conduct

8 deemed to be malicious, wanton, willful, or exces9 sively reckless.

10 PART 4—PAYMENT AREAS FOR PHYSICIANS’

11 SERVICES UNDER MEDICARE

12 SEC. 15151. MODIFICATION OF PAYMENT AREAS USED TO

13 DETERMINE PAYMENTS FOR PHYSICIANS’

14 SERVICES UNDER MEDICARE.

15 (a) IN GENERAL.—Section 1848(j)(2) (42 U.S.C.

16 1395w@4(j)(2)) is amended to read as follows:

17 ‘‘(2) FEE SCHEDULE AREA.—

18 ‘‘(A) GENERAL RULE.—Except as provided

19 in subparagraph (B), the term ‘fee schedule

20 area’ means, with respect to physicians’ services

21 furnished in a State, the State.

22 ‘‘(B) EXCEPTION FOR STATES WITH HIGH23 EST VARIATION AMONG AREAS.—In the case of

24 the 15 States with the greatest variation in cost

25 associated with physicians’ services among var-
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1 ious geographic areas of the State (as deter2 mined by the Secretary in accordance with such

3 standards as the Secretary considers appro4 priate), the fee schedule area applicable with re5 spect to physicians’ services furnished in the

6 State shall be a locality used under section

7 1842(b) for purposes of computing payment

8 amounts for physicians’ services, except that

9 the Secretary shall revise the localities used

10 under such section so that there are no more

11 than 5 such localities in any State.’’.

12 (b) BUDGET-NEUTRALITY REQUIREMENT.—The

13 Secretary of Health and Human Services shall carry out

14 the amendment made by subsection (a) in a manner which

15 ensures that the aggregate amount of payment made for

16 physicians’ services under part B of the medicare program

17 in any year does not exceed the aggregate amount of pay18 ment which would have been made for such services under

19 part B during the year if the amendment were not in ef20 fect.

21 (c) EFFECTIVE DATE.—The amendment made by

22 subsection (a) shall apply to physicians’ services furnished

23 on or after January 1, 1997.
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1 Subtitle C—Medicare Payments to

2 Health Care Providers

3 PART 1—PROVISIONS AFFECTING ALL

4 PROVIDERS

5 SEC. 15201. ONE-YEAR FREEZE IN PAYMENTS TO PROVID6 ERS.

7 (a) FREEZE IN UPDATES.—

8 (1) IN GENERAL.—Notwithstanding any other

9 provision of law, except as otherwise provided in

10 paragraph (2), for purposes of determining the

11 amount to be paid for an item or service under title

12 XVIII of the Social Security Act, the percentage in13 crease in any economic index by which a payment

14 amount under title XVIII of the Social Security Act

15 is required to be increased during fiscal year 1996

16 shall be deemed to be zero.

17 (2) EXCEPTIONS.—Paragraph (1) shall not

18 apply—

19 (A) to payments for the operating costs of

20 inpatient hospital services of a subsection (d)

21 hospital (as defined in section 1886(d)(1)(B) of

22 the Social Security Act); or

23 (B) to the determination of hospital-spe24 cific FTE resident amounts under section

25 1886(h) of such Act.
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1 (b) ECONOMIC INDEX.— The term ‘‘economic index’’

2 includes—

3 (1) the hospital market basket index (described

4 in section 1886(b)(3)(B)(iii) of the Social Security

5 Act),

6 (2) the medicare economic index (referred to in

7 the fourth sentence of section 1842(b)(3) of such

8 Act),

9 (3) the consumer price index for all urban con10 sumers (U.S. city average), and

11 (4) any other index used to adjust payment

12 amounts under title XVIII of such Act.

13 (c) EXTENSION OF PAYMENT FREEZE FOR SNFS

14 AND HHAS.—

15 (1) SKILLED NURSING FACILITIES.—

16 (A) NO CHANGE IN COST LIMITS.—Section

17 13503(a)(1) of OBRA–1993 is amended by

18 striking ‘‘1994 and 1995’’ and inserting ‘‘1994,

19 1995, and 1996’’.

20 (B) DELAY IN UPDATES; NO CATCHUP.—

21 The last sentence of section 1888(a) (42 U.S.C.

22 1395yy(a)) is amended—

23 (i) by striking ‘‘1995’’ and inserting

24 ‘‘1996’’, and
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1 (ii) by striking ‘‘subsection.’’ and in2 serting ‘‘subsection (except that such up3 dates may not take into account any

4 changes in the routine service costs of

5 skilled nursing facilities during cost report6 ing periods which began during fiscal year

7 1994, 1995, or 1996).’’.

8 (C) PROSPECTIVE PAYMENTS.—Section

9 13505(b) of OBRA–1993 is amended by strik10 ing ‘‘fiscal years 1994 and 1995’’ and inserting

11 ‘‘fiscal years 1994, 1995, and 1996’’.

12 (2) HOME HEALTH AGENCIES.—

13 (A) NO CHANGE IN COST LIMITS.—Section

14 13564(a)(1) of OBRA–1993 is amended by

15 striking ‘‘1996’’ and inserting ‘‘1997’’.

16 (B) DELAY IN UPDATES; NO CATCHUP.—

17 Section 1861(v)(1)(L)(iii) (42 U.S.C.

18 1395x(v)(1)(L)(iii)) is amended—

19 (i) by striking ‘‘1996’’ and inserting

20 ‘‘1997’’, and

21 (ii) by adding at the end the follow22 ing: ‘‘In establishing limits under this sub23 paragraph, the Secretary may not take

24 into account any changes in the routine

25 service costs of the provision of services
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1 furnished by home health agencies with re2 spect to cost reporting periods which began

3 on or after July 1, 1994, and before July

4 1,1997.’’.

5 PART 2—PROVISIONS AFFECTING DOCTORS

6 SEC. 15211. UPDATING FEES FOR PHYSICIANS’ SERVICES.

7 (a) ESTABLISHMENT OF SINGLE, CUMULATIVE

8 MVPS.— Section 1848(f) (42 U.S.C. 1395w–4(f)) is

9 amended—

10 (1) in subparagraphs (A) and (C) of paragraph

11 (1), by striking ‘‘rates of increase for all physicians’

12 services and for each category of such services’’ each

13 place it appears and inserting ‘‘rate of increase for

14 all physicians’ services (and, in the case of fiscal

15 years beginning before fiscal year 1996, for each

16 category of such services)’’; and

17 (2) in paragraph (2)—

18 (A) in subparagraph (A)—

19 (i) by striking ‘‘IN GENERAL.—’’ and

20 inserting ‘‘FISCAL YEARS 1991 THROUGH

21 1995.—’’,

22 (ii) in the matter preceding clause (i),

23 by striking ‘‘a fiscal year (beginning with

24 fiscal year 1991)’’ and inserting ‘‘fiscal

25 years 1991 through 1995’’, and
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1 (iii) in the matter following clause

2 (iv), by striking ‘‘subparagraph (B)) and

3 inserting ‘‘subparagraph (C))’’,

4 (B) by redesignating subparagraphs (B)

5 and (C) as subparagraphs (C) and (D), and

6 (C) by inserting after subparagraph (A)

7 the following:

8 ‘‘(B) FISCAL YEAR 1996 AND THERE9 AFTER.—Unless Congress otherwise provides,

10 the performance standard rate of increase for

11 all physicians’ services for a fiscal year begin12 ning with fiscal year 1996 shall be equal to the

13 performance standard rate of increase deter14 mined under this paragraph for the previous

15 fiscal year, increased by the product of—

16 ‘‘(i) 1 plus the Secretary’s estimate of

17 the weighted average percentage increase

18 (divided by 100) in the fees for all physi19 cians’ services under this part for portions

20 of calendar years included in the fiscal

21 year involved,

22 ‘‘(ii) 1 plus the Secretary’s estimate of

23 the percentage increase or decrease (di24 vided by 100) in the average number of in25 dividuals enrolled under this part (other
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1 than HMO enrollees) from the previous fis2 cal year to the fiscal year involved,

3 ‘‘(iii) 1 plus the Secretary’s estimate

4 of the average annual percentage growth

5 (divided by 100) in volume and intensity of

6 all physicians’ services under this part for

7 the 5-fiscal-year-period ending with the

8 preceding fiscal year, and

9 ‘‘(iv) 1 plus the Secretary’s estimate

10 of the percentage increase or decrease (di11 vided by 100) in expenditures for all physi12 cians’ services in the fiscal year (compared

13 with the previous fiscal year) that are esti14 mated to result from changes in law or

15 regulations affecting the percentage in16 crease described in clause (i) and that is

17 not taken into account in the percentage

18 increase described in clause (i), minus 1,

19 multiplied by 100, and reduced by the per20 formance standard factor (specified in sub21 paragraph (C)).’’.

22 (b) ANNUAL UPDATE BASED ON CUMULATIVE PER23 FORMANCE.—

24 (1) IN GENERAL.—Section 1848(d)(3)(B) (42

25 U.S.C. 1395w–4(d)(3)(B)) is amended—
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1 (A) in clause (i)—

2 (i) by striking ‘‘IN GENERAL.—’’ and

3 inserting ‘‘For 1992 through 1995’’,

4 (ii) by striking ‘‘for a year’’ and in5 serting ‘‘for each of the years 1992

6 through 1995’’, and

7 (iii) by striking ‘‘, subject to clause

8 (ii),’’ and inserting ‘‘subject to clause

9 (iii),’’;

10 (B) by redesignating clause (ii) as clause

11 (iii); and

12 (C) by inserting after clause (i) the follow13 ing:

14 ‘‘(ii) YEARS BEGINNING AFTER

15 1996.—

16 ‘‘(I) IN GENERAL.—The update

17 for all physicians’’ services for a year

18 beginning after 1996 provided under

19 subparagraph (A) shall, subject to

20 clause (iii), be increased or decreased

21 by the same percentage by which the

22 cumulative percentage increase in ac23 tual expenditures for all physicians’

24 services in the second previous fiscal

25 year over the third previous fiscal
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1 year, was less or greater, respectively,

2 than the performance standard rate of

3 increase (established under subsection

4 (f)) for such services for the second

5 previous fiscal year.

6 ‘‘(II) CUMULATIVE PERCENTAGE

7 INCREASE DEFINED.—In subclause

8 (I), the ‘cumulative percentage in9 crease in actual expenditures’ for a

10 year shall be equal to the product of

11 the adjusted increases for each year

12 beginning with 1995 up to and includ13 ing the year involved, minus 1 and

14 multiplied by 100. In the previous

15 sentence, the ‘adjusted increase’ for a

16 year is equal to 1 plus the percentage

17 increase in actual expenditures for the

18 year (over the preceding year).’’.

19 (3) ESTABLISHMENT OF CONVERSION FACTOR

20 FOR 1996.—Section 1848(d)(1) (42 U.S.C. 1395w–

21 4(d)(1)) is amended—

22 (A) by redesignating subparagraph (C) as

23 subparagraph (D); and

24 (B) by inserting after subparagraph (B)

25 the following new subparagraph:
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1 ‘‘(C) SPECIAL RULE FOR 1996.—For

2 1996, the conversion factor under this sub3 section shall be $36.40 for all physicians’ serv4 ices.’’.

5 (c) ESTABLISHING UPPER LIMIT ON MVPS RE6 WARDS.—

7 (1) IN GENERAL.—Clause (iii) of section

8 1848(d)(3)(B), as redesignated by subsection

9 (b)(1)(B), is amended by striking ‘‘a decrease’’ and

10 inserting ‘‘an increase or decrease’’.

11 (2) EFFECTIVE DATE.—The amendment made

12 by paragraph (1) shall apply to physicians’ services

13 furnished on or after January 1, 1996.

14 SEC. 15212. USE OF REAL GDP TO ADJUST FOR VOLUME

15 AND INTENSITY.

16 Section 1848(f)(2)(B)(iii) (42 U.S.C. 1395w–

17 4(f)(2)(B)(iii)), as added by section 15211(a)(2)(C), is

18 amended to read as follows:

19 ‘‘(iii) 1 plus the average per capita

20 growth in the real gross domestic product

21 (divided by 100) for the 5-fiscal-year pe22 riod ending with the previous fiscal year

23 (increased by 1.5 percentage points for the

24 category of services consisting of primary

25 care services), and’’.
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1 PART 3—PROVISIONS AFFECTING HOSPITALS

2 SEC. 15221. REDUCTION IN UPDATE FOR INPATIENT HOS3 PITAL SERVICES.

4 (a) PPS HOSPITALS.—Section 1886(b)(3)(B)(i) (42

5 U.S.C. 1395ww(b)(3)(B)(i)) is amended—

6 (1) by amending subclause (XII) to read as fol7 lows:

8 ‘‘(XII) for each of the fiscal years 1997 through

9 2002, the market basket percentage increase minus

10 0.5 percentage point for hospitals in a rural area,

11 and the market basket percentage increase minus

12 1.5 percentage points for all other hospitals, and’’;

13 and

14 (2) in subclause (XIII), by striking ‘‘1998’’ and

15 inserting ‘‘2003’’.

16 (b) PPS-EXEMPT HOSPITALS.—

17 (1) IN GENERAL.—Section 1886(b)(3)(B)(ii)

18 (42 U.S.C. 1395ww(b)(3)(B)(ii)) is amended—

19 (A) in subclause (V)—

20 (i) by striking ‘‘through 1997’’ and

21 inserting ‘‘through 1996’’, and

22 (ii) by striking ‘‘and’’ at the end;

23 (B) by redesignating subclause (VI) as

24 subclause (VII); and

25 (C) by inserting after subclause (V) the

26 following new subclause:
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1 ‘‘(VI) fiscal years 1997 through 2002, is the

2 market basket percentage increase minus 1.0 per3 centage point, and’’.

4 (2) CONFORMING AMENDMENT.—Section

5 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is

6 amended by striking clause (v).

7 SEC. 15222. ELIMINATION OF FORMULA-DRIVEN OVERPAY8 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

9 SERVICES.

10 (a) AMBULATORY SURGICAL CENTER PROCE11 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

12 1395l(i)(3)(B)(i)(II)) is amended—

13 (1) by striking ‘‘of 80 percent’’; and

14 (2) by striking the period at the end and insert15 ing the following: ‘‘, less the amount a provider may

16 charge as described in clause (ii) of section

17 1866(a)(2)(A).’’.

18 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE19 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

20 1395l(n)(1)(B)(i)(II)) is amended—

21 (1) by striking ‘‘of 80 percent’’; and

22 (2) by striking the period at the end and insert23 ing the following: ‘‘, less the amount a provider may

24 charge as described in clause (ii) of section

25 1866(a)(2)(A).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to services furnished during por3 tions of cost reporting periods occurring on or after July

4 1, 1994.

5 SEC. 15223. ESTABLISHMENT OF PROSPECTIVE PAYMENT

6 SYSTEM FOR OUTPATIENT SERVICES.

7 (a) IN GENERAL.—Section 1833(a)(2)(B) (42 U.S.C.

8 1395l(a)(2)(B)) is amended by striking ‘‘section 1886)—

9 ’’ and all that follows and inserting the following: ‘‘section

10 1886), an amount equal to a prospectively determined

11 payment rate established by the Secretary that provides

12 for payments for such items and services to be based upon

13 a national rate adjusted to take into account the relative

14 costs of furnishing such items and services in various geo15 graphic areas, except that for items and services furnished

16 during cost reporting periods (or portions thereof) in years

17 beginning with 1996, such amount shall be equal to 95

18 percent of the amount that would otherwise have been de19 termined;’’.

20 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

21 SYSTEM.—Not later than July 1, 1995, the Secretary of

22 Health and Human Services shall establish the prospective

23 payment system for hospital outpatient services necessary

24 to carry out section 1833(a)(2)(B) of the Social Security

25 Act (as amended by subsection (a)).
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1 (c) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to items and services furnished

3 on or after January 1, 1996.

4 SEC. 15224. REDUCTION IN MEDICARE PAYMENTS TO HOS5 PITALS FOR INPATIENT CAPITAL-RELATED

6 COSTS.

7 (a) PPS HOSPITALS.—Section 1886(g)(1)(A) (42

8 U.S.C. 1395ww(g)(1)(A)) is amended by striking ‘‘1995’’

9 and inserting ‘‘1996’’.

10 (b) REDUCTION IN BASE PAYMENT RATES FOR PPS

11 HOSPITALS.—Section 1886(g)(1)(A) (42 U.S.C.

12 1395ww(g)(1)(A)) is amended by adding at the end the

13 following new sentence: ‘‘In addition to the reduction de14 scribed in the preceding sentence, for discharges occurring

15 after September 30, 1995, the Secretary shall reduce by

16 7.47 percent the unadjusted standard Federal capital pay17 ment rate (as described in 42 CFR 412.308(c), as in effect

18 on the date of the enactment of the Omnibus Budget Rec19 onciliation Act of 1995) and shall reduce by 8.27 percent

20 the unadjusted hospital-specific rate (as described in 42

21 CFR 412.328(e)(1), as in effect on the date of the enact22 ment of the Omnibus Budget Reconciliation Act of

23 1995).’’.
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1 (c) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1)

2 (42 U.S.C. 1395x(v)(1)) is amended by adding at the end

3 the following:

4 ‘‘(T) Such regulations shall provide that,

5 in determining the amount of the payments

6 that may be made under this title with respect

7 to the capital-related costs of inpatient hospital

8 services furnished by a hospital that is not a

9 subsection (d) hospital (as defined in section

10 1886(d)(1)(B)) or a subsection (d) Puerto Rico

11 hospital (as defined in section 1886(d)(9)(A)),

12 the Secretary shall reduce the amounts of such

13 payments otherwise established under this title

14 by 10 percent for payments attributable to por15 tions of cost reporting periods occurring during

16 fiscal year 1996.’’.

17 SEC. 15225. MORATORIUM ON PPS EXEMPTION FOR LONG18 TERM CARE HOSPITALS.

19 (a) IN GENERAL.—Section 1886(d)(1)(B)(iv) (42

20 U.S.C. 1395ww(d)(1)(B)(iv)) is amended by striking

21 ‘‘Secretary)’’ and inserting ‘‘Secretary on or before Sep22 tember 30, 1995)’’.

23 (b) RECOMMENDATIONS ON APPROPRIATE STAND24 ARDS FOR LONG-TERM CARE HOSPITALS.—Not later

25 than 1 year after the date of the enactment of this Act,
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1 the Secretary of Health and Human Services shall submit

2 to Congress recommendations for modifications to the

3 standards used by the Secretary to determine whether a

4 hospital (including a distinct part of another hospital) is

5 classified as a long-term care hospital for purposes of de6 termining the amount of payment to the hospital under

7 part A of the medicare program for the operating costs

8 of inpatient hospital services.

9 SEC. 15226. ELIMINATION OF CERTAIN ADDITIONAL PAY10 MENTS FOR OUTLIER CASES.

11 (a) INDIRECT MEDICAL EDUCATION.—Section

12 1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is

13 amended—

14 (1) by striking ‘‘the sum of’’; and

15 (2) by striking ‘‘and the amount paid to the

16 hospital under subparagraph (A)’’.

17 (b) DISPROPORTIONATE SHARE ADJUSTMENTS.—

18 Section 1886(d)(5)(F)(ii)(I) (42 U.S.C.

19 1395ww(d)(5)(F)(ii)(I)) is amended—

20 (1) by striking ‘‘the sum of’’; and

21 (2) by striking ‘‘and the amount paid to the

22 hospital under subparagraph (A) for that dis23 charge’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to discharges occurring on or after

3 October 1, 1995.

4 PART 4—PROVISIONS AFFECTING OTHER

5 PROVIDERS.

6 SEC. 15231. REVISION OF PAYMENT METHODOLOGY FOR

7 HOME HEALTH SERVICES.

8 (a) ADDITIONS TO COST LIMITS.—Section

9 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by

10 adding at the end the following new clauses:

11 ‘‘(iv) For services furnished by home

12 health agencies for cost reporting periods

13 beginning on or after October 1, 1996, the

14 Secretary shall provide for an interim sys15 tem of limits. Payment shall be the lower

16 of—

17 ‘‘(I) costs determined under the

18 preceding provisions of this subpara19 graph, or

20 ‘‘(II) an agency-specific per bene21 ficiary annual limit calculated from

22 the agency’s 12-month cost reporting

23 period ending on or after January 1,

24 1994 and on or before December 31,

25 1994 based on reasonable costs (in-
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1 cluding non-routine medical supplies),

2 updated by the home health market

3 basket index. The per beneficiary limi4 tation shall be multiplied by the agen5 cy’s unduplicated census count of

6 Medicare patients for the year subject

7 to the limitation. The limitation shall

8 represent total Medicare reasonable

9 costs divided by the unduplicated cen10 sus count of Medicare patients.

