I

104TH CONGRESS

1ST SESSION H. R. 2485

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. ARCHER (for himself, Mr. BLILEY, Mr. BILIRAKIS, Mr. THOMAS, Mr.

HYDE, Mr. GREENWOOD, Mr. HASTERT, Mrs. JOHNSON of Connecticut,

and Mr. MCCRERY) 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 SECTION 1. PURPOSE.

4 The purpose of this Act is to reform the medicare

5 program, in order to preserve and protect the financial

6 stability of the program.
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1 TITLE XV—MEDICARE

2 SEC. 15000. SHORT TITLE OF TITLE; AMENDMENTS AND

3 REFERENCES TO OBRA; TABLE OF CONTENTS

4 OF TITLE.

5 (a) SHORT TITLE.—This title may be cited as the

6 ‘‘Medicare Preservation Act of 1995’’.

7 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex8 cept as otherwise specifically provided, whenever in this

9 title an amendment is expressed in terms of an amend10 ment to or repeal of a section or other provision, the ref11 erence shall be considered to be made to that section or

12 other provision of the Social Security Act.

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

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

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

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

17 the Omnibus Budget Reconciliation Act of 1987 (Public

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

19 of 1989 (Public Law 101–239), the Omnibus Budget Rec20 onciliation Act of 1990 (Public Law 101–508), and the

21 Omnibus Budget Reconciliation Act of 1993 (Public Law

22 103–66), respectively.

23 (d) TABLE OF CONTENTS OF TITLE.—The table of

24 contents of this title is as follows:

Sec. 15000. Short title of title; amendments and references to OBRA; table of

contents of title.
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Subtitle A—MedicarePlus Program

PART 1—INCREASING CHOICE UNDER THE MEDICARE PROGRAM

Sec. 15001. Increasing choice under medicare.

Sec. 15002. MedicarePlus program.

‘‘PART C—PROVISIONS RELATING TO MEDICAREPLUS

‘‘Sec. 1851. Requirements for MedicarePlus organizations; high deductible/

medisave products.

‘‘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 MedicarePlus organizations.

‘‘Sec. 1856. Establishment of standards for MedicarePlus organizations

and products.

‘‘Sec. 1857. MedicarePlus certification.

‘‘Sec. 1858. Contracts with MedicarePlus organizations.’’

Sec. 15003. Duplication and coordination of medicare-related products.

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

PART 2—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

Sec. 15011. MedicarePlus 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.

Sec. 15033. Change in appointment of Administrator of HCFA.

PART 5—TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDERSPONSORED ORGANIZATIONS

Sec. 15041. Treatment of hospitals which participate in provider-sponsored organizations.

Subtitle B—Preventing Fraud and Abuse

PART 1—GENERAL PROVISIONS

Sec. 15101. Increasing awareness of fraud and abuse.

Sec. 15102. Beneficiary incentive programs.

Sec. 15103. Intermediate sanctions for medicare health maintenance organizations.

Sec. 15104. Voluntary disclosure program.

Sec. 15105. Revisions to current sanctions.

Sec. 15106. Direct spending for anti-fraud activities under medicare.

Sec. 15107. Permitting carriers to carry out prior authorization for certain

items of durable medical equipment.

Sec. 15108. National Health Care Anti-Fraud Task Force.
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Sec. 15109. Study of adequacy of private quality assurance programs.

Sec. 15110. Penalty for false certification for home health services.

Sec. 15111. Pilot projects.

PART 2—CRIMINAL LAW PROVISIONS

Sec. 15121. Offenses involving fraud, false statement, theft, or embezzlement.

Subtitle C—Regulatory Relief

PART 1—PHYSICIAN OWNERSHIP REFERRAL REFORM

Sec. 15201. Repeal of prohibitions based on compensation arrangements.

Sec. 15202. Revision of designated health services subject to prohibition.

Sec. 15203. Delay in implementation until promulgation of regulations.

Sec. 15204. Exceptions to prohibition.

Sec. 15205. Repeal of reporting requirements.

Sec. 15206. Preemption of State law.

Sec. 15207. Effective date.

PART 2—OTHER MEDICARE REGULATORY RELIEF

Sec. 15211. Repeal of Medicare and Medicaid Coverage Data Bank.

Sec. 15212. Clarification of level of intent required for imposition of sanctions.

Sec. 15213. Additional exception to anti-kickback penalties for managed care

arrangements.

Sec. 15214. Solicitation and publication of modifications to existing safe harbors and new safe harbors.

Sec. 15215. Issuance of advisory opinions under title XI.

Sec. 15216. Prior notice of changes in billing and claims processing requirements for physicians’ services.

PART 3—PROMOTING PHYSICIAN SELF-POLICING

Sec. 15221. Exemption from antitrust laws for certain activities of medical selfregulatory entities.

Subtitle D—Medical Liability Reform

PART 1—GENERAL PROVISIONS

Sec. 15301. Federal reform of health care liability actions.

Sec. 15302. Definitions.

Sec. 15303. Effective date.

PART 2—UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

Sec. 15311. Statute of limitations.

Sec. 15312. Calculation and payment of damages.

Sec. 15313. Alternative dispute resolution.

Subtitle E—Teaching Hospitals and Graduate Medical

Education

PART 1—TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST

FUND

Sec. 15401. Establishment of Fund; payments to teaching hospitals.
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‘‘TITLE XXII—TEACHING HOSPITAL AND GRADUATE MEDICAL

EDUCATION TRUST FUND

‘‘PART A—ESTABLISHMENT OF FUND

‘‘Sec. 2201. Establishment of Fund.

‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

‘‘Subpart 1—Requirement of Payments

‘‘Sec. 2211. Formula payments to teaching hospitals.

‘‘Subpart 2—Amount Relating to Indirect Costs of Graduate Medical

Education

‘‘Sec. 2221. Determination of amount relating to indirect costs.

‘‘Sec. 2222. Indirect costs; special rules regarding determination of hospital-specific percentage.

‘‘Sec. 2223. Indirect costs; alternative payments regarding teaching hospitals in certain States.

‘‘Subpart 3—Amount Relating to Direct Costs of Graduate Medical

Education

‘‘Sec. 2231. Determination of amount relating to direct costs.

‘‘Sec. 2232. Direct costs; special rules regarding determination of hospitalspecific percentage.

‘‘Sec. 2233. Direct costs; authority for payments to consortia of providers.

‘‘Sec. 2234. Direct costs; alternative payments regarding teaching hospitals in certain States.

‘‘Subpart 4—General Provisions

‘‘Sec. 2241. Adjustments in payment amounts.’’

PART 2—AMENDMENTS TO MEDICARE PROGRAM

Sec. 15411. Transfers to Teaching Hospital and Graduate Medical Education

Trust Fund.

Sec. 15412. Modification in payment policies regarding graduate medical education.

PART 3—REFORM OF FEDERAL POLICIES REGARDING TEACHING HOSPITALS

AND GRADUATE MEDICAL EDUCATION

Sec. 15421. Establishment of advisory panel for recommending policies.

‘‘PART C—OTHER MATTERS

‘‘Sec. 2251. Advisory Panel on Reform in Financing of Teaching Hospitals

and Graduate Medical Education.’’

Subtitle F—Provisions Relating to Medicare Part A

PART 1—HOSPITALS

SUBPART A—GENERAL PROVISIONS RELATING TO HOSPITALS

Sec. 15501. Reductions in inflation updates for PPS hospitals.
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Sec. 15502. Reductions in disproportionate share payment adjustments.

Sec. 15503. Payments for capital-related costs for inpatient hospital services.

Sec. 15504. Reduction in adjustment for indirect medical education.

Sec. 15505. Treatment of PPS-exempt hospitals.

Sec. 15506. Reduction in payments to hospitals for enrollees’ bad debts.

Sec. 15507. Permanent extension of hemophilia pass-through.

Sec. 15508. Conforming amendment to certification of Christian Science providers.

SUBPART B—PROVISIONS RELATING TO RURAL HOSPITALS

Sec. 15511. Sole community hospitals.

Sec. 15512. Clarification of treatment of EAC and RPC hospitals.

Sec. 15513. Establishment of rural emergency access care hospitals.

Sec. 15514. Classification of rural referral centers.

Sec. 15515. Floor on area wage index.

PART 2—PAYMENTS TO SKILLED NURSING FACILITIES

Sec. 15521. Payments for routine service costs.

Sec. 15522. Incentives for cost effective management of covered non-routine

services.

Sec. 15523. Payments for routine service costs.

Sec. 15524. Reductions in payment for capital-related costs.

Sec. 15525. Treatment of items and services paid for under part B.

Sec. 15526. Certification of facilities meeting revised nursing home reform

standards.

Sec. 15527. Medical review process.

Sec. 15528. Report by Medicare Payment Review Commission.

Sec. 15529. Effective date.

PART 3—CLARIFICATION OF CREDITS TO PART A TRUST FUND

Sec. 15531. Clarification of amount of taxes credited to Federal Hospital Insurance Trust Fund.

Subtitle G—Provisions Relating to Medicare Part B

PART 1—PAYMENT REFORMS

Sec. 15601. Payments for physicians’ services.

Sec. 15602. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 15603. Payments for durable medical equipment.

Sec. 15604. Reduction in updates to payment amounts for clinical diagnostic

laboratory tests.

Sec. 15605. Extension of reductions in payments for costs of hospital outpatient services.

Sec. 15606. Freeze in payments for ambulatory surgical center services.

Sec. 15607. Rural emergency access care hospitals.

Sec. 15608. Ensuring payment for physician and nurse for jointly furnished anesthesia services.

Sec. 15609. Statewide fee schedule area for physicians’ services.

Sec. 15609A. Establishment of fee schedule for ambulance services.

Sec. 15609B. Standards for physical therapy services furnished by physicians.

PART 2—PART B PREMIUM
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Sec. 15611. Extension of part B premium.

Sec. 15612. Income-related reduction in medicare subsidy.

PART 3—ADMINISTRATION AND BILLING OF LABORATORY SERVICES

Sec. 15621. Administrative simplification for laboratory services.

Sec. 15622. Restrictions on direct billing for laboratory services.

PART 4—QUALITY STANDARDS FOR DURABLE MEDICAL EQUIPMENT

Sec. 15631. Recommendations for quality standards for durable medicare

equipment.

Subtitle H—Provisions Relating to Medicare Parts A and B

PART 1—PAYMENT FOR HOME HEALTH SERVICES

Sec. 15701. Payment for home health services.

Sec. 15702. Maintaining savings resulting from temporary freeze on payment

increases for home health services.

Sec. 15703. Extension of waiver of presumption of lack of knowledge of exclusion from coverage for home health agencies.

Sec. 15704. Report on recommendations for payments and certification for

home health services of Christian Science providers.

Sec. 15705. Extension of period of home health agency certification.

PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS

Sec. 15711. Extension and expansion of existing requirements.

Sec. 15712. Improvements in recovery of payments.

Sec. 15713. Prohibiting retroactive application of policy regarding ESRD beneficiaries enrolled in primary plans.

PART 3—FAILSAFE

Sec. 15721. Failsafe budget mechanism.

PART 4—ADMINISTRATIVE SIMPLIFICATION

Sec. 15731. Standards for medicare information transactions and data elements.

PART 5—OTHER PROVISIONS RELATING TO PARTS A AND B

Sec. 15741. Clarification of medicare coverage of items and services associated

with certain medical devices approved for investigational use.

Sec. 15742. Additional exclusion from coverage.

Sec. 15743. Competitive bidding for certain items and services.

Sec. 15744. Disclosure of criminal convictions relating to provision of home

health services.

Sec. 15745. Requiring renal dialysis facilities to make services available on a

24-hour basis.

Subtitle I—Clinical Laboratories

Sec. 15801. Exemption of physician office laboratories.
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Subtitle J—Lock-Box Provisions for Medicare Part B Savings

from Growth Reductions

Sec. 15901. Establishment of Medicare Growth Reduction Trust Fund for Part

B savings.

1 Subtitle A—MedicarePlus Program

2 PART 1—INCREASING CHOICE UNDER THE

3 MEDICARE PROGRAM

4 SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

5 (a) IN GENERAL.—Title XVIII is amended by insert6 ing after section 1804 the following new section:

7 ‘‘PROVIDING FOR CHOICE OF COVERAGE

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

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

10 this section, every individual who is entitled to bene11 fits under part A and enrolled under part B shall

12 elect to receive benefits under this title through one

13 of the following:

14 ‘‘(A) THROUGH FEE-FOR-SERVICE SYS15 TEM.—Through the provisions of parts A and

16 B.

17 ‘‘(B) THROUGH A MEDICAREPLUS PROD18 UCT.—Through a MedicarePlus product (as de19 fined in paragraph (2)), which may be—

20 ‘‘(i) a high deductible/medisave prod21 uct (and a contribution into a

22 MedicarePlus medical savings account

23 (MSA)),
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1 ‘‘(ii) a product offered by a provider2 sponsored organization,

3 ‘‘(iii) a product offered by an organi4 zation that is a union, Taft-Hartley plan,

5 or association, or

6 ‘‘(iv) a product providing for benefits

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

8 ‘‘(2) MEDICAREPLUS PRODUCT DEFINED.—For

9 purposes this section and part C, the term

10 ‘MedicarePlus product’ means health benefits cov11 erage offered under a policy, contract, or plan by a

12 MedicarePlus organization (as defined in section

13 1851(a)) pursuant to and in accordance with a con14 tract under section 1858.

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

16 For purposes of this section and part C—

17 ‘‘(A) NON-MEDICAREPLUS OPTION.—An

18 individual who has made the election described

19 in paragraph (1)(A) is considered to have elect20 ed the ‘Non-MedicarePlus option’.

21 ‘‘(B) MEDICAREPLUS OPTION.—An indi22 vidual who has made the election described in

23 paragraph (1)(B) to obtain coverage through a

24 MedicarePlus product is considered to have
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1 elected the ‘MedicarePlus option’ for that prod2 uct.

3 ‘‘(b) SPECIAL RULES.—

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

5 the Secretary may otherwise provide, an individual is

6 eligible to elect a MedicarePlus product offered by a

7 MedicarePlus organization only if the organization

8 in relation to the product serves the geographic area

9 in which the individual resides.

10 ‘‘(2) AFFILIATION REQUIREMENTS FOR CER11 TAIN PRODUCTS.—

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), an individual is eligible to elect a

14 MedicarePlus product offered by a limited en15 rollment MedicarePlus organization (as defined

16 in section 1852(c)(4)(E)) only if—

17 ‘‘(i) the individual is eligible under

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

19 and

20 ‘‘(ii) in the case of a MedicarePlus or21 ganization that is a union sponsor or a

22 Taft-Hartley sponsor (as defined in section

23 1852(c)(4)), the individual elected under

24 this section a MedicarePlus product offered

25 by the sponsor during the first enrollment
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1 period in which the individual was eligible

2 to make such election with respect to such

3 sponsor.

4 ‘‘(B) NO REELECTION AFTER

5 DISENROLLMENT FOR CERTAIN PRODUCTS.—

6 An individual is not eligible to elect a

7 MedicarePlus product offered by a

8 MedicarePlus organization that is a union spon9 sor or a Taft-Hartley sponsor if the individual

10 previously had elected a MedicarePlus product

11 offered by the organization and had subse12 quently discontinued to elect such a product of13 fered by the organization.

14 ‘‘(3) SPECIAL RULE FOR CERTAIN ANNU15 ITANTS.—An individual is not eligible to elect a high

16 deductible/medisave product if the individual is enti17 tled to benefits under chapter 89 of title 5, United

18 States Code, as an annuitant or spouse of an annu19 itant.

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

21 ‘‘(1) IN GENERAL.—The Secretary shall estab22 lish a process through which elections described in

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

24 form and manner in which such elections are made

25 and changed. Such elections shall be made or
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1 changed only during coverage election periods speci2 fied under subsection (e) and shall become effective

3 as provided in subsection (f).

4 ‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec5 retary shall establish the process of electing coverage

6 under this section during the transition period (as

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

8 manner as will permit such an election for

9 MedicarePlus products in an area as soon as such

10 products become available in that area.

11 ‘‘(3) COORDINATION THROUGH MEDICAREPLUS

12 ORGANIZATIONS.—

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

14 permit an individual who wishes to elect a

15 MedicarePlus product offered by a

16 MedicarePlus organization to make such elec17 tion through the filing of an appropriate elec18 tion form with the organization.

19 ‘‘(B) DISENROLLMENT.—Such process

20 shall permit an individual, who has elected a

21 MedicarePlus product offered by a

22 MedicarePlus organization and who wishes to

23 terminate such election, to terminate such elec24 tion through the filing of an appropriate elec25 tion form with the organization.
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1 ‘‘(4) DEFAULT.—

2 ‘‘(A) INITIAL ELECTION.—

3 ‘‘(i) IN GENERAL.—Subject to clause

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

5 election during an initial election period

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

7 chosen the Non-MedicarePlus option.

8 ‘‘(ii) SEAMLESS CONTINUATION OF

9 COVERAGE.—The Secretary shall establish

10 procedures under which individuals who

11 are enrolled with a MedicarePlus organiza12 tion at the time of the initial election pe13 riod and who fail to elect to receive cov14 erage other than through the organization

15 are deemed to have elected an appropriate

16 MedicarePlus product offered by the orga17 nization.

18 ‘‘(B) CONTINUING PERIODS.—An individ19 ual who has made (or deemed to have made) an

20 election under this section is considered to have

21 continued to make such election until such time

22 as—

23 ‘‘(i) the individual changes the elec24 tion under this section, or
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1 ‘‘(ii) a MedicarePlus product is dis2 continued, if the individual had elected

3 such product at the time of the discontinu4 ation.

5 ‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO6 CIAL SECURITY TO PROMOTE EFFICIENT ADMINIS7 TRATION.—In order to promote the efficient admin8 istration of this section and the MedicarePlus pro9 gram under part C, the Secretary may enter into an

10 agreement with the Commissioner of Social Security

11 under which the Commissioner performs administra12 tive responsibilities relating to enrollment and

13 disenrollment in MedicarePlus products under this

14 section.

15 ‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO

16 PROMOTE INFORMED CHOICE.—

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

18 for activities under this subsection to disseminate

19 broadly information to medicare beneficiaries (and

20 prospective medicare beneficiaries) on the coverage

21 options provided under this section in order to pro22 mote an active, informed selection among such op23 tions. Such information shall be made available on

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

25 date an individual would first attain eligibility for
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1 medicare on the basis of age) as to permit individ2 uals to elect the MedicarePlus option during the ini3 tial election period described in subsection (e)(1).

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

5 Secretary shall, to the maximum extent feasible,

6 enter into contracts with appropriate non-Federal

7 entities to carry out activities under this subsection.

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

9 this subsection, the Secretary shall provide for at

10 least the following activities in all areas in which

11 MedicarePlus products are offered:

12 ‘‘(A) INFORMATION BOOKLET.—

13 ‘‘(i) IN GENERAL.—The Secretary

14 shall publish an information booklet and

15 disseminate the booklet to all individuals

16 eligible to elect the MedicarePlus option

17 under this section during coverage election

18 periods.