11 ‘‘(v) For services furnished by home

12 health agencies for cost reporting periods

13 beginning on or after October 1, 1996, the

14 following rules shall apply:

15 ‘‘(I) For new providers and those

16 providers without a 12-month cost re17 porting period ending in calendar year

18 1994, the per beneficiary limit shall

19 be equal to the mean of these limits

20 (or the Secretary’s best estimates

21 thereof) applied to home health agen22 cies as determined by the Secretary.

23 Home health agencies that have al24 tered their corporate structure or
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1 name may not be considered new pro2 viders for payment purposes.

3 ‘‘(II) For beneficiaries who use

4 services furnished by more than one

5 home health agency, the per bene6 ficiary limitation shall be pro-rated

7 among agencies.

8 ‘‘(vi) Home health agencies whose cost

9 or utilization experience is below 125 per10 cent of the mean national or census region

11 aggregate per beneficiary cost or utilization

12 experience for 1994, or best estimates

13 thereof, and whose year-end reasonable

14 costs are below the agency-specific per ben15 eficiary limit, shall receive payment equal

16 to 50 percent of the difference between the

17 agency’s reasonable costs and its limit for

18 fiscal years 1996, 1997, 1998, and 1999.

19 Such payments may not exceed 5 percent

20 of an agency’s aggregate Medicare reason21 able cost in a year.

22 ‘‘(vii) Effective January 1, 1997, or

23 as soon as feasible, the Secretary shall

24 modify the agency specific per beneficiary

25 annual limit described in clause (iv) to pro-
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1 vide for regional or national variations in

2 utilization. For purposes of determining

3 payment under clause (iv), the limit shall

4 be calculated through a blend of 75 per5 cent of the agency-specific cost or utiliza6 tion experience in 1994 with 25 percent of

7 the national or census region cost or utili8 zation experience in 1994, or the Sec9 retary’s best estimates thereof.’’.

10 (b) USE OF INTERIM FINAL REGULATIONS.—The

11 Secretary shall implement the payment limits described in

12 section 1861(v)(1)(L)(iv) of the Social Security Act by

13 publishing in the Federal Register a notice of interim final

14 payment limits by August 1, 1996 and allowing for a pe15 riod of public comments thereon. Payments subject to

16 these limits will be effective for cost reporting periods be17 ginning on or after October 1, 1996, without the necessity

18 for consideration of comments received, but the Secretary

19 shall, by Federal Register notice, affirm or modify the lim20 its after considering those comments.

21 (c) STUDIES.—The Secretary shall expand research

22 on a prospective payment system for home health agencies

23 that shall tie prospective payments to an episode of care,

24 including an intensive effort to develop a reliable case mix

25 adjuster that explains a significant amount of the
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1 variances in costs. The Secretary shall develop such a sys2 tem for implementation in fiscal year 2000.

3 (d) PAYMENTS DETERMINED ON PROSPECTIVE

4 BASIS.—Title XVIII is amended by adding at the end the

5 following new section:

6 ‘‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

7 ‘‘SEC. 1893. (a) Notwithstanding section 1861(v),

8 the Secretary shall, for cost reporting periods beginning

9 on or after fiscal year 2000, provide for payments for

10 home health services in accordance with a prospective pay11 ment system, which pays home health agencies on a per

12 episode basis, established by the Secretary.

13 ‘‘(b) Such a system shall include the following:

14 ‘‘(1) Per episode rates under the system shall

15 be 15 percent less than those that would otherwise

16 occur under fiscal year 2000 Medicare expenditures

17 for home health services.

18 ‘‘(2) All services covered and paid on a reason19 able cost basis under the Medicare home health ben20 efit as of the date of the enactment of the Medicare

21 Enhancement Act of 1995, including medical sup22 plies, shall be subject to the per episode amount. In

23 defining an episode of care, the Secretary shall con24 sider an appropriate length of time for an episode

25 the use of services and the number of visits provided

26 within an episode, potential changes in the mix of
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1 services provided within an episode and their cost,

2 and a general system design that will provide for

3 continued access to quality services. The per episode

4 amount shall be based on the most current audited

5 cost report data available to the Secretary.

6 ‘‘(c) The Secretary shall employ an appropriate case

7 mix adjuster that explains a significant amount of the var8 iation in cost.

9 ‘‘(d) The episode payment amount shall be adjusted

10 annually by the home health market basket index. The

11 labor portion of the episode amount shall be adjusted for

12 geographic differences in labor-related costs based on the

13 most current hospital wage index.

14 ‘‘(e) The Secretary may designate a payment provi15 sion for outliers, recognizing the need to adjust payments

16 due to unusual variations in the type or amount of medi17 cally necessary care.

18 ‘‘(f) A home health agency shall be responsible for

19 coordinating all care for a beneficiary. If a beneficiary

20 elects to transfer to, or receive services from, another

21 home health agency within an episode period, the episode

22 payment shall be pro-rated between home health agen23 cies.’’.
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1 SEC. 15232. LIMITATION OF HOME HEALTH COVERAGE

2 UNDER PART A.

3 (a) IN GENERAL.—Section 1812(a)(3) (42 U.S.C.

4 1395d(a)(3)) is amended by striking the semicolon and in5 serting ‘‘for up to 150 days during any spell of illness;’’.

6 (b) CONFORMING AMENDMENT.—Section 1812(b)

7 (42 U.S.C. 1395d(b)) is amended—

8 (1) by striking ‘‘or’’ at the end of paragraph

9 (2),

10 (2) by striking the period at the end of para11 graph (3) and inserting ‘‘; or’’, and

12 (3) by adding at the end the following new

13 paragraph:

14 ‘‘(4) home health services furnished to the indi15 vidual during such spell after such services have

16 been furnished to the individual for 150 days during

17 such spell.’’.

18 (3) EXCLUSION OF ADDITIONAL PART B COSTS

19 FROM DETERMINATION OF PART B MONTHLY PRE20 MIUM.—Section 1839(a) (42 U.S.C. 1395r(a)) is

21 amended—

22 (A) in the second sentence of paragraph

23 (1), by striking ‘‘enrollees.’’ and inserting ‘‘en24 rollees (except as provided in paragraph (5)).’’;

25 and
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1 (B) by adding at the end the following new

2 paragraph:

3 ‘‘(5) In estimating the benefits and administrative

4 costs which will be payable from the Federal Supple5 mentary Medical Insurance Trust Fund for a year (begin6 ning with 1996), the Secretary shall exclude an estimate

7 of any benefits and costs attributable to home health serv8 ices for which payment would have been made under part

9 A during the year but for paragraph (4) of section

10 1812(b).’’.

11 (c) EFFECTIVE DATE.—The amendments made by

12 this subsection shall apply to spells of illness beginning

13 on or after October 1, 1995.

14 SEC. 15233. REDUCTION IN FEE SCHEDULE FOR DURABLE

15 MEDICAL EQUIPMENT.

16 (a) IN GENERAL.—

17 (1) FREEZE IN UPDATE FOR COVERED

18 ITEMS.—Section 1834(a)(14) (42 U.S.C.

19 1395m(a)(14)) is amended—

20 (A) by striking ‘‘and’’ at the end of sub21 paragraph (A);

22 (B) in subparagraph (B)—

23 (i) by striking ‘‘a subsequent year’’

24 and inserting ‘‘1993, 1994, and 1995’’,

25 and
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1 (ii) by striking the period at the end

2 and inserting ‘‘; and’’; and

3 (C) by adding at the end the following:

4 ‘‘(C) for each of the years 1996 through

5 1998, 0 percent; and

6 ‘‘(D) for a subsequent year, the percentage

7 increase in the consumer price index for all

8 urban consumers (U.S. urban average) for the

9 12-month period ending with June of the pre10 vious year.’’.

11 (2) UPDATE FOR ORTHOTICS AND PROSTHET12 ICS.—Section 1834(h)(4)(A)(iii) (42 U.S.C.

13 1395m(h)(4)(A)(iii)) is amended by striking ‘‘1994

14 and 1995’’ and inserting ‘‘each of the years 1994

15 through 1998’’.

16 (b) OXYGEN AND OXYGEN EQUIPMENT.—Section

17 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—

18 (1) by striking ‘‘and’’ at the end of clause (iii);

19 (2) in clause (iv)—

20 (A) by striking ‘‘a subsequent year’’ and

21 inserting ‘‘1993, 1994, and 1995’’, and

22 (B) by striking the period at the end and

23 inserting ‘‘; and’’; and

24 (3) by adding at the end the following new

25 clause:
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1 ‘‘(v) in 1996 and each subsequent

2 year, is 90 percent of the national limited

3 monthly payment rate computed under

4 subparagraph (B) for the item for the

5 year.’’.

6 SEC. 15234. NURSING HOME BILLING.

7 (a) PAYMENTS FOR ROUTINE SERVICE COSTS.—

8 (1) CLARIFICATION OF DEFINITION OF ROU9 TINE SERVICE COSTS.—Section 1888 (42 U.S.C.

10 1395yy) is amended by adding at the end the follow11 ing new subsection:

12 ‘‘(e) For purposes of this section, the ‘routine service

13 costs’ of a skilled nursing facility are all costs which are

14 attributable to nursing services, room and board, adminis15 trative costs, other overhead costs, and all other ancillary

16 services (including supplies and equipment), excluding

17 costs attributable to covered non-routine services subject

18 to payment limits under section 1888A.’’.

19 (2) CONFORMING AMENDMENT.—Section 1888

20 (42 U.S.C. 1395yy) is amended in the heading by

21 inserting ‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERV22 ICE’’.

23 (b) INCENTIVES FOR COST-EFFECTIVE MANAGE24 MENT OF COVERED NON-ROUTINE SERVICES.—
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1 (1) IN GENERAL.—Title XVIII is amended by

2 inserting after section 1888 the following new sec3 tion:

4 ‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT OF

5 COVERED NON-ROUTINE SERVICES OF SKILLED

6 NURSING FACILITIES

7 ‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of

8 this section:

9 ‘‘(1) COVERED NON-ROUTINE SERVICES.—The

10 term ‘covered non-routine services’ means post-hos11 pital extended care services consisting of any of the

12 following:

13 ‘‘(A) Physical or occupational therapy or

14 speech-language pathology services, or res15 piratory therapy.

16 ‘‘(B) Prescription drugs.

17 ‘‘(C) Complex medical equipment.

18 ‘‘(D) Intravenous therapy and solutions

19 (including enteral and parenteral nutrients,

20 supplies, and equipment).

21 ‘‘(E) Radiation therapy.

22 ‘‘(F) Diagnostic services, including labora23 tory, radiology (including computerized tomog24 raphy services and imaging services), and pul25 monary services.
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1 ‘‘(2) SNF MARKET BASKET PERCENTAGE IN2 CREASE.—The term ‘SNF market basket percentage

3 increase’ for a fiscal year means a percentage equal

4 to the percentage increase in routine service cost

5 limits for the year under section 1888(a).

6 ‘‘(3) STAY.—The term ‘stay’ means, with re7 spect to an individual who is a resident of a skilled

8 nursing facility, a period of continuous days during

9 which the facility provides extended care services for

10 which payment may be made under this title to the

11 individual during the individual’s spell of illness.

12 ‘‘(b) NEW PAYMENT METHOD FOR COVERED NON13 ROUTINE SERVICES.—

14 ‘‘(1) IN GENERAL.—Subject to subsection (c), a

15 skilled nursing facility shall receive interim pay16 ments under this title for covered non-routine serv17 ices furnished to an individual during a cost report18 ing period beginning during a fiscal year (after fiscal

19 year 1996) in an amount equal to the reasonable

20 cost of providing such services in accordance with

21 section 1861(v). The Secretary may adjust such pay22 ments if the Secretary determines (on the basis of

23 such estimated information as the Secretary consid24 ers appropriate) that payments to the facility under

25 this paragraph for a cost reporting period would
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1 substantially exceed the cost reporting period limit

2 determined under subsection (c)(1)(B).

3 ‘‘(2) RESPONSIBILITY OF SKILLED NURSING

4 FACILITY TO MANAGE BILLINGS.—

5 ‘‘(A) CLARIFICATION RELATING TO PART A

6 BILLING.—In the case of a covered non-routine

7 service furnished to an individual who (at the

8 time the service is furnished) is a resident of a

9 skilled nursing facility who is entitled to cov10 erage under section 1812(a)(2) for such service,

11 the skilled nursing facility shall submit a claim

12 for payment under this title for such service

13 under part A (without regard to whether or not

14 the item or service was furnished by the facility,

15 by others under arrangement with them made

16 by the facility, under any other contracting or

17 consulting arrangement, or otherwise).

18 ‘‘(B) PART B BILLING.—In the case of a

19 covered non-routine service furnished to an in20 dividual who (at the time the service is fur21 nished) is a resident of a skilled nursing facility

22 who is not entitled to coverage under section

23 1812(a)(2) for such service but is entitled to

24 coverage under part B for such service, the

25 skilled nursing facility shall submit a claim for
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1 payment under this title for such service under

2 part B (without regard to whether or not the

3 item or service was furnished by the facility, by

4 others under arrangement with them made by

5 the facility, under any other contracting or con6 sulting arrangement, or otherwise).

7 ‘‘(C) MAINTAINING RECORDS ON SERVICES

8 FURNISHED TO RESIDENTS.—Each skilled nurs9 ing facility receiving payments for extended

10 care services under this title shall document on

11 the facility’s cost report all covered non-routine

12 services furnished to all residents of the facility

13 to whom the facility provided extended care

14 services for which payment was made under

15 part A during a fiscal year (beginning with fis16 cal year 1996) (without regard to whether or

17 not the services were furnished by the facility,

18 by others under arrangement with them made

19 by the facility, under any other contracting or

20 consulting arrangement, or otherwise).

21 ‘‘(c) RECONCILIATION OF AMOUNTS.—

22 ‘‘(1) LIMIT BASED ON PER STAY LIMIT AND

23 NUMBER OF STAYS.—

24 ‘‘(A) IN GENERAL.—If a skilled nursing fa25 cility has received aggregate payments under
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1 subsection (b) for covered non-routine services

2 during a cost reporting period beginning during

3 a fiscal year in excess of an amount equal to

4 the cost reporting period limit determined

5 under subparagraph (B), the Secretary shall re6 duce the payments made to the facility with re7 spect to such services for cost reporting periods

8 beginning during the following fiscal year in an

9 amount equal to such excess. The Secretary

10 shall reduce payments under this subparagraph

11 at such times and in such manner during a fis12 cal year as the Secretary finds necessary to

13 meet the requirement of this subparagraph.

14 ‘‘(B) COST REPORTING PERIOD LIMIT.—

15 The cost reporting period limit determined

16 under this subparagraph is an amount equal to

17 the product of—

18 ‘‘(i) the per stay limit applicable to

19 the facility under subsection (d) for the pe20 riod; and

21 ‘‘(ii) the number of stays beginning

22 during the period for which payment was

23 made to the facility for such services.

24 ‘‘(C) PROSPECTIVE REDUCTION IN PAY25 MENTS.—In addition to the process for reduc-
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1 ing payments described in subparagraph (A),

2 the Secretary may reduce payments made to a

3 facility under this section during a cost report4 ing period if the Secretary determines (on the

5 basis of such estimated information as the Sec6 retary considers appropriate) that payments to

7 the facility under this section for the period will

8 substantially exceed the cost reporting period

9 limit for the period determined under this para10 graph.

11 ‘‘(2) INCENTIVE PAYMENTS.—

12 ‘‘(A) IN GENERAL.—If a skilled nursing fa13 cility has received aggregate payments under

14 subsection (b) for covered non-routine services

15 during a cost reporting period beginning during

16 a fiscal year in an amount that is less than the

17 amount determined under paragraph (1)(B),

18 the Secretary shall pay the skilled nursing facil19 ity in the following fiscal year an incentive pay20 ment equal to 50 percent of the difference be21 tween such amounts, except that the incentive

22 payment may not exceed 5 percent of the aggre23 gate payments made to the facility under sub24 section (b) for the previous fiscal year (without

25 regard to subparagraph (B)).
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1 ‘‘(B) INSTALLMENT INCENTIVE PAY2 MENTS.—The Secretary may make installment

3 payments during a fiscal year to a skilled nurs4 ing facility based on the estimated incentive

5 payment that the facility would be eligible to re6 ceive with respect to such fiscal year.

7 ‘‘(d) DETERMINATION OF FACILITY PER STAY

8 LIMIT.—

9 ‘‘(1) LIMIT FOR FISCAL YEAR 1997.—

10 ‘‘(A) IN GENERAL.—Except as provided in

11 subparagraph (B), the Secretary shall establish

12 separate per stay limits for hospital-based and

13 freestanding skilled nursing facilities for the 12-

14 month cost reporting period beginning during

15 fiscal year 1997 that are equal to the sum of—

16 ‘‘(i) 50 percent of the facility-specific

17 stay amount for the facility (as determined

18 under subsection (e)) for the last 12-month

19 cost reporting period ending on or before

20 September 30, 1994, increased (in a

21 compounded manner) by the SNF market

22 basket percentage increase for fiscal years

23 1995 through 1997; and

24 ‘‘(ii) 50 percent of the average of all

25 facility-specific stay amounts for all hos-
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1 pital-based facilities or all freestanding fa2 cilities (whichever is applicable) during the

3 cost reporting period described in clause

4 (i), increased (in a compounded manner)

5 by the SNF market basket percentage in6 crease for fiscal years 1995 through 1997.

7 ‘‘(B) FACILITIES NOT HAVING 1994 COST

8 REPORTING PERIOD.—In the case of a skilled

9 nursing facility for which payments were not

10 made under this title for covered non-routine

11 services for the last 12-month cost reporting pe12 riod ending on or before September 30, 1994,

13 the per stay limit for the 12-month cost report14 ing period beginning during fiscal year 1997

15 shall be twice the amount determined under

16 subparagraph (A)(ii).

17 ‘‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS.—

18 The per stay limit for a skilled nursing facility for

19 a 12-month cost reporting period beginning during

20 a fiscal year after fiscal year 1997 is equal to the

21 per stay limit established under this subsection for

22 the 12-month cost reporting period beginning during

23 the previous fiscal year, increased by the SNF mar24 ket basket percentage increase for such subsequent

25 fiscal year minus 2 percentage points.
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1 ‘‘(3) REBASING OF AMOUNTS.—

2 ‘‘(A) IN GENERAL.—The Secretary shall

3 provide for an update to the facility-specific

4 amounts used to determine the per stay limits

5 under this subsection for cost reporting periods

6 beginning on or after October 1, 1999, and

7 every 2 years thereafter.

8 ‘‘(B) TREATMENT OF FACILITIES NOT

9 HAVING REBASED COST REPORTING PERIODS.—

10 Paragraph (1)(B) shall apply with respect to a

11 skilled nursing facility for which payments were

12 not made under this title for covered non-rou13 tine services for the 12-month cost reporting

14 period used by the Secretary to update facility15 specific amounts under subparagraph (A) in the

16 same manner as such paragraph applies with

17 respect to a facility for which payments were

18 not made under this title for covered non-rou19 tine services for the last 12-month cost report20 ing period ending on or before September 30,

21 1994.

22 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY

23 AMOUNTS.—The ‘facility-specific stay amount’ for a

24 skilled nursing facility for a cost reporting period is the

25 sum of—
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1 ‘‘(1) the average amount of payments made to

2 the facility under part A during the period which are

3 attributable to covered non-routine services fur4 nished during a stay (as determined on a per diem

5 basis); and

6 ‘‘(2) the Secretary’s best estimate of the aver7 age amount of payments made under part B during

8 the period for covered non-routine services furnished

9 to all residents of the facility to whom the facility

10 provided extended care services for which payment

11 was made under part A during the period (without

12 regard to whether or not the services were furnished

13 by the facility, by others under arrangement with

14 them made by the facility, under any other contract15 ing or consulting arrangement, or otherwise), as es16 timated by the Secretary.

17 ‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—

18 ‘‘(1) IN GENERAL.—In applying subsection (b)

19 to covered non-routine services furnished during a

20 stay beginning during a cost reporting period begin21 ning during a fiscal year (beginning with fiscal years

22 after fiscal year 1997) to a resident of a skilled

23 nursing facility who requires intensive nursing or

24 therapy services, the per stay limit for such resident

25 shall be the per stay limit developed under para-
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1 graph (2) instead of the per stay limit determined

2 under subsection (d)(1)(A).