19 ‘‘(ii) INFORMATION INCLUDED.—The

20 booklet shall include information presented

21 in plain English and in a standardized for22 mat regarding—

23 ‘‘(I) the benefits (including cost24 sharing) and premiums for the var-
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1 ious MedicarePlus products in the

2 areas involved;

3 ‘‘(II) the quality of such prod4 ucts, including consumer satisfaction

5 information; and

6 ‘‘(III) rights and responsibilities

7 of medicare beneficiaries under such

8 products.

9 ‘‘(iii) PERIODIC UPDATING.—The

10 booklet shall be updated on a regular basis

11 (not less often than once every 12 months)

12 to reflect changes in the availability of

13 MedicarePlus products and the benefits

14 and premiums for such products.

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

16 shall maintain a toll-free number for inquiries

17 regarding MedicarePlus options and the oper18 ation of part C.

19 ‘‘(C) GENERAL INFORMATION IN MEDI20 CARE HANDBOOK.—The Secretary shall include

21 information about the MedicarePlus option pro22 vided under this section in the annual notice of

23 medicare benefits under section 1804.

24 ‘‘(e) COVERAGE ELECTION PERIODS.—
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1 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO

2 MAKE ELECTION.—

3 ‘‘(A) IN GENERAL.—In the case of an indi4 vidual who first becomes entitled to benefits

5 under part A and enrolled under part B after

6 the beginning of the transition period (as de7 fined in subparagraph (B)), the individual shall

8 make the election under this section during a

9 period (of a duration and beginning at a time

10 specified by the Secretary) at the first time the

11 individual both is entitled to benefits under part

12 A and enrolled under part B. Such period shall

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

14 an individual who elects a MedicarePlus prod15 uct during the period, coverage under the prod16 uct becomes effective as of the first date on

17 which the individual may receive such coverage.

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

19 this subsection, the term ‘transition period’

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

21 the period beginning on the first day of the first

22 month in which a MedicarePlus product is first

23 made available to individuals in the area and

24 ending with the month preceding the beginning
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1 of the first annual, coordinated election period

2 under paragraph (3).

3 ‘‘(2) DURING TRANSITION PERIOD.—Subject to

4 paragraph (6)—

5 ‘‘(A) CONTINUOUS OPEN ENROLLMENT

6 INTO A MEDICARE-PLUS OPTION.—During the

7 transition period, an individual who is eligible

8 to make an election under this section and who

9 has elected the non-MedicarePlus option may

10 change such election to a MedicarePlus option

11 at any time.

12 ‘‘(B) OPEN DISENROLLMENT BEFORE END

13 OF TRANSITION PERIOD.—

14 ‘‘(i) IN GENERAL.—During the transi15 tion period, an individual who has elected

16 a MedicarePlus option for a MedicarePlus

17 product may change such election to an18 other MedicarePlus product or to the non19 MedicarePlus option.

20 ‘‘(ii) SPECIAL RULE.—During the

21 transition period, an individual who has

22 elected a high deductible/medisave product

23 may not change such election to a

24 MedicarePlus product that is not a high

25 deductible/medisave product unless the in-
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1 dividual has had such election in effect for

2 12 months.

3 ‘‘(3) ANNUAL, COORDINATED ELECTION PE4 RIOD.—

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

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

7 election under this section may change such

8 election during annual, coordinated election pe9 riods.

10 ‘‘(B) ANNUAL, COORDINATED ELECTION

11 PERIOD.—For purposes of this section, the

12 term ‘annual, coordinated election period’

13 means, with respect to a calendar year (begin14 ning with 1998), the month of October before

15 such year.

16 ‘‘(C) MEDICAREPLUS HEALTH FAIR DUR17 ING OCTOBER, 1996.—In the month of October,

18 1996, the Secretary shall provide for a nation19 ally coordinated educational and publicity cam20 paign to inform individuals, who are eligible to

21 elect MedicarePlus products, about such prod22 ucts and the election process provided under

23 this section (including the annual, coordinated

24 election periods that occur in subsequent years).
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1 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OP2 TION.—

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

4 time an individual elects a MedicarePlus option

5 (other than a high deductible/medisave product)

6 under this section, the individual may dis7 continue such election through the filing of an

8 appropriate notice during the 90-day period be9 ginning on the first day on which the individ10 ual’s coverage under the MedicarePlus product

11 under such option becomes effective.

12 ‘‘(B) EFFECT OF DISCONTINUATION OF

13 ELECTION.—An individual who discontinues an

14 election under this paragraph shall be deemed

15 at the time of such discontinuation to have

16 elected the Non-MedicarePlus option.

17 ‘‘(5) SPECIAL ELECTION PERIODS.—An individ18 ual may discontinue an election of a MedicarePlus

19 product offered by a MedicarePlus organization

20 other than during an annual, coordinated election

21 period and make a new election under this section

22 if—

23 ‘‘(A) the organization’s or product’s certifi24 cation under part C has been terminated or the
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1 organization has terminated or otherwise dis2 continued providing the product;

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

4 elected a MedicarePlus product offered by a

5 MedicarePlus organization, the individual is no

6 longer eligible to elect the product because of a

7 change in the individual’s place of residence or

8 other change in circumstances (specified by the

9 Secretary, but not including termination of

10 membership in a qualified association in the

11 case of a product offered by a qualified associa12 tion or termination of the individual’s enroll13 ment on the basis described in clause (i) or (ii)

14 section 1852(c)(3)(B));

15 ‘‘(C) the individual demonstrates (in ac16 cordance with guidelines established by the Sec17 retary) that—

18 ‘‘(i) the organization offering the

19 product substantially violated a material

20 provision of the organization’s contract

21 under part C in relation to the individual

22 and the product; or

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

24 other entity acting on the organization’s

25 behalf) materially misrepresented the prod-
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1 uct’s provisions in marketing the product

2 to the individual; or

3 ‘‘(D) the individual meets such other con4 ditions as the Secretary may provide.

5 ‘‘(6) SPECIAL RULE FOR HIGH DEDUCTIBLE/

6 MEDISAVE PRODUCTS.—Notwithstanding the pre7 vious provisions of this subsection, an individual may

8 elect a high deductible/medisave product only during

9 an annual, coordinated election period described in

10 paragraph (3)(B) or during the month of October,

11 1996.

12 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—

13 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE14 RIOD.—An election of coverage made during the ini15 tial coverage election period under subsection

16 (e)(1)(A) shall take effect upon the date the individ17 ual becomes entitled to benefits under part A and

18 enrolled under part B, except as the Secretary may

19 provide (consistent with section 1838) in order to

20 prevent retroactive coverage.

21 ‘‘(2) DURING TRANSITION; 90-DAY

22 DISENROLLMENT OPTION.—An election of coverage

23 made under subsection (e)(2) and an election to dis24 continue a MedicarePlus option under subsection

25 (e)(4) at any time shall take effect with the first cal-
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1 endar month following the date on which the election

2 is made.

3 ‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD

4 AND MEDISAVE ELECTION.—An election of coverage

5 made during an annual, coordinated election period

6 (as defined in subsection (e)(3)(B)) in a year or for

7 a high deductible/medisave product shall take effect

8 as of the first day of the following year.

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

10 made during any other period under subsection

11 (e)(5) shall take effect in such manner as the Sec12 retary provides in a manner consistent (to the extent

13 practicable) with protecting continuity of health ben14 efit coverage.

15 ‘‘(g) EFFECT OF ELECTION OF MEDICAREPLUS OP16 TION.—Subject to the provisions of section 1855(f), pay17 ments under a contract with a MedicarePlus organization

18 under section 1858(a) with respect to an individual elect19 ing a MedicarePlus product offered by the organization

20 shall be instead of the amounts which (in the absence of

21 the contract) would otherwise be payable under parts A

22 and B for items and services furnished to the individual.

23 ‘‘(h) ADMINISTRATION.—

24 ‘‘(1) IN GENERAL.—This part and sections

25 1805 and 1876 shall be administered through an op-
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1 erating division (A) that is established or identified

2 by the Secretary in the Department of Health and

3 Human Services, (B) that is separate from the

4 Health Care Financing Administration, and (C) the

5 primary function of which is the administration of

6 this part and such sections. The director of such di7 vision shall be of equal pay and rank to that of the

8 individual responsible for overall administration of

9 parts A and B.

10 ‘‘(2) TRANSFER AUTHORITY.—The Secretary

11 shall transfer such personnel, administrative support

12 systems, assets, records, funds, and other resources

13 in the Health Care Financing Administration to the

14 operating division referred to in paragraph (1) as

15 are used in the administration of section 1876 and

16 as may be required to implement the provisions re17 ferred to in such paragraph promptly and effi18 ciently.’’.

19 SEC. 15002. MEDICAREPLUS PROGRAM.

20 (a) IN GENERAL.—Title XVIII is amended by redes21 ignating part C as part D and by inserting after part B

22 the following new part:
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1 ‘‘PART C—PROVISIONS RELATING TO MEDICAREPLUS

2 ‘‘REQUIREMENTS FOR MEDICAREPLUS ORGANIZATIONS;

3 HIGH DEDUCTIBLE/MEDISAVE PRODUCTS

4 ‘‘SEC. 1851. (a) MEDICAREPLUS ORGANIZATION DE5 FINED.—In this part, subject to the succeeding provisions

6 of this section, the term ‘MedicarePlus organization’

7 means a public or private entity that is certified under

8 section 1857 as meeting the requirements and standards

9 of this part for such an organization.

10 ‘‘(b) ORGANIZED AND LICENSED UNDER STATE

11 LAW.—

12 ‘‘(1) IN GENERAL.—A MedicarePlus organiza13 tion shall be organized and licensed under State law

14 to offer health insurance or health benefits coverage

15 in each State in which it offers a MedicarePlus prod16 uct.

17 ‘‘(2) EXCEPTION FOR UNION AND TAFT-HART18 LEY SPONSORS.—Paragraph (1) shall not apply to

19 an MedicarePlus organization that is a union spon20 sor or a Taft-Hartley sponsor (as defined in section

21 1852(c)(4)).

22 ‘‘(3) EXCEPTION FOR PROVIDER-SPONSORED

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

24 a MedicarePlus organization that is a provider-spon-
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1 sored organization (as defined in section 1854(a))

2 except to the extent provided under section 1857(c).

3 ‘‘(4) EXCEPTION FOR QUALIFIED ASSOCIA4 TIONS.—Paragraph (1) shall not apply to a

5 MedicarePlus organization that is a qualified asso6 ciation (as defined in section 1852(c)(4)(C)).

7 ‘‘(c) PREPAID PAYMENT.—A MedicarePlus organiza8 tion shall be compensated (except for deductibles, coinsur9 ance, and copayments) for the provision of health care

10 services to enrolled members by a payment which is paid

11 on a periodic basis without regard to the date the health

12 care services are provided and which is fixed without re13 gard to the frequency, extent, or kind of health care serv14 ice actually provided to a member.

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

16 MedicarePlus organization shall assume full financial risk

17 on a prospective basis for the provision of the health care

18 services (other than hospice care) for which benefits are

19 required to be provided under section 1852(a)(1), except

20 that the organization—

21 ‘‘(1) may obtain insurance or make other ar22 rangements for the cost of providing to any enrolled

23 member such services the aggregate value of which

24 exceeds $5,000 in any year,
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1 ‘‘(2) may obtain insurance or make other ar2 rangements for the cost of such services provided to

3 its enrolled members other than through the organi4 zation because medical necessity required their pro5 vision before they could be secured through the orga6 nization,

7 ‘‘(3) may obtain insurance or make other ar8 rangements for not more than 90 percent of the

9 amount by which its costs for any of its fiscal years

10 exceed 115 percent of its income for such fiscal year,

11 and

12 ‘‘(4) may make arrangements with physicians

13 or other health professionals, health care institu14 tions, or any combination of such individuals or in15 stitutions to assume all or part of the financial risk

16 on a prospective basis for the provision of basic

17 health services by the physicians or other health pro18 fessionals or through the institutions.

19 In the case of a MedicarePlus organization that is a union

20 sponsor (as defined in section 1852(c)(4)(A)), Taft-Hart21 ley sponsor (as defined in section 1852(c)(4)(B)), a quali22 fied association (as defined in section 1852(c)(4)(C)), this

23 subsection shall not apply with respect to MedicarePlus

24 products offered by such organization and issued by an

25 organization to which subsection (b)(1) applies or by a
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1 provider-sponsored organization (as defined in section

2 1854(a)).

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

4 ‘‘(1) IN GENERAL.—Each MedicarePlus organi5 zation shall meet standards under section 1856 re6 lating to the financial solvency and capital adequacy

7 of the organization. Such standards shall take into

8 account the nature and type of MedicarePlus prod9 ucts offered by the organization.

10 ‘‘(2) TREATMENT OF UNION AND TAFT-HART11 LEY SPONSORS.—An entity that is a union sponsor

12 or a Taft-Hartley sponsor is deemed to meet the re13 quirement of paragraph (1).

14 ‘‘(3) TREATMENT OF CERTAIN QUALIFIED AS15 SOCIATIONS.—An entity that is a qualified associa16 tion is deemed to meet the requirement of paragraph

17 (1) with respect to MedicarePlus products offered by

18 such association and issued by an organization to

19 which subsection (b)(1) applies or by a provider20 sponsored organization.

21 ‘‘(f) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DE22 FINED.—

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

24 deductible/medisave product’ means a MedicarePlus

25 product that—
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1 ‘‘(A) provides reimbursement for at least

2 the items and services described in section

3 1852(a)(1) in a year but only after the enrollee

4 incurs countable expenses (as specified under

5 the product) equal to the amount of a deduct6 ible (described in paragraph (2));

7 ‘‘(B) counts as such expenses (for purposes

8 of such deductible) at least all amounts that

9 would have been payable under parts A and B

10 or by the enrollee if the enrollee had elected to

11 receive benefits through the provisions of such

12 parts; and

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

14 for a year and for all subsequent expenses for

15 benefits referred to in subparagraph (A) in the

16 year, for a level of reimbursement that is not

17 less than—

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

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

20 would have been paid (without regard to

21 any deductibles or coinsurance) under

22 parts A and B with respect to such ex23 penses,
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1 whichever is less. Such term does not include

2 the MedicarePlus MSA itself or any contribu3 tion into such account.

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

5 under a high deductible/medisave product—

6 ‘‘(A) for contract year 1997 shall be not

7 more than $10,000; and

8 ‘‘(B) for a subsequent contract year shall

9 be not more than the maximum amount of such

10 deductible for the previous contract year under

11 this paragraph increased by the national aver12 age per capita growth rate under section

13 1855(c)(3) for the year.

14 If the amount of the deductible under subparagraph

15 (B) is not a multiple of $50, the amount shall be

16 rounded to the nearest multiple of $50.

17 ‘‘(g) ORGANIZATIONS TREATED AS MEDICAREPLUS

18 ORGANIZATIONS DURING TRANSITION.—Any of the fol19 lowing organizations shall be considered to qualify as a

20 MedicarePlus organization for contract years beginning

21 before January 1, 1998:

22 ‘‘(1) HEALTH MAINTENANCE ORGANIZA23 TIONS.—An organization that is organized under the

24 laws of any State and that is a qualified health

25 maintenance organization (as defined in section
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1 1310(d) of the Public Health Service Act), an orga2 nization recognized under State law as a health

3 maintenance organization, or a similar organization

4 regulated under State law for solvency in the same

5 manner and to the same extent as such a health

6 maintenance organization.

7 ‘‘(2) LICENSED INSURERS.—An organization

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

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

10 insurer for the offering of health benefit cov11 erage, or

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

13 service benefit plan,

14 but only for individuals residing in an area in which

15 the organization is licensed to offer health insurance

16 coverage.

17 ‘‘(3) CURRENT RISK-CONTRACTORS.—An orga18 nization that is an eligible organization (as defined

19 in section 1876(b)) and that has a risk-sharing con20 tract in effect under section 1876 as of the date of

21 the enactment of this section.

22 ‘‘(h) MEDIGRANT DEMONSTRATION PROJECTS.—

23 The Secretary shall provide, in at least 10 States, for dem24 onstration projects which would permit MediGrant pro25 grams under title XXI to be treated as MedicarePlus orga-
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1 nizations under this part for individuals who are qualified

2 to elect the MedicarePlus option and who eligible to re3 ceive medical assistance under the MediGrant program,

4 for the purpose of demonstrating the delivery of primary,

5 acute, and long-term care through an integrated delivery

6 network which emphasizes noninstitutional care.

7 ‘‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF

8 SERVICES, ENROLLMENT, AND PREMIUMS

9 ‘‘SEC. 1852. (a) BENEFITS COVERED.—

10 ‘‘(1) IN GENERAL.—Except as provided in sec11 tion 1851(f)(1) with respect to high deductible/

12 medisave products, each MedicarePlus product of13 fered under this part shall provide benefits for at

14 least the items and services for which benefits are

15 available under parts A and B consistent with the

16 standards for coverage of such items and services

17 applicable under this title.

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

19 Notwithstanding any other provision of law, a

20 MedicarePlus organization may (in the case of the

21 provision of items and services to an individual

22 under this part under circumstances in which pay23 ment under this title is made secondary pursuant to

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

25 of such services to charge, in accordance with the

26 charges allowed under such law or policy—
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1 ‘‘(A) the insurance carrier, employer, or

2 other entity which under such law, plan, or pol3 icy is to pay for the provision of such services,

4 or

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

6 individual has been paid under such law, plan,

7 or policy for such services.

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

9 MedicarePlus product (other than a high deductible/

10 medisave product) offered by a MedicarePlus organi11 zation satisfies paragraph (1) with respect to bene12 fits for items and services if the following require13 ments are met:

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

15 the case of benefits furnished through a pro16 vider that does not have a contract with the or17 ganization, the product provides for at least the

18 dollar amount of payment for such items and

19 services as would otherwise be provided under

20 parts A and B.

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

22 case of benefits furnished through a provider

23 that has such a contract, the individual’s liabil24 ity for payment for such items and services

25 does not exceed (after taking into account any
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1 deductible, which does not exceed any deduct2 ible under parts A and B) the lesser of the fol3 lowing:

4 ‘‘(i) NON-MEDICAREPLUS LIABIL5 ITY.—The amount of the liability that the

6 individual would have had (based on the

7 provider being a participating provider) if

8 the individual had elected the non9 MedicarePlus option.

10 ‘‘(ii) MEDICARE COINSURANCE AP11 PLIED TO PRODUCT PAYMENT RATES.—

12 The applicable coinsurance or copayment

13 rate (that would have applied under the

14 non-MedicarePlus option) of the payment

15 rate provided under the contract.

16 ‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi17 zation may not deny, limit, or condition the coverage or

18 provision of benefits under this part based on the health

19 status, claims experience, receipt of health care, medical

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

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

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

23 subsection, a MedicarePlus organization shall pro24 vide that at any time during which elections are ac25 cepted under section 1805 with respect to a
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1 MedicarePlus product offered by the organization,

2 the organization will accept without restrictions indi3 viduals who are eligible to make such election.

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

5 that a MedicarePlus organization, in relation to a

6 MedicarePlus product it offers, has a capacity limit

7 and the number of eligible individuals who elect the

8 product under section 1805 exceeds the capacity

9 limit, the organization may limit the election of indi10 viduals of the product under such section but only

11 if priority in election is provided—

12 ‘‘(A) first to such individuals as have elect13 ed the product at the time of the determination,

14 and

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

16 a manner that does not discriminate among the

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

18 basis described in subsection (b).

19 ‘‘(3) LIMITATION ON TERMINATION OF ELEC20 TION.—

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graph (B), a MedicarePlus organization may

23 not for any reason terminate the election of any

24 individual under section 1805 for a

25 MedicarePlus product it offers.
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1 ‘‘(B) BASIS FOR TERMINATION OF ELEC2 TION.—A MedicarePlus organization may ter3 minate an individual’s election under section

4 1805 with respect to a MedicarePlus product it

5 offers if—

6 ‘‘(i) any premiums required with re7 spect to such product are not paid on a

8 timely basis (consistent with standards

9 under section 1856 that provide for a

10 grace period for late payment of pre11 miums),

12 ‘‘(ii) the individual has engaged in

13 disruptive behavior (as specified in such

14 standards), or

15 ‘‘(iii) the product is terminated with

16 respect to all individuals under this part.

17 Any individual whose election is so terminated

18 is deemed to have elected the Non-MedicarePlus

19 option (as defined in section 1805(a)(3)(A)).

20 ‘‘(C) ORGANIZATION OBLIGATION WITH RE21 SPECT TO ELECTION FORMS.—Pursuant to a con22 tract under section 1858, each MedicarePlus organi23 zation receiving an election form under section

24 1805(c)(2) shall transmit to the Secretary (at such

25 time and in such manner as the Secretary may
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1 specify) a copy of such form or such other informa2 tion respecting the election as the Secretary may

3 specify.

4 ‘‘(4) SPECIAL RULES FOR LIMITED ENROLL5 MENT MEDICAREPLUS ORGANIZATIONS.—

6 ‘‘(A) UNIONS.—

7 ‘‘(i) IN GENERAL.—Subject to sub8 paragraph (D), a union sponsor (as de9 fined in clause (ii)) shall limit eligibility of

10 enrollees under this part for MedicarePlus

11 products it offers to individuals who are

12 members of the sponsor and affiliated with

13 the sponsor through an employment rela14 tionship with any employer or are the

15 spouses of such members.

16 ‘‘(ii) UNION SPONSOR.—In this part

17 and section 1805, the term ‘union sponsor’

18 means an employee organization in relation

19 to a group health plan that is established

20 or maintained by the organization other

21 than pursuant to a collective bargaining

22 agreement.

23 ‘‘(B) TAFT-HARTLEY SPONSORS.—

24 ‘‘(i) IN GENERAL.—Subject to sub25 paragraph (D), a MedicarePlus organiza-
38

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1 tion that is a Taft-Hartley sponsor (as de2 fined in clause (ii)) shall limit eligibility of

3 enrollees under this part for MedicarePlus

4 products it offers to individuals who are

5 entitled to obtain benefits through such

6 products under the terms of an applicable

7 collective bargaining agreement.

8 ‘‘(ii) TAFT-HARTLEY SPONSOR.—In

9 this part and section 1805, the term ‘Taft10 Hartley sponsor’ means, in relation to a

11 group health plan that is established or

12 maintained by two or more employers or

13 jointly by one or more employers and one

14 or more employee organizations, the asso15 ciation, committee, joint board of trustees,

16 or other similar group of representatives of

17 parties who establish or maintain the plan.

18 ‘‘(C) QUALIFIED ASSOCIATIONS.—

19 ‘‘(i) IN GENERAL.—Subject to sub20 paragraph (D), a MedicarePlus organiza21 tion that is a qualified association (as de22 fined in clause (iii)) shall limit eligibility of

23 individuals under this part for products it

24 offers to individuals who are members of
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1 the association (or who are spouses of such

2 individuals).

3 ‘‘(ii) LIMITATION ON TERMINATION

4 OF COVERAGE.—Such a qualifying associa5 tion offering a MedicarePlus product to an

6 individual may not terminate coverage of

7 the individual on the basis that the individ8 ual is no longer a member of the associa9 tion except pursuant to a change of elec10 tion during an open election period occur11 ring on or after the date of the termination

12 of membership.

13 ‘‘(iii) QUALIFIED ASSOCIATION.—In

14 this part and section 1805, the term ‘quali15 fied association’ means an association, reli16 gious fraternal organization, or other orga17 nization (which may be a trade, industry,

18 or professional association, a chamber of

19 commerce, or a public entity association)

20 that the Secretary finds—

21 ‘‘(I) has been formed for pur22 poses other than the sale of any

23 health insurance and does not restrict

24 membership based on the health sta25 tus, claims experience, receipt of
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1 health care, medical history, or lack of

2 evidence of insurability, of an individ3 ual,

4 ‘‘(II) does not exist solely or

5 principally for the purpose of selling

6 insurance, and

7 ‘‘(III) has at least 1,000 individ8 ual members or 200 employer mem9 bers.

10 Such term includes a subsidiary or cor11 poration that is wholly owned by one or

12 more qualified organizations.

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

14 carry out the previous subparagraphs of this

15 paragraph shall not have the effect of denying

16 eligibility to individuals on the basis of health

17 status, claims experience, receipt of health care,

18 medical history, or lack of evidence of insurabil19 ity.

20 ‘‘(E) LIMITED ENROLLMENT MEDICARE21 PLUS ORGANIZATION.—In this part and section

22 1805, the term ‘limited enrollment

23 MedicarePlus organization’ means a

24 MedicarePlus organization that is a union spon-
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1 sor, a Taft-Hartley sponsor, or a qualified asso2 ciation.

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

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

5 and ‘group health plan’ have the meanings

6 given such terms for purposes of part 6 of sub7 title B of title I of the Employee Retirement In8 come Security Act of 1974.

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

10 ‘‘(1) IN GENERAL.—Each MedicarePlus organi11 zation shall file with the Secretary each year, in a

12 form and manner and at a time specified by the Sec13 retary—

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

15 for coverage under each MedicarePlus product

16 it offers under this part in each payment area

17 (as determined for purposes of section 1855) in

18 which the product is being offered; and

19 ‘‘(B) the enrollment capacity in relation to

20 the product in each such area.

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

22 amount of the monthly premium charged by a

23 MedicarePlus organization for a MedicarePlus prod24 uct offered in a payment area to an individual under
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1 this part shall be equal to the amount (if any) by

2 which—

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

4 for the product for the period involved, as es5 tablished under paragraph (3) and submitted

6 under paragraph (1), exceeds

‘‘(B)(i) 1 7 ⁄12 of the annual MedicarePlus

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

9 for the area and period involved, or (ii) in the

10 case of a high deductible/medisave product, the

11 monthly adjusted MedicarePlus capitation rate

12 specified in section 1855(b)(1) for the individ13 ual and period involved.

14 ‘‘(3) UNIFORM PREMIUM.—

15 ‘‘(A) IN GENERAL.—Except as provided in

16 subparagraph (B), the premiums charged by a

17 MedicarePlus organization under this part may

18 not vary among individuals who reside in the

19 same payment area.

20 ‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/

21 MEDISAVE PRODUCTS.—A MedicarePlus organi22 zation shall establish premiums for any high de23 ductible/medisave product it offers in a payment

24 area based on each of the risk adjustment cat25 egories established for purposes of determining
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1 the amount of the payment to MedicarePlus or2 ganizations under section 1855(b)(1) and using

3 the identical demographic and other adjust4 ments among such categories as are used for

5 such purposes.

6 ‘‘(4) TERMS AND CONDITIONS OF IMPOSING

7 PREMIUMS.—Each MedicarePlus organization shall

8 permit the payment of monthly premiums on a

9 monthly basis and may terminate election of individ10 uals for a MedicarePlus product for failure to make

11 premium payments only in accordance with sub12 section (c)(3)(B).

13 ‘‘(5) RELATION OF PREMIUMS AND COST-SHAR14 ING TO BENEFITS.—In no case may the portion of

15 a MedicarePlus organization’s premium rate and the

16 actuarial value of its deductibles, coinsurance, and

17 copayments charged (to the extent attributable to

18 the minimum benefits described in subsection (a)(1)

19 and not counting any amount attributable to balance

20 billing) to individuals who are enrolled under this

21 part with the organization exceed the actuarial value

22 of the coinsurance and deductibles that would be ap23 plicable on the average to individuals enrolled under

24 this part with the organization (or, if the Secretary

25 finds that adequate data are not available to deter-
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1 mine that actuarial value, the actuarial value of the

2 coinsurance and deductibles applicable on the aver3 age to individuals in the area, in the State, or in the

4 United States, eligible to enroll under this part with

5 the organization, or other appropriate data) and en6 titled to benefits under part A and enrolled under

7 part B if they were not members of a MedicarePlus

8 organization.

9 ‘‘(e) REQUIREMENT FOR ADDITIONAL BENEFITS,

10 PART B PREMIUM DISCOUNT REBATES, OR BOTH.—

11 ‘‘(1) REQUIREMENT.—

12 ‘‘(A) IN GENERAL.—Each MedicarePlus

13 organization (in relation to a MedicarePlus

14 product it offers) shall provide that if there is

15 an excess amount (as defined in subparagraph

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

17 to the succeeding provisions of this subsection,

18 the organization shall provide to individuals

19 such additional benefits (as the organization

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

21 monthly basis) of the part B monthly premium,

22 or a combination thereof, in a total value which

23 is at least equal to the adjusted excess amount

24 (as defined in subparagraph (C)).
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1 ‘‘(B) EXCESS AMOUNT.—For purposes of

2 this paragraph, the ‘excess amount’, for an or3 ganization for a product, is the amount (if any)

4 by which—

5 ‘‘(i) the average of the capitation pay6 ments made to the organization under this

7 part for the product at the beginning of

8 contract year, exceeds

9 ‘‘(ii) the actuarial value of the mini10 mum benefits described in subsection

11 (a)(1) under the product for individuals

12 under this part, as determined based upon

13 an adjusted community rate described in

14 paragraph (5) (as reduced for the actuarial

15 value of the coinsurance and deductibles

16 under parts A and B).

17 ‘‘(C) ADJUSTED EXCESS AMOUNT.—For

18 purposes of this paragraph, the ‘adjusted excess

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

20 the excess amount reduced to reflect any

21 amount withheld and reserved for the organiza22 tion for the year under paragraph (3).

23 ‘‘(D) NO APPLICATION TO HIGH DEDUCT24 IBLE/MEDISAVE PRODUCT.—Subparagraph (A)
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1 shall not apply to a high deductible/medisave

2 product.

3 ‘‘(E) UNIFORM APPLICATION.—This para4 graph shall be applied uniformly for all enroll5 ees for a product in a service area.

6 ‘‘(F) CONSTRUCTION.—Nothing in this

7 subsection shall be construed as preventing a

8 MedicarePlus organization from providing

9 health care benefits that are in addition to the

10 benefits otherwise required to be provided under

11 this paragraph and from imposing a premium

12 for such additional benefits.

13 ‘‘(2) LIMITATION ON AMOUNT OF PART B PRE14 MIUM DISCOUNT REBATE.—In no case shall the

15 amount of a part B premium discount rebate under

16 paragraph (1)(A) exceed, with respect to a month,

17 the amount of premiums imposed under part B (not

18 taking into account section 1839(b) (relating to pen19 alty for late enrollment) or 1839(h) (relating to af20 fluence testing)), for the individual for the month.

21 Except as provided in the previous sentence, a

22 MedicarePlus organization is not authorized to pro23 vide for cash or other monetary rebates as an in24 ducement for enrollment or otherwise.
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1 ‘‘(3) STABILIZATION FUND.—A MedicarePlus

2 organization may provide that a part of the value of

3 an excess actuarial amount described in paragraph

4 (1) be withheld and reserved in the Federal Hospital

5 Insurance Trust Fund and in the Federal Supple6 mentary Medical Insurance Trust Fund (in such

7 proportions as the Secretary determines to be appro8 priate) by the Secretary for subsequent annual con9 tract periods, to the extent required to stabilize and

10 prevent undue fluctuations in the additional benefits

11 and rebates offered in those subsequent periods by

12 the organization in accordance with such paragraph.

13 Any of such value of amount reserved which is not

14 provided as additional benefits described in para15 graph (1)(A) to individuals electing the

16 MedicarePlus product in accordance with such para17 graph prior to the end of such periods, shall revert

18 for the use of such trust funds.

19 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

20 DATA.—For purposes of this subsection, if the Sec21 retary finds that there is insufficient enrollment ex22 perience (including no enrollment experience in the

23 case of a provider-sponsored organization) to deter24 mine an average of the capitation payments to be

25 made under this part at the beginning of a contract
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1 period, the Secretary may determine such an aver2 age based on the enrollment experience of other con3 tracts entered into under this part.

4 ‘‘(5) ADJUSTED COMMUNITY RATE.—

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

6 subsection, subject to subparagraph (B), the

7 term ‘adjusted community rate’ for a service or

8 services means, at the election of a

9 MedicarePlus organization, either—

10 ‘‘(i) the rate of payment for that serv11 ice or services which the Secretary annu12 ally determines would apply to an individ13 ual electing a MedicarePlus product under

14 this part if the rate of payment were deter15 mined under a ‘community rating system’

16 (as defined in section 1302(8) of the Pub17 lic Health Service Act, other than subpara18 graph (C)), or

19 ‘‘(ii) such portion of the weighted ag20 gregate premium, which the Secretary an21 nually estimates would apply to such an in22 dividual, as the Secretary annually esti23 mates is attributable to that service or

24 services,
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1 but adjusted for differences between the utiliza2 tion characteristics of the individuals electing

3 coverage under this part and the utilization

4 characteristics of the other enrollees with the

5 organization (or, if the Secretary finds that

6 adequate data are not available to adjust for

7 those differences, the differences between the

8 utilization characteristics of individuals select9 ing other MedicarePlus coverage, or individuals

10 in the area, in the State, or in the United

11 States, eligible to elect MedicarePlus coverage

12 under this part and the utilization characteris13 tics of the rest of the population in the area, in

14 the State, or in the United States, respectively).

15 ‘‘(B) SPECIAL RULE FOR PROVIDER-SPON16 SORED ORGANIZATIONS.—In the case of a

17 MedicarePlus organization that is a provider18 sponsored organization, the adjusted community

19 rate under subparagraph (A) for a

20 MedicarePlus product may be computed (in a

21 manner specified by the Secretary) using data

22 in the general commercial marketplace or (dur23 ing a transition period) based on the costs in24 curred by the organization in providing such a

25 product.
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1 ‘‘(f) RULES REGARDING PHYSICIAN PARTICIPA2 TION.—

3 ‘‘(1) PROCEDURES.—Each MedicarePlus orga4 nization shall establish reasonable procedures relat5 ing to the participation (under an agreement be6 tween a physician and the organization) of physi7 cians under MedicarePlus products offered by the

8 organization under this part. Such procedures shall

9 include—

10 ‘‘(A) providing notice of the rules regard11 ing participation,

12 ‘‘(B) providing written notice of participa13 tion decisions that are adverse to physicians,

14 and

15 ‘‘(C) providing a process within the organi16 zation for appealing adverse decisions, including

17 the presentation of information and views of the

18 physician regarding such decision.

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

20 MedicarePlus organization shall consult with physi21 cians who have entered into participation agree22 ments with the organization regarding the organiza23 tion’s medical policy, quality, and medical manage24 ment procedures.
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1 ‘‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE

2 PLANS.—

3 ‘‘(A) IN GENERAL.—Each MedicarePlus

4 organization may not operate any physician in5 centive plan (as defined in subparagraph (B))

6 unless the following requirements are met:

7 ‘‘(i) No specific payment is made di8 rectly or indirectly under the plan to a

9 physician or physician group as an induce10 ment to reduce or limit medically necessary

11 services provided with respect to a specific

12 individual enrolled with the organization.

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

14 physician group at substantial financial

15 risk (as determined by the Secretary) for

16 services not provided by the physician or

17 physician group, the organization—

18 ‘‘(I) provides stop-loss protection

19 for the physician or group that is ade20 quate and appropriate, based on

21 standards developed by the Secretary

22 that take into account the number of

23 physicians placed at such substantial

24 financial risk in the group or under

25 the plan and the number of individ-
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1 uals enrolled with the organization

2 who receive services from the physi3 cian or the physician group, and

4 ‘‘(II) conducts periodic surveys of

5 both individuals enrolled and individ6 uals previously enrolled with the orga7 nization to determine the degree of

8 access of such individuals to services

9 provided by the organization and sat10 isfaction with the quality of such serv11 ices.

12 ‘‘(iii) The organization provides the

13 Secretary with descriptive information re14 garding the plan, sufficient to permit the

15 Secretary to determine whether the plan is

16 in compliance with the requirements of this

17 subparagraph.

18 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE19 FINED.—In this paragraph, the term ‘physician

20 incentive plan’ means any compensation ar21 rangement between a MedicarePlus organiza22 tion and a physician or physician group that

23 may directly or indirectly have the effect of re24 ducing or limiting services provided with respect
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1 to individuals enrolled with the organization

2 under this part.

3 ‘‘(4) LIMITATION ON PROVIDER INDEMNIFICA4 TION.—A MedicarePlus organization may not pro5 vide (directly or indirectly) for a provider (or group

6 of providers) to indemnify the organization against

7 any liability resulting from a civil action brought by

8 or on behalf of an enrollee under this part for any

9 damage caused to the enrollee by the organization’s

10 denial of medically necessary care.

11 ‘‘(5) EXCEPTION FOR CERTAIN FEE-FOR-SERV12 ICE PLANS.—The previous provisions of this sub13 section shall not apply in the case of a MedicarePlus

14 organization in relation to a MedicarePlus product if

15 the organization does not have agreements between

16 physicians and the organization for the provision of

17 benefits under the product.

18 ‘‘(g) PROVISION OF INFORMATION.—A MedicarePlus

19 organization shall provide the Secretary with such infor20 mation on the organization and each MedicarePlus prod21 uct it offers as may be required for the preparation of

22 the information booklet described in section

23 1805(d)(3)(A).

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

25 BENEFITS UNDER A MEDICAREPLUS PRODUCT.—Noth-
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1 ing in this part shall be construed as preventing a State

2 from coordinating benefits under its MediGrant program

3 under title XXI with those provided under a MedicarePlus

4 product in a manner that assures continuity of a full5 range of acute care and long-term care services to poor

6 elderly or disabled individuals eligible for benefits under

7 this title and under such program.

8 ‘‘(i) TRANSITIONAL FILE AND USE FOR CERTAIN

9 REQUIREMENTS.—

10 ‘‘(1) IN GENERAL.—In the case of a

11 MedicarePlus product proposed to be offered before

12 the end of the transition period (as defined in sec13 tion 1805(e)(1)(B)), by a MedicarePlus organization

14 described in section 1851(g)(3) or by a

15 MedicarePlus organization with a contract in effect

16 under section 1858, if the organization submits com17 plete information to the Secretary regarding the

18 product demonstrating that the product meets the

19 requirements and standards under subsections (a),

20 (d), and (e) (relating to benefits and premiums), the

21 product shall be deemed as meeting such require22 ments and standards under such subsections unless

23 the Secretary disapproves the product within 60

24 days after the date of submission of the complete in25 formation.
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1 ‘‘(2) CONSTRUCTION.—Nothing in paragraph

2 (1) shall be construed as waiving the requirement of

3 a contract under section 1858 or waiving require4 ments and standards not referred to in paragraph

5 (1).