3 ‘‘(2) PER STAY LIMIT FOR INTENSIVE NEED

4 RESIDENTS.—Not later than June 30, 1997, the

5 Secretary, after consultation with the Medicare Pay6 ment Review Commission and skilled nursing facility

7 experts, shall develop and publish a per stay limit

8 for residents of a skilled nursing facility who require

9 intensive nursing or therapy services.

10 ‘‘(3) BUDGET NEUTRALITY.—The Secretary

11 shall adjust payments under subsection (b) in a

12 manner that ensures that total payments for covered

13 non-routine services under this section are not great14 er or less than total payments for such services

15 would have been but for the application of para16 graph (1).

17 ‘‘(g) SPECIAL TREATMENT FOR SMALL SKILLED

18 NURSING FACILITIES.—This section shall not apply with

19 respect to a skilled nursing facility for which payment is

20 made for routine service costs during a cost reporting pe21 riod on the basis of prospective payments under section

22 1888(d).

23 ‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS.—

24 ‘‘(1) IN GENERAL.—The Secretary may make

25 exceptions and adjustments to the cost reporting
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1 limits applicable to a skilled nursing facility under

2 subsection (c)(1)(B) for a cost reporting period, ex3 cept that the total amount of any additional pay4 ments made under this section for covered non-rou5 tine services during the cost reporting period as a

6 result of such exceptions and adjustments may not

7 exceed 5 percent of the aggregate payments made to

8 all skilled nursing facilities for covered non-routine

9 services during the cost reporting period (determined

10 without regard to this paragraph).

11 ‘‘(2) BUDGET NEUTRALITY.—The Secretary

12 shall adjust payments under subsection (b) in a

13 manner that ensures that total payments for covered

14 non-routine services under this section are not great15 er or less than total payments for such services

16 would have been but for the application of para17 graph (1).

18 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before

19 furnishing a covered non-routine service consisting of an

20 X-ray service for which payment may be made under part

21 A or part B to a resident, a skilled nursing facility shall

22 consider whether furnishing the service through a provider

23 of portable X-ray service services would be appropriate,

24 taking into account the cost effectiveness of the service

25 and the convenience to the resident.’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 1814(b) (42 U.S.C. 1395f(b)) is amended in the

3 matter preceding paragraph (1) by striking ‘‘1813

4 and 1886’’ and inserting ‘‘1813, 1886, 1888, and

5 1888A’’.

6 SEC. 15235. FREEZE IN PAYMENTS FOR CLINICAL DIAG7 NOSTIC LABORATORY TESTS.

8 Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C.

9 1395l(h)(2)(A)(ii)(IV)) is amended by striking ‘‘1994 and

10 1995’’ and inserting ‘‘1994 through 1998’’.

11 PART 5—GRADUATE MEDICAL EDUCATION AND

12 TEACHING HOSPITALS

13 SEC. 15241. TEACHING HOSPITAL AND GRADUATE MEDICAL

14 EDUCATION TRUST FUND.

15 (a) TEACHING HOSPITAL AND GRADUATE MEDICAL

16 EDUCATION TRUST FUND.—The Social Security Act (42

17 U.S.C. 300 et seq.) is amended by adding at the end the

18 following title:

19 ‘‘TITLE XXI—TEACHING HOSPITAL AND

20 GRADUATE MEDICAL EDUCATION TRUST FUND

21 ‘‘PART A—ESTABLISHMENT OF FUND

22 ‘‘SEC. 2101. ESTABLISHMENT OF FUND.

23 ‘‘(a) IN GENERAL.—There is established in the

24 Treasury of the United States a fund to be known as the

25 Teaching Hospital and Graduate Medical Education Trust
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1 Fund (in this title referred to as the ‘Fund’), consisting

2 of amounts transferred to the Fund under subsection (c),

3 amounts appropriated to the Fund pursuant to sub4 sections (d) and (e)(3), and such gifts and bequests as

5 may be deposited in the Fund pursuant to subsection (f).

6 Amounts in the Fund are available until expended.

7 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

8 Fund are available to the Secretary for making payments

9 under section 2111.

10 ‘‘(c) TRANSFERS TO FUND.—

11 ‘‘(1) IN GENERAL.—From the Federal Hospital

12 Insurance Trust Fund and the Federal Supple13 mentary Medical Insurance Trust Fund, the Sec14 retary shall, for fiscal year 1996 and each subse15 quent fiscal year, transfer to the Fund an amount

16 determined by the Secretary for the fiscal year in17 volved in accordance with paragraph (2).

18 ‘‘(2) DETERMINATION OF AMOUNTS.—For pur19 poses of paragraph (1), the amount determined

20 under this paragraph for a fiscal year is an estimate

21 by the Secretary of an amount equal to 75 percent

22 of the difference between—

23 ‘‘(A) the nationwide total of the amounts

24 that would have been paid under sections 1855
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1 and 1876 during the year but for the operation

2 of section 1855(b)(2)(B)(ii); and

3 ‘‘(B) the nationwide total of the amounts

4 paid under such sections during the year.

5 ‘‘(3) ALLOCATION BETWEEN MEDICARE TRUST

6 FUNDS.—In providing for a transfer under para7 graph (1) for a fiscal year, the Secretary shall pro8 vide for an allocation of the amounts involved be9 tween part A and part B of title XVIII (and the

10 trust funds established under the respective parts)

11 as reasonably reflects the proportion of payments for

12 the indirect costs of medical education and direct

13 graduate medical education costs of hospitals associ14 ated with the provision of services under each re15 spective part.

16 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There

17 are authorized to be appropriated to the Fund such sums

18 as may be necessary for each of the fiscal years 1996

19 through 2002.

20 ‘‘(e) INVESTMENT.—

21 ‘‘(1) IN GENERAL.—The Secretary of the

22 Treasury shall invest such amounts of the Fund as

23 such Secretary determines are not required to meet

24 current withdrawals from the Fund. Such invest25 ments may be made only in interest-bearing obliga-
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1 tions of the United States. For such purpose, such

2 obligations may be acquired on original issue at the

3 issue price, or by purchase of outstanding obliga4 tions at the market price.

5 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation

6 acquired by the Fund may be sold by the Secretary

7 of the Treasury at the market price.

8 ‘‘(3) AVAILABILITY OF INCOME.—Any interest

9 derived from obligations acquired by the Fund, and

10 proceeds from any sale or redemption of such obliga11 tions, are hereby appropriated to the Fund.

12 ‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—The

13 Fund may accept on behalf of the United States money

14 gifts and bequests made unconditionally to the Fund for

15 the benefit of the Fund or any activity financed through

16 the Fund.

17 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

18 ‘‘SEC. 2111. FORMULA PAYMENTS TO TEACHING HOS19 PITALS.

20 ‘‘(a) IN GENERAL.—In the case of each teaching hos21 pital that in accordance with subsection (b) submits to the

22 Secretary a payment document for fiscal year 1996 or any

23 subsequent fiscal year, the Secretary shall make payments

24 for the year to the teaching hospital for the direct and

25 indirect costs of operating approved medical residency
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1 training programs. Such payments shall be made from the

2 Fund, and shall be made in accordance with a formula

3 established by the Secretary.

4 ‘‘(b) PAYMENT DOCUMENT.—For purposes of sub5 section (a), a payment document is a document containing

6 such information as may be necessary for the Secretary

7 to make payments under such subsection to a teaching

8 hospital for a fiscal year. The document is submitted in

9 accordance with this subsection if the document is submit10 ted not later than the date specified by the Secretary, and

11 the document is in such form and is made in such manner

12 as the Secretary may require. The Secretary may require

13 that information under this subsection be submitted to the

14 Secretary in periodic reports.’’.

15 (b) NATIONAL ADVISORY COUNCIL ON POST16 GRADUATE MEDICAL EDUCATION.—

17 (1) IN GENERAL.—There is established within

18 the Department of Health and Human Services an

19 advisory council to be known as the National Advi20 sory Council on Postgraduate Medical Education (in

21 this title referred to as the ‘‘Council’’).

22 (2) DUTIES.—The council shall provide advice

23 to the Secretary on appropriate policies for making

24 payments for the support of postgraduate medical

25 education in order to assure an adequate supply of
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1 physicians trained in various specialities, consistent

2 with the health care needs of the United States.

3 (3) COMPOSITION.—

4 (A) IN GENERAL.—The Secretary shall ap5 point to the Council 15 individuals who are not

6 officers or employees of the United States. Such

7 individuals shall include not less than 1 individ8 ual from each of the following categories of in9 dividuals or entities:

10 (i) Organizations representing con11 sumers of health care services.

12 (ii) Physicians who are faculty mem13 bers of medical schools, or who supervise

14 approved physician training programs.

15 (iii) Physicians in private practice who

16 are not physicians described in clause (ii).

17 (iv) Practitioners in public health.

18 (v) Advanced-practice nurses.

19 (vi) Other health professionals who

20 are not physicians.

21 (vii) Medical schools.

22 (viii) Teaching hospitals.

23 (ix) The Accreditation Council on

24 Graduate Medical Education.
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1 (x) The American Board of Medical

2 Specialities.

3 (xi) The Council on Postdoctoral

4 Training of the American Osteopathic As5 sociation.

6 (xii) The Council on Podiatric Medical

7 Education of the American Podiatric Medi8 cal Association.

9 (B) REQUIREMENTS REGARDING REP10 RESENTATIVE MEMBERSHIP.—To the greatest

11 extent feasible, the membership of the Council

12 shall represent the various geographic regions

13 of the United States, shall reflect the racial,

14 ethnic, and gender composition of the popu15 lation of the United States, and shall be broadly

16 representative of medical schools and teaching

17 hospitals in the United States.

18 (C) EX OFFICIO MEMBERS; OTHER FED19 ERAL OFFICERS OR EMPLOYEES.—The member20 ship of the Council shall include individuals des21 ignated by the Secretary to serve as members

22 of the Council from among Federal officers or

23 employees who are appointed by the President,

24 or by the Secretary (or by other Federal offi25 cers who are appointed by the President with
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1 the advice and consent of the Senate). Individ2 uals designated under the preceding sentence

3 shall include each of the following officials (or

4 a designee of the official):

5 (i) The Secretary of Health and

6 Human Services.

7 (ii) The Secretary of Veterans Affairs.

8 (iii) The Secretary of Defense.

9 (4) CHAIR.—The Secretary shall, from among

10 members of the council appointed under paragraph

11 (3)(A), designate an individual to serve as the chair

12 of the council.

13 (5) TERMINATION.—The Council terminates

14 December 31, 1999.

15 (c) REMOVE MEDICAL EDUCATION AND DISPROPOR16 TIONATE SHARE HOSPITAL PAYMENTS FROM CALCULA17 TION OF ADJUSTED AVERAGE PER CAPITA COST.—For

18 provision removing medical education and disproportion19 ate share hospital payments from calculation of payment

20 amounts for organizations paid on a capitated basis, see

21 section 1855(b)(2)(B)(ii).

22 (2) PAYMENTS TO HOSPITALS OF AMOUNTS AT23 TRIBUTABLE TO DSH.—Section 1886 (42 U.S.C.

24 1395ww) is amended by adding at the end the fol25 lowing new subsection:
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1 ‘‘(j)(1) In addition to amounts paid under subsection

2 (d)(5)(F), the Secretary is authorized to pay hospitals

3 which are eligible for such payments for a fiscal year sup4 plemental amounts that do not exceed the limit provided

5 for in paragraph (2).

6 ‘‘(2) The sum of the aggregate amounts paid pursu7 ant to paragraph (1) for a fiscal year shall not exceed the

8 Secretary’s estimate of 75 percent of the amount of reduc9 tions in payments under section 1855 that are attributable

10 to the operation of subsection (b)(2)(B)(ii) of such

11 section. ’’.

12 SEC. 15242. REDUCTION IN PAYMENT ADJUSTMENTS FOR

13 INDIRECT MEDICAL EDUCATION.

14 (a) MODIFICATION REGARDING 5.6 PERCENT.—Sec15 tion 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is

16 amended—

17 (1) by striking ‘‘on or after October 1, 1988,’’

18 and inserting ‘‘on or after October 1, 1999,’’; and

19 (2) by striking ‘‘1.89’’ and inserting ‘‘1.38’’.

20 (b) SPECIAL RULE REGARDING FISCAL YEARS 1996

21 THROUGH 1998; MODIFICATION REGARDING 6 PER22 CENT.—Section 1886(d)(5)(B)(ii), as amended by para23 graph (1), is amended by adding at the end the following:

24 ‘‘In the case of discharges occurring on or after October

25 1, 1995, and before October 1, 1999, the preceding sen-
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1 tence applies to the same extent and in the same manner

2 as the sentence applies to discharges occurring on or after

3 October 1, 1999, except that the term ‘1.38’ is deemed

4 to be 1.48.’’.

5 Subtitle D—Provisions Relating to

6 Medicare Beneficiaries

7 SEC. 15301. EXTENDING MEDICARE PART B PREMIUM.

8 Section 1839(e) (42 U.S.C. 1395r(e)) is amended—

9 (1) in paragraph (1)(A), by striking ‘‘January

10 1999 shall be an amount equal to 50 percent’’ and

11 inserting ‘‘January 2003 shall be an amount equal

12 to 56 percent’’, and

13 (2) in paragraph (2) by striking ‘‘1998’’ and in14 serting ‘‘2002’’.

15 SEC. 15302. RELATING MEDICARE PART B PREMIUM TO IN16 COME FOR CERTAIN HIGH INCOME INDIVID17 UALS.

18 (a) INCREASE IN PREMIUM.—

19 (1) IN GENERAL.—Section 1839 (42 U.S.C.

20 1395r) is amended by adding at the end the follow21 ing:

22 ‘‘(h)(1) Notwithstanding the previous subsections of

23 this section, in the case of an individual whose modified

24 adjusted gross income in a taxable year ending with or

25 within a calendar year (as reported by the individual under
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1 section 1894(a)) is equal to or exceeds the sum of the

2 threshold amount described in paragraph (4) and

3 $25,000, the amount of the monthly premium for the cal4 endar year shall be increased by an amount such that the

5 total monthly premium (determined without regard to sub6 section (b)) is equal to 200 percent of the monthly actuar7 ial rate for enrollees age 65 and over as determined under

8 subsection (a)(1) for that calendar year. The preceding

9 sentence shall not apply to any individual whose threshold

10 amount is zero.

11 ‘‘(2) Notwithstanding the previous subsections of this

12 section, in the case of an individual not described in para13 graph (1) whose modified adjusted gross income in a tax14 able year ending with or within a calendar year (as re15 ported by the individual under section 1894(a)) exceeds

16 the threshold amount described in paragraph (4), the

17 amount of the monthly premium for the calendar year

18 shall be increased by an amount which bears the same

19 ratio to the amount of the increase determined under

20 paragraph (1) as such excess bears to $25,000. The pre21 ceding sentence shall not apply to any individual whose

22 threshold amount is zero.

23 ‘‘(3) Using information provided by the Secretary of

24 the Treasury under section 6103(l)(14) of the Internal

25 Revenue Code of 1986, the Secretary shall determine the
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1 actual modified adjusted gross income of individuals en2 rolled in this part during a taxable year and adjust the

3 monthly premium applicable to an individual during a cal4 endar year to take into account any overpayments or un5 derpayments in the premium during the previous calendar

6 year resulting from the application of this subsection.

7 ‘‘(4) In this subsection and section 1813(c), the term

8 ‘threshold amount’ means—

9 ‘‘(A) except as otherwise provided in this para10 graph, $75,000,

11 ‘‘(B) $100,000 in the case of an individual who

12 files a joint return under section 6013 of the Inter13 nal Revenue Code of 1986, and

14 ‘‘(C) zero in the case of an individual who—

15 ‘‘(i) is married at the close of the taxable

16 year (as determined under section 7703 of the

17 Internal Revenue Code of 1986) but does not

18 file a joint return for such year, and

19 ‘‘(ii) does not live apart from the individ20 ual’s spouse at all times during the taxable

21 year.’’.

22 (2) CONFORMING AMENDMENT.—Section

23 1839(f) (42 U.S.C. 1395r(f)) is amended by striking

24 ‘‘if an individual’’ and inserting the following: ‘‘if an

25 individual (other than an individual subject to an in-
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1 crease in the monthly premium under this section

2 pursuant to subsection (h))’’.

3 (3) EFFECTIVE DATE.—The amendments made

4 by paragraphs (1) and (2) shall apply to the month5 ly premium under section 1839 of the Social Secu6 rity Act for months beginning after February 1996

7 in taxable years beginning after December 31, 1995.

8 (b) REPORTING REQUIREMENT FOR BENE9 FICIARIES.—Title XVIII, as amended by section

10 15231(d), is further amended by adding at the end the

11 following:

12 ‘‘REPORT TO SECRETARY ON ESTIMATED MODIFIED

13 ADJUSTED GROSS INCOME

14 ‘‘SEC. 1894. (a) IN GENERAL.—

15 ‘‘(1) INDIVIDUALS COVERED THROUGHOUT

16 YEAR.—Not later than November 1 of each year (be17 ginning with 1996), each individual enrolled under

18 part B shall submit to the Secretary (in such form

19 and manner as the Secretary may require, in con20 sultation with the Secretary of the Treasury) an es21 timate of the individual’s modified adjusted gross in22 come anticipated for the taxable year ending with or

23 within the following calendar year, to be used (sub24 ject to section 1839(h)(3)) to determine whether the

25 individual is to be subject to an increase in the
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1 monthly part B premium under section 1839(h) for

2 such following calendar year.

3 ‘‘(2) SPECIAL RULE FOR FIRST YEAR OF COV4 ERAGE.—For the first year in which an individual is

5 enrolled under part B, the individual shall submit to

6 the Secretary (at such time and in such form and

7 manner as the Secretary may require, in consulta8 tion with the Secretary of the Treasury) an estimate

9 of the individual’s modified adjusted gross income

10 anticipated for the taxable year ending with Decem11 ber 31 of such year, to be used to determine whether

12 the individual is to be subject to an increase in the

13 monthly part B premium under section 1839(h) for

14 such year.

15 ‘‘(b) SPECIAL RULE FOR 1996.—Not later than 60

16 days after the date of the enactment of this section, each

17 individual described in subsection (a) shall submit to the

18 Secretary an estimate of the individual’s modified adjusted

19 gross income for the taxable year ending December 1995,

20 to be used to determine (subject to section 1839(h)(3))

21 whether the individual is to be subject to an increase in

22 the monthly part B premium under section 1839(h) dur23 ing 1996.

24 ‘‘(c) MODIFIED ADJUSTED GROSS INCOME DE25 FINED.—In subsection (a), the term ‘modified adjusted
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1 gross income’ means, with respect to an individual for a

2 taxable year, the individual’s adjusted gross income under

3 the Internal Revenue Code of 1986, determined without

4 regard to sections 931 or 933 of such Code.’’.

5 (c) DISCLOSURE OF CERTAIN TAX INFORMATION BY

6 SECRETARY OF TREASURY.—

7 (1) IN GENERAL.—Subsection (l) of section

8 6103 of the Internal Revenue Code of 1986 (relating

9 to confidentiality and disclosure of returns and re10 turn information) is amended by adding at the end

11 thereof the following new paragraph:

12 ‘‘(14) DISCLOSURE OF RETURN INFORMATION

13 TO MEANS-TEST MEDICARE.—

14 ‘‘(A) IN GENERAL.—The Secretary shall,

15 upon written request from the Administrator of

16 the Health Care Financing Administration, dis17 close to the officers and employees of such Ad18 ministration return information necessary to

19 determine the modified adjusted gross income

20 (as defined in section 1894(c) of the Social Se21 curity Act) of any medicare beneficiary (as de22 fined in paragraph (12)(E)), to be used to de23 termine whether the beneficiary is to be subject

24 to an increase in the monthly part B premium

25 under section 1839(g) of such Act.
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1 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

2 INFORMATION.—Any officer or employee of the

3 Health Care Financing Administration receiv4 ing return information under subparagraph (A)

5 shall use such information only for purposes of,

6 and to the extent necessary in, establishing the

7 modified adjusted gross income (as so defined)

8 of any medicare beneficiary (as so defined).’’

9 (2) CONFORMING AMENDMENTS.—Paragraphs

10 (3)(A) and (4) of section 6103(p) of such Code are

11 each amended by striking ‘‘or (13)’’ each place it ap12 pears and inserting ‘‘(13), or (14)’’.

13 (3) EFFECTIVE DATE.—The amendments made

14 by paragraphs (1) and (2) shall apply with respect

15 to information for taxable years beginning after De16 cember 31, 1995.