6 ‘‘PATIENT PROTECTION STANDARDS

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

8 MedicarePlus organization shall disclose in clear, accurate,

9 and standardized form, information regarding all of the

10 following for each MedicarePlus product it offers:

11 ‘‘(1) Benefits under the MedicarePlus product

12 offered, including exclusions from coverage and, if it

13 is a high deductible/medisave product, a comparison

14 of benefits under such a product with benefits under

15 other MedicarePlus products.

16 ‘‘(2) Rules regarding prior authorization or

17 other review requirements that could result in

18 nonpayment.

19 ‘‘(3) Potential liability for cost-sharing for out20 of-network services.

21 ‘‘(4) The number, mix, and distribution of par22 ticipating providers.

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

24 including premiums, deductibles, co-payments, and

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

26 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 MedicarePlus organiza18 tion offering a MedicarePlus product may restrict

19 the providers from whom the benefits under the

20 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 (4)) 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

25 MedicarePlus product provides benefits for items
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1 and services (not described in paragraph (1)(C))

2 through a network of providers and also permits

3 payment to be made under the product for such

4 items and services not provided through such a net5 work, the payment level under the product with re6 spect to such items and services furnished outside

7 the network shall be at least 70 percent (or, if the

8 effective cost-sharing rate is 50 percent, at least 40

9 percent) of 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 EMERGENCY SERVICES.—

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

19 case of emergency services described in sub20 paragraph (C) which are furnished by a partici21 pating physician or provider of services to an

22 individual enrolled with a MedicarePlus organi23 zation under this section, the applicable partici24 pation agreement is deemed to provide that the

25 physician or provider of services will accept as
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1 payment in full from the organization for such

2 emergency services described in subparagraph

3 (C) the amount that would be payable to the

4 physician or provider of services under part B

5 and from the individual under such part, if the

6 individual were not enrolled with such an orga7 nization under this part.

8 ‘‘(B) NONPARTICIPATING PROVIDERS.—In

9 the case of emergency services described in sub10 paragraph (C) which are furnished by a

11 nonparticipating physician, the limitations on

12 actual charges for such services otherwise appli13 cable under part B (to services furnished by in14 dividuals not enrolled with a MedicarePlus or15 ganization under this section) shall apply in the

16 same manner as such limitations apply to serv17 ices furnished to individuals not enrolled with

18 such an organization.

19 ‘‘(C) EMERGENCY SERVICES DESCRIBED.—

20 The emergency services described in this sub21 paragraph are emergency services which are

22 furnished to an enrollee of a MedicarePlus or23 ganization under this part by a physician or

24 provider of services that is not under a contract

25 with the organization.
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1 ‘‘(D) EXCEPTION FOR CERTAIN FEE-FOR2 SERVICE PLANS.—The previous provisions of

3 this paragraph shall not apply in the case of a

4 MedicarePlus organization in relation to a

5 MedicarePlus product if the organization does

6 not have agreements between physicians and

7 the organization for the provision of benefits

8 under the product.

9 ‘‘(4) DEFINITION OF EMERGENCY SERVICES.—

10 In this subsection, the term ‘emergency services’

11 means, with respect to an individual enrolled with an

12 organization, covered inpatient and outpatient serv13 ices that—

14 ‘‘(A) are furnished by an appropriate

15 source other than the organization,

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

17 injury or sudden illness, and

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

19 to reach the organization’s providers or suppli20 ers would have meant risk of serious damage to

21 the patient’s health.

22 ‘‘(c) CONFIDENTIALITY AND ACCURACY OF EN23 ROLLEE RECORDS.—Each MedicarePlus organization

24 shall establish procedures—
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1 ‘‘(1) to safeguard the privacy of individually

2 identifiable enrollee information, and

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

4 records for enrollees.

5 ‘‘(d) QUALITY ASSURANCE PROGRAM.—

6 ‘‘(1) IN GENERAL.—Each MedicarePlus organi7 zation must have arrangements, established in ac8 cordance with regulations of the Secretary, for an

9 ongoing quality assurance program for health care

10 services it provides to such individuals.

11 ‘‘(2) ELEMENTS OF PROGRAM.—The quality as12 surance program shall—

13 ‘‘(A) stress health outcomes;

14 ‘‘(B) provide for the establishment of writ15 ten protocols for utilization review, based on

16 current standards of medical practice;

17 ‘‘(C) provide review by physicians and

18 other health care professionals of the process

19 followed in the provision of such health care

20 services;

21 ‘‘(D) monitors and evaluates high volume

22 and high risk services and the care of acute and

23 chronic conditions;

24 ‘‘(E) evaluates the continuity and coordi25 nation of care that enrollees receive;
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1 ‘‘(F) has mechanisms to detect both under2 utilization and overutilization of services;

3 ‘‘(G) after identifying areas for improve4 ment, establishes or alters practice parameters;

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

6 assesses the effectiveness of such action

7 through systematic follow-up;

8 ‘‘(I) makes available information on quality

9 and outcomes measures to facilitate beneficiary

10 comparison and choice of health coverage op11 tions (in such form and on such quality and

12 outcomes measures as the Secretary determines

13 to be appropriate);

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

15 its effectiveness; and

16 ‘‘(K) provide for external accreditation or

17 review, by a utilization and quality control peer

18 review organization under part B of title XI or

19 other qualified independent review organization,

20 of the quality of services furnished by the orga21 nization meets professionally recognized stand22 ards of health care (including providing ade23 quate access of enrollees to services).

24 ‘‘(3) EXCEPTION FOR CERTAIN FEE-FOR-SERV25 ICE PLANS.—Paragraph (1) and subsection (c)(2)
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1 shall not apply in the case of a MedicarePlus organi2 zation in relation to a MedicarePlus product to the

3 extent the organization provides for coverage of ben4 efits without restrictions relating to utilization and

5 without regard to whether the provider has a con6 tract or other arrangement with the plan for the

7 provision of such benefits.

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

9 Secretary shall provide that a MedicarePlus organi10 zation is deemed to meet the requirements of para11 graphs (1) and (2) of this subsection and subsection

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

13 reaccredited) by a private organization under a proc14 ess that the Secretary has determined assures that

15 the organization meets standards that are no less

16 stringent than the standards established under sec17 tion 1856 to carry out this subsection and sub18 section (c).

19 ‘‘(e) COVERAGE DETERMINATIONS.—

20 ‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A

21 MedicarePlus organization shall make determina22 tions regarding authorization requests for non23 emergency care on a timely basis, depending on the

24 urgency of the situation.

25 ‘‘(2) APPEALS.—
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1 ‘‘(A) IN GENERAL.—Appeals from a deter2 mination of an organization denying coverage

3 shall be decided within 30 days of the date of

4 receipt of medical information, but not later

5 than 60 days after the date of the decision.

6 ‘‘(B) PHYSICIAN DECISION ON CERTAIN

7 APPEALS.—Appeal decisions relating to a deter8 mination to deny coverage based on a lack of

9 medical necessity shall be made only by a physi10 cian.

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

12 such a determination involving a life-threaten13 ing or emergency situation shall be decided on

14 an expedited basis.

15 ‘‘(f) GRIEVANCES AND APPEALS.—

16 ‘‘(1) GRIEVANCE MECHANISM.—Each

17 MedicarePlus organization must provide meaningful

18 procedures for hearing and resolving grievances be19 tween the organization (including any entity or indi20 vidual through which the organization provides

21 health care services) and enrollees under this part.

22 ‘‘(2) APPEALS.—An enrollee with an organiza23 tion under this part who is dissatisfied by reason of

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

25 which the enrollee believes the enrollee is entitled
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1 and at no greater charge than the enrollee believes

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

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

4 before the Secretary to the same extent as is pro5 vided in section 205(b), and in any such hearing the

6 Secretary shall make the organization a party. If the

7 amount in controversy is $1,000 or more, the indi8 vidual or organization shall, upon notifying the other

9 party, be entitled to judicial review of the Sec10 retary’s final decision as provided in section 205(g),

11 and both the individual and the organization shall be

12 entitled to be parties to that judicial review. In ap13 plying sections 205(b) and 205(g) as provided in

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

15 thereto, any reference therein to the Commissioner

16 of Social Security or the Social Security Administra17 tion shall be considered a reference to the Secretary

18 or the Department of Health and Human Services,

19 respectively.

20 ‘‘(3) INDEPENDENT REVIEW OF CERTAIN COV21 ERAGE DENIALS.—The Secretary shall contract with

22 an independent, outside entity to review and resolve

23 appeals of denials of coverage related to urgent or

24 emergency services with respect to MedicarePlus

25 products.
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1 ‘‘(4) 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 MedicarePlus 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 MedicarePlus organi16 zation may not distribute marketing materials un17 less—

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 MedicarePlus product in an

12 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 MedicarePlus organization shall

17 conform to fair marketing standards in relation to

18 MedicarePlus products offered under this part, in19 cluded 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 ‘‘PROVIDER-SPONSORED ORGANIZATIONS

25 ‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA26 TION DEFINED.—
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1 ‘‘(1) IN GENERAL.—In this part, the term ‘pro2 vider-sponsored organization’ means a public or pri3 vate entity that (in accordance with standards estab4 lished under subsection (b)) is a provider, or group

5 of affiliated providers, that provides a substantial

6 proportion (as defined by the Secretary under such

7 standards) of the health care items and services

8 under the contract under this part directly through

9 the provider or affiliated group of providers.

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

11 what is a ‘substantial proportion’ for purposes of

12 paragraph (1), the Secretary—

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

14 such an organization to assume responsibility

15 for a substantial proportion of services in order

16 to assure financial stability and the practical

17 difficulties in such an organization integrating

18 a very wide range of service providers; and

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

20 relevant differences among organizations, such

21 as their location in an urban or rural area.

22 ‘‘(3) AFFILIATION.—For purposes of this sub23 section, a provider is ‘affiliated’ with another pro24 vider if, through contract, ownership, or otherwise—
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1 ‘‘(A) one provider, directly or indirectly,

2 controls, is controlled by, or is under common

3 control with the other,

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

5 lawful combination under which each provider

6 shares, directly or indirectly, substantial finan7 cial risk in connection with their operations,

8 ‘‘(C) both providers are part of a con9 trolled group of corporations under section

10 1563 of the Internal Revenue Code of 1986, or

11 ‘‘(D) both providers are part of an affili12 ated service group under section 414 of such

13 Code.

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

15 (3), control is presumed to exist if one party, di16 rectly or indirectly, owns, controls, or holds the

17 power to vote, or proxies for, not less than 51 per18 cent of the voting rights or governance rights of an19 other.

20 ‘‘(b) PROCESS FOR ESTABLISHING STANDARDS FOR

21 PROVIDER-SPONSORED ORGANIZATIONS.—For process of

22 establishing of standards for provider-sponsored organiza23 tions, see section 1856(c).

24 ‘‘(c) PROCESS FOR STATE CERTIFICATION OF PRO25 VIDER-SPONSORED ORGANIZATIONS.—For process of
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1 State certification of provider-sponsored organizations, see

2 section 1857(c).

3 ‘‘(d) PREEMPTION OF STATE INSURANCE LICENSING

4 REQUIREMENTS.—

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

6 any State law which—

7 ‘‘(A) requires that a provider-sponsored or8 ganization meet requirements for insurers of

9 health services or health maintenance organiza10 tions doing business in the State with respect to

11 initial capitalization and establishment of finan12 cial reserves against insolvency, or

13 ‘‘(B) imposes requirements that would

14 have the effect of prohibiting the organization

15 from complying with the applicable require16 ments of this part,

17 insofar as such the law applies to individuals en18 rolled with the organization under this part.

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

20 apply with respect to any State law to the extent

21 that such law provides standards or requirements, or

22 provides for enforcement thereof, so as to meet the

23 requirements of section 1857(c)(2) with respect to

24 approval by the Secretary of State certification re25 quirements thereunder.
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1 ‘‘(3) CONSTRUCTION.—Nothing in this sub2 section shall be construed as affecting the operation

3 of section 514 of the Employee Retirement Income

4 Security Act of 1974.

5 ‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS

6 ‘‘SEC. 1855. (a) PAYMENTS.—

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

8 section 1858 the Secretary shall pay to each

9 MedicarePlus organization, with respect to coverage

10 of an individual under this part in a payment area

11 for a month, an amount equal to the monthly ad12 justed MedicarePlus capitation rate (as provided

13 under subsection (b)) with respect to that individual

14 for that area.

15 ‘‘(2) ANNUAL ANNOUNCEMENT.—The Secretary

16 shall annually determine, and shall announce (in a

17 manner intended to provide notice to interested par18 ties) not later than September 7 before the calendar

19 year concerned—

20 ‘‘(A) the annual MedicarePlus capitation

21 rate for each payment area for the year, and

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

23 such rates under subsection (b) for payments

24 for months in that year.

25 ‘‘(3) ADVANCE NOTICE OF METHODOLOGICAL

26 CHANGES.—At least 45 days before making the an-
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1 nouncement under paragraph (2) for a year, the

2 Secretary shall provide for notice to MedicarePlus

3 organizations of proposed changes to be made in the

4 methodology or benefit coverage assumptions from

5 the methodology and assumptions used in the pre6 vious announcement and shall provide such organi7 zations an opportunity to comment on such proposed

8 changes.

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

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

11 the Secretary shall include an explanation of the as12 sumptions (including any benefit coverage assump13 tions) and changes in methodology used in the an14 nouncement in sufficient detail so that MedicarePlus

15 organizations can compute monthly adjusted

16 MedicarePlus capitation rates for classes of individ17 uals located in each payment area which is in whole

18 or in part within the service area of such an organi19 zation.

20 ‘‘(b) MONTHLY ADJUSTED MEDICAREPLUS CAPITA21 TION RATE.—

22 ‘‘(1) IN GENERAL.—For purposes of this sec23 tion, the ‘monthly adjusted MedicarePlus capitation

24 rate’ under this subsection, for a month in a year

25 for an individual in a payment area (specified under
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1 paragraph (3)) and in a class (established under

paragraph (4)), is 1 2 ⁄12 of the annual MedicarePlus

3 capitation rate specified in paragraph (2) for that

4 area for the year, adjusted to reflect the actuarial

5 value of benefits under this title with respect to indi6 viduals in such class compared to the national aver7 age for individuals in all classes.

8 ‘‘(2) ANNUAL MEDICAREPLUS CAPITATION

9 RATES.—For purposes of this section, the annual

10 MedicarePlus capitation rate for a payment area for

11 a year is equal to the annual MedicarePlus capita12 tion rate for the area for the previous year (or, in

13 the case of 1996, the average annual per capita rate

14 of payment described in section 1876(a)(1)(C) for

15 the area for 1995) increased by the per capita

16 growth rate for that area and year (as determined

17 under subsection (c)).

18 ‘‘(3) PAYMENT AREA DEFINED.—In this sec19 tion, the term ‘payment area’ means a county (or

20 equivalent area specified by the Secretary), except

21 that in the case of the population group described in

22 paragraph (5)(C), the payment area shall be each

23 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) LOWEST SERVICE UTILIZATION

18 COHORT.—For areas assigned to the low19 est service utilization cohort, 9.7 percent

20 plus the additional percent provided under

21 subparagraph (B)(ii).

22 ‘‘(ii) LOWER SERVICE UTILIZATION

23 COHORT.—For areas assigned to the lower

24 service utilization cohort, 8.0 percent.
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1 ‘‘(iii) MEDIAN SERVICE UTILIZATION

2 COHORT.—For areas assigned to the me3 dian service utilization cohort, 5.1 percent.

4 ‘‘(iv) HIGHER SERVICE UTILIZATION

5 COHORT.—For areas assigned to the high6 er service utilization cohort, 4.7 percent.

7 ‘‘(v) HIGHEST SERVICE UTILIZATION

8 COHORT.—For areas assigned to the high9 est service utilization cohort, 4.0 percent.

10 ‘‘(B) BUDGET NEUTRAL ADJUSTMENT.—

11 In order to assure that the total capitation pay12 ments under this section during 1996 are the

13 same as the amount such payments would have

14 been if the per capita growth rate for all such

15 areas for 1996 were equal to the national aver16 age per capita growth rate, specified in para17 graph (3) for 1996, the Secretary shall adjust

18 the per capita growth rates for payment areas

19 as follows:

20 ‘‘(i) INCREASE UP TO FLOOR FOR

21 LOWEST SERVICE UTILIZATION COHORT.—

22 First, such additional percent increase as

23 may be necessary to assure that the annual

24 MedicarePlus capitation rate for each pay-
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1 ment area is at least 12 times $250 for

2 1996.

3 ‘‘(ii) RESIDUAL INCREASE TO LOWEST

4 SERVICE UTILIZATION COHORT.—Next, for

5 payment areas assigned to the lowest serv6 ice utilization cohort, such additional per7 cent increase as will assure that the total

8 capitation payments under this section

9 during 1996 are the same as the amount

10 such payments would have been if the per

11 capita growth rate for all such areas for

12 1996 were equal to the national average

13 per capita growth rate. The increase under

14 this clause may apply to a payment area

15 described in clause (i) and shall be applied

16 after the increase provided under such

17 clause.

18 ‘‘(2) FOR SUBSEQUENT YEARS.—

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

20 section and subject to subparagraph (B), the

21 Secretary shall compute a per capita growth

22 rate for each year after 1996, for each payment

23 area as assigned to a service utilization cohort

24 under subsection (d), consistent with the follow25 ing rules:
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1 ‘‘(i) MEDIAN SERVICE UTILIZATION

2 COHORT SET AT NATIONAL AVERAGE PER

3 CAPITA GROWTH RATE.—The per capita

4 growth rate for areas assigned to the me5 dian service utilization cohort for the year

6 shall be the national average per capita

7 growth rate for the year (as specified

8 under paragraph (3)), subject to subpara9 graph (C).

10 ‘‘(ii) HIGHEST SERVICE UTILIZATION

11 COHORT SET AT 75 PERCENT OF NA12 TIONAL AVERAGE PER CAPITA GROWTH

13 RATE.—The per capita growth rate for

14 areas assigned to the highest service utili15 zation cohort for the year shall be 75 per16 cent of the national average per capita

17 growth rate for the year.

18 ‘‘(iii) LOWEST SERVICE UTILIZATION

19 COHORT SET AT 187.5 PERCENT OF NA20 TIONAL AVERAGE PER CAPITA GROWTH

21 RATE.—The per capita growth rate for

22 areas assigned to the lowest service utiliza23 tion cohort for the year shall be 187.5 per24 cent of the national average per capita
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1 growth rate for the year, subject to sub2 paragraph (C).

3 ‘‘(iv) LOWER SERVICE UTILIZATION

4 COHORT SET AT 150 PERCENT OF NA5 TIONAL AVERAGE PER CAPITA GROWTH

6 RATE.—

7 ‘‘(I) IN GENERAL.—Subject to

8 subclause (II), the per capita growth

9 rate for areas assigned to the lower

10 service utilization cohort for the year

11 shall be 150 percent of the national

12 average per capita growth rate for the

13 year.

14 ‘‘(II) ADJUSTMENT.—If the Sec15 retary has established under clause

16 (v) the per capita growth rate for

17 areas assigned to the higher service

18 utilization cohort for the year at 75

19 percent of the national average per

20 capita growth rate, the Secretary may

21 provide for a reduced per capita

22 growth rate under subclause (I) to the

23 extent necessary to comply with sub24 paragraph (B).
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1 ‘‘(v) HIGHER SERVICE UTILIZATION

2 COHORT.—The per capita growth rate for

3 areas assigned to the higher service utiliza4 tion cohort for the year shall be such per5 cent (not less than 75 percent) of the na6 tional average per capita growth rate, as

7 the Secretary may determine consistent

8 with subparagraph (B).

9 ‘‘(B) AVERAGE PER CAPITA GROWTH RATE

10 AT NATIONAL AVERAGE TO ASSURE BUDGET

11 NEUTRALITY.—The Secretary shall compute per

12 capita growth rates for a year under subpara13 graph (A) (before the application of subpara14 graph (C)) in a manner so that the weighted

15 average per capita growth rate for all areas for

16 the year (weighted to reflect the number of

17 medicare beneficiaries in each area) is equal to

18 the national average per capita growth rate

19 under paragraph (3) for the year.

20 ‘‘(C) FINAL ADJUSTMENT OF GROWTH

21 RATES.—After computing per capita growth

22 rates under the previous provisions of this para23 graph the Secretary shall—

24 ‘‘(i) reduce the per capita growth rate

25 for areas assigned to the median service
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1 utilization cohort by the ratio of .1 to 5.3,

2 and

3 ‘‘(ii) increase the per capita growth

4 rate for areas assigned to the lowest serv5 ice utilization cohort by such proportion as

6 the Secretary determines will result in an

7 increase in outlays resulting from this

8 clause equal to the reduction in outlays re9 sulting from clause (i) for the year in10 volved.

11 ‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH

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

13 per capita growth rate’ for—

14 ‘‘(A) 1996 is 5.3 percent,

15 ‘‘(B) 1997 is 3.8 percent,

16 ‘‘(C) 1998 is 4.6 percent,

17 ‘‘(D) 1999 is 4.3 percent,

18 ‘‘(E) 2000 is 3.8 percent,

19 ‘‘(F) 2001 is 5.5 percent,

20 ‘‘(G) 2002 is 5.6 percent, and

21 ‘‘(H) each subsequent year is 5.0 percent.

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

23 UTILIZATION COHORTS.—

24 ‘‘(1) IN GENERAL.—For purposes of determin25 ing per capita growth rates under subsection (c) for
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1 areas for a year, the Secretary shall assign each pay2 ment area to a service utilization cohort (based on

3 the service utilization index value for that area de4 termined under paragraph (2)) as follows:

5 ‘‘(A) LOWEST SERVICE UTILIZATION CO6 HORT.—Areas with a service utilization index

7 value of less than .80 shall be assigned to the

8 lowest service utilization cohort.

9 ‘‘(B) LOWER SERVICE UTILIZATION CO10 HORT.—Areas with a service utilization index

11 value of at least .80 but less than .90 shall be

12 assigned to the lower service utilization cohort.

13 ‘‘(C) MEDIAN SERVICE UTILIZATION CO14 HORT.—Areas with a service utilization index

15 value of at least .90 but less than 1.10 shall be

16 assigned to the median service utilization co17 hort.

18 ‘‘(D) HIGHER SERVICE UTILIZATION CO19 HORT.—Areas with a service utilization index

20 value of at least 1.10 but less than 1.20 shall

21 be assigned to the higher service utilization co22 hort.

23 ‘‘(E) HIGHEST SERVICE UTILIZATION CO24 HORT.—Areas with a service utilization index
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1 value of at least 1.20 shall be assigned to the

2 highest service utilization cohort.

3 ‘‘(2) DETERMINATION OF SERVICE UTILIZATION

4 INDEX VALUES.—In order to determine the per cap5 ita growth rate for a payment area for each year

6 (beginning with 1996), the Secretary shall determine

7 for such area and year a service utilization index

8 value, which is equal to—

9 ‘‘(A) the annual MedicarePlus capitation

10 rate under this section for the area for the year

11 in which the determination is made (or, in the

12 case of 1996, the average annual per capita

13 rate of payment (described in section

14 1876(a)(1)(C)) for the area for 1995); divided

15 by

16 ‘‘(B) the input-price-adjusted annual na17 tional MedicarePlus capitation rate (as deter18 mined under paragraph (3)) for that area for

19 the year in which the determination is made.

20 ‘‘(3) DETERMINATION OF INPUT-PRICE-AD21 JUSTED RATES.—

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (2), the ‘input-price-adjusted annual na24 tional MedicarePlus capitation rate’ for a pay25 ment area for a year is equal to the sum, for
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1 all the types of medicare services (as classified

2 by the Secretary), of the product (for each such

3 type) of—

4 ‘‘(i) the national standardized

5 MedicarePlus capitation rate (determined

6 under subparagraph (B)) for the year,

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

8 the year which is attributable to such type

9 of services, and

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

11 year and that type of services) the relative

12 input price of such services in the area

13 compared to the national average input

14 price of such services.

15 In applying clause (iii), the Secretary shall, sub16 ject to subparagraph (C), apply those indices

17 under this title that are used in applying (or

18 updating) national payment rates for specific

19 areas and localities.

20 ‘‘(B) NATIONAL STANDARDIZED

21 MEDICAREPLUS CAPITATION RATE.—In this

22 paragraph, the ‘national standardized

23 MedicarePlus capitation rate’ for a year is

24 equal to—
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1 ‘‘(i) the sum (for all payment areas)

2 of the product of (I) the annual

3 MedicarePlus capitation rate for that year

4 for the area under subsection (b)(2), and

5 (II) the average number of medicare bene6 ficiaries residing in that area in the year;

7 divided by

8 ‘‘(ii) the total average number of med9 icare beneficiaries residing in all the pay10 ment areas for that year.

11 ‘‘(C) SPECIAL RULES FOR 1996.—In apply12 ing this paragraph for 1996—

13 ‘‘(i) medicare services shall be divided

14 into 2 types of services: part A services

15 and part B services;

16 ‘‘(ii) the proportions described in sub17 paragraph (A)(ii) for such types of services

18 shall be—

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

20 (expressed as a percentage) of the av21 erage annual per capita rate of pay22 ment for the area for part A for 1995

23 to the total average annual per capita

24 rate of payment for the area for parts

25 A and B for 1995, and
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1 ‘‘(II) for part B services, 100

2 percent minus the ratio described in

3 subclause (I);

4 ‘‘(iii) for the part A services, 70 per5 cent of payments attributable to such serv6 ices shall be adjusted by the index used

7 under section 1886(d)(3)(E) to adjust pay8 ment rates for relative hospital wage levels

9 for hospitals located in the payment area

10 involved;

11 ‘‘(iv) for part B services—

12 ‘‘(I) 66 percent of payments at13 tributable to such services shall be ad14 justed by the index of the geographic

15 area factors under section 1848(e)

16 used to adjust payment rates for phy17 sicians’ services furnished in the pay18 ment area, and

19 ‘‘(II) of the remaining 34 percent

20 of the amount of such payments, 70

21 percent shall be adjusted by the index

22 described in clause (iii);

23 ‘‘(v) the index values shall be com24 puted based only on the beneficiary popu25 lation described in subsection (b)(5)(A).
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1 The Secretary may continue to apply the rules

2 described in this subparagraph (or similar

3 rules) for 1997.

4 ‘‘(e) PAYMENT PROCESS.—

5 ‘‘(1) IN GENERAL.—Subject to subsection (f),

6 the Secretary shall make monthly payments under

7 this section in advance and in accordance with the

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

9 each individual enrolled with a MedicarePlus organi10 zation under this part.

11 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF

12 ENROLLEES.—

13 ‘‘(A) IN GENERAL.—The amount of pay14 ment under this subsection may be retroactively

15 adjusted to take into account any difference be16 tween the actual number of individuals enrolled

17 with an organization under this part and the

18 number of such individuals estimated to be so

19 enrolled in determining the amount of the ad20 vance payment.

21 ‘‘(B) SPECIAL RULE FOR CERTAIN EN22 ROLLEES.—

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

24 (ii), the Secretary may make retroactive

25 adjustments under subparagraph (A) to
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1 take into account individuals enrolled dur2 ing the period beginning on the date on

3 which the individual enrolls with a

4 MedicarePlus organization under a product

5 operated, sponsored, or contributed to by

6 the individual’s employer or former em7 ployer (or the employer or former employer

8 of the individual’s spouse) and ending on

9 the date on which the individual is enrolled

10 in the organization under this part, except

11 that for purposes of making such retro12 active adjustments under this subpara13 graph, such period may not exceed 90

14 days.

15 ‘‘(ii) EXCEPTION.—No adjustment

16 may be made under clause (i) with respect

17 to any individual who does not certify that

18 the organization provided the individual

19 with the disclosure statement described in

20 section 1853(a) at the time the individual

21 enrolled with the organization.

22 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

23 HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—

24 ‘‘(1) IN GENERAL.—In the case of an individual

25 who has elected a high deductible/medisave product,
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1 notwithstanding the preceding provisions of this sec2 tion—

3 ‘‘(A) the amount of the payment to the

4 MedicarePlus organization offering the high de5 ductible/medisave product shall not exceed the

6 premium for the product, and

7 ‘‘(B) subject to paragraph (2), the dif8 ference between the amount of payment that

9 would otherwise be made and the amount of

10 payment to such organization shall be made di11 rectly into a MedicarePlus MSA established

12 (and, if applicable, designated) by the individual

13 under paragraph (2).

14 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

15 MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE16 QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In

17 the case of an individual who has elected coverage

18 under a high deductible/medisave product, no pay19 ment shall be made under paragraph (1)(B) on be20 half of an individual for a month unless the individ21 ual—

22 ‘‘(A) has established before the beginning

23 of the month (or by such other deadline as the

24 Secretary may specify) a MedicarePlus 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 MedicarePlus MSA, has designated

5 one of such accounts as the individual’s

6 MedicarePlus 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 MedicarePlus

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) PAYMENTS FROM TRUST FUND.—The payment

23 to a MedicarePlus organization under this section for indi24 viduals enrolled under this part with the organization, and

25 payments to a MedicarePlus MSA under subsection
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1 (f)(1)(B), shall be made from the Federal Hospital Insur2 ance Trust Fund and the Federal Supplementary Medical

3 Insurance Trust Fund in such proportion as the Secretary

4 determines reflects the relative weight that benefits under

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

6 of the total benefits under this title.

7 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS8 PITAL STAYS.—In the case of an individual who is receiv9 ing inpatient hospital services from a subsection (d) hos10 pital (as defined in section 1886(d)(1)(B)) as of the effec11 tive date of the individual’s—

12 ‘‘(1) election under this part of a MedicarePlus

13 product offered by a MedicarePlus organization—

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

15 date of the individual’s discharge shall be made

16 under this title through the MedicarePlus prod17 uct or Non-MedicarePlus option (as the case

18 may be) elected before the election with such

19 organization,

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

21 financially responsible for payment for such

22 services until the date after the date of the indi23 vidual’s discharge, and
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1 ‘‘(C) the organization shall nonetheless be

2 paid the full amount otherwise payable to the

3 organization under this part; or

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

5 MedicarePlus organization under this part—

6 ‘‘(A) the organization shall be financially

7 responsible for payment for such services after

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

9 discharge,

10 ‘‘(B) payment for such services during the

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

12 by any succeeding MedicarePlus organization,

13 and

14 ‘‘(C) the terminated organization shall not

15 receive any payment with respect to the individ16 ual under this part during the period the indi17 vidual is not enrolled.

18 ‘‘ESTABLISHMENT OF STANDARDS FOR MEDICARE-PLUS

19 ORGANIZATIONS AND PRODUCTS

20 ‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO STATE21 REGULATED ORGANIZATIONS AND PRODUCTS.—

22 ‘‘(1) RECOMMENDATIONS OF NAIC.—The Sec23 retary shall request the National Association of In24 surance Commissioners to develop and submit to the

25 Secretary, not later than 12 months after the date

26 of the enactment of the Medicare Preservation Act
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1 of 1995, proposed standards consistent with the re2 quirements of this part for MedicarePlus organiza3 tions (other than union sponsors, Taft-Hartley spon4 sors, and provider-sponsored organizations) and

5 MedicarePlus products offered by such organiza6 tions, except that such proposed standards may re7 late to MedicarePlus organizations that are qualified

8 associations only with respect to MedicarePlus prod9 ucts offered by them and only if such products are

10 issued by organizations to which section 1851(b)(1)

11 applies.

12 ‘‘(2) REVIEW.—If the Association submits such

13 standards on a timely basis, the Secretary shall re14 view such standards to determine if the standards

15 meet the requirements of the part. The Secretary

16 shall complete the review of the standards not later

17 than 90 days after the date of their submission. The

18 Secretary shall promulgate such proposed standards

19 to apply to organizations and products described in

20 paragraph (1) except to the extent that the Sec21 retary modifies such proposed standards because

22 they do not meet such requirements.

23 ‘‘(3) FAILURE TO SUBMIT.—If the Association

24 does not submit such standards on a timely basis,

25 the Secretary shall promulgate such standards by
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1 not later than the date the Secretary would other2 wise have been required to promulgate standards

3 under paragraph (2).

4 ‘‘(4) USE OF INTERIM RULES.—For the period

5 in which this part is in effect and standards are

6 being developed and established under the preceding

7 provisions of this subsection, the Secretary shall pro8 vide by not later than June 1, 1996, for the applica9 tion of such interim standards (without regard to

10 any requirements for notice and public comment) as

11 may be appropriate to provide for the expedited im12 plementation of this part. Such interim standards

13 shall not apply after the date standards are estab14 lished under the preceding provisions of this sub15 section.

16 ‘‘(b) UNION AND TAFT-HARTLEY SPONSORS, QUALI17 FIED ASSOCIATIONS, AND PRODUCTS.—

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

19 and promulgate by regulation standards consistent

20 with the requirements of this part for union and

21 Taft-Hartley sponsors, for qualified associations,

22 and for MedicarePlus products offered by such orga23 nizations (other than MedicarePlus products offered

24 by qualified associations that are issued by organiza25 tions to which section 1851(b)(1) applies).
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1 ‘‘(2) CONSULTATION WITH LABOR.—The Sec2 retary shall consult with the Secretary of Labor with

3 respect to such standards for such sponsors and

4 products.

5 ‘‘(3) TIMING.—Standards under this subsection

6 shall be promulgated at or about the time standards

7 are promulgated under subsection (a).

8 ‘‘(c) ESTABLISHMENT OF STANDARDS FOR PRO9 VIDER-SPONSORED ORGANIZATIONS.—

10 ‘‘(1) IN GENERAL.—The Secretary shall estab11 lish, on an expedited basis and using a negotiated

12 rulemaking process under subchapter 3 of chapter 5

13 of title 5, United States Code, standards that enti14 ties must meet to qualify as provider-sponsored or15 ganizations under this part.

16 ‘‘(2) PUBLICATION OF NOTICE.—In carrying

17 out the rulemaking process under this subsection,

18 the Secretary, after consultation with the National

19 Association of Insurance Commissioners, the Amer20 ican Academy of Actuaries, organizations represent21 ative of medicare beneficiaries, and other interested

22 parties, shall publish the notice provided for under

23 section 564(a) of title 5, United States Code, by not

24 later than 45 days after the date of the enactment

25 of Medicare Preservation Act of 1995.
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1 ‘‘(3) TARGET DATE FOR PUBLICATION OF

2 RULE.—As part of the notice under paragraph (2),

3 and for purposes of this subsection, the ‘target date

4 for publication’ (referred to in section 564(a)(5) of

5 such title) shall be September 1, 1996.

6 ‘‘(4) ABBREVIATED PERIOD FOR SUBMISSION

7 OF COMMENTS.—In applying section 564(c) of such

8 title under this subsection, ‘15 days’ shall be sub9 stituted for ‘30 days’.

10 ‘‘(5) APPOINTMENT OF NEGOTIATED RULE11 MAKING COMMITTEE AND FACILITATOR.—The Sec12 retary shall provide for—

13 ‘‘(A) the appointment of a negotiated rule14 making committee under section 565(a) of such

15 title by not later than 30 days after the end of

16 the comment period provided for under section

17 564(c) of such title (as shortened under para18 graph (4)), and

19 ‘‘(B) the nomination of a facilitator under

20 section 566(c) of such title by not later than 10

21 days after the date of appointment of the com22 mittee.

23 ‘‘(6) PRELIMINARY COMMITTEE REPORT.—The

24 negotiated rulemaking committee appointed under

25 paragraph (5) shall report to the Secretary, by not
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1 later than June 1, 1996, regarding the committee’s

2 progress on achieving a concensus with regard to the

3 rulemaking proceeding and whether such consensus

4 is likely to occur before one month before the target

5 date for publication of the rule. If the committee re6 ports that the committee has failed to make signifi7 cant progress towards such consensus or is unlikely

8 to reach such consensus by the target date, the Sec9 retary may terminate such process and provide for

10 the publication of a rule under this subsection

11 through such other methods as the Secretary may

12 provide.

13 ‘‘(7) FINAL COMMITTEE REPORT.—If the com14 mittee is not terminated under paragraph (6), the

15 rulemaking committee shall submit a report contain16 ing a proposed rule by not later than one month be17 fore the target publication date.

18 ‘‘(8) INTERIM, FINAL EFFECT.—The Secretary

19 shall publish a rule under this subsection in the Fed20 eral Register by not later than the target publication

21 date. Such rule shall be effective and final imme22 diately on an interim basis, but is subject to change

23 and revision after public notice and opportunity for

24 a period (of not less than 60 days) for public com25 ment. In connection with such rule, the Secretary
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1 shall specify the process for the timely review and

2 approval of applications of entities to be certified as

3 provider-sponsored organizations pursuant to such

4 rules and consistent with this subsection.

5 ‘‘(9) PUBLICATION OF RULE AFTER PUBLIC

6 COMMENT.—The Secretary shall provide for consid7 eration of such comments and republication of such

8 rule by not later than 1 year after the target publi9 cation date.

10 ‘‘(10) PROCESS FOR APPROVAL OF APPLICA11 TIONS FOR CERTIFICATION.—

12 ‘‘(A) IN GENERAL.—The Secretary shall

13 establish a process for the receipt and approval

14 of applications of entities for certification as

15 provider-sponsored organizations under this

16 part. Under such process, the Secretary shall

17 act upon a complete application submitted with18 in 60 days after the date it is received.

19 ‘‘(B) CIRCULATION OF PROPOSED APPLI20 CATION FORM.—By March 1, 1996, the Sec21 retary, after consultation with the negotiated

22 rulemaking committee, shall circulate a pro23 posed application form that could be used by

24 entities considering becoming certified as a pro25 vider-sponsored organization under this part.
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1 ‘‘(d) COORDINATION AMONG FINAL STANDARDS.—In

2 establishing standards (other than on an interim basis)

3 under the previous provisions of this section, the Secretary

4 shall seek to provide for consistency (as appropriate)

5 across the different types of MedicarePlus organizations,

6 in order to promote equitable treatment of different types

7 of organizations and consistent protection for individuals

8 who elect products offered by the different types of

9 MedicarePlus organizations.

10 ‘‘(e) USE OF CURRENT STANDARDS FOR INTERIM

11 STANDARDS.—To the extent practicable and consistent

12 with the requirements of this part, standards established

13 on an interim basis to carry out requirements of this part

14 may be based on currently applicable standards, such as

15 the rules established under section 1876 (as in effect as

16 of the date of the enactment of this section) to carry out

17 analogous provisions of such section or standards estab18 lished or developed for application in the private health

19 insurance market.