17 SEC. 15303. EXPANDED COVERAGE OF PREVENTIVE BENE18 FITS.

19 (a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY

20 FOR WOMEN OVER AGE 49.—Section 1834(c)(2)(A) (42

21 U.S.C. 1395m(c)(2)(A)) is amended—

22 (1) in clause (iv), by striking ‘‘but under 65

23 years of age,’’; and

24 (2) by striking clause (v).
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1 (b) COVERAGE OF SCREENING PAP SMEAR AND PEL2 VIC EXAMS.—

3 (1) COVERAGE OF PELVIC EXAM; INCREASING

4 FREQUENCY OF COVERAGE OF PAP SMEAR.—Section

5 1861(nn) (42 U.S.C. 1395x(nn)) is amended—

6 (A) in the heading, by striking ‘‘Smear’’

7 and inserting ‘‘Smear; Screening Pelvic Exam’’;

8 (B) by striking ‘‘(nn)’’ and inserting

9 ‘‘(nn)(1)’’;

10 (C) by striking ‘‘3 years’’ and all that fol11 lows and inserting ‘‘3 years, or during the pre12 ceding year in the case of a woman described

13 in paragraph (3).’’; and

14 (D) by adding at the end the following new

15 paragraphs:

16 ‘‘(2) The term ‘screening pelvic exam’ means an pel17 vic examination provided to a woman if the woman in18 volved has not had such an examination during the preced19 ing 3 years, or during the preceding year in the case of

20 a woman described in paragraph (3), and includes a clini21 cal breast examination.

22 ‘‘(3) A woman described in this paragraph is a

23 woman who—

24 ‘‘(A) is of childbearing age and has not had a

25 test described in this subsection during each of the
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1 preceding 3 years that did not indicate the presence

2 of cervical cancer; or

3 ‘‘(B) is at high risk of developing cervical can4 cer (as determined pursuant to factors identified by

5 the Secretary).’’.

6 (2) WAIVER OF DEDUCTIBLE.—The first sen7 tence of section 1833(b) (42 U.S.C. 1395l(b)), as

8 amended by subsection (a)(2), is amended—

9 (A) by striking ‘‘and (5)’’ and inserting

10 ‘‘(5)’’; and

11 (B) by striking the period at the end and

12 inserting the following: ‘‘, and (6) such deduct13 ible shall not apply with respect to screening

14 pap smear and screening pelvic exam (as de15 scribed in section 1861(nn)).’’.

16 (3) CONFORMING AMENDMENTS.—(A) Section

17 1861(s)(14) (42 U.S.C. 1395x(s)(14)) is amended

18 by inserting ‘‘and screening pelvic exam’’ after

19 ‘‘screening pap smear’’.

20 (B) Section 1862(a)(1)(F) (42 U.S.C.

21 1395y(a)(1)(F)) is amended by inserting ‘‘and

22 screening pelvic exam’’ after ‘‘screening pap smear’’.

23 (c) COVERAGE OF COLORECTAL SCREENING.—
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1 (1) IN GENERAL.—Section 1834 (42 U.S.C.

2 1395m) is amended by inserting after subsection (c)

3 the following new subsection:

4 ‘‘(d) FREQUENCY AND PAYMENT LIMITS FOR

5 SCREENING FECAL-OCCULT BLOOD TESTS, SCREENING

6 FLEXIBLE SIGMOIDOSCOPIES, AND SCREENING

7 COLONOSCOPY.—

8 ‘‘(1) FREQUENCY LIMITS FOR SCREENING

9 FECAL-OCCULT BLOOD TESTS.—Subject to revision

10 by the Secretary under paragraph (4), no payment

11 may be made under this part for a screening fecal12 occult blood test provided to an individual for the

13 purpose of early detection of colon cancer if the test

14 is performed—

15 ‘‘(A) in the case of an individual under 65

16 years of age, more frequently than is provided

17 in a periodicity schedule established by the Sec18 retary for purposes of this subparagraph; or

19 ‘‘(B) in the case of any other individual,

20 within the 11 months following the month in

21 which a previous screening fecal-occult blood

22 test was performed.

23 ‘‘(2) SCREENING FLEXIBLE SIGMOIDO24 SCOPIES.—
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1 ‘‘(A) PAYMENT AMOUNT.—The Secretary

2 shall establish a payment amount under section

3 1848 with respect to screening flexible

4 sigmoidoscopies provided for the purpose of

5 early detection of colon cancer that is consistent

6 with payment amounts under such section for

7 similar or related services, except that such

8 payment amount shall be established without

9 regard to subsection (a)(2)(A) of such section.

10 ‘‘(B) FREQUENCY LIMITS.—Subject to re11 vision by the Secretary under paragraph (4), no

12 payment may be made under this part for a

13 screening flexible sigmoidoscopy provided to an

14 individual for the purpose of early detection of

15 colon cancer if the procedure is performed—

16 ‘‘(i) in the case of an individual under

17 65 years of age, more frequently than is

18 provided in a periodicity schedule estab19 lished by the Secretary for purposes of this

20 subparagraph; or

21 ‘‘(ii) in the case of any other individ22 ual, within the 59 months following the

23 month in which a previous screening flexi24 ble sigmoidoscopy was performed.
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1 ‘‘(3) SCREENING COLONOSCOPY FOR INDIVID2 UALS AT HIGH RISK FOR COLORECTAL CANCER.—

3 ‘‘(A) PAYMENT AMOUNT.—The Secretary

4 shall establish a payment amount under section

5 1848 with respect to screening colonoscopy for

6 individuals at high risk for colorectal cancer (as

7 determined in accordance with criteria estab8 lished by the Secretary) provided for the pur9 pose of early detection of colon cancer that is

10 consistent with payment amounts under such

11 section for similar or related services, except

12 that such payment amount shall be established

13 without regard to subsection (a)(2)(A) of such

14 section.

15 ‘‘(B) FREQUENCY LIMIT.—Subject to revi16 sion by the Secretary under paragraph (4), no

17 payment may be made under this part for a

18 screening colonoscopy for individuals at high

19 risk for colorectal cancer provided to an individ20 ual for the purpose of early detection of colon

21 cancer if the procedure is performed within the

22 47 months following the month in which a pre23 vious screening colonoscopy was performed.

24 ‘‘(C) FACTORS CONSIDERED IN ESTAB25 LISHING CRITERIA FOR DETERMINING INDIVID-
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1 UALS AT HIGH RISK.—In establishing criteria

2 for determining whether an individual is at high

3 risk for colorectal cancer for purposes of this

4 paragraph, the Secretary shall take into consid5 eration family history, prior experience of can6 cer, a history of chronic digestive disease condi7 tion, and the presence of any appropriate recog8 nized gene markers for colorectal cancer.

9 ‘‘(4) REVISION OF FREQUENCY.—

10 ‘‘(A) REVIEW.—The Secretary shall review

11 periodically the appropriate frequency for per12 forming screening fecal-occult blood tests,

13 screening flexible sigmoidoscopies, and screen14 ing colonoscopy based on age and such other

15 factors as the Secretary believes to be pertinent.

16 ‘‘(B) REVISION OF FREQUENCY.—The Sec17 retary, taking into consideration the review

18 made under clause (i), may revise from time to

19 time the frequency with which such tests and

20 procedures may be paid for under this sub21 section.’’.

22 (2) CONFORMING AMENDMENTS.—(A) Para23 graphs (1)(D) and (2)(D) of section 1833(a) (42

24 U.S.C. 1395l(a)) are each amended by striking
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1 ‘‘subsection (h)(1),’’ and inserting ‘‘subsection (h)(1)

2 or section 1834(d)(1),’’.

3 (B) Clauses (i) and (ii) of section

4 1848(a)(2)(A) (42 U.S.C. 1395w–4(a)(2)(A)) are

5 each amended by striking ‘‘a service’’ and inserting

6 ‘‘a service (other than a screening flexible

7 sigmoidoscopy provided to an individual for the pur8 pose of early detection of colon cancer or a screening

9 colonoscopy provided to an individual at high risk

10 for colorectal cancer for the purpose of early detec11 tion of colon cancer)’’.

12 (C) Section 1862(a) (42 U.S.C. 1395y(a)) is

13 amended—

14 (i) in paragraph (1)—

15 (I) in subparagraph (E), by striking

16 ‘‘and’’ at the end;

17 (II) in subparagraph (F), by striking

18 the semicolon at the end and inserting ‘‘,

19 and’’; and

20 (III) by adding at the end the follow21 ing new subparagraph:

22 ‘‘(G) in the case of screening fecal-occult blood

23 tests, screening flexible sigmoidoscopies, and screen24 ing colonoscopy provided for the purpose of early de25 tection of colon cancer, which are performed more
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1 frequently than is covered under section 1834(d);’’;

2 and

3 (ii) in paragraph (7), by striking ‘‘para4 graph (1)(B) or under paragraph (1)(F)’’ and

5 inserting ‘‘subparagraphs (B), (F), or (G) of

6 paragraph (1)’’.

7 (d) PROSTATE CANCER SCREENING TESTS.—

8 (1) IN GENERAL.—Section 1861(s)(2) (42

9 U.S.C. 1395x(s)(2)) is amended—

10 (A) by striking ‘‘and’’ at the end of sub11 paragraph (N) and subparagraph (O); and

12 (B) by inserting after subparagraph (O)

13 the following new subparagraph:

14 ‘‘(P) prostate cancer screening tests (as defined

15 in subsection (oo)); and’’.

16 (2) TESTS DESCRIBED.—Section 1861 (42

17 U.S.C. 1395x) is amended by adding at the end the

18 following new subsection:

19 ‘‘Prostate Cancer Screening Tests

20 ‘‘(oo) The term ‘prostate cancer screening test’

21 means a test that consists of a digital rectal examination

22 or a prostate-specific antigen blood test (or both) provided

23 for the purpose of early detection of prostate cancer to

24 a man over 40 years of age who has not had such a test

25 during the preceding year.’’.
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1 (3) PAYMENT FOR PROSTATE-SPECIFIC ANTI2 GEN BLOOD TEST UNDER CLINICAL DIAGNOSTIC

3 LABORATORY TEST FEE SCHEDULES.—Section

4 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amend5 ed by inserting after ‘‘laboratory tests’’ the follow6 ing: ‘‘(including prostate cancer screening tests

7 under section 1861(oo) consisting of prostate-spe8 cific antigen blood tests)’’.

9 (4) CONFORMING AMENDMENT.—Section

10 1862(a) (42 U.S.C. 1395y(a)), as amended by sub11 section (c)(3)(C), is amended—

12 (A) in paragraph (1)—

13 (i) in subparagraph (F), by striking

14 ‘‘and’’ at the end,

15 (ii) in subparagraph (G), by striking

16 the semicolon at the end and inserting ‘‘,

17 and’’, and

18 (iii) by adding at the end the follow19 ing new subparagraph:

20 ‘‘(H) in the case of prostate cancer screening

21 test (as defined in section 1861(oo)) provided for the

22 purpose of early detection of prostate cancer, which

23 are performed more frequently than is covered under

24 such section;’’; and
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1 (B) in paragraph (7), by striking ‘‘or (G)’’

2 and inserting ‘‘(G), or (H)’’.

3 (e) DIABETES SCREENING BENEFITS.—

4 (1) DIABETES OUTPATIENT SELF-MANAGEMENT

5 TRAINING SERVICES.—

6 (A) IN GENERAL.—Section 1861(s)(2) (42

7 U.S.C. 1395x(s)(2)), as amended by subsection

8 (d)(1), is amended—

9 (i) by striking ‘‘and’’ at the end of

10 subparagraph (N);

11 (ii) by striking ‘‘and’’ at the end of

12 subparagraph (O); and

13 (iii) by inserting after subparagraph

14 (O) the following new subparagraph:

15 ‘‘(P) diabetes outpatient self-management train16 ing services (as defined in subsection (pp)); and’’.

17 (B) DEFINITION.—Section 1861 (42

18 U.S.C. 1395x), as amended by subsection

19 (d)(2), is amended by adding at the end the fol20 lowing new subsection:

21 ‘‘DIABETES OUTPATIENT SELF-MANAGEMENT TRAINING

22 SERVICES

23 ‘‘(pp)(1) The term ‘diabetes outpatient self-manage24 ment training services’ means educational and training

25 services furnished to an individual with diabetes by or

26 under arrangements with a certified provider (as described
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1 in paragraph (2)(A)) in an outpatient setting by an indi2 vidual or entity who meets the quality standards described

3 in paragraph (2)(B), but only if the physician who is man4 aging the individual’s diabetic condition certifies that such

5 services are needed under a comprehensive plan of care

6 related to the individual’s diabetic condition to provide the

7 individual with necessary skills and knowledge (including

8 skills related to the self-administration of injectable drugs)

9 to participate in the management of the individual’s condi10 tion.

11 ‘‘(2) In paragraph (1)—

12 ‘‘(A) a ‘certified provider’ is an individual or

13 entity that, in addition to providing diabetes out14 patient self-management training services, provides

15 other items or services for which payment may be

16 made under this title; and

17 ‘‘(B) an individual or entity meets the quality

18 standards described in this paragraph if the individ19 ual or entity meets quality standards established by

20 the Secretary, except that the individual or entity

21 shall be deemed to have met such standards if the

22 individual or entity meets applicable standards origi23 nally established by the National Diabetes Advisory

24 Board and subsequently revised by organizations

25 who participated in the establishment of standards
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1 by such Board, or is recognized by the American Di2 abetes Association as meeting standards for furnish3 ing the services.’’.

4 (C) CONSULTATION WITH ORGANIZATIONS

5 IN ESTABLISHING PAYMENT AMOUNTS FOR

6 SERVICES PROVIDED BY PHYSICIANS.—In es7 tablishing payment amounts under section

8 1848(a) of the Social Security Act for physi9 cians’ services consisting of diabetes outpatient

10 self-management training services, the Sec11 retary of Health and Human Services shall con12 sult with appropriate organizations, including

13 the American Diabetes Association, in deter14 mining the relative value for such services

15 under section 1848(c)(2) of such Act.

16 (2) BLOOD-TESTING STRIPS FOR INDIVIDUALS

17 WITH DIABETES.—

18 (A) INCLUDING STRIPS AS DURABLE MEDI19 CAL EQUIPMENT.—Section 1861(n) (42 U.S.C.

20 1395x(n)) is amended by striking the semicolon

21 in the first sentence and inserting the following:

22 ‘‘, and includes blood-testing strips for individ23 uals with diabetes without regard to whether

24 the individual has Type I or Type II diabetes

25 (as determined under standards established by
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1 the Secretary in consultation with the American

2 Diabetes Association);’’.

3 (2) PAYMENT FOR STRIPS BASED ON METH4 ODOLOGY FOR INEXPENSIVE AND ROUTINELY PUR5 CHASED EQUIPMENT.—Section 1834(a)(2)(A) (42

6 U.S.C. 1395m(a)(2)(A)) is amended—

7 (A) by striking ‘‘or’’ at the end of clause

8 (ii);

9 (B) by adding ‘‘or’’ at the end of clause

10 (iii); and

11 (C) by inserting after clause (iii) the fol12 lowing new clause:

13 ‘‘(iv) which is a blood-testing strip for

14 an individual with diabetes,’’.

15 (e) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to items and services furnished on

17 or after January 1, 1996.

18 Subtitle E—Medicare Fraud

19 Reduction

20 SEC. 15401. INCREASING BENEFICIARY AWARENESS OF

21 FRAUD AND ABUSE.

22 (a) BENEFICIARY OUTREACH EFFORTS.—The Sec23 retary of Health and Human Services (acting through the

24 Administrator of the Health Care Financing Administra25 tion and the Inspector General of the Department of
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1 Health and Human Services) shall make ongoing efforts

2 (through public service announcements, publications, and

3 other appropriate methods) to alert individuals entitled to

4 benefits under the medicare program of the existence of

5 fraud and abuse committed against the program and the

6 costs to the program of such fraud and abuse, and of the

7 existence of the toll-free telephone line operated by the

8 Secretary to receive information on fraud and abuse com9 mitted against the program.

10 (b) CLARIFICATION OF REQUIREMENT TO PROVIDE

11 EXPLANATION OF MEDICARE BENEFITS.—The Secretary

12 shall provide an explanation of benefits under the medi13 care program with respect to each item or service for

14 which payment may be made under the program which

15 is furnished to an individual, without regard to whether

16 or not a deductible or coinsurance may be imposed against

17 the individual with respect to the item or service.

18 (c) PROVIDER OUTREACH EFFORTS; PUBLICATION

19 OF FRAUD ALERTS.—

20 (1) SPECIAL FRAUD ALERTS.—

21 (A) IN GENERAL.—

22 (i) REQUEST FOR SPECIAL FRAUD

23 ALERTS.—Any person may present, at any

24 time, a request to the Secretary to issue

25 and publish a special fraud alert.
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1 (ii) SPECIAL FRAUD ALERT DE2 FINED.—In this section, a ‘‘special fraud

3 alert’’ is a notice which informs the public

4 of practices which the Secretary considers

5 to be suspect or of particular concern

6 under the medicare program or a State

7 health care program (as defined in section

8 1128(h) of the Social Security Act).

9 (B) ISSUANCE AND PUBLICATION OF SPE10 CIAL FRAUD ALERTS.—

11 (i) INVESTIGATION.—Upon receipt of

12 a request for a special fraud alert under

13 subparagraph (A), the Secretary shall in14 vestigate the subject matter of the request

15 to determine whether a special fraud alert

16 should be issued. If appropriate, the Sec17 retary (in consultation with the Attorney

18 General) shall issue a special fraud alert in

19 response to the request. All special fraud

20 alerts issued pursuant to this subpara21 graph shall be published in the Federal

22 Register.

23 (ii) CRITERIA FOR ISSUANCE.—In de24 termining whether to issue a special fraud
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1 alert upon a request under subparagraph

2 (A), the Secretary may consider—

3 (I) whether and to what extent

4 the practices that would be identified

5 in the special fraud alert may result

6 in any of the consequences described

7 in subparagraph (C); and

8 (II) the extent and frequency of

9 the conduct that would be identified

10 in the special fraud alert.

11 (C) CONSEQUENCES DESCRIBED.—The

12 consequences described in this subparagraph

13 are as follows:

14 (i) An increase or decrease in access

15 to health care services.

16 (ii) An increase or decrease in the

17 quality of health care services.

18 (iii) An increase or decrease in patient

19 freedom of choice among health care pro20 viders.

21 (iv) An increase or decrease in com22 petition among health care providers.

23 (v) An increase or decrease in the cost

24 to health care programs of the Federal

25 Government.
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1 (vi) An increase or decrease in the po2 tential overutilization of health care serv3 ices.

4 (vii) Any other factors the Secretary

5 deems appropriate in the interest of pre6 venting fraud and abuse in health care

7 programs of the Federal Government.

8 (2) PUBLICATION OF ALL HCFA FRAUD ALERTS

9 IN FEDERAL REGISTER.—Each notice issued by the

10 Health Care Financing Administration which in11 forms the public of practices which the Secretary

12 considers to be suspect or of particular concern

13 under the medicare program or a State health care

14 program (as defined in section 1128(h) of the Social

15 Security Act) shall be published in the Federal Reg16 ister, without regard to whether or not the notice is

17 issued by a regional office of the Health Care Fi18 nancing Administration.

19 SEC. 15402. BENEFICIARY INCENTIVES TO REPORT FRAUD

20 AND ABUSE.

21 (a) PROGRAM TO COLLECT INFORMATION ON FRAUD

22 AND ABUSE.—

23 (1) ESTABLISHMENT OF PROGRAM.—Not later

24 than 3 months after the date of the enactment of

25 this Act, the Secretary shall establish a program
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1 under which the Secretary shall encourage individ2 uals to report to the Secretary information on indi3 viduals and entities who are engaging or who have

4 engaged in acts or omissions which constitute

5 grounds for the imposition of a sanction under sec6 tion 1128, section 1128A, or section 1128B of the

7 Social Security Act, or who have otherwise engaged

8 in fraud and abuse against the medicare program.

9 (2) PAYMENT OF PORTION OF AMOUNTS COL10 LECTED.—If an individual reports information to

11 the Secretary under the program established under

12 paragraph (1) which serves as the basis for the col13 lection by the Secretary or the Attorney General of

14 any amount of at least $100 (other than any

15 amount paid as a penalty under section 1128B of

16 the Social Security Act), the Secretary may pay a

17 portion of the amount collected to the individual

18 (under procedures similar to those applicable under

19 section 7623 of the Internal Revenue Code of 1986

20 to payments to individuals providing information on

21 violations of such Code).

22 (b) PROGRAM TO COLLECT INFORMATION ON PRO23 GRAM EFFICIENCY.—

24 (1) ESTABLISHMENT OF PROGRAM.—Not later

25 than 3 months after the date of the enactment of
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1 this Act, the Secretary shall establish a program

2 under which the Secretary shall encourage individ3 uals to submit to the Secretary suggestions on meth4 ods to improve the efficiency of the medicare pro5 gram.