20 ‘‘(f) APPLICATION OF NEW STANDARDS TO ENTITIES

21 WITH A CONTRACT.—In the case of a MedicarePlus orga22 nization with a contract in effect under this part at the

23 time standards applicable to the organization under this

24 section are changed, the organization may elect not to

25 have such changes apply to the organization until the end
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1 of the current contract year (or, if there is less than 6

2 months remaining in the contract year, until 1 year after

3 the end of the current contract year).

4 ‘‘(g) RELATION TO STATE LAWS.—The standards es5 tablished under this section shall supersede any State law

6 or regulation with respect to MedicarePlus products which

7 are offered by MedicarePlus organizations and are issued

8 by organizations to which section 1851(b)(1) applies, to

9 the extent such law or regulation is inconsistent with such

10 standards.

11 ‘‘MEDICARE-PLUS CERTIFICATION

12 ‘‘SEC. 1857. (a) STATE CERTIFICATION PROCESS

13 FOR STATE-REGULATED ORGANIZATIONS.—

14 ‘‘(1) APPROVAL OF STATE PROCESS.—The Sec15 retary shall approve a MedicarePlus certification and

16 enforcement program established by a State for ap17 plying the standards established under section 1856

18 to MedicarePlus organizations (other than union

19 sponsors, Taft-Hartley sponsors, and provider-spon20 sored organizations) and MedicarePlus products of21 fered by such organizations if the Secretary deter22 mines that the program effectively provides for the

23 application and enforcement of such standards in

24 the State with respect to such organizations and

25 products. Such program shall provide for certifi26 cation of compliance of MedicarePlus organizations
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1 and products with the applicable requirements of

2 this part not less often than once every 3 years.

3 ‘‘(2) EFFECT OF CERTIFICATION UNDER STATE

4 PROCESS.—A MedicarePlus organization and

5 MedicarePlus product offered by such an organiza6 tion that is certified under such program is consid7 ered to have been certified under this subsection

8 with respect to the offering of the product to individ9 uals residing in the State.

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

11 fees on organizations seeking certification under this

12 subsection in such amounts as the State deems suffi13 cient to finance the costs of such certification. Noth14 ing in this paragraph shall be construed as restrict15 ing a State’s authority to impose premium taxes,

16 other taxes, or other levies.

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

18 review State programs approved under paragraph

19 (1) to determine if they continue to provide for cer20 tification and enforcement described in such para21 graph. If the Secretary finds that a State program

22 no longer so provides, before making a final deter23 mination, the Secretary shall provide the State an

24 opportunity to adopt such a plan of correction as

25 would permit the State program to meet the require-
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1 ments of paragraph (1). If the Secretary makes a

2 final determination that the State program, after

3 such an opportunity, fails to meet such require4 ments, the provisions of subsection (b) shall apply to

5 MedicarePlus organizations and products in the

6 State.

7 ‘‘(5) EFFECT OF NO STATE PROGRAM.—Begin8 ning on the date standards are established under

9 section 1856, in the case of organizations and prod10 ucts in States in which a certification program has

11 not been approved and in operation under paragraph

12 (1), the Secretary shall establish a process for the

13 certification of MedicarePlus organizations (other

14 than union sponsors, Taft-Hartley sponsors, and

15 provider-sponsored organizations) and products of

16 such organizations as meeting such standards.

17 ‘‘(6) PUBLICATION OF LIST OF APPROVED

18 STATE PROGRAMS.—The Secretary shall publish

19 (and periodically update) a list of those State pro20 grams which are approved for purposes of this sub21 section.

22 ‘‘(b) FEDERAL CERTIFICATION PROCESS FOR UNION

23 SPONSORS, TAFT-HARTLEY SPONSORS, AND PROVIDER24 SPONSORED ORGANIZATIONS.—
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1 ‘‘(1) ESTABLISHMENT.—The Secretary shall es2 tablish a process for the certification of union spon3 sors, Taft-Hartley sponsors, and provider-sponsored

4 organizations and MedicarePlus products offered by

5 such sponsors and organizations as meeting the ap6 plicable standards established under section 1856.

7 ‘‘(2) INVOLVEMENT OF SECRETARY OF

8 LABOR.—Such process shall be established and oper9 ated in cooperation with the Secretary of Labor with

10 respect to union sponsors and Taft-Hartley spon11 sors.

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

13 ACCREDITATION PROCESSES.—

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

15 this subsection shall, to the maximum extent

16 practicable, provide that MedicarePlus organi17 zations and products that are licensed or cer18 tified through a qualified private accreditation

19 process that the Secretary finds applies stand20 ards that are no less stringent than the require21 ments of this part are deemed to meet the cor22 responding requirements of this part for such

23 an organization or product.

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

25 of an accreditation under subparagraph (A)
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1 shall be valid only for such period as the Sec2 retary specifies.

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

4 user fees on entities seeking certification under this

5 subsection in such amounts as the Secretary deems

6 sufficient to finance the costs of such certification.

7 ‘‘(c) CERTIFICATION OF PROVIDER-SPONSORED OR8 GANIZATIONS BY STATES.—

9 ‘‘(1) IN GENERAL.—The Secretary shall estab10 lish a process under which a State may propose to

11 provide for certification of entities as meeting the re12 quirements of this part to be provider-sponsored or13 ganizations.

14 ‘‘(2) CONDITIONS FOR APPROVAL.—The Sec15 retary may not approve a State program for certifi16 cation under paragraph (1) unless the Secretary de17 termines that the certification program applies

18 standards and requirements that are identical to the

19 standards and requirements of this part and the ap20 plicable provisions for enforcement of such standards

21 and requirements do not result in a lower level or

22 quality of enforcement than that which is otherwise

23 applicable under this title.

24 ‘‘(d) NOTICE TO ENROLLEES IN CASE OF DECERTI25 FICATION.—If a MedicarePlus organization or product is
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1 decertified under this section, the organization shall notify

2 each enrollee with the organization and product under this

3 part of such decertification.

4 ‘‘(e) QUALIFIED ASSOCIATIONS.—In the case of

5 MedicarePlus products offered by a MedicarePlus organi6 zation that is a qualified association (as defined in section

7 1854(c)(4)(C)) and issued by an organization to which

8 section 1851(b)(1) applies or by a provider-sponsored or9 ganization (as defined in section 1854(a)), nothing in this

10 section shall be construed as limiting the authority of

11 States to regulate such products.

12 ‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS

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

14 not permit the election under section 1805 of a

15 MedicarePlus product offered by a MedicarePlus organiza16 tion under this part, and no payment shall be made under

17 section 1856 to an organization, unless the Secretary has

18 entered into a contract under this section with an organi19 zation with respect to the offering of such product. Such

20 a contract with an organization may cover more than one

21 MedicarePlus product. Such contract shall provide that

22 the organization agrees to comply with the applicable re23 quirements and standards of this part and the terms and

24 conditions of payment as provided for in this part.

25 ‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—
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1 ‘‘(1) IN GENERAL.—Subject to paragraphs (1)

2 and (2), the Secretary may not enter into a contract

3 under this section with a MedicarePlus organization

4 (other than a union sponsor or Taft-Hartley spon5 sor) unless the organization has at least 5,000 indi6 viduals (or 1,500 individuals in the case of an orga7 nization that is a provider-sponsored organization)

8 who are receiving health benefits through the organi9 zation, except that the standards under section 1856

10 may permit the organization to have a lesser number

11 of beneficiaries (but not less than 500 in the case

12 of an organization that is a provider-sponsored orga13 nization) if the organization primarily serves individ14 uals residing outside of urbanized areas.

15 ‘‘(2) EXCEPTION FOR HIGH DEDUCTIBLE/

16 MEDISAVE PRODUCT.—Paragraph (1) shall not apply

17 with respect to a contract that relates only to a high

18 deductible/medisave product.

19 ‘‘(3) ALLOWING TRANSITION.—The Secretary

20 may waive the requirement of paragraph (1) during

21 the first 3 contract years with respect to an organi22 zation.

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

24 ‘‘(1) PERIOD.—Each contract under this sec25 tion shall be for a term of at least one year, as de-
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1 termined by the Secretary, and may be made auto2 matically renewable from term to term in the ab3 sence of notice by either party of intention to termi4 nate at the end of the current term.

5 ‘‘(2) TERMINATION AUTHORITY.—In accord6 ance with procedures established under subsection

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

8 such contract or may impose the intermediate sanc9 tions described in an applicable paragraph of sub10 section (g) on the MedicarePlus organization if the

11 Secretary determines that the organization—

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

13 the contract;

14 ‘‘(B) is carrying out the contract in a man15 ner inconsistent with the efficient and effective

16 administration of this part;

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

18 in the best interests of the individuals covered

19 under the contract; or

20 ‘‘(D) no longer substantially meets the ap21 plicable conditions of this part.

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

23 effective date of any contract executed pursuant to

24 this section shall be specified in the contract, except

25 that in no case shall a contract under this section
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1 which provides for coverage under a high deductible/

2 medisave account be effective before January 1997

3 with respect to such coverage.

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

5 may not enter into a contract with a MedicarePlus

6 organization if a previous contract with that organi7 zation under this section was terminated at the re8 quest of the organization within the preceding five9 year period, except in circumstances which warrant

10 special consideration, as determined by the Sec11 retary.

12 ‘‘(5) NO CONTRACTING AUTHORITY.—The au13 thority vested in the Secretary by this part may be

14 performed without regard to such provisions of law

15 or regulations relating to the making, performance,

16 amendment, or modification of contracts of the

17 United States as the Secretary may determine to be

18 inconsistent with the furtherance of the purpose of

19 this title.

20 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BENE21 FICIARY PROTECTIONS.—

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

23 under this section shall provide that the Secretary,

24 or any person or organization designated by the Sec25 retary—
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1 ‘‘(A) shall have the right to inspect or oth2 erwise evaluate (i) the quality, appropriateness,

3 and timeliness of services performed under the

4 contract and (ii) the facilities of the organiza5 tion when there is reasonable evidence of some

6 need for such inspection, and

7 ‘‘(B) shall have the right to audit and in8 spect any books and records of the

9 MedicarePlus organization that pertain (i) to

10 the ability of the organization to bear the risk

11 of potential financial losses, or (ii) to services

12 performed or determinations of amounts pay13 able under the contract.

14 ‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI15 NATION.—Each contract under this section shall re16 quire the organization to provide (and pay for) writ17 ten notice in advance of the contract’s termination,

18 as well as a description of alternatives for obtaining

19 benefits under this title, to each individual enrolled

20 with the organization under this part.

21 ‘‘(3) DISCLOSURE.—

22 ‘‘(A) IN GENERAL.—Each MedicarePlus

23 organization shall, in accordance with regula24 tions of the Secretary, report to the Secretary
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1 financial information which shall include the

2 following:

3 ‘‘(i) Such information as the Sec4 retary may require demonstrating that the

5 organization has a fiscally sound operation.

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

7 with the Health Care Financing Adminis8 tration containing the information required

9 to be reported under section 1124 by dis10 closing entities.

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

12 specified by the Secretary, between the or13 ganization and a party in interest. Such

14 transactions shall include—

15 ‘‘(I) any sale or exchange, or

16 leasing of any property between the

17 organization and a party in interest;

18 ‘‘(II) any furnishing for consider19 ation of goods, services (including

20 management services), or facilities be21 tween the organization and a party in

22 interest, but not including salaries

23 paid to employees for services pro24 vided in the normal course of their

25 employment and health services pro-
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1 vided to members by hospitals and

2 other providers and by staff, medical

3 group (or groups), individual practice

4 association (or associations), or any

5 combination thereof; and

6 ‘‘(III) any lending of money or

7 other extension of credit between an

8 organization and a party in interest.

9 The Secretary may require that information re10 ported respecting an organization which con11 trols, is controlled by, or is under common con12 trol with, another entity be in the form of a

13 consolidated financial statement for the organi14 zation and such entity.

15 ‘‘(B) PARTY IN INTEREST DEFINED.—For

16 the purposes of this paragraph, the term ‘party

17 in interest’ means—

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

19 employee responsible for management or

20 administration of a MedicarePlus organiza21 tion, any person who is directly or indi22 rectly the beneficial owner of more than 5

23 percent of the equity of the organization,

24 any person who is the beneficial owner of

25 a mortgage, deed of trust, note, or other
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1 interest secured by, and valuing more than

2 5 percent of the organization, and, in the

3 case of a MedicarePlus organization orga4 nized as a nonprofit corporation, an incor5 porator or member of such corporation

6 under applicable State corporation law;

7 ‘‘(ii) any entity in which a person de8 scribed in clause (i)—

9 ‘‘(I) is an officer or director;

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

11 is organized as a partnership);

12 ‘‘(III) has directly or indirectly a

13 beneficial interest of more than 5 per14 cent of the equity; or

15 ‘‘(IV) has a mortgage, deed of

16 trust, note, or other interest valuing

17 more than 5 percent of the assets of

18 such entity;

19 ‘‘(iii) any person directly or indirectly

20 controlling, controlled by, or under com21 mon control with an organization; and

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

23 an individual described in clause (i).

24 ‘‘(C) ACCESS TO INFORMATION.—Each

25 MedicarePlus organization shall make the infor-
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1 mation reported pursuant to subparagraph (A)

2 available to its enrollees upon reasonable re3 quest.

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

5 require the organization to notify the Secretary of

6 loans and other special financial arrangements which

7 are made between the organization and subcontrac8 tors, affiliates, and related parties.

9 ‘‘(e) ADDITIONAL CONTRACT TERMS.—The contract

10 shall contain such other terms and conditions not incon11 sistent with this part (including requiring the organization

12 to provide the Secretary with such information) as the

13 Secretary may find necessary and appropriate.

14 ‘‘(f) INTERMEDIATE SANCTIONS.—

15 ‘‘(1) IN GENERAL.—If the Secretary determines

16 that a MedicarePlus organization with a contract

17 under this section—

18 ‘‘(A) fails substantially to provide medi19 cally necessary items and services that are re20 quired (under law or under the contract) to be

21 provided to an individual covered under the con22 tract, if the failure has adversely affected (or

23 has substantial likelihood of adversely affecting)

24 the individual;
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1 ‘‘(B) imposes premiums on individuals en2 rolled under this part in excess of the premiums

3 permitted;

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

5 an individual in violation of the provisions of

6 this part;

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

8 reasonably be expected to have the effect of de9 nying or discouraging enrollment (except as

10 permitted by this part) by eligible individuals

11 with the organization whose medical condition

12 or history indicates a need for substantial fu13 ture medical services;

14 ‘‘(E) misrepresents or falsifies information

15 that is furnished—

16 ‘‘(i) to the Secretary under this part,

17 or

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

19 entity under this part;

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

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

22 ‘‘(G) employs or contracts with any indi23 vidual or entity that is excluded from participa24 tion under this title under section 1128 or

25 1128A for the provision of health care, utiliza-
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1 tion review, medical social work, or administra2 tive services or employs or contracts with any

3 entity for the provision (directly or indirectly)

4 through such an excluded individual or entity of

5 such services;

6 the Secretary may provide, in addition to any other

7 remedies authorized by law, for any of the remedies

8 described in paragraph (2).

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

10 this paragraph are—

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

12 than $25,000 for each determination under

13 paragraph (1) or, with respect to a determina14 tion under subparagraph (D) or (E)(i) of such

15 paragraph, of not more than $100,000 for each

16 such determination, plus, with respect to a de17 termination under paragraph (1)(B), double the

18 excess amount charged in violation of such

19 paragraph (and the excess amount charged

20 shall be deducted from the penalty and returned

21 to the individual concerned), and plus, with re22 spect to a determination under paragraph

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

24 as a result of the practice involved,
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1 ‘‘(B) suspension of enrollment of individ2 uals under this part after the date the Sec3 retary notifies the organization of a determina4 tion under paragraph (1) and until the Sec5 retary is satisfied that the basis for such deter6 mination has been corrected and is not likely to

7 recur, or

8 ‘‘(C) suspension of payment to the organi9 zation under this part for individuals enrolled

10 after the date the Secretary notifies the organi11 zation of a determination under paragraph (1)

12 and until the Secretary is satisfied that the

13 basis for such determination has been corrected

14 and is not likely to recur.

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

16 the case of a MedicarePlus organization for which

17 the Secretary makes a determination under sub18 section (c)(2) the basis of which is not described in

19 paragraph (1), the Secretary may apply the follow20 ing intermediate sanctions:

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

22 than $25,000 for each determination under

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

24 basis of the determination has directly adversely

25 affected (or has the substantial likelihood of ad-
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1 versely affecting) an individual covered under

2 the organization’s contract;

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

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

5 initiation of procedures by the Secretary under

6 subsection (h) during which the deficiency that

7 is the basis of a determination under subsection

8 (c)(2) exists; and

9 ‘‘(C) suspension of enrollment of individ10 uals under this part after the date the Sec11 retary notifies the organization of a determina12 tion under subsection (c)(2) and until the Sec13 retary is satisfied that the deficiency that is the

14 basis for the determination has been corrected

15 and is not likely to recur.

16 ‘‘(4) PROCEDURES FOR IMPOSING SANC17 TIONS.—The provisions of section 1128A (other

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

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

20 same manner as they apply to a civil money penalty

21 or proceeding under section 1128A(a).

22 ‘‘(g) PROCEDURES FOR IMPOSING SANCTIONS.—The

23 Secretary may terminate a contract with a MedicarePlus

24 organization under this section or may impose the inter25 mediate sanctions described in subsection (f) on the orga-
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1 nization in accordance with formal investigation and com2 pliance procedures established by the Secretary under

3 which—

4 ‘‘(1) the Secretary provides the organization

5 with the opportunity to develop and implement a

6 corrective action plan to correct the deficiencies that

7 were the basis of the Secretary’s determination

8 under subsection (c)(2);

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

10 sanctions on organizations that have a history of de11 ficiencies or that have not taken steps to correct de12 ficiencies the Secretary has brought to their atten13 tion;

14 ‘‘(3) there are no unreasonable or unnecessary

15 delays between the finding of a deficiency and the

16 imposition of sanctions; and

17 ‘‘(4) the Secretary provides the organization

18 with reasonable notice and opportunity for hearing

19 (including the right to appeal an initial decision) be20 fore imposing any sanction or terminating the con21 tract.’’.

22 (b) CONFORMING REFERENCES TO PREVIOUS PART

23 C.—Any reference in law (in effect before the date of the

24 enactment of this Act) to part C of title XVIII of the So-
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1 cial Security Act is deemed a reference to part D of such

2 title (as in effect after such date).

3 (c) USE OF INTERIM, FINAL REGULATIONS.—In

4 order to carry out the amendment made by subsection (a)

5 in a timely manner, the Secretary of Health and Human

6 Services may promulgate regulations that take effect on

7 an interim basis, after notice and pending opportunity for

8 public comment.

9 (d) ADVANCE DIRECTIVES.—Section 1866(f) (42

10 U.S.C. 1395cc(f)) is amended—

11 (1) in paragraph (1)—

12 (A) by inserting ‘‘1853(g),’’ after

13 ‘‘1833(s),’’, and

14 (B) by inserting ‘‘, MedicarePlus organiza15 tion,’’ after ‘‘provider of services’’, and

16 (2) by adding at the end the following new

17 paragraph:

18 ‘‘(4) Nothing in this subsection shall be construed to

19 require the provision of information regarding assisted

20 suicide, euthanasia, or mercy killing.’’.

21 (e) CONFORMING AMENDMENT.—Section

22 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended

23 by inserting before the semicolon at the end the following:

24 ‘‘and in the case of hospitals to accept as payment in full

25 for inpatient hospital services that are emergency services
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1 (as defined in section 1853(b)(4)) that are covered under

2 this title and are furnished to any individual enrolled

3 under part C with a MedicarePlus organization which does

4 not have a contract establishing payment amounts for

5 services furnished to members of the organization the

6 amounts that would be made as a payment in full under

7 this title if the individuals were not so enrolled’’.

8 SEC. 15003. DUPLICATION AND COORDINATION OF MEDI9 CARE-RELATED PRODUCTS.

10 (a) TREATMENT OF CERTAIN HEALTH INSURANCE

11 POLICIES AS NONDUPLICATIVE.—

12 (1) IN GENERAL.—Effective as if included in

13 the enactment of section 4354 of the Omnibus

14 Budget Reconciliation Act of 1990, section

15 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is

16 amended—

17 (A) by amending clause (i) to read as fol18 lows:

19 ‘‘(i) It is unlawful for a person to sell or issue to an

20 individual entitled to benefits under part A or enrolled

21 under part B of this title or electing a MedicarePlus prod22 uct under section 1805—

23 ‘‘(I) a health insurance policy (other than a

24 medicare supplemental policy) with knowledge that

25 the policy duplicates health benefits to which the in-
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1 dividual is otherwise entitled under this title or title

2 XIX,

3 ‘‘(II) in the case of an individual not electing a

4 MedicarePlus product, a medicare supplemental pol5 icy with knowledge that the individual is entitled to

6 benefits under another medicare supplemental policy,

7 or

8 ‘‘(III) in the case of an individual electing a

9 MedicarePlus product, a medicare supplemental pol10 icy with knowledge that the policy duplicates health

11 benefits to which the individual is otherwise entitled

12 under this title or under another medicare supple13 mental policy.’’;

14 (B) in clause (iii), by striking ‘‘clause (i)’’

15 and inserting ‘‘clause (i)(II)’’; and

16 (C) by adding at the end the following new

17 clauses:

18 ‘‘(iv) For purposes of this subparagraph a health in19 surance policy shall be considered to ‘duplicate’ benefits

20 under this title only when, under its terms, the policy pro21 vides specific reimbursement for identical items and serv22 ices to the extent paid for under this title, and a health

23 insurance policy providing for benefits which are payable

24 to or on behalf of an individual without regard to other
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1 health benefit coverage of such individual is not considered

2 to ‘duplicate’ any health benefits under this title.

3 ‘‘(v) For purposes of this subparagraph, a health in4 surance policy (or a rider to an insurance contract which

5 is not a health insurance policy), including a policy (such

6 as a long-term care insurance contract described in section

7 7702B(b) of the Internal Revenue Code of 1986, as added

8 by the Contract with America Tax Relief Act of 1995

9 (H.R. 1215)) providing benefits for long-term care, nurs10 ing home care, home health care, or community-based

11 care, that coordinates against or excludes items and serv12 ices available or paid for under this title and (for policies

13 sold or issued after January 1, 1996) that discloses such

14 coordination or exclusion in the policy’s outline of cov15 erage, is not considered to ‘duplicate’ health benefits

16 under this title. For purposes of this clause, the terms ‘co17 ordinates’ and ‘coordination’ mean, with respect to a pol18 icy in relation to health benefits under this title, that the

19 policy under its terms is secondary to, or excludes from

20 payment, items and services to the extent available or paid

21 for under this title.

22 ‘‘(vi) Notwithstanding any other provision of law, no

23 criminal or civil penalty may be imposed at any time under

24 this subparagraph and no legal action may be brought or

25 continued at any time in any Federal or State court if
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1 the penalty or action is based on an act or omission that

2 occurred after November 5, 1991, and before the date of

3 the enactment of this clause, and relates to the sale, issu4 ance, or renewal of any health insurance policy during

5 such period, if such policy meets the requirements of

6 clause (iv) or (v).

7 ‘‘(vii) A State may not impose, with respect to the

8 sale or issuance of a policy (or rider) that meets the re9 quirements of this title pursuant to clause (iv) or (v) to

10 an individual entitled to benefits under part A or enrolled

11 under part B or enrolled under a MedicarePlus product

12 under part C, any requirement based on the premise that

13 such a policy or rider duplicates health benefits to which

14 the individual is otherwise entitled under this title.’’.

15 (2) CONFORMING AMENDMENTS.—Section

16 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—

17 (A) in subparagraph (B), by inserting

18 ‘‘(including any MedicarePlus product)’’ after

19 ‘‘health insurance policies’’;

20 (B) in subparagraph (C)—

21 (i) by striking ‘‘with respect to (i)’’

22 and inserting ‘‘with respect to’’, and

23 (ii) by striking ‘‘, (ii) the sale’’ and all

24 that follows up to the period at the end;

25 and
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1 (C) by striking subparagraph (D).

2 (3) MEDICAREPLUS PRODUCTS NOT TREATED

3 AS MEDICARE SUPPLEMENTARY POLICIES.—Section

4 1882(g) (42 U.S.C. 1395ss(g)) is amended by in5 serting ‘‘a MedicarePlus product or’’ after ‘‘and does

6 not include’’

7 (4) REPORT ON DUPLICATION AND COORDINA8 TION OF HEALTH INSURANCE POLICIES THAT ARE

9 NOT MEDICARE SUPPLEMENTAL POLICIES.—Not

10 later than 3 years after the date of the enactment

11 of this Act, the Secretary of Health and Human

12 Services shall prepare and submit to Congress a re13 port on the advisability and feasibility of restricting

14 the sale to medicare beneficiaries of health insurance

15 policies that duplicate (within the meaning of section

16 1882(d)(3)(A) of the Social Security Act) other

17 health insurance policies that such a beneficiary may

18 have. In preparing such report, the Secretary shall

19 seek the advice of the National Association of Insur20 ance Commissioners and shall take into account the

21 standards established under section 1807 of the So22 cial Security Act for the electronic coordination of

23 benefits.

24 (b) ADDITIONAL RULES RELATING TO INDIVIDUALS

25 ENROLLED IN MEDICAREPLUS PRODUCTS.—Section
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1 1882 (42 U.S.C. 1395ss) is further amended by adding

2 at the end the following new subsection:

3 ‘‘(u)(1) Notwithstanding the previous provisions of

4 this section, the following provisions shall not apply to a

5 health insurance policy (other than a medicare supple6 mental policy) provided to an individual who has elected

7 the MedicarePlus option under section 1805:

8 ‘‘(A) Subsections (o)(1), (o)(2), (p)(1)(A)(i),

9 (p)(2), (p)(3), (p)(8), and (p)(9) (insofar as they re10 late to limitations on benefits or groups of benefits

11 that may be offered).

12 ‘‘(B) Subsection (r) (relating to loss-ratios).

13 ‘‘(2)(A) It is unlawful for a person to sell or issue

14 a policy described in subparagraph (B) to an individual

15 with knowledge that the individual has in effect under sec16 tion 1805 an election of a high deductible/medisave prod17 uct.

18 ‘‘(B) A policy described in this subparagraph is a

19 health insurance policy that provides for coverage of ex20 penses that are otherwise required to be counted toward

21 meeting the annual deductible amount provided under the

22 high deductible/medisave product.’’.

23 SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI24 CARE HMO PROGRAM.

25 (a) TRANSITION FROM CURRENT CONTRACTS.—
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1 (1) LIMITATION ON NEW CONTRACTS.—

2 (A) NO NEW RISK-SHARING CONTRACTS

3 AFTER NEW STANDARDS ESTABLISHED.—The

4 Secretary of Health and Human Services (in

5 this section referred to as the ‘‘Secretary’’)

6 shall not enter into any risk-sharing contract

7 under section 1876 of the Social Security Act

8 with an eligible organization for any contract

9 year beginning on or after the date standards

10 for MedicarePlus organizations and products

11 are first established under section 1856(a) of

12 such Act with respect to MedicarePlus organi13 zations that are insurers or health maintenance

14 organizations unless such a contract had been

15 in effect under section 1876 of such Act for the

16 organization for the previous contract year.

17 (B) NO NEW COST REIMBURSEMENT CON18 TRACTS.—The Secretary shall not enter into

19 any cost reimbursement contract under section

20 1876 of the Social Security Act beginning for

21 any contract year beginning on or after the

22 date of the enactment of this Act.

23 (2) TERMINATION OF CURRENT CONTRACTS.—

24 (A) RISK-SHARING CONTRACTS.—Notwith25 standing any other provision of law, the Sec-
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1 retary shall not extend or continue any risk2 sharing contract with an eligible organization

3 under section 1876 of the Social Security Act

4 (for which a contract was entered into consist5 ent with paragraph (1)(A)) for any contract

6 year beginning on or after 1 year after the date

7 standards described in paragraph (1)(A) are es8 tablished.

9 (B) COST REIMBURSEMENT CONTRACTS.—

10 The Secretary shall not extend or continue any

11 reasonable cost reimbursement contract with an

12 eligible organization under section 1876 of the

13 Social Security Act for any contract year begin14 ning on or after January 1, 1998.

15 (b) CONFORMING PAYMENT RATES.—

16 (1) RISK-SHARING CONTRACTS.—Notwithstand17 ing any other provision of law, the Secretary shall

18 provide that payment amounts under risk-sharing

19 contracts under section 1876(a) of the Social Secu20 rity Act for months in a year (beginning with Janu21 ary 1996) shall be computed—

22 (A) with respect to individuals entitled to

23 benefits under both parts A and B of title

24 XVIII of such Act, by substituting payment

25 rates under section 1855(a) of such Act for the
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1 payment rates otherwise established under sec2 tion 1876(a) of such Act, and

3 (B) with respect to individuals only enti4 tled to benefits under part B of such title, by

5 substituting an appropriate proportion of such

6 rates (reflecting the relative proportion of pay7 ments under such title attributable to such

8 part) for the payment rates otherwise estab9 lished under section 1876(a) of such Act.

10 For purposes of carrying out this paragraph for pay11 ment for months in 1996, the Secretary shall com12 pute, announce, and apply the payment rates under

13 section 1855(a) of such Act (notwithstanding any

14 deadlines specified in such section) in as timely a

15 manner as possible and may (to the extent nec16 essary) provide for retroactive adjustment in pay17 ments made not in accordance with such rates.

18 (2) COST CONTRACTS.—Notwithstanding any

19 other provision of law, the Secretary shall provide

20 that payment amounts under cost reimbursement

21 contracts under section 1876(a) of the Social Secu22 rity Act shall take into account adjustments in pay23 ment amounts made in parts A and B of title XVIII

24 of such Act pursuant to the amendments made by

25 this title.
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1 (c) ELIMINATION OF 50:50 RULE.—

2 (1) IN GENERAL.—Section 1876 (42 U.S.C.

3 1395mm) is amended by striking subsection (f).

4 (2) CONFORMING AMENDMENTS.—Section 1876

5 is further amended—

6 (A) in subsection (c)(3)(A)(i), by striking

7 ‘‘would result in failure to meet the require8 ments of subsection (f) or’’, and

9 (B) in subsection (i)(1)(C), by striking

10 ‘‘(e), and (f)’’ and inserting ‘‘and (e)’’.

11 (3) EFFECTIVE DATE.—The amendments made

12 by this section shall apply to contract years begin13 ning on or after January 1, 1996.

14 PART 2—SPECIAL RULES FOR MEDICAREPLUS

15 MEDICAL SAVINGS ACCOUNTS

16 SEC. 15011. MEDICAREPLUS MSA’S.

17 (a) IN GENERAL.—Part III of subchapter B of chap18 ter 1 of the Internal Revenue Code of 1986 (relating to

19 amounts specifically excluded from gross income) is

20 amended by redesignating section 137 as section 138 and

21 by inserting after section 136 the following new section:

22 ‘‘SEC. 137. MEDICAREPLUS MSA’S.

23 ‘‘(a) EXCLUSION.—Gross income shall not include

24 any payment to the MedicarePlus MSA of an individual
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1 by the Secretary of Health and Human Services under

2 section 1855(f)(1)(B) of the Social Security Act.

3 ‘‘(b) MEDICAREPLUS MSA.—For purposes of this

4 section—

5 ‘‘(1) MEDICAREPLUS MSA.—The term

6 ‘MedicarePlus MSA’ means a trust created or orga7 nized in the United States exclusively for the pur8 pose of paying the qualified medical expenses of the

9 account holder, but only if the written governing in10 strument creating the trust meets the following re11 quirements:

12 ‘‘(A) Except in the case of a trustee-to13 trustee transfer described in subsection (d)(4),

14 no contribution will be accepted unless it is

15 made by the Secretary of Health and Human

16 Services under section 1855(f)(1)(B) of the So17 cial Security Act.

18 ‘‘(B) The trustee is a bank (as defined in

19 section 408(n)), an insurance company (as de20 fined in section 816), or another person who

21 demonstrates to the satisfaction of the Sec22 retary that the manner in which such person

23 will administer the trust will be consistent with

24 the requirements of this section.
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1 ‘‘(C) No part of the trust assets will be in2 vested in life insurance contracts.

3 ‘‘(D) The assets of the trust will not be

4 commingled with other property except in a

5 common trust fund or common investment

6 fund.

7 ‘‘(E) The interest of an individual in the

8 balance in his account is nonforfeitable.

9 ‘‘(F) Trustee-to-trustee transfers described

10 in subsection (d)(4) may be made to and from

11 the trust.

12 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

13 ‘‘(A) IN GENERAL.—The term ‘qualified

14 medical expenses’ means, with respect to an ac15 count holder, amounts paid by such holder—

16 ‘‘(i) for medical care (as defined in

17 section 213(d)) for the account holder, but

18 only to the extent such amounts are not

19 compensated for by insurance or otherwise,

20 or

21 ‘‘(ii) for long-term care insurance for

22 the account holder.

23 ‘‘(B) HEALTH INSURANCE MAY NOT BE

24 PURCHASED FROM ACCOUNT.—Subparagraph
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1 (A)(i) shall not apply to any payment for insur2 ance.

3 ‘‘(3) ACCOUNT HOLDER.—The term ‘account

4 holder’ means the individual on whose behalf the

5 MedicarePlus MSA is maintained.

6 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

7 to the rules of subsections (g) and (h) of section 408

8 shall apply for purposes of this section.

9 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

10 ‘‘(1) IN GENERAL.—A MedicarePlus MSA is ex11 empt from taxation under this subtitle unless such

12 MSA has ceased to be a MedicarePlus MSA by rea13 son of paragraph (2). Notwithstanding the preceding

14 sentence, any such MSA is subject to the taxes im15 posed by section 511 (relating to imposition of tax

16 on unrelated business income of charitable, etc. or17 ganizations).

18 ‘‘(2) ACCOUNT ASSETS TREATED AS DISTRIB19 UTED IN THE CASE OF PROHIBITED TRANSACTIONS

20 OR ACCOUNT PLEDGED AS SECURITY FOR LOAN.—

21 Rules similar to the rules of paragraphs (2) and (4)

22 of section 408(e) shall apply to MedicarePlus

23 MSA’s, and any amount treated as distributed under

24 such rules shall be treated as not used to pay quali25 fied medical expenses.
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1 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

2 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

3 QUALIFIED MEDICAL EXPENSES.—No amount shall

4 be included in the gross income of the account hold5 er by reason of a payment or distribution from a

6 MedicarePlus MSA which is used exclusively to pay

7 the qualified medical expenses of the account holder.

8 Any amount paid or distributed from a

9 MedicarePlus MSA which is not so used shall be in10 cluded in the gross income of such holder.

11 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

12 FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM

13 BALANCE NOT MAINTAINED.—

14 ‘‘(A) IN GENERAL.—The tax imposed by

15 this chapter for any taxable year in which there

16 is a payment or distribution from a

17 MedicarePlus MSA which is not used exclu18 sively to pay the qualified medical expenses of

19 the account holder shall be increased by 50 per20 cent of the excess (if any) of—

21 ‘‘(i) the amount of such payment or

22 distribution, over

23 ‘‘(ii) the excess (if any) of—

24 ‘‘(I) the fair market value of the

25 assets in the MedicarePlus MSA as of
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1 the close of the calendar year preced2 ing the calendar year in which the

3 taxable year begins, over

4 ‘‘(II) an amount equal to 60 per5 cent of the deductible under the high

6 deductible/medisave product covering

7 the account holder as of January 1 of

8 the calendar year in which the taxable

9 year begins.

10 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

11 shall not apply if the payment or distribution is

12 made on or after the date the account holder—

13 ‘‘(i) becomes disabled within the

14 meaning of section 72(m)(7), or

15 ‘‘(ii) dies.

16 ‘‘(C) SPECIAL RULES.—For purposes of

17 subparagraph (A)—

18 ‘‘(i) all MedicarePlus MSA’s of the ac19 count holder shall be treated as 1 account,

20 ‘‘(ii) all payments and distributions

21 not used exclusively to pay the qualified

22 medical expenses of the account holder

23 during any taxable year shall be treated as

24 1 distribution, and
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1 ‘‘(iii) any distribution of property

2 shall be taken into account at its fair mar3 ket value on the date of the distribution.

4 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU5 TIONS.—Paragraphs (1) and (2) shall not apply to

6 any payment or distribution from a MedicarePlus

7 MSA to the Secretary of Health and Human Serv8 ices of an erroneous contribution to such MSA and

9 of the net income attributable to such contribution.

10 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—

11 Paragraphs (1) and (2) shall not apply to any trust12 ee-to-trustee transfer from a MedicarePlus MSA of

13 an account holder to another MedicarePlus MSA of

14 such account holder.

15 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

16 DEDUCTION.—For purposes of section 213, any pay17 ment or distribution out of a MedicarePlus MSA for

18 qualified medical expenses shall not be treated as an

19 expense paid for medical care.

20 ‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF

21 ACCOUNT HOLDER.—

22 ‘‘(1) TREATMENT IF DESIGNATED BENEFICIARY

23 IS SPOUSE.—

24 ‘‘(A) IN GENERAL.—In the case of an ac25 count holder’s interest in a MedicarePlus MSA
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1 which is payable to (or for the benefit of) such

2 holder’s spouse upon the death of such holder,

3 such MedicarePlus MSA shall be treated as a

4 MedicarePlus MSA of such spouse as of the

5 date of such death.

6 ‘‘(B) SPECIAL RULES IF SPOUSE NOT MED7 ICARE ELIGIBLE.—If, as of the date of such

8 death, such spouse is not entitled to benefits

9 under title XVIII of the Social Security Act,

10 then after the date of such death—

11 ‘‘(i) the Secretary of Health and

12 Human Services may not make any pay13 ments to such MedicarePlus MSA, other

14 than payments attributable to periods be15 fore such date,

16 ‘‘(ii) in applying subsection (b)(2)

17 with respect to such MedicarePlus MSA,

18 references to the account holder shall be

19 treated as including references to any de20 pendent (as defined in section 152) of such

21 spouse and any subsequent spouse of such

22 spouse, and

23 ‘‘(iii) in lieu of applying subsection

24 (d)(2), the rules of section 220(f)(2) shall

25 apply.
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1 ‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY

2 IS NOT SPOUSE.—In the case of an account holder’s

3 interest in a MedicarePlus MSA which is payable to

4 (or for the benefit of) any person other than such

5 holder’s spouse upon the death of such holder—

6 ‘‘(A) such account shall cease to be a

7 MedicarePlus MSA as of the date of death, and

8 ‘‘(B) an amount equal to the fair market

9 value of the assets in such account on such date

10 shall be includible—

11 ‘‘(i) if such person is not the estate of

12 such holder, in such person’s gross income

13 for the taxable year which includes such

14 date, or

15 ‘‘(ii) if such person is the estate of

16 such holder, in such holder’s gross income

17 for last taxable year of such holder.