6 (2) PAYMENT OF PORTION OF PROGRAM SAV7 INGS.—If an individual submits a suggestion to the

8 Secretary under the program established under

9 paragraph (1) which is adopted by the Secretary and

10 which results in savings to the program, the Sec11 retary may make a payment to the individual of

12 such amount as the Secretary considers appropriate.

13 SEC. 15403. ELIMINATION OF HOME HEALTH OVERPAY14 MENTS.

15 (a) REQUIRING BILLING AND PAYMENT TO BE

16 BASED ON SITE WHERE SERVICE FURNISHED.—Section

17 1891 (42 U.S.C. 1395bbb) is amended by adding at the

18 end the following new subsection:

19 ‘‘(g) A home health agency shall submit claims for

20 payment for home health services under this title only on

21 the basis of the geographic location at which the service

22 is furnished.’’.

23 (b) EFFECTIVE DATE.—The amendment made by

24 subsection (a) shall apply to services furnished during cost

25 reporting periods beginning on or after October 1, 1995.
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1 SEC. 15404. SKILLED NURSING FACILITIES.

2 (a) CLARIFICATION OF TREATMENT OF HOSPITAL

3 TRANSFERS.—Section 1886(d)(5)(I) (42 U.S.C.

4 1395ww(d)(5)(I)) is amended by adding at the end the

5 following new clause:

6 ‘‘(iii) In making adjustments under clause (i) for

7 transfer cases, the Secretary shall treat as a transfer any

8 transfer to a hospital (without regard to whether or not

9 the hospital is a subsection (d) hospital), a unit thereof,

10 or a skilled nursing facility.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to discharges occurring on or

13 after October 1, 1995.

14 SEC. 15405. DIRECT SPENDING FOR ANTI-FRAUD ACTIVI15 TIES UNDER MEDICARE.

16 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO17 GRAM.—Title XVIII, as amended by section 15231(d) and

18 section 15302(b), is further amended by adding at the end

19 the following new section:

20 ‘‘MEDICARE INTEGRITY PROGRAM

21 ‘‘SEC. 1895. (a) ESTABLISHMENT OF PROGRAM.—

22 There is hereby established the Medicare Integrity Pro23 gram (hereafter in this section referred to as the ‘Pro24 gram’) under which the Secretary shall promote the integ25 rity of the medicare program by entering into contracts
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1 in accordance with this section with eligible private entities

2 to carry out the activities described in subsection (b).

3 ‘‘(b) ACTIVITIES DESCRIBED.—The activities de4 scribed in this subsection are as follows:

5 ‘‘(1) Review of activities of providers of services

6 or other individuals and entities furnishing items

7 and services for which payment may be made under

8 this title (including skilled nursing facilities and

9 home health agencies), including medical and utiliza10 tion review and fraud review (employing similar

11 standards, processes, and technologies used by pri12 vate health plans, including equipment and software

13 technologies which surpass the capability of the

14 equipment and technologies used in the review of

15 claims under this title as of the date of the enact16 ment of this section).

17 ‘‘(2) Audit of cost reports.

18 ‘‘(3) Determinations as to whether payment

19 should not be, or should not have been, made under

20 this title by reason of section 1862(b), and recovery

21 of payments that should not have been made.

22 ‘‘(4) Education of providers of services, bene23 ficiaries, and other persons with respect to payment

24 integrity and benefit quality assurance issues.
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1 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

2 to enter into a contract under the Program to carry out

3 any of the activities described in subsection (b) if—

4 ‘‘(1) the entity has demonstrated capability to

5 carry out such activities;

6 ‘‘(2) in carrying out such activities, the entity

7 agrees to cooperate with the Inspector General of

8 the Department of Health and Human Services, the

9 Attorney General of the United States, and other

10 law enforcement agencies, as appropriate, in the in11 vestigation and deterrence of fraud and abuse in re12 lation to this title and in other cases arising out of

13 such activities;

14 ‘‘(3) the entity’s financial holdings, interests, or

15 relationships will not interfere with its ability to per16 form the functions to be required by the contract in

17 an effective and impartial manner; and

18 ‘‘(4) the entity meets such other requirements

19 as the Secretary may impose.

20 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—

21 The Secretary shall enter into contracts under the Pro22 gram in accordance with such procedures as the Secretary

23 may by regulation establish, except that such procedures

24 shall include the following:
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1 ‘‘(1) The Secretary shall determine the appro2 priate number of separate contracts which are nec3 essary to carry out the Program and the appropriate

4 times at which the Secretary shall enter into such

5 contracts.

6 ‘‘(2) The provisions of section 1153(e)(1) shall

7 apply to contracts and contracting authority under

8 this section, except that competitive procedures must

9 be used when entering into new contracts under this

10 section, or at any other time considered appropriate

11 by the Secretary.

12 ‘‘(3) A contract under this section may be re13 newed without regard to any provision of law requir14 ing competition if the contractor has met or ex15 ceeded the performance requirements established in

16 the current contract.

17 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

18 Secretary shall by regulation provide for the limitation of

19 a contractor’s liability for actions taken to carry out a con20 tract under the Program, and such regulation shall, to the

21 extent the Secretary finds appropriate, employ the same

22 or comparable standards and other substantive and proce23 dural provisions as are contained in section 1157.

24 ‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI25 FRAUD AND ABUSE TRUST FUND.—For each fiscal year,
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1 the Secretary shall transfer from the Federal Hospital In2 surance Trust Fund and the Federal Supplementary Med3 ical Insurance Trust Fund to the Medicare Anti-Fraud

4 and Abuse Trust Fund under subsection (g) such amounts

5 as are necessary to carry out the activities described in

6 subsection (b). Such transfer shall be in an allocation as

7 reasonably reflects the proportion of such expenditures as8 sociated with part A and part B.

9 ‘‘(g) MEDICARE ANTI-FRAUD AND ABUSE TRUST

10 FUND.—

11 ‘‘(1) ESTABLISHMENT.—

12 ‘‘(A) IN GENERAL.—There is hereby estab13 lished in the Treasury of the United States the

14 Anti-Fraud and Abuse Trust Fund (hereafter

15 in this subsection referred to as the ‘Trust

16 Fund’). The Trust Fund shall consist of such

17 gifts and bequests as may be made as provided

18 in subparagraph (B) and such amounts as may

19 be deposited in the Trust Fund as provided in

20 subsection (f).

21 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS

22 AND BEQUESTS.—The Trust Fund is author23 ized to accept on behalf of the United States

24 money gifts and bequests made unconditionally

25 to the Trust Fund, for the benefit of the Trust
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1 Fund or any activity financed through the

2 Trust Fund.

3 ‘‘(2) INVESTMENT.—

4 ‘‘(A) IN GENERAL.—The Secretary of the

5 Treasury shall invest such amounts of the Fund

6 as such Secretary determines are not required

7 to meet current withdrawals from the Fund in

8 government account serial securities.

9 ‘‘(B) USE OF INCOME.—Any interest de10 rived from investments under subparagraph (A)

11 shall be credited to the Fund.

12 ‘‘(3) DIRECT APPROPRIATION OF FUNDS TO

13 CARRY OUT PROGRAM.—

14 ‘‘(A) IN GENERAL.—There are appro15 priated from the Trust Fund for each fiscal

16 year such amounts as are necessary to carry

17 out the Medicare Integrity Program under this

18 section, subject to subparagraph (B).

19 ‘‘(B) AMOUNTS SPECIFIED.—The amount

20 appropriated under subparagraph (A) for a fis21 cal year is as follows:

22 ‘‘(i) For fiscal year 1996, such

23 amount shall be not less than

24 $430,000,000 and not more than

25 $440,000,000.
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1 ‘‘(ii) For fiscal year 1997, such

2 amount shall be not less than

3 $490,000,000 and not more than

4 $500,000,000.

5 ‘‘(iii) For fiscal year 1998, such

6 amount shall be not less than

7 $550,000,000 and not more than

8 $560,000,000.

9 ‘‘(iv) For fiscal year 1999, such

10 amount shall be not less than

11 $620,000,000 and not more than

12 $630,000,000.

13 ‘‘(v) For fiscal year 2000, such

14 amount shall be not less than

15 $670,000,000 and not more than

16 $680,000,000.

17 ‘‘(vi) For fiscal year 2001, such

18 amount shall be not less than

19 $690,000,000 and not more than

20 $700,000,000.

21 ‘‘(vii) For fiscal year 2002, such

22 amount shall be not less than

23 $710,000,000 and not more than

24 $720,000,000.
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1 ‘‘(4) ANNUAL REPORT.—The Secretary shall

2 submit an annual report to Congress on the amount

3 of revenue which is generated and disbursed by the

4 Trust Fund in each fiscal year.’’.

5 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL6 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO7 GRAM.—

8 (1) RESPONSIBILITIES OF FISCAL

9 INTERMEDIARIES UNDER PART A.—Section 1816

10 (42 U.S.C. 1395h) is amended by adding at the end

11 the following new subsection:

12 ‘‘(l) No agency or organization may carry out (or re13 ceive payment for carrying out) any activity pursuant to

14 an agreement under this section to the extent that the ac15 tivity is carried out pursuant to a contract under the Med16 icare Integrity Program under section 1895.’’.

17 (2) RESPONSIBILITIES OF CARRIERS UNDER

18 PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is

19 amended by adding at the end the following new

20 paragraph:

21 ‘‘(6) No carrier may carry out (or receive payment

22 for carrying out) any activity pursuant to a contract under

23 this subsection to the extent that the activity is carried

24 out pursuant to a contract under the Medicare Integrity

25 Program under section 1895.’’.
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1 (c) DIRECT SPENDING FOR MEDICARE-RELATED AC2 TIVITIES OF INSPECTOR GENERAL.—Section 1895, as

3 added by subsection (a), is amended by adding at the end

4 the following new subsection:

5 ‘‘(h) DIRECT SPENDING FOR MEDICARE-RELATED

6 ACTIVITIES OF INSPECTOR GENERAL.—

7 ‘‘(1) IN GENERAL.—There are appropriated

8 from the Federal Hospital Insurance Trust Fund

9 and the Federal Supplementary Medical Insurance

10 Trust Fund to the Inspector General of the Depart11 ment of Health and Human Services for each fiscal

12 year such amounts as are necessary to enable the

13 Inspector General to carry out activities relating to

14 the medicare program (as described in paragraph

15 (2)), subject to paragraph (3).

16 ‘‘(2) ACTIVITIES DESCRIBED.—The activities

17 described in this paragraph are as follows:

18 ‘‘(A) Prosecuting medicare-related matters

19 through criminal, civil, and administrative pro20 ceedings.

21 ‘‘(B) Conducting investigations relating to

22 the medicare program.

23 ‘‘(C) Performing financial and performance

24 audits of programs and operations relating to

25 the medicare program.
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1 ‘‘(D) Performing inspections and other

2 evaluations relating to the medicare program.

3 ‘‘(E) Conducting provider and conumer

4 education activities regarding the requirements

5 of this title.

6 ‘‘(3) AMOUNTS SPECIFIED.—The amount ap7 propriated under paragraph (1) for a fiscal year is

8 as follows:

9 ‘‘(A) For fiscal year 1996, such amount

10 shall be $130,000,000.

11 ‘‘(B) For fiscal year 1997, such amount

12 shall be $181,000,000.

13 ‘‘(C) For fiscal year 1998, such amount

14 shall be $204,000,000.

15 ‘‘(D) For each subsequent fiscal year, the

16 amount appropriated for the previous fiscal

17 year, increased by the percentage increase in

18 aggregate expenditures under this title for the

19 fiscal year involved over the previous fiscal year.

20 ‘‘(4) ALLOCATION OF PAYMENTS AMONG TRUST

21 FUNDS.—The appropriations made under paragraph

22 (1) shall be in an allocation as reasonably reflects

23 the proportion of such expenditures associated with

24 part A and part B.’’.
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1 SEC. 15406. FRAUD REDUCTION DEMONSTRATION

2 PROJECT.

3 (a) IN GENERAL.—Not later than July 1, 1996, the

4 Secretary of Health and Human Services (in this section

5 referred to as the ‘‘Secretary’’) shall establish not less

6 than three demonstration projects under which organiza7 tions with a contract under section 1816 or section 1842

8 of the Social Security Act—

9 (1) identify practitioners and providers whose

10 patterns of providing care to beneficiaries enrolled

11 under title XVIII of the Social Security Act are con12 sistently outside the norm for other practitioners or

13 providers of the same category, class, or type, and

14 (2) experiment with ways of identifying fraudu15 lent claims submitted to the program established

16 under such title before they are paid.

17 (b) DURATION OF PROJECTS.—Each project estab18 lished under subsection (a) shall last for at least 18

19 months and shall focus on those categories, classes, or

20 types of providers and practitioners that have been identi21 fied by the Inspector General of the Department of Health

22 and Human Services as having a high incidence of fraud

23 and abuse.

24 (c) REPORT.—Not later than July 1, 1997, the Sec25 retary shall report to the Congress on the demonstration

26 projects established under subsection (a), and shall include
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1 in the report an assessment of the effectiveness of, and

2 any recommended legislative changes based on, the

3 projects.

4 SEC. 15407. REPORT ON COMPETITIVE PRICING.

5 Not later than 1 year after the date of the enactment

6 of this Act, the Secretary of Health and Human Services

7 (acting through the Administrator of the Health Care Fi8 nancing Administration) shall submit to Congress a report

9 recommending legislative changes to the medicare pro10 gram to enable the prices paid for items and services

11 under the medicare program to be established on a more

12 competitive basis.

13 Subtitle F—Improving Access to

14 Health Care

15 PART 1—IMPROVING ACCESS TO HEALTH CARE

16 IN RURAL AREAS

17 SEC. 15501. COMMUNITY RURAL HEALTH NETWORK

18 GRANTS.

19 (a) ASSISTANCE FOR DEVELOPMENT OF ACCESS

20 PLANS FOR CHRONICALLY UNDERSERVED AREAS.—

21 (1) AVAILABILITY OF FINANCIAL ASSISTANCE

22 TO IMPLEMENT ACTION PLANS TO INCREASE AC23 CESS.—

24 (A) IN GENERAL.—The Secretary shall

25 provide grants (in amounts determined in ac-
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1 cordance with subparagraph (C)) over a 3-year

2 period to an eligible State for the development

3 of plans to increase access to health care serv4 ices during such period for residents of areas in

5 the State that are designated as chronically un6 derserved areas in accordance with paragraph

7 (2).

8 (B) ELIGIBILITY REQUIREMENTS.—A

9 State is eligible to receive grants under this sec10 tion if the State submits to the Secretary (at

11 such time and in such form as the Secretary

12 may require) assurances that the State has de13 veloped (or is in the process of developing) a

14 plan to increase the access of residents of a

15 chronically underserved area to health care

16 services that meets the requirements of para17 graph (3), together with such other information

18 and assurances as the Secretary may require.

19 (C) AMOUNT OF ASSISTANCE.—

20 (i) IN GENERAL.—Subject to clause

21 (ii), the amount of assistance provided to

22 a State under this subsection with respect

23 to any plan during a 3-year period shall be

24 equal to—
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1 (I) for the first year of the pe2 riod, an amount equal to 100 percent

3 of the amounts expended by the State

4 during the year to implement the plan

5 described in subparagraph (A) (as re6 ported to the Secretary in accordance

7 with such requirements as the Sec8 retary may impose);

9 (II) for the second year of the

10 period, an amount equal to 50 percent

11 of the amounts expended by the State

12 during the year to implement the

13 plan; and

14 (III) for the third year of the pe15 riod, an amount equal to 33 percent

16 of the amounts expended by the State

17 during the year to implement the

18 plan.

19 (ii) AGGREGATE PER PLAN LIMIT.—

20 The amount of assistance provided to a

21 State under this paragraph with respect to

22 any plan may not exceed $100,000 during

23 any year of the 3-year period for which the

24 State receives assistance.

25 (2) DESIGNATION OF AREAS.—
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1 (A) DESIGNATION BY GOVERNOR.—In ac2 cordance with the guidelines developed under

3 subparagraph (B), the Governor of a State may

4 designate an area in the State as a chronically

5 underserved area for purposes of this section

6 upon the request of a local official of the area

7 or upon the Governor’s initiative.

8 (B) GUIDELINES FOR DESIGNATION.—

9 (i) DEVELOPMENT BY SECRETARY.—

10 Not later than 1 year after the date of the

11 enactment of this Act, the Secretary shall

12 develop guidelines for the designation of

13 areas as chronically underserved areas

14 under this subsection.

15 (ii) FACTORS CONSIDERED IN DEVEL16 OPMENT OF GUIDELINES.—In developing

17 guidelines under subparagraph (A), the

18 Secretary shall consider the following fac19 tors:

20 (I) Whether the area (or a sig21 nificant portion of the area)—

22 (aa) is designated as a

23 health professional shortage area

24 (under section 332(a) of the Pub25 lic Health Service Act), or meets
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1 the criteria for designation as

2 such an area; or

3 (bb) was previously des4 ignated as such an area or pre5 viously met such criteria for an

6 extended period prior to the des7 ignation of the area under this

8 subsection (in accordance with

9 criteria established by the Sec10 retary).

11 (II) The availability and ade12 quacy of health care providers and fa13 cilities for residents of the area.

14 (III) The extent to which the

15 availability of assistance under other

16 Federal and State programs has failed

17 to alleviate the lack of access to

18 health care services for residents of

19 the area.

20 (IV) The percentage of residents

21 of the area whose income is at or

22 below the poverty level.

23 (V) The percentage of residents

24 of the area who are age 65 or older.
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1 (VI) The existence of cultural or

2 geographic barriers to access to health

3 care services in the area, including

4 weather conditions.

5 (C) REVIEW BY SECRETARY.—No designa6 tion under subparagraph (A) shall take effect

7 under this subsection unless the Secretary—

8 (i) has been notified of the proposed

9 designation; and

10 (ii) has not, within 60 days after the

11 date of receipt of the notice, disapproved

12 the designation.

13 (D) PERIOD OF DESIGNATION.—A designa14 tion under this subsection shall be effective dur15 ing a period specified by the Governor of not

16 longer than 3 years. The Governor may extend

17 the designation for additional 3-year periods,

18 except that a State may not receive assistance

19 under paragraph (1)(C) for amounts expended

20 during any such additional periods.

21 (3) REQUIREMENTS FOR STATE ACCESS

22 PLANS.—A State plan to increase the access of resi23 dents of chronically underserved areas to health care

24 services meets the requirements of this subsection if

25 the Secretary finds that the plan was developed with
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1 the participation of health care providers and facili2 ties and residents of the area that is the subject of

3 the plan, together with such other requirements as

4 the Secretary may impose.

5 (4) AUTHORIZATION OF APPROPRIATIONS.—

6 There are authorized to be appropriated for assist7 ance under this subsection $10,000,000 for each of

8 the first 3 fiscal years beginning after the date on

9 which the Secretary develops guidelines for the des10 ignation of areas as chronically underserved areas

11 under paragraph (2)(B).

12 (b) TECHNICAL ASSISTANCE GRANTS FOR NET13 WORKS.—

14 (1) IN GENERAL.—The Secretary shall make

15 funds available under this subsection to provide

16 technical assistance (including information regarding

17 eligibility for other Federal programs) and advice for

18 entities described in paragraph (2) seeking to estab19 lish or enhance a community rural health network in

20 an underserved rural area.

21 (2) ENTITIES ELIGIBLE TO RECEIVE FUNDS.—

22 The following entities are eligible to receive funds

23 for technical assistance under this subsection:

24 (A) An entity receiving a grant under sub25 section (c).
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1 (B) A State or unit of local government.

2 (C) An entity providing health care serv3 ices (including health professional education

4 services) in the area involved.

5 (3) USE OF FUNDS.—

6 (A) IN GENERAL.—Funds made available

7 under this subsection may be used—

8 (i) for planning a community rural

9 health network and the submission of the

10 plan for the network to the Secretary

11 under subsection (c)(3) (subject to the lim12 itation described in subparagraph (B));

13 (ii) to provide assistance in conduct14 ing community-based needs and

15 prioritization, identifying existing regional

16 health resources, and developing networks,

17 utilizing existing local providers and facili18 ties where appropriate;

19 (iii) to provide advice on obtaining the

20 proper balance of primary and secondary

21 facilities for the population served by the

22 network;

23 (iv) to provide assistance in coordinat24 ing arrangements for tertiary care;
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1 (v) to provide assistance in recruit2 ment and retention of health care profes3 sionals;

4 (vi) to provide assistance in coordinat5 ing the delivery of emergency services with

6 the provision of other health care services

7 in the area served by the network;

8 (vii) to provide assistance in coordi9 nating arrangements for mental health and

10 substance abuse treatment services; and

11 (viii) to provide information regarding

12 the area or proposed network’s eligibility

13 for Federal and State assistance for health

14 care-related activities, together with infor15 mation on funds available through private

16 sources.

17 (B) LIMITATION ON AMOUNT AVAILABLE

18 FOR DEVELOPMENT OF NETWORK.—The

19 amount of financial assistance available for ac20 tivities described in subparagraph (A) may not

21 exceed $50,000 and may not be available for a

22 period of time exceeding 1 year.

23 (4) USE OF RURAL HEALTH OFFICES.—In car24 rying out this subsection with respect to entities in

25 rural areas, the Secretary shall make funds available
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1 through the State offices of rural health or through

2 appropriate entities designated by such offices.

3 (5) AUTHORIZATION OF APPROPRIATIONS.—

4 There are authorized to be appropriated

5 $10,000,000 for each of fiscal years 1996 through

6 2000 to carry out this section. Amounts appro7 priated under this subsection shall be available until

8 expended.

9 (c) DEVELOPMENT GRANTS FOR NETWORKS.—

10 (1) IN GENERAL.—The Secretary shall provide

11 financial assistance to eligible entities for the pur12 pose of providing for the development and implemen13 tation of community rural health networks (as de14 fined in subsection (d)). In providing such assist15 ance, the Secretary shall give priority to eligible enti16 ties that will carry out such purpose in States that

17 have developed a plan under subsection (a).

18 (2) ELIGIBLE ENTITIES.—

19 (A) IN GENERAL.—An entity is eligible to

20 receive financial assistance under this sub21 section only if the entity meets the require22 ments of clauses (i) through (iii) as follows:

23 (i) The entity—

24 (I) is based in a rural area;
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1 (II) is described in subparagraph

2 (B), (C), or (D) of subsection

3 (b)(2);or

4 (III) is a hospital-affiliated pri5 mary care center (as defined in sub6 section (d)).

7 (ii) The entity is undertaking to de8 velop and implement a community rural

9 health network in one or more underserved

10 rural areas (as defined in subsection (d))

11 with the active participation of at least 3

12 health care providers or facilities in the

13 area.

14 (iii) The entity has consulted with the

15 local governments of the area to be served

16 by the network and with individuals who

17 reside in the area.

18 (B) COORDINATION WITH PROVIDERS OUT19 SIDE OF AREA PERMITTED.—Nothing in this

20 subsection shall be construed as preventing an

21 entity that coordinates the delivery of services

22 in an underserved rural area with an entity out23 side the area from qualifying for financial as24 sistance under this section, or as preventing an

25 entity consisting of a consortia of members lo-
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1 cated in adjoining States from qualifying for

2 such assistance.

3 (C) PERMITTING ENTITIES NOT RECEIVING

4 FUNDING FOR DEVELOPMENT OF PLAN TO RE5 CEIVE FUNDING FOR IMPLEMENTATION.—An

6 entity that is eligible to receive financial assist7 ance under this subsection may receive assist8 ance to carry out activities described in para9 graph (3)(A)(ii) notwithstanding that the entity

10 does not receive assistance to carry out activi11 ties described in paragraph (c)(A)(i).

12 (3) USE OF FUNDS.—

13 (A) IN GENERAL.—Financial assistance

14 made available to eligible entities under this

15 subsection may be used only—

16 (ii) for the development of a commu17 nity health network and the submission of

18 the plan for the network to the Secretary;

19 and

20 (ii) after the Secretary approves the

21 plan for the network, for activities to im22 plement the network, including (but not

23 limited to)—

24 (I) establishing information sys25 tems, including telecommunications,
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1 (II) recruiting health care provid2 ers,

3 (III) providing services to enable

4 individuals to have access to health

5 care services, including transportation

6 and language interpretation services

7 (including interpretation services for

8 the hearing-impaired), and

9 (IV) establishing and operating a

10 community health advisor program

11 described in subparagraph (B).

12 (B) COMMUNITY HEALTH ADVISOR PRO13 GRAM.—

14 (i) PROGRAM DESCRIBED.—In sub15 paragraph (A), a ‘‘community health advi16 sor program’’ is a program under which

17 community health advisors carry out the

18 following activities:

19 (I) Collaborating efforts with

20 health care providers and related enti21 ties to facilitate the provision of

22 health services and health-related so23 cial services.

24 (II) Providing public education

25 on health promotion and disease pre-
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1 vention and efforts to facilitate the

2 use of available health services and

3 health-related social services.

4 (III) Providing health-related

5 counseling.

6 (IV) Making referrals for avail7 able health services and health-related

8 social services.

9 (V) Improving the ability of indi10 viduals to use health services and

11 health-related social services under

12 Federal, State, and local programs

13 through assisting individuals in estab14 lishing eligibility under the programs.

15 (VI) Providing outreach services

16 to inform the community of the avail17 ability of the services provided under

18 the program.

19 (ii) COMMUNITY HEALTH ADVISOR

20 DEFINED.—In clause (i), the term ‘‘com21 munity health advisor’’ means, with re22 spect to a community health advisor pro23 gram, an individual—

24 (I) who has demonstrated the ca25 pacity to carry out one or more of the
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1 activities carried out under the pro2 gram; and

3 (II) who, for not less than one

4 year, has been a resident of the com5 munity in which the program is to be

6 operated.

7 (C) LIMITATIONS ON ACTIVITIES FUND8 ED.—Financial assistance made available under

9 this subsection may not be used for any of the

10 following:

11 (i) For a telecommunications system

12 unless such system is coordinated with,

13 and does not duplicate, a system existing

14 in the area.

15 (ii) For construction or remodeling of

16 health care facilities.

17 (D) LIMITATION ON AMOUNT AVAILABLE

18 FOR DEVELOPMENT OF NETWORK.—The

19 amount of financial assistance available for ac20 tivities described in subparagraph (A)(i) may

21 not exceed $50,000 and may not be made avail22 able for a period of time exceeding 1 year.

23 (4) APPLICATION.—

24 (A) IN GENERAL.—No financial assistance

25 shall be provided under this section to an entity
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1 unless the entity has submitted to the Sec2 retary, in a time and manner specified by the

3 Secretary, and had approved by the Secretary

4 an application.

5 (B) INFORMATION TO BE INCLUDED.—

6 Each such application shall include—

7 (i) a description of the community

8 rural health network, including service

9 area and capacity, and

10 (ii) a description of how the proposed

11 network will utilize existing health care fa12 cilities in a manner that avoids unneces13 sary duplication.

14 (5) AUTHORIZATION OF APPROPRIATIONS.—

15 (A) IN GENERAL.—There are authorized to

16 be appropriated $100,000,000 for each of fiscal

17 years 1996 through 2000 to carry out this sub18 section. Amounts appropriated under this sub19 section shall be available until expended.

20 (B) ANNUAL LIMIT ON ASSISTANCE TO

21 GRANTEE.—The amount of financial assistance

22 provided to an entity under this subsection dur23 ing a year may not exceed $250,000.

24 (d) DEFINITIONS.—

25 (1) IN GENERAL.—
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1 (A) COMMUNITY RURAL HEALTH NET2 WORK.—For purposes of this section, the term

3 ‘‘community rural health network’’ means a for4 mal cooperative arrangement between partici5 pating hospitals, physicians, and other health

6 care providers which—

7 (i) is located in an underserved rural

8 area;

9 (ii) furnishes health care services to

10 individuals residing in the area; and

11 (iii) is governed by a board of direc12 tors selected by participating health care

13 providers and residents of the area.

14 (B) HOSPITAL-AFFILIATED PRIMARY CARE

15 CENTER.—

16 (i) IN GENERAL.—For purposes of

17 this section, the term ‘‘hospital-affiliated

18 primary care center’’ means a distinct ad19 ministrative unit of a community hospital

20 (as defined in clause (ii)) meeting the fol21 lowing requirement:

22 (I) The unit is located in, or ad23 jacent to, the hospital.

24 (II) The unit delivers primary

25 health services, as defined in para-
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1 graph (1) of section 330(b) of the

2 Public Health Service Act to a

3 catchment area determined by the

4 hospital and approved by the Sec5 retary.

6 (III) The unit provides referrals

7 to providers of supplemental health

8 services, as defined in paragraph (2)

9 of such section.

10 (IV) The services of the unit are

11 delivered through a primary care

12 group practice (as defined in clause

13 (iii)).

14 (V) To the extent practicable,

15 primary health services in the commu16 nity hospital are delivered only

17 through the unit.

18 (VI) Qualified personnel trained

19 in triage are placed in the unit, the

20 emergency room, and the outpatient

21 department to screen and direct pa22 tients to the appropriate location for

23 care.

24 (VII) Each patient of the unit

25 has an identified member of the group
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1 practice responsible for continuous

2 management of the patient, including

3 emergency services and referrals of

4 the patients for inpatient or out5 patient services.

6 (VIII) To the extent practicable,

7 excess facilities and equipment in or

8 owned by the community hospital are

9 covered for use in the unit.

10 (IX) The unit and the hospital

11 avoid unnecessary duplication of fa12 cilities and equipment, except that the

13 unit may install appropriate support

14 equipment for routine primary health

15 services.

16 (X) The unit is maintained as a

17 separate and distinct cost and revenue

18 center for accounting purposes.

19 (XI) The unit is operated in ac20 cordance with all of the requirements

21 specified for community health centers

22 in section 330(e)(3) of the Public

23 Health Service Act (other than clause

24 (vii).
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1 (XII) The hospital has an advi2 sory committee that—

3 (aa) is composed of individ4 uals a majority of whom are

5 health consumers in the

6 catchment area of the hospital;

7 and

8 (bb) meets at least 6 times a

9 year to review the operations of

10 the primary care center and de11 velop recommendations to the

12 governing board of the hospital

13 about the operation of the center

14 and the types of services to be

15 provided.

16 (XIII) The unit maintains an in17 formation program for its patients

18 that fully discloses—

19 (aa) the covered professional

20 services and referral capabilities

21 offered by the unit; and

22 (bb) the method by which

23 patients of the unit may resolve

24 grievances about billing for cov-
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1 ered professional services and the

2 quality of such services.

3 (ii) COMMUNITY HOSPITAL.—For pur4 poses of this section, the term ‘‘community

5 hospital’’ means a public general hospital,

6 owned and operated by a State, county or

7 local unit of government, or a private com8 munity hospital that—

9 (i) has less than 50 beds; and

10 (ii) primarily serves—

11 (I) a medically underserved popu12 lation, as defined in section 330(b)(3)

13 of the Public Health Service Act; or

14 (II) a health professional short15 age area, as defined in section

16 332(a)(1) of such Act.

17 (iii) PRIMARY CARE GROUP PRAC18 TICE.—For purposes of this section, the

19 term ‘‘primary care group practice’’ means

20 any combination of 3 or more primary care

21 physicians who are—

22 (I) organized to provide primary

23 health services in a manner that is

24 consistent with the needs of the popu25 lation served;
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1 (II) located in, or adjacent to,

2 the community hospital;

3 (III) who have admitting privi4 leges at the community hospital; and

5 (IV)(aa) who are salaried by the

6 hospital such that a majority of the

7 members of the group practice is full

8 time in the primary care center; or

9 (bb) who are organized into a

10 legal entity (partnership, corporation,

11 or professional association) that has a

12 contract approved by the Secretary

13 with the community hospital to pro14 vide primary health services.

15 (2) OTHER DEFINITIONS.—For purposes of this

16 section:

17 (A) The term ‘‘rural area’’ has the mean18 ing given such term in section 1886(d)(2)(D) of

19 the Social Security Act.

20 (B) The term ‘‘Secretary’’ means the Sec21 retary of Health and Human Services.

22 (C) The term ‘‘State’’ means each of the

23 several States, the District of Columbia, Puerto

24 Rico, the Virgin Islands, Guam, the Northern

25 Mariana Islands, and American Samoa.
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1 (D) The term ‘‘underserved rural area’’

2 means a rural area designated—

3 (i) as a health professional shortage

4 area under section 332(a) of the Public

5 Health Service Act; or

6 (ii) as a chronically underserved area

7 under subsection (a).

8 SEC. 15502. PROVIDER INCENTIVES.

9 (a) ADDITIONAL PAYMENTS UNDER MEDICARE FOR

10 PHYSICIANS’ SERVICES FURNISHED IN SHORTAGE

11 AREAS.—

12 (1) INCREASE IN AMOUNT OF ADDITIONAL PAY13 MENT.—Section 1833(m) (42 U.S.C. 1395l(m)) is

14 amended by striking ‘‘10 percent’’ and inserting ‘‘20

15 percent’’.

16 (2) RESTRICTION TO PRIMARY CARE SERV17 ICES.—Section 1833(m) (42 U.S.C. 1395l(m)) is

18 amended by inserting after ‘‘physicians’ services’’

19 the following: ‘‘consisting of primary care services

20 (as defined in section 1842(i)(4))’’.

21 (3) EXTENSION OF PAYMENT FOR FORMER

22 SHORTAGE AREAS.—

23 (A) IN GENERAL.—Section 1833(m) (42

24 U.S.C. 1395l(m)) is amended by striking

25 ‘‘area,’’ and inserting ‘‘area (or, in the case of
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1 an area for which the designation as a health

2 professional shortage area under such section is

3 withdrawn, in the case of physicians’ services

4 furnished to such an individual during the 3-

5 year period beginning on the effective date of

6 the withdrawal of such designation),’’.

7 (B) EFFECTIVE DATE.—The amendment

8 made by subparagraph (A) shall apply to physi9 cians’ services furnished in an area for which

10 the designation as a health professional short11 age area under section 332(a)(1)(A) of the

12 Public Health Service Act is withdrawn on or

13 after January 1, 1996.

14 (4) REQUIRING CARRIERS TO REPORT ON SERV15 ICES PROVIDED.—Section 1842(b)(3) (42 U.S.C.

16 1395u(b)(3)) is amended—

17 (A) by striking ‘‘and’’ at the end of sub18 paragraph (I); and

19 (B) by inserting after subparagraph (I) the

20 following new subparagraph:

21 ‘‘(J) will provide information to the Secretary

22 not later than 30 days after the end of the contract

23 year on the types of providers to whom the carrier

24 made additional payments during the year for cer25 tain physicians’ services pursuant to section
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1 1833(m), together with a description of the services

2 furnished by such providers during the year; and’’.

3 (5) STUDY.—

4 (A) IN GENERAL.—The Secretary of

5 Health and Human Services shall conduct a

6 study analyzing the effectiveness of the provi7 sion of additional payments under part B of the

8 medicare program for physicians’ services pro9 vided in health professional shortage areas in

10 recruiting and retaining physicians to provide

11 services in such areas.

12 (B) REPORT.—Not later than 1 year after

13 the date of the enactment of this Act, the Sec14 retary shall submit to Congress a report on the

15 study conducted under subparagraph (A), and

16 shall include in the report such recommenda17 tions as the Secretary considers appropriate.

18 (6) EFFECTIVE DATE.—The amendments made

19 by paragraphs (1), (2), and (4) shall apply to physi20 cians’ services furnished on or after January 1,

21 1996.

22 (b) DEVELOPMENT OF MODEL STATE SCOPE OF

23 PRACTICE LAW.—

24 (1) IN GENERAL.—The Secretary of Health and

25 Human Services shall develop and publish a model
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1 law that may be adopted by States to increase the

2 access of individuals residing in underserved rural

3 areas to health care services by expanding the serv4 ices which non-physician health care professionals

5 may provide in such areas.

6 (2) DEADLINE.—The Secretary shall publish

7 the model law developed under paragraph (1) not

8 later than 1 year after the date of the enactment of

9 this Act.

10 SEC. 8503. MODIFICATIONS TO THE NATIONAL HEALTH

11 SERVICE CORPS.

12 (a) NATIONAL HEALTH SERVICE CORPS LOAN RE13 PAYMENTS EXCLUDED FROM GROSS INCOME.—

14 (1) IN GENERAL.—Part III of subchapter B of

15 chapter 1 of the Internal Revenue Code of 1986 (re16 lating to items specifically excluded from gross in17 come) is amended by redesignating section 137 as

18 section 138 and by inserting after section 136 the

19 following new section:

20 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE21 PAYMENTS.

22 ‘‘(a) GENERAL RULE.—Gross income shall not in23 clude any qualified loan repayment.

24 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

25 of this section, the term ‘qualified loan repayment’ means
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1 any payment made on behalf of the taxpayer by the Na2 tional Health Service Corps Loan Repayment Program

3 under section 338B(g) of the Public Health Service Act.’’.

4 (2) CONFORMING AMENDMENT.—Paragraph (3)

5 of section 338B(g) of the Public Health Service Act

6 is amended by striking ‘‘Federal, State, or local’’

7 and inserting ‘‘State or local’’.

8 (3) CLERICAL AMENDMENT.—The table of sec9 tions for part III of subchapter B of chapter 1 of

10 the Internal Revenue Code of 1986 is amended by

11 striking the item relating to section 137 and insert12 ing the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

‘‘Sec. 138. Cross references to other Acts.’’.

13 (4) EFFECTIVE DATE.—The amendments made

14 by this subsection shall apply to payments made

15 under section 338B(g) of the Public Health Service

16 Act after the date of the enactment of this Act.

17 (b) STUDY REGARDING DESIGNATION AS HEALTH

18 PROFESSIONAL SHORTAGE AREA; ALLOCATION OF CORPS

19 MEMBERS AMONG SHORTAGE AREAS.—

20 (1) IN GENERAL.—The Secretary of Health and

21 Human Services (in this subsection referred to as

22 the ‘‘Secretary’’) shall conduct a study for the pur23 pose of determining the following:
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1 (A) With respect to the designation of

2 health professional shortage areas under sub3 part II of part D of title III of the Public

4 Health Service Act—

5 (i) whether the statutory and adminis6 trative criteria for the designation of such

7 areas should be modified to ensure that all

8 areas with significant shortages of health

9 professionals receive such a designation;

10 and

11 (ii) if so, the recommendations of the

12 Secretary for modifications in the criteria.

13 (B) With respect to the assignment of

14 members of the National Health Service Corps

15 under such subpart—

16 (i) whether the statutory and adminis17 trative criteria for the assignment of Corps

18 members should be modified in order to

19 ensure that the members are equitably al20 located among health professional shortage

21 areas; and

22 (ii) if so, the recommendations of the

23 Secretary for modifications in the criteria.

24 (2) REPORT.—Not later than May 1, 1996, the

25 Secretary shall complete the study required in para-
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1 graph (1) and submit to the Congress a report de2 scribing the findings made in the study.

3 (c) OTHER PROVISIONS REGARDING NATIONAL

4 HEALTH SERVICE CORPS.—

5 (1) PRIORITY IN ASSIGNMENT OF CORPS MEM6 BERS; COMMUNITY RURAL HEALTH NETWORKS.—

7 Section 333A(a)(1)(B) of the Public Health Service

8 Act (42 U.S.C. 254f–1(a)(1)(B)) is amended—

9 (A) in clause (iii), by striking ‘‘and’’ after

10 the semicolon at the end;

11 (B) in clause (iv), by adding ‘‘and’’ after

12 the semicolon at the end; and

13 (B) by adding at the end the following

14 clause:

15 ‘‘(v) is a participant in a community

16 rural health network, as defined in section

17 15501 of the Medicare Preservation Act of

18 1995.’’.

19 (2) ALLOCATION FOR PARTICIPATION OF

20 NURSES IN SCHOLARSHIP PROGRAM.—Section

21 338H(b)(2) of the Public Health Service Act (42

22 U.S.C. 254q(b)(2)) is amended by adding at the end

23 the following subparagraph:

24 ‘‘(C) Of the amounts appropriated under

25 paragraph (1) for fiscal year 1996 and subse-
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1 quent fiscal years, the Secretary shall reserve

2 such amounts as may be necessary to ensure

3 that, of the aggregate number of individuals

4 who are participants in the Scholarship Pro5 gram, the total number who are being educated

6 as nurses or are serving as nurses, respectively,

7 is increased to 20 percent.’’.

8 SEC. 15504. CREATION OF HOSPITAL-AFFILIATED PRIMARY

9 CARE CENTERS.

10 Section 330 of the Public Health Service Act (42

11 U.S.C. 254c) is amended by adding at the end the follow12 ing subsection:

13 ‘‘(l) Of the amounts appropriated under subsection

14 (g)(1)(A) for a fiscal year, the Secretary shall reserve not

15 less than 10 percent, and not more than 20 percent, for

16 the establishment and operation of hospital-affiliated pri17 mary care centers, as defined in section 15504 of the Med18 icare Preservation Act of 1995.’’.