18 ‘‘(f) REPORTS.—

19 ‘‘(1) IN GENERAL.—The trustee of a

20 MedicarePlus MSA shall make such reports regard21 ing such account to the Secretary and to the account

22 holder with respect to—

23 ‘‘(A) the fair market value of the assets in

24 such MedicarePlus MSA as of the close of each

25 calendar year, and
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1 ‘‘(B) contributions, distributions, and other

2 matters,

3 as the Secretary may require by regulations.

4 ‘‘(2) TIME AND MANNER OF REPORTS.—The re5 ports required by this subsection—

6 ‘‘(A) shall be filed at such time and in

7 such manner as the Secretary prescribes in

8 such regulations, and

9 ‘‘(B) shall be furnished to the account

10 holder—

11 ‘‘(i) not later than January 31 of the

12 calendar year following the calendar year

13 to which such reports relate, and

14 ‘‘(ii) in such manner as the Secretary

15 prescribes in such regulations.’’

16 (b) EXCLUSION OF MEDICAREPLUS MSA’S FROM

17 ESTATE TAX.—Part IV of subchapter A of chapter 11 of

18 such Code is amended by adding at the end the following

19 new section:

20 ‘‘SEC. 2057. MEDICAREPLUS MSA’S.

21 ‘‘For purposes of the tax imposed by section 2001,

22 the value of the taxable estate shall be determined by de23 ducting from the value of the gross estate an amount

24 equal to the value of any MedicarePlus MSA (as defined

25 in section 137(b)) included in the gross estate.’’
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1 (c) TAX ON PROHIBITED TRANSACTIONS.—

2 (1) Section 4975 of such Code (relating to tax

3 on prohibited transactions) is amended by adding at

4 the end of subsection (c) the following new para5 graph:

6 ‘‘(4) SPECIAL RULE FOR MEDICAREPLUS

7 MSA’S.—An individual for whose benefit a

8 MedicarePlus MSA (within the meaning of section

9 137(b)) is established shall be exempt from the tax

10 imposed by this section with respect to any trans11 action concerning such account (which would other12 wise be taxable under this section) if, with respect

13 to such transaction, the account ceases to be a

14 MedicarePlus MSA by reason of the application of

15 section 137(c)(2) to such account.’’

16 (2) Paragraph (1) of section 4975(e) of such

17 Code is amended to read as follows:

18 ‘‘(1) PLAN.—For purposes of this section, the

19 term ‘plan’ means—

20 ‘‘(A) a trust described in section 401(a)

21 which forms a part of a plan, or a plan de22 scribed in section 403(a), which trust or plan is

23 exempt from tax under section 501(a),

24 ‘‘(B) an individual retirement account de25 scribed in section 408(a),
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1 ‘‘(C) an individual retirement annuity de2 scribed in section 408(b),

3 ‘‘(D) a medical savings account described

4 in section 220(d),

5 ‘‘(E) a MedicarePlus MSA described in

6 section 137(b), or

7 ‘‘(F) a trust, plan, account, or annuity

8 which, at any time, has been determined by the

9 Secretary to be described in any preceding sub10 paragraph of this paragraph.’’

11 (d) FAILURE TO PROVIDE REPORTS ON

12 MEDICAREPLUS MSA’S.—

13 (1) Subsection (a) of section 6693 of such Code

14 (relating to failure to provide reports on individual

15 retirement accounts or annuities) is amended to read

16 as follows:

17 ‘‘(a) REPORTS.—

18 ‘‘(1) IN GENERAL.—If a person required to file

19 a report under a provision referred to in paragraph

20 (2) fails to file such report at the time and in the

21 manner required by such provision, such person

22 shall pay a penalty of $50 for each failure unless it

23 is shown that such failure is due to reasonable

24 cause.
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1 ‘‘(2) PROVISIONS.—The provisions referred to

2 in this paragraph are—

3 ‘‘(A) subsections (i) and (l) of section 408

4 (relating to individual retirement plans),

5 ‘‘(B) section 220(h) (relating to medical

6 savings accounts), and

7 ‘‘(C) section 137(f) (relating to

8 MedicarePlus MSA’s).’’

9 (2) The section heading for section 6693 of

10 such Code is amended to read as follows:

11 ‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE12 TIREMENT PLANS AND CERTAIN OTHER TAX13 FAVORED ACCOUNTS; PENALTIES RELATING

14 TO DESIGNATED NONDEDUCTIBLE CON15 TRIBUTIONS.’’

16 (e) CLERICAL AMENDMENTS.—

17 (1) The table of sections for part III of sub18 chapter B of chapter 1 of such Code is amended by

19 striking the last item and inserting the following:

‘‘Sec. 137. MedicarePlus MSA’s.

‘‘Sec. 138. Cross references to other Acts.’’

20 (2) The table of sections for part 1 of sub21 chapter B of chapter 68 of such Code is amended
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1 by striking the item relating to section 6693 and in2 serting the following new item:

‘‘Sec. 6693. Failure to file reports on individual retirement plans

and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’’

3 (3) The table of sections for part IV of sub4 chapter A of chapter 11 of such Code is amended by

5 adding at the end the following new item:

‘‘Sec. 2057. MedicarePlus MSA’s.’’

6 (f) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to taxable years beginning after

8 December 31, 1996.

9 SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS

10 INCOME.

11 (a) IN GENERAL.—Section 105 of the Internal Reve12 nue Code of 1986 (relating to amounts received under ac13 cident and health plans) is amended by adding at the end

14 the following new subsection:

15 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY

16 ACT.—Gross income does not include any rebate received

17 under section 1852(e)(1)(A) of the Social Security Act

18 during the taxable year.’’

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) shall apply to amounts received after the

21 date of the enactment of this Act.
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1 PART 3—SPECIAL ANTITRUST RULE FOR

2 PROVIDER SERVICE NETWORKS

3 SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON

4 TO PROVIDER SERVICE NETWORKS.

5 (a) RULE OF REASON STANDARD.—In any action

6 under the antitrust laws, or under any State law similar

7 to the antitrust laws—

8 (1) the conduct of a provider service network in

9 negotiating, making, or performing a contract (in10 cluding the establishment and modification of a fee

11 schedule and the development of a panel of physi12 cians), to the extent such contract is for the purpose

13 of providing health care services to individuals under

14 the terms of a MedicarePlus PSO product, and

15 (2) the conduct of any member of such network

16 for the purpose of providing such health care serv17 ices under such contract to such extent,

18 shall not be deemed illegal per se. Such conduct shall be

19 judged on the basis of its reasonableness, taking into ac20 count all relevant factors affecting competition, including

21 the effects on competition in properly defined markets.

22 (b) DEFINITIONS.—For purposes of subsection (a):

23 (1) ANTITRUST LAWS.—The term ‘‘antitrust

24 laws’’ has the meaning given it in subsection (a) of

25 the first section of the Clayton Act (15 U.S.C. 12),

26 except that such term includes section 5 of the Fed-
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1 eral Trade Commission Act (15 U.S.C. 45) to the

2 extent that such section 5 applies to unfair methods

3 of competition.

4 (2) HEALTH CARE PROVIDER.—The term

5 ‘‘health care provider’’ means any individual or en6 tity that is engaged in the delivery of health care

7 services in a State and that is required by State law

8 or regulation to be licensed or certified by the State

9 to engage in the delivery of such services in the

10 State.

11 (3) HEALTH CARE SERVICE.—The term ‘‘health

12 care service’’ means any service for which payment

13 may be made under a MedicarePlus PSO product in14 cluding services related to the delivery or adminis15 tration of such service.

16 (4) MEDICAREPLUS PROGRAM.—The term

17 ‘‘MedicarePlus program’’ means the program under

18 part C of title XVIII of the Social Security Act.

19 (5) MEDICAREPLUS PSO PRODUCT.—The term

20 ‘‘MedicarePlus PSO product’’ means a MedicarePlus

21 product offered by a provider-sponsored organization

22 under part C of title XVIII of the Social Security

23 Act.
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1 (6) PROVIDER SERVICE NETWORK.—The term

2 ‘‘provider service network’’ means an organization

3 that—

4 (A) is organized by, operated by, and com5 posed of members who are health care providers

6 and for purposes that include providing health

7 care services,

8 (B) is funded in part by capital contribu9 tions made by the members of such organiza10 tion,

11 (C) with respect to each contract made by

12 such organization for the purpose of providing

13 a type of health care service to individuals

14 under the terms of a MedicarePlus PSO prod15 uct—

16 (i) requires all members of such orga17 nization who engage in providing such type

18 of health care service to agree to provide

19 health care services of such type under

20 such contract,

21 (ii) receives the compensation paid for

22 the health care services of such type pro23 vided under such contract by such mem24 bers, and
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1 (iii) provides for the distribution of

2 such compensation,

3 (D) has established, consistent with the re4 quirements of the MedicarePlus program for

5 provider-sponsored organizations, a program to

6 review, pursuant to written guidelines, the qual7 ity, efficiency, and appropriateness of treatment

8 methods and setting of services for all health

9 care providers and all patients participating in

10 such product, along with internal procedures to

11 correct identified deficiencies relating to such

12 methods and such services,

13 (E) has established, consistent with the re14 quirements of the MedicarePlus program for

15 provider-sponsored organizations, a program to

16 monitor and control utilization of health care

17 services provided under such product, for the

18 purpose of improving efficient, appropriate care

19 and eliminating the provision of unnecessary

20 health care services,

21 (F) has established a management pro22 gram to coordinate the delivery of health care

23 services for all health care providers and all pa24 tients participating in such product, for the
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1 purpose of achieving efficiencies and enhancing

2 the quality of health care services provided, and

3 (G) has established, consistent with the re4 quirements of the MedicarePlus program for

5 provider-sponsored organizations, a grievance

6 and appeal process for such organization de7 signed to review and promptly resolve bene8 ficiary or patient grievances and complaints.

9 Such term may include a provider-sponsored organi10 zation.

11 (7) PROVIDER-SPONSORED ORGANIZATION.—

12 The term ‘‘provider-sponsored organization’’ means

13 a MedicarePlus organization under the MedicarePlus

14 program that is a provider-sponsored organization

15 (as defined in section ll of the Social Security

16 Act).

17 (8) STATE.—The term ‘‘State’’ has the mean18 ing given it in section 4G(2) of the Clayton Act (15

19 U.S.C. 15g(2)).

20 (c) ISSUANCE OF GUIDELINES.—Not later than 120

21 days after the date of the enactment of this Act, the Attor22 ney General and the Federal Trade Commission shall

23 issue jointly guidelines specifying the enforcement policies

24 and analytical principles that will be applied by the De-
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1 partment of Justice and the Commission with respect to

2 the operation of subsection (a).

3 PART 4—COMMISSIONS

4 SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

5 (a) IN GENERAL.—Title XVIII, as amended by sec6 tion 15001(a), is amended by inserting after section 1805

7 the following new section:

8 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

9 ‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby

10 established the Medicare Payment Review Commission (in

11 this section referred to as the ‘Commission’).

12 ‘‘(b) DUTIES.—

13 ‘‘(1) GENERAL DUTIES AND REPORTS.—

14 ‘‘(A) IN GENERAL.—The Commission shall

15 review, and make recommendations to Congress

16 concerning, payment policies under this title.

17 ‘‘(B) ANNUAL REPORTS.—By not later

18 than June 1 of each year, the Commission shall

19 submit a report to Congress containing an ex20 amination of issues affecting the medicare pro21 gram, including the implications of changes in

22 health care delivery in the United States and in

23 the market for health care services on the medi24 care program.

25 ‘‘(C) ADDITIONAL REPORTS.—The Com26 mission may submit to Congress from time to
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1 time such other reports as the Commission

2 deems appropriate. By not later than May 1,

3 1997, the Commission shall submit to Congress

4 a report on the matter described in paragraph

5 (2)(G).

6 ‘‘(D) SECRETARIAL RESPONSE IN RULE7 MAKING.—The Secretary shall respond to rec8 ommendations of the Commission in notices of

9 rulemaking proceedings under this title.

10 ‘‘(2) SPECIFIC DUTIES RELATING TO

11 MEDICAREPLUS PROGRAM.—Specifically, the Com12 mission shall review, with respect to the

13 MedicarePlus program under part C—

14 ‘‘(A) the appropriateness of the methodol15 ogy for making payment to plans under such

16 program, including the making of differential

17 payments and the distribution of differential

18 updates among different payment areas);

19 ‘‘(B) the appropriateness of the mecha20 nisms used to adjust payments for risk and the

21 need to adjust such mechanisms to take into ac22 count health status of beneficiaries;

23 ‘‘(C) the implications of risk selection both

24 among MedicarePlus organizations and between
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1 the MedicarePlus option and the non2 MedicarePlus option;

3 ‘‘(D) in relation to payment under part C,

4 the development and implementation of mecha5 nisms to assure the quality of care for those en6 rolled with MedicarePlus organizations;

7 ‘‘(E) the impact of the MedicarePlus pro8 gram on access to care for medicare bene9 ficiaries;

10 ‘‘(F) the feasibility and desirability of ex11 tending the rules for open enrollment that apply

12 during the transition period to apply in each

13 county during the first 2 years in which

14 MedicarePlus products are made available to in15 dividuals residing in the county; and

16 ‘‘(G) other major issues in implementation

17 and further development of the MedicarePlus

18 program.

19 ‘‘(3) SPECIFIC DUTIES RELATING TO THE

20 FAILSAFE BUDGET MECHANISM.—Specifically, the

21 Commission shall review, with respect to the failsafe

22 budget mechanism described in section 1895—

23 ‘‘(A) the appropriateness of the expendi24 ture projections by the Secretary under section

25 1895(c) for each medicare sector;
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1 ‘‘(B) the appropriateness of the growth

2 factors for each sector and the ability to take

3 into account substitution across sectors;

4 ‘‘(C) the appropriateness of the mecha5 nisms for implementing reductions in payment

6 amounts for different sectors, including any ad7 justments to reflect changes in volume or inten8 sity resulting for any payment reductions;

9 ‘‘(D) the impact of the mechanism on pro10 vider participation in parts A and B and in the

11 MedicarePlus program; and

12 ‘‘(E) the appropriateness of the medicare

13 benefit budget (under section 1895(c)(2)(C) of

14 the Social Security Act), particularly for fiscal

15 years after fiscal year 2002.

16 ‘‘(4) SPECIFIC DUTIES RELATING TO THE FEE17 FOR-SERVICE SYSTEM.—Specifically, the Commission

18 shall review payment policies under parts A and B,

19 including—

20 ‘‘(A) the factors affecting expenditures for

21 services in different sectors, including the proc22 ess for updating hospital, physician, and other

23 fees,

24 ‘‘(B) payment methodologies; and
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1 ‘‘(C) the impact of payment policies on ac2 cess and quality of care for medicare bene3 ficiaries.

4 ‘‘(5) SPECIFIC DUTIES RELATING TO INTER5 ACTION OF PAYMENT POLICIES WITH HEALTH CARE

6 DELIVERY GENERALLY.—Specifically the Commis7 sion shall review the effect of payment policies under

8 this title on the delivery of health care services

9 under this title and assess the implications of

10 changes in the health services market on the medi11 care program.

12 ‘‘(c) MEMBERSHIP.—

13 ‘‘(1) NUMBER AND APPOINTMENT.—The Com14 mission shall be composed of 15 members appointed

15 by the Comptroller General.

16 ‘‘(2) QUALIFICATIONS.—The membership of the

17 Commission shall include individuals with national

18 recognition for their expertise in health finance and

19 economics, actuarial science, health facility manage20 ment, health plans and integrated delivery systems,

21 reimbursement of health facilities, allopathic and os22 teopathic physicians, and other providers of services,

23 and other related fields, who provide a mix of dif24 ferent professionals, broad geographic representa25 tion, and a balance between urban and rural rep-
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1 resentatives, including physicians and other health

2 professionals, employers, third party payors, individ3 uals skilled in the conduct and interpretation of bio4 medical, health services, and health economics re5 search and expertise in outcomes and effectiveness

6 research and technology assessment. Such member7 ship shall also include representatives of consumers

8 and the elderly.

9 ‘‘(3) CONSIDERATIONS IN INITIAL APPOINT10 MENT.—To the extent possible, in first appointing

11 members to the Commission the Comptroller Gen12 eral shall consider appointing individuals who (as of

13 the date of the enactment of this section) were serv14 ing on the Prospective Payment Assessment Com15 mission or the Physician Payment Review Commis16 sion.

17 ‘‘(4) TERMS.—

18 ‘‘(A) IN GENERAL.—The terms of mem19 bers of the Commission shall be for 3 years ex20 cept that the Comptroller General shall des21 ignate staggered terms for the members first

22 appointed.

23 ‘‘(B) VACANCIES.—Any member appointed

24 to fill a vacancy occurring before the expiration

25 of the term for which the member’s predecessor
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1 was appointed shall be appointed only for the

2 remainder of that term. A member may serve

3 after the expiration of that member’s term until

4 a successor has taken office. A vacancy in the

5 Commission shall be filled in the manner in

6 which the original appointment was made.

7 ‘‘(5) COMPENSATION.—While serving on the

8 business of the Commission (including traveltime), a

9 member of the Commission shall be entitled to com10 pensation at the per diem equivalent of the rate pro11 vided for level IV of the Executive Schedule under

12 section 5315 of title 5, United States Code; and

13 while so serving away from home and member’s reg14 ular place of business, a member may be allowed

15 travel expenses, as authorized by the Chairman of

16 the Commission. Physicians serving as personnel of

17 the Commission may be provided a physician com18 parability allowance by the Commission in the same

19 manner as Government physicians may be provided

20 such an allowance by an agency under section 5948

21 of title 5, United States Code, and for such purpose

22 subsection (i) of such section shall apply to the Com23 mission in the same manner as it applies to the Ten24 nessee Valley Authority. For purposes of pay (other

25 than pay of members of the Commission) and em-
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1 ployment benefits, rights, and privileges, all person2 nel of the Commission shall be treated as if they

3 were employees of the United States Senate.

4 ‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp5 troller General shall designate a member of the

6 Commission, at the time of appointment of the mem7 ber, as Chairman and a member as Vice Chairman

8 for that term of appointment.

9 ‘‘(7) MEETINGS.—The Commission shall meet

10 at the call of the Chairman.

11 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON12 SULTANTS.—Subject to such review as the Comptroller

13 General deems necessary to assure the efficient adminis14 tration of the Commission, the Commission may—

15 ‘‘(1) employ and fix the compensation of an Ex16 ecutive Director (subject to the approval of the

17 Comptroller General) and such other personnel as

18 may be necessary to carry out its duties (without re19 gard to the provisions of title 5, United States Code,

20 governing appointments in the competitive