19 SEC. 15505. ESTABLISHMENT OF RURAL EMERGENCY AC20 CESS CARE HOSPITALS.

21 (a) ESTABLISHMENT.—

22 (1) IN GENERAL.—Section 1861 (42 U.S.C.

23 1395x) is amended by adding at the end the follow24 ing new subsection:
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1 ‘‘Rural Emergency Access Care Hospital; Rural

2 Emergency Access Care Hospital Services

3 ‘‘(oo)(1) The term ‘rural emergency access care hos4 pital’ means, for a fiscal year, a facility with respect to

5 which the Secretary finds the following:

6 ‘‘(A) The facility is located in a rural area (as

7 defined in section 1886(d)(2)(D)).

8 ‘‘(B) The facility was a hospital under this title

9 at any time during the 5-year period that ends on

10 the date of the enactment of this subsection.

11 ‘‘(C) The facility is in danger of closing due to

12 low inpatient utilization rates and operating losses,

13 and the closure of the facility would limit the access

14 to emergency services of individuals residing in the

15 facility’s service area.

16 ‘‘(D) The facility has entered into (or plans to

17 enter into) an agreement with a hospital with a par18 ticipation agreement in effect under section 1866(a),

19 and under such agreement the hospital shall accept

20 patients transferred to the hospital from the facility

21 and receive data from and transmit data to the

22 facility.

23 ‘‘(E) There is a practitioner who is qualified to

24 provide advanced cardiac life support services (as de-
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1 termined by the State in which the facility is lo2 cated) on-site at the facility on a 24-hour basis.

3 ‘‘(F) A physician is available on-call to provide

4 emergency medical services on a 24-hour basis.

5 ‘‘(G) The facility meets such staffing require6 ments as would apply under section 1861(e) to a

7 hospital located in a rural area, except that—

8 ‘‘(i) the facility need not meet hospital

9 standards relating to the number of hours dur10 ing a day, or days during a week, in which the

11 facility must be open, except insofar as the fa12 cility is required to provide emergency care on

13 a 24-hour basis under subparagraphs (E) and

14 (F); and

15 ‘‘(ii) the facility may provide any services

16 otherwise required to be provided by a full-time,

17 on-site dietitian, pharmacist, laboratory techni18 cian, medical technologist, or radiological tech19 nologist on a part-time, off-site basis.

20 ‘‘(H) The facility meets the requirements appli21 cable to clinics and facilities under subparagraphs

22 (C) through (J) of paragraph (2) of section

23 1861(aa) and of clauses (ii) and (iv) of the second

24 sentence of such paragraph (or, in the case of the

25 requirements of subparagraph (E), (F), or (J) of
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1 such paragraph, would meet the requirements if any

2 reference in such subparagraph to a ‘nurse practi3 tioner’ or to ‘nurse practitioners’ were deemed to be

4 a reference to a ‘nurse practitioner or nurse’ or to

5 ‘nurse practitioners or nurses’); except that in deter6 mining whether a facility meets the requirements of

7 this subparagraph, subparagraphs (E) and (F) of

8 that paragraph shall be applied as if any reference

9 to a ‘physician’ is a reference to a physician as de10 fined in section 1861(r)(1).

11 ‘‘(2) The term ‘rural emergency access care hospital

12 services’ means the following services provided by a rural

13 emergency access care hospital and furnished to an indi14 vidual over a continuous period not to exceed 24 hours

15 (except that such services may be furnished over a longer

16 period in the case of an individual who is unable to leave

17 the hospital because of inclement weather):

18 ‘‘(A) An appropriate medical screening exam19 ination (as described in section 1867(a)).

20 ‘‘(B) Necessary stabilizing examination and

21 treatment services for an emergency medical condi22 tion and labor (as described in section 1867(b)).’’.

23 (2) REQUIRING RURAL EMERGENCY ACCESS

24 CARE HOSPITALS TO MEET HOSPITAL ANTI-DUMPING

25 REQUIREMENTS.—Section 1867(e)(5) (42 U.S.C.
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1 1395dd(e)(5)) is amended by striking

2 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) and

3 a rural emergency access care hospital (as defined in

4 section 1861(oo)(1))’’.

5 (b) COVERAGE AND PAYMENT UNDER PART B.—

6 (1) COVERAGE UNDER PART B.—Section

7 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended—

8 (A) by striking ‘‘and’’ at the end of sub9 paragraph (I);

10 (B) by striking the period at the end of

11 subparagraph (J) and inserting ‘‘; and’’; and

12 (C) by adding at the end the following new

13 subparagraph:

14 ‘‘(K) rural emergency access care hospital

15 services (as defined in section 1861(oo)(2)).’’.

16 (2) PAYMENT BASED ON PAYMENT FOR OUT17 PATIENT RURAL PRIMARY CARE HOSPITAL SERV18 ICES.—

19 (A) IN GENERAL.—Section 1833(a)(6) (42

20 U.S.C. 1395l(a)(6)) is amended by striking

21 ‘‘services,’’ and inserting ‘‘services and rural

22 emergency access care hospital services,’’.

23 (B) PAYMENT METHODOLOGY DE24 SCRIBED.—Section 1834(g) (42 U.S.C.

25 1395m(g)) is amended—
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1 (i) in the heading, by striking ‘‘SERV2 ICES’’ and inserting ‘‘SERVICES AND

3 RURAL EMERGENCY ACCESS CARE HOS4 PITAL SERVICES’’; and

5 (ii) by adding at the end the following

6 new sentence: ‘‘The amount of payment for

7 rural emergency access care hospital serv8 ices provided during a year shall be deter9 mined using the applicable method pro10 vided under this subsection for determining

11 payment for outpatient rural primary care

12 hospital services during the year.’’.

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to fiscal years beginning on or

15 after October 1, 1995.

16 SEC. 15506. MEDICAL EDUCATION.

17 (a) STATE AND CONSORTIUM DEMONSTRATION

18 PROJECTS.—

19 (1) IN GENERAL.—

20 (A) PARTICIPATION OF STATES AND CON21 SORTIA.—The Secretary shall establish and

22 conduct a demonstration project to increase the

23 number and percentage of medical students en24 tering primary care practice relative to those

25 entering nonprimary care practice under which
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1 the Secretary shall make payments in accord2 ance with paragraph (4)—

3 (i) to not more than 10 States for the

4 purpose of testing and evaluating mecha5 nisms to meet the goals described in sub6 section (b); and

7 (ii) to not more than 10 health care

8 training consortia for the purpose of test9 ing and evaluating mechanisms to meet

10 such goals.

11 (B) EXCLUSION OF CONSORTIA IN PAR12 TICIPATING STATES.—A consortia may not re13 ceive payments under the demonstration project

14 under subparagraph (A)(ii) if any of its mem15 bers is located in a State receiving payments

16 under the project under subparagraph (A)(i).

17 (2) APPLICATIONS.—

18 (A) IN GENERAL.—Each State and consor19 tium desiring to conduct a demonstration

20 project under this subsection shall prepare and

21 submit to the Secretary an application, at such

22 time, in such manner, and containing such in23 formation as the Secretary may require to as24 sure that the State or consortium will meet the

25 goals described in subsection (b). In the case
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1 of an application of a State, the application

2 shall include—

3 (i) information demonstrating that the

4 State has consulted with interested parties

5 with respect to the project, including State

6 medical associations, State hospital asso7 ciations, and medical schools located in the

8 State;

9 (ii) an assurance that no hospital con10 ducting an approved medical residency

11 training program in the State will lose

12 more than 10 percent of such hospital’s

13 approved medical residency positions in

14 any year as a result of the project; and

15 (iii) an explanation of a plan for eval16 uating the impact of the project in the

17 State.

18 (B) APPROVAL OF APPLICATIONS.—A

19 State or consortium that submits an application

20 under subparagraph (A) may begin a dem21 onstration project under this subsection—

22 (i) upon approval of such application

23 by the Secretary; or

24 (ii) at the end of the 60-day period

25 beginning on the date such application is
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1 submitted, unless the Secretary denies the

2 application during such period.

3 (C) NOTICE AND COMMENT.—A State or

4 consortium shall issue a public notice on the

5 date it submits an application under subpara6 graph (A) which contains a general description

7 of the proposed demonstration project. Any in8 terested party may comment on the proposed

9 demonstration project to the State or consor10 tium or the Secretary during the 30-day period

11 beginning on the date the public notice is is12 sued.

13 (3) SPECIFIC REQUIREMENTS FOR PARTICI14 PANTS.—

15 (A) REQUIREMENTS FOR STATES.—Each

16 State participating in the demonstration project

17 under this section shall use the payments pro18 vided under paragraph (4) to test and evaluate

19 either of the following mechanisms to increase

20 the number and percentage of medical students

21 entering primary care practice relative to those

22 entering nonprimary care practice:

23 (i) USE OF ALTERNATIVE WEIGHTING

24 FACTORS.—
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1 (I) IN GENERAL.—The State

2 may make payments to hospitals in

3 the State for direct graduate medical

4 education costs in amounts deter5 mined under the methodology pro6 vided under section 1886(h) of the

7 Social Security Act, except that the

8 State shall apply weighting factors

9 that are different than the weighting

10 factors otherwise set forth in section

11 1886(h)(4)(C) of the Social Security

12 Act.

13 (II) USE OF PAYMENTS FOR PRI14 MARY CARE RESIDENTS.—In applying

15 different weighting factors under

16 subclause (I), the State shall ensure

17 that the amount of payment made to

18 hospitals for costs attributable to pri19 mary care residents shall be greater

20 than the amount that would have been

21 paid to hospitals for costs attributable

22 to such residents if the State had ap23 plied the weighting factors otherwise

24 set forth in section 1886(h)(4)(C) of

25 the Social Security Act.
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1 (ii) PAYMENTS FOR MEDICAL EDU2 CATION THROUGH CONSORTIUM.—The

3 State may make payments for graduate

4 medical education costs through payments

5 to a health care training consortium (or

6 through any entity identified by such a

7 consortium as appropriate for receiving

8 payments on behalf of the consortium) that

9 is established in the State but that is not

10 otherwise participating in the demonstra11 tion project.

12 (B) REQUIREMENTS FOR CONSORTIUM.—

13 (i) IN GENERAL.—In the case of a

14 consortium participating in the demonstra15 tion project under this section, the Sec16 retary shall make payments for graduate

17 medical education costs through a health

18 care training consortium whose members

19 provide medical residency training (or

20 through any entity identified by such a

21 consortium as appropriate for receiving

22 payments on behalf of the consortium).

23 (ii) USE OF PAYMENTS.—

24 (I) IN GENERAL.—Each consor25 tium receiving payments under clause
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1 (i) shall use such funds to conduct ac2 tivities which test and evaluate mech3 anisms to increase the number and

4 percentage of medical students enter5 ing primary care practice relative to

6 those entering nonprimary care prac7 tice, and may use such funds for the

8 operation of the consortium.

9 (II) PAYMENTS TO PARTICIPAT10 ING PROGRAMS.—The consortium

11 shall ensure that the majority of the

12 payments received under clause (i) are

13 directed to consortium members for

14 primary care residency programs, and

15 shall designate for each resident as16 signed to the consortium a hospital

17 operating an approved medical resi18 dency training program for purposes

19 of enabling the Secretary to calculate

20 the consortium’s payment amount

21 under the project. Such hospital shall

22 be the hospital where the resident re23 ceives the majority of the resident’s

24 hospital-based, nonambulatory train25 ing experience.
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1 (4) ALLOCATION OF PORTION OF MEDICARE

2 GME PAYMENTS FOR ACTIVITIES UNDER PROJECT.—

3 Notwithstanding any provision of title XVIII of the

4 Social Security Act, the following rules apply with

5 respect to each State and each health care training

6 consortium participating in the demonstration

7 project established under this subsection during a

8 year:

9 (A) In the case of a State—

10 (i) the Secretary shall reduce the

11 amount of each payment made to hospitals

12 in the State during the year for direct

13 graduate medical education costs under

14 section 1886(h) of the Social Security Act

15 by 3 percent; and

16 (ii) the Secretary shall pay the State

17 an amount equal to the Secretary’s esti18 mate of the sum of the reductions made

19 during the year under clause (i) (as ad20 justed by the Secretary in subsequent

21 years for over- or under-estimations in the

22 amount estimated under this subparagraph

23 in previous years).

24 (B) In the case of a consortium—
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1 (i) the Secretary shall reduce the

2 amount of each payment made to hospitals

3 who are members of the consortium during

4 the year for direct graduate medical edu5 cation costs under section 1886(h) of the

6 Social Security Act by 3 percent; and

7 (ii) the Secretary shall pay the consor8 tium an amount equal to the Secretary’s

9 estimate of the sum of the reductions made

10 during the year under clause (i) (as ad11 justed by the Secretary in subsequent

12 years for over- or under-estimations in the

13 amount estimated under this subparagraph

14 in previous years).

15 (5) ADDITIONAL GRANT FOR PLANNING AND

16 EVALUATION.—

17 (A) IN GENERAL.—The Secretary may

18 award grants to States and consortia participat19 ing in the demonstration project under this sub20 section for the purpose of planning and evaluat21 ing such projects. A State or consortia may

22 conduct such planning and evaluation activities

23 or contract with a private entity to conduct

24 such activities. Each State and consortia desir25 ing to receive a grant under this subparagraph
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1 shall prepare and submit to the Secretary an

2 application, at such time, in such manner, and

3 containing such information as the Secretary

4 may require.

5 (B) AUTHORIZATION OF APPROPRIA6 TIONS.—There are authorized to be appro7 priated for grants under this subparagraph

8 $250,000 for fiscal year 1996, and $100,000

9 for each of the fiscal years 1997 through 2001.

10 (6) DURATION.—A demonstration project under

11 this subsection shall be conducted for a period not

12 to exceed 5 years. The Secretary may terminate a

13 project if the Secretary determines that the State or

14 consortium conducting the project is not in substan15 tial compliance with the terms of the application ap16 proved by the Secretary.

17 (7) EVALUATIONS AND REPORTS.—

18 (A) EVALUATIONS.—Each State or consor19 tium participating in the demonstration project

20 shall submit to the Secretary a final evaluation

21 within 360 days of the termination of the State

22 or consortium’s participation and such interim

23 evaluations as the Secretary may require.

24 (B) REPORTS TO CONGRESS.—Not later

25 than 360 days after the first demonstration
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1 project under this section begins, and annually

2 thereafter for each year in which such a project

3 is conducted, the Secretary shall submit a re4 port to Congress which evaluates the effective5 ness of the State and consortium activities con6 ducted under such projects and includes any

7 legislative recommendations determined appro8 priate by the Secretary.

9 (8) MAINTENANCE OF EFFORT.—Any funds

10 available for the activities covered by a demonstra11 tion project under this section shall supplement, and

12 shall not supplant, funds that are expended for simi13 lar purposes under any State, regional, or local pro14 gram.

15 (b) GOALS FOR PROJECTS.—The goals referred to in

16 this subsection for a State or consortium participating in

17 the demonstration project under this section are as fol18 lows:

19 (1) The training of an equal number of physi20 cian and nonphysician primary care providers.

21 (2) The recruiting of residents for graduate

22 medical education training programs who received a

23 portion of undergraduate training in a rural area.

24 (3) The allocation of not less than 50 percent

25 of the training spent in a graduate medical residency
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1 training program at sites at which acute care inpa2 tient hospital services are not furnished.

3 (4) The rotation of residents in approved medi4 cal residency training programs among practices

5 that serve residents of rural areas.

6 (5) The development of a plan under which,

7 after a 5-year transition period, not less than 50

8 percent of the residents who begin an initial resi9 dency period in an approved medical residency train10 ing program shall be primary care residents.

11 (c) DEFINITIONS.—In this section:

12 (1) APPROVED MEDICAL RESIDENCY TRAINING

13 PROGRAM.—The term ‘‘approved medical residency

14 training program’’ has the meaning given such term

15 in section 1886(h)(5)(A) of the Social Security Act.

16 (2) HEALTH CARE TRAINING CONSORTIUM.—

17 The term ‘‘health care training consortium’’ means

18 a State, regional, or local entity consisting of at

19 least one of each of the following:

20 (A) A hospital operating an approved med21 ical residency training program at which resi22 dents receive training at ambulatory training

23 sites located in rural areas.

24 (B) A school of medicine or osteopathic

25 medicine.
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1 (C) A school of allied health or a program

2 for the training of physician assistants (as such

3 terms are defined in section 799 of the Public

4 Health Service Act).

5 (D) A school of nursing (as defined in sec6 tion 853 of the Public Health Service Act).

7 (3) PRIMARY CARE.—The term ‘‘primary care’’

8 means family practice, general internal medicine,

9 general pediatrics, and obstetrics and gynecology.

10 (4) RESIDENT.—The term ‘‘resident’’ has the

11 meaning given such term in section 1886(h)(5)(H)

12 of the Social Security Act.

13 (5) RURAL AREA.—The term ‘‘rural area’’ has

14 the meaning given such term in section

15 1886(d)(2)(D) of the Social Security Act.

16 SEC. 15507. TELEMEDICINE PAYMENT METHODOLOGY.

17 The Secretary of Health and Human Services shall

18 establish a methodology for making payments under part

19 B of the medicare program for telemedicine services fur20 nished on an emergency basis to individuals residing in

21 an area designated as a health professional shortage area

22 (under section 332(a) of the Public Health Service Act).
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1 SEC. 15508. DEMONSTRATION PROJECT TO INCREASE

2 CHOICE IN RURAL AREAS.

3 The Secretary of Health and Human Services (acting

4 through the Administrator of the Health Care Financing

5 Administration) shall conduct a demonstration project to

6 assess the advantages and disadvantages of requiring

7 Medicare Choice organizations under part C of title XVIII

8 of the Social Security Act (as added by section 15002(a))

9 to market Medicare Choice products in certain under10 served areas which are near the standard service area for

11 such products.

12 PART 2—MEDICARE SUBVENTION

13 SEC. 15511. MEDICARE PROGRAM PAYMENTS FOR HEALTH

14 CARE SERVICES PROVIDED IN THE MILITARY

15 HEALTH SERVICES SYSTEM.

16 (a) PAYMENTS UNDER MEDICARE RISK CONTRACTS

17 PROGRAM.—

18 (1) CURRENT PROGRAM.—Section 1876 (42

19 U.S.C. 1395mm) is amended by adding at the end

20 the following new subsection:

21 ‘‘(k) Notwithstanding any other provision of this sec22 tion, a managed health care plan established by the Sec23 retary of Defense under chapter 55 of title 10, United

24 States Code, shall be considered an eligible organization

25 under this section, and the Secretary shall make payments

26 to such a managed health care plan during a year on be-
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1 half of any individuals entitled to benefits under this title

2 who are enrolled in such a managed health care plan dur3 ing the year. Such payments shall be made in the same

4 amounts and under similar terms and conditions under

5 which the Secretary makes payments to other eligible

6 organizations with risk sharing contracts under this

7 section.’’.

8 (2) MEDICARE CHOICE PROGRAM.—Section

9 1855, as inserted by section 15002(a), by adding at

10 the end the following new subsection:

11 ‘‘(h) PAYMENTS TO MILITARY PROGRAM.—Notwith12 standing any other provision of this section, a managed

13 health care plan established by the Secretary of Defense

14 under chapter 55 of title 10, United States Code, shall

15 be considered a Medicare Choice organization under this

16 part, and the Secretary shall make payments to such a

17 managed health care plan during a year on behalf of any

18 individuals entitled to benefits under this title who are en19 rolled in such a managed health care plan during the year.

20 Such payments shall be made in the same amounts and

21 under similar terms and conditions under which the Sec22 retary makes payments to other Medicare Choice organi23 zations with contracts in effect under this part.’’.

24 (b) TEMPORARY PROVISION FOR WAIVER OF PART

25 B PREMIUM PENALTY.—Section 1839 (42 U.S.C. 1395r)
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1 is amended by adding at the end the following new sub2 section:

3 ‘‘(h) The premium increase required by subsection

4 (b) shall not apply with respect to a person who is enrolled

5 with a managed care plan that is established by the Sec6 retary of Defense under chapter 55 of title 10, United

7 States Code, and is recognized as an eligible organization

8 pursuant to section 1855(h) or section 1876(k), if such

9 person first enrolled in such plan prior to January 1,

10 1998.’’.

11 (c) PAYMENTS UNDER PART A OF MEDICARE.—Sec12 tion 1814(c) (42 U.S.C. 1395f(c)) is amended—

13 (1) by redesignating the current matter as

14 paragraph (1); and

15 (2) by adding at the end the following new

16 paragraph:

17 ‘‘(2) Paragraph (1) shall not apply to services

18 provided by facilities of the uniformed services pur19 suant to chapter 55 of title 10, United States Code,

20 and subject to the provisions of section 1095 of such

21 title. With respect to such services, payments under

22 this title shall be made without regard to whether

23 the beneficiary under this title has paid the deduct24 ible and copayments amounts generally required by

25 this title.’’.
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1 (d) PAYMENTS UNDER PART B OF MEDICARE.—Sec2 tion 1835(d) (42 U.S.C. 1395n(d)) is amended—

3 (1) by redesignating the current matter as

4 paragraph (1); and

5 (2) by adding at the end the following new

6 paragraph:

7 ‘‘(2) Paragraph (1) shall not apply to services pro8 vided by facilities of the uniformed services pursuant to

9 chapter 55 of title 10, United States Code, and subject

10 to the provisions of section 1095 of such title. With respect

11 to such services, payments under this title shall be made

12 without regard to whether the beneficiary under this title

13 has paid the deductible and copayments amounts generally

14 required by this title.’’.

15 (e) CONFORMING AMENDMENTS TO THE THIRD

16 PARTY COLLECTION PROGRAM FOR MILITARY MEDICAL

17 FACILITIES.—(1) Section 1095(d) of title 10, United

18 States Code, is amended—

19 (A) by striking ‘‘XVIII or’’; and

20 (B) by striking ‘‘1395’’ and inserting ‘‘1396’’.

21 (2) Section 1095(h)(2) of such title is amended by

22 inserting after ‘‘includes’’ the following: ‘‘plans adminis23 tered under title XVIII of the Social Security Act (42

24 U.S.C. 1395 et seq.),’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect at the end of the 30-day pe3 riod beginning on the date of the enactment of this Act.

4 Subtitle G—Other Provisions

5 SEC. 15601. EXTENSION AND EXPANSION OF EXISTING SEC6 ONDARY PAYER REQUIREMENTS.

7 (a) DATA MATCH.—

8 (1) Section 1862(b)(5)(C) (42 U.S.C.

9 1395y(b)(5)(C)) is amended by striking clause (iii).

10 (2) Section 6103(l)(12) of the Internal Revenue

11 Code of 1986 is amended by striking subparagraph

12 (F).

13 (b) APPLICATION TO DISABLED INDIVIDUALS IN

14 LARGE GROUP HEALTH PLANS.—

15 (1) IN GENERAL.—Section 1862(b)(1)(B) (42

16 U.S.C. 1395y(b)(1)(B)) is amended—

17 (A) in clause (i), by striking ‘‘clause (iv)’’

18 and inserting ‘‘clause (iii)’’,

19 (B) by striking clause (iii), and

20 (C) by redesignating clause (iv) as clause

21 (iii).

22 (2) CONFORMING AMENDMENTS.—Paragraphs

23 (1) through (3) of section 1837(i) (42 U.S.C.

24 1395p(i)) and the second sentence of section

25 1839(b) (42 U.S.C. 1395r(b)) are each amended by
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1 striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears

2 and inserting ‘‘1862(b)(1)(B)(iii)’’.

3 (c) EXPANSION OF PERIOD OF APPLICATION TO IN4 DIVIDUALS WITH END STAGE RENAL DISEASE.—Section

5 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—

6 (1) in the first sentence, by striking ‘‘12-

7 month’’ each place it appears and inserting ‘‘24-

8 month’’, and

9 (2) by striking the second sentence.

10 SEC. 15602. CLARIFICATION OF MEDICARE COVERAGE OF

11 ITEMS AND SERVICES ASSOCIATED WITH

12 CERTAIN MEDICAL DEVICES APPROVED FOR

13 INVESTIGATIONAL USE.

14 (a) COVERAGE.—Nothing in title XVIII of the Social

15 Security Act may be construed to prohibit coverage under

16 part A or part B of the medicare program of items and

17 services associated with the use of a medical device in the

18 furnishing of inpatient or outpatient hospital services (in19 cluding outpatient diagnostic imaging services) for which

20 payment may be made under the program solely on the

21 grounds that the device is not an approved device, if—

22 (1) the device is an investigational device; and

23 (2) the device is used instead of either an ap24 proved device or a covered procedure.
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1 (b) CLARIFICATION OF PAYMENT AMOUNT.—Not2 withstanding any other provision of title XVIII of the So3 cial Security Act, the amount of payment made under the

4 medicare program for any item or service associated with

5 the use of an investigational device in the furnishing of

6 inpatient or outpatient hospital services (including out7 patient diagnostic imaging services) for which payment

8 may be made under the program may not exceed the

9 amount of the payment which would have been made

10 under the program for the item or service if the item or

11 service were associated with the use of an approved device

12 or a covered procedure.

13 (c) DEFINITIONS.—In this section—

14 (1) the term ‘‘approved device’’ means a medi15 cal device (or devices) which has been approved for

16 marketing under pre-market approval under the

17 Federal Food, Drug, and Cosmetic Act or cleared

18 for marketing under a 510(k) notice under such Act;

19 and

20 (2) the term ‘‘investigational device’’ means—

21 (A) a medical device or devices (other than

22 a device described in paragraph (1)) approved

23 for investigational use under section 520(g) of

24 the Federal Food, Drug, and Cosmetic Act, or
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1 (B) a product authorized for use under

2 section 505(i) of the Federal Food, Drug, and

3 Cosmetic Act which includes the use of a medi4 cal device (or devices) or an investigational

5 combination product under section 503(g) of

6 such Act which includes a device (or devices)

7 authorized for use under section 505(i) of such

8 Act.

9 SEC. 15603. ADDITIONAL EXCLUSION FROM COVERAGE.

10 (a) IN GENERAL.—Section 1862(a) (42 U.S.C.

11 1395y(a)) is amended—

12 (1) by striking ‘‘or’’ at the end of paragraph

13 (14),

14 (2) by striking the period at the end of para15 graph (15) and inserting ‘‘; or’’, and

16 (3) by inserting after paragraph (15) the fol17 lowing new paragraph:

18 ‘‘(16) where such expenses are for items or

19 services, or to assist in the purchase, in whole or in

20 part, of health benefit coverage that includes items

21 or services, for the purpose of causing, or assisting

22 in causing, the death, suicide, euthanasia, or mercy

23 killing of a person.’’.

24 (b) EFFECTIVE DATE.—The amendments made by

25 subsection (a) shall apply to payment for items and serv-
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1 ices furnished on or after the date of the enactment of

2 this Act.

3 Subtitle H—Monitoring Achieve4 ment of Medicare Reform Goals

5 SEC. 15701. ESTABLISHMENT OF BUDGETARY AND PRO6 GRAM GOALS.

7 (a) IN GENERAL.—The Secretary shall establish pro8 gram budgetary and program goals for the medicare pro9 gram consistent with this section.

10 (b) BUDGETARY GOALS.—The budgetary goal is to

11 restrict total outlays under the medicare program as fol12 lows:

13 (1) For fiscal year 1996, $ll.

14 (2) For fiscal year 1997, $ll.

15 (3) For fiscal year 1998, $ll.

16 (4) For fiscal year 1999, $ll.

17 (5) For fiscal year 2000, $ll.

18 (6) For fiscal year 2001, $ll.

19 (7) For fiscal year 2002, $ll.

20 (c) PROGRAM GOALS.—The program goals shall be

21 consistent with the following:

22 (1) There should be an equitable distribution of

23 funds between per beneficiary spending on payments

24 to Medicare Choice organizations under part C of

25 the medicare program and on payments to providers
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1 on a fee-for-service basis under parts A and B of the

2 program.

3 (2) Payments to Medicare Choice organizations

4 should be established in a manner that promotes the

5 availability of Medicare Choice products in all re6 gions of the country and that permits such organiza7 tions to offer adequate coverage.

8 SEC. 15702. MEDICARE REFORM COMMISSION.

9 (a) ESTABLISHMENT.—There is established a com10 mission to be known as the Medicare Reform Commission

11 (in this section referred to as the ‘‘Commission’’).

12 (b) DUTIES.—

13 (1) IN GENERAL.—The Commission shall exam14 ine how the medicare program has met the budg15 etary and program goals established under section

16 15701.

17 (2) PERIODIC REPORTS.—

18 (A) IN GENERAL.—The Commission shall

19 issue a report on April 1, 1998, and on March

20 1 of every third subsequent year, on the status

21 of the medicare program in relation to the

22 budgetary and program goals specified in sec23 tion 15601.

24 (B) CONTENTS.—Each report shall include

25 the following information about the medicare
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1 program in the most recent fiscal year and

2 projects for the succeeding 3 fiscal years:

3 (i) The actuarial value of the tradi4 tional medicare benefit package.

5 (ii) The projected rate of growth of

6 outlays under the traditional medicare pro7 gram.

8 (iii) The ability of Medicare Choice or9 ganizations to offer an adequate benefit

10 package under part C of the medicare pro11 gram.

12 (iv) The extent of Medicare Choice

13 products made available to medicare bene14 ficiaries in the different regions of the

15 country.

16 (3) RECOMMENDATIONS.—

17 (A) IN GENERAL.—If a report under para18 graph (2) finds that any of the following prob19 lems exists, the Commission shall include rec20 ommendations to respond to the problem:

21 (i) The actuarial value of the tradi22 tional medicare benefit package exceeds

23 the payment rate under the Medicare

24 Choice program.
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1 (ii) The rate of growth of the tradi2 tional medicare program under parts A

3 and B is projected to result in medicare

4 outlays exceeding the outlay targets speci5 fied in section 15701.

6 (iii) The payments under the Medi7 care Choice program are not sufficient to

8 allow contractors to provide an adequate

9 benefit package.

10 (iv) The selection of Medicare Choice

11 products are limited or not available in

12 parts of the country.

13 (B) TYPES OF RECOMMENDATIONS.—The

14 recommendations provided under subparagraph

15 (A) may include—

16 (i) in response to the problem de17 scribed in subparagraph (A)(ii), reduction

18 in payments to providers under parts A

19 and B or an increase in cost sharing by

20 beneficiaries; and

21 (ii) in response to the problems de22 scribed in subparagraphs (A)(iii) and

23 (A)(iv), an adjustment to payment rates to

24 Medicare Choice organizations.
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1 Such recommendations may not include any

2 change that is inconsistent with attaining the

3 outlay targets specified under section 15701.

4 (4) PRESIDENTIAL RESPONSE.—If the Commis5 sion reports under this subsection that the goals es6 tablished in section 15701 are not met (or projects

7 that such goals will not be met during a 3-year pe8 riod), the President shall submit to Congress, within

9 90 days after the date of submission of the report,

10 specific legislative recommendations to correct the

11 problem. Such recommendations may include those

12 described in paragraph (3)(B) and may not include

13 any change that is inconsistent with attaining the

14 outlay targets specified under section 15701.

15 (5) CONGRESSIONAL CONSIDERATION.—

16 (A) IN GENERAL.—The President’s rec17 ommendations submitted under paragraph (4)

18 shall not apply unless a joint resolution (de19 scribed in subparagraph (B)) approving such

20 recommendations is enacted, in accordance with

21 the provisions of subparagraph (C), before the

22 end of the 60-day period beginning on the date

23 on which a report containing such recommenda24 tions is submitted by the President under para25 graph (4). For purposes of applying the preced-
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1 ing sentence and subparagraphs (B) and (C),

2 the days on which either House of Congress is

3 not in session because of an adjournment of

4 more than three days to a day certain shall be

5 excluded in the computation of a period.

6 (B) JOINT RESOLUTION OF APPROVAL.—A

7 joint resolution described in this subparagraph

8 means only a joint resolution which is intro9 duced within the 10-day period beginning on

10 the date on which the report described in sub11 paragraph (A) is submitted and—

12 (i) which does not have a preamble;

13 (ii) the matter after the resolving

14 clause of which is as follows: ‘‘That Con15 gress approves the recommendations of the

16 President under section 15702(b)(4) of the

17 Medicare Preservation Act, as submitted

18 by the President on lllllll.’’,

19 the blank space being filled in with the ap20 propriate date; and

21 (iii) the title of which is as follows:

22 ‘‘Joint resolution approving Presidential

23 recommendations submitted under section

24 15702(b)(4) of the Medicare Preservation

25 Act, as submitted by the President on
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1 lllllll.’’, the blank space being

2 filled in with the appropriate date.

3 (C) PROCEDURES FOR CONSIDERATION OF

4 RESOLUTION OF APPROVAL.—Subject to sub5 paragraph (D), the provisions of section 2908

6 (other than subsection (a)) of the Defense Base

7 Closure and Realignment Act of 1990 shall

8 apply to the consideration of a joint resolution

9 described in subparagraph (B) in the same

10 manner as such provisions apply to a joint reso11 lution described in section 2908(a) of such Act.

12 (D) SPECIAL RULES.—For purposes of ap13 plying subparagraph (C) with respect to such

14 provisions—

15 (i) any reference to the Committee on

16 Armed Services of the House of Represent17 atives shall be deemed a reference to the

18 Committee on Ways and Means and any

19 reference to the Committee on Armed

20 Services of the Senate shall be deemed a

21 reference to the Committee on Finance of

22 the Senate; and

23 (ii) any reference to the date on which

24 the President transmits a report shall be

25 deemed a reference to the date on which
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1 the President submits the recommenda2 tions under paragraph (4).

3 (c) MEMBERSHIP.—

4 (1) APPOINTMENT.—The Commission shall be

5 composed of 5 members appointed by the President,

6 of which 4 of whom are appointed from a list (of at

7 least 5 nominees) submitted by each of the following:

8 (A) The Speaker of the House of Rep9 resentatives.

10 (B) The Minority Leader of the House of

11 Representatives.

12 (C) The Majority Leader of the Senate.

13 (D) The Minority Leader of the Senate.

14 (2) CHAIRMAN AND VICE CHAIRMAN.—The

15 Commission shall elect a Chairman and Vice Chair16 man from among its members.

17 (3) VACANCIES.—Any vacancy in the member18 ship of the Commission shall be filled in the manner

19 in which the original appointment was made and

20 shall not affect the power of the remaining members

21 to execute the duties of the Commission.

22 (4) QUORUM.—A quorum shall consist of 3

23 members of the Commission, except that 2 members

24 may conduct a hearing under subsection (e).
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1 (5) MEETINGS.—The Commission shall meet at

2 the call of its Chairman or a majority of its mem3 bers.

4 (6) COMPENSATION AND REIMBURSEMENT OF

5 EXPENSES.—Members of the Commission are not

6 entitled to receive compensation for service on the

7 Commission. Members may be reimbursed for travel,

8 subsistence, and other necessary expenses incurred

9 in carrying out the duties of the Commission.

10 (d) STAFF AND CONSULTANTS.—

11 (1) STAFF.—The Commission may appoint and

12 determine the compensation of such staff as may be

13 necessary to carry out the duties of the Commission.

14 Such appointments and compensation may be made

15 without regard to the provisions of title 5, United

16 States Code, that govern appointments in the com17 petitive services, and the provisions of chapter 51

18 and subchapter III of chapter 53 of such title that

19 relate to classifications and the General Schedule

20 pay rates.

21 (2) CONSULTANTS.—The Commission may pro22 cure such temporary and intermittent services of

23 consultants under section 3109(b) of title 5, United

24 States Code, as the Commission determines to be

25 necessary to carry out the duties of the Commission.
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1 (e) POWERS.—

2 (1) HEARINGS AND OTHER ACTIVITIES.—For

3 the purpose of carrying out its duties, the Commis4 sion may hold such hearings and undertake such

5 other activities as the Commission determines to be

6 necessary to carry out its duties.

7 (2) STUDIES BY GAO.—Upon the request of the

8 Commission, the Comptroller General shall conduct

9 such studies or investigations as the Commission de10 termines to be necessary to carry out its duties.

11 (3) COST ESTIMATES BY CONGRESSIONAL

12 BUDGET OFFICE.—

13 (A) Upon the request of the Commission,

14 the Director of the Congressional Budget Office

15 shall provide to the Commission such cost esti16 mates as the Commission determines to be nec17 essary to carry out its duties.

18 (B) The Commission shall reimburse the

19 Director of the Congressional Budget Office for

20 expenses relating to the employment in the of21 fice of the Director of such additional staff as

22 may be necessary for the Director to comply

23 with requests by the Commission under sub24 paragraph (A).
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1 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon

2 the request of the Commission, the head of any Fed3 eral agency is authorized to detail, without reim4 bursement, any of the personnel of such agency to

5 the Commission to assist the Commission in carry6 ing out its duties. Any such detail shall not interrupt

7 or otherwise affect the civil service status or privi8 leges of the Federal employee.

9 (5) TECHNICAL ASSISTANCE.—Upon the re10 quest of the Commission, the head of a Federal

11 agency shall provide such technical assistance to the

12 Commission as the Commission determines to be

13 necessary to carry out its duties.

14 (6) USE OF MAILS.—The Commission may use

15 the United States mails in the same manner and

16 under the same conditions as Federal agencies and

17 shall, for purposes of the frank, be considered a

18 commission of Congress as described in section 3215

19 of title 39, United States Code.

20 (7) OBTAINING INFORMATION.—The Commis21 sion may secure directly from any Federal agency

22 information necessary to enable it to carry out its

23 duties, if the information may be disclosed under

24 section 552 of title 5, United States Code. Upon re25 quest of the Chairman of the Commission, the head
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1 of such agency shall furnish such information to the

2 Commission. In particular, the Administrator of the

3 Health Care Financing Administration and the Di4 rector of the Office of Management and Budget

5 shall provide the Commission with access to data for

6 the conduct of its work.

7 (8) ADMINISTRATIVE SUPPORT SERVICES.—

8 Upon the request of the Commission, the Adminis9 trator of General Services shall provide to the Com10 mission on a reimbursable basis such administrative

11 support services as the Commission may request.

12 (9) ACCEPTANCE OF DONATIONS.—The Com13 mission may accept, use, and dispose of gifts or do14 nations of services or property.

15 (10) PRINTING.—For purposes of costs relating

16 to printing and binding, including the cost of per17 sonnel detailed from the Government Printing Of18 fice, the Commission shall be deemed to be a com19 mittee of the Congress.

20 (f) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated such sums as may be

22 necessary to carry out this section. Amounts appropriated

23 to carry out this section shall remain available until ex24 pended.
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1 Subtitle I—Lock-Box Provisions for

2 Medicare Part B Savings from

3 Growth Reductions

4 SEC. 15801. ESTABLISHMENT OF MEDICARE GROWTH RE5 DUCTION TRUST FUND FOR PART B SAVINGS.

6 Part B of title XVIII is amended by inserting after

7 section 1841 the following new section:

8 ‘‘MEDICARE GROWTH REDUCTION TRUST FUND

9 ‘‘SEC. 1841A. (a)(1) There is hereby created on the

10 books of the Treasury of the United States a trust fund

11 to be known as the ‘Federal Medicare Growth Reduction

12 Trust Fund’ (in this section referred to as the ‘Trust

13 Fund’). The Trust Fund shall consist of such gifts and

14 bequests as may be made as provided in section 201(i)(1)

15 and amounts appropriated under paragraph (2).

16 ‘‘(2) There are hereby appropriated to the Trust

17 Fund amounts equivalent to 100 percent of the Sec18 retary’s estimate of the reductions in expenditures under

19 this part that are attributable to the Medicare Preserva20 tion Act of 1995. The amounts appropriated by the pre21 ceding sentence shall be transferred from time to time (not

22 less frequently than monthly) from the general fund in the

23 Treasury to the Trust Fund.

24 ‘‘(3)(A) Subject to subparagraph (B), with respect to

25 monies transferred to the Trust Fund, no transfers, au-
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1 thorizations of appropriations, or appropriations are per2 mitted.

3 ‘‘(B) Beginning with fiscal year 2003, the Secretary

4 may expend funds in the Trust Fund to carry out this

5 title, but only to the extent provided by Congress in ad6 vance through a specific amendment to this section.

7 ‘‘(b) The provisions of subsections (b) through (e) of

8 section 1841 shall apply to the Trust Fund in the same

9 manner as they apply to the Federal Supplementary Medi10 cal Insurance Trust Fund, except that the Board of Trust11 ees and Managing Trustee of the Trust Fund shall be

12 composed of the members of the Board of Trustees and

13 the Managing Trustee, respectively, of the Federal Supple14 mentary Medical Insurance Trust Fund.’’.

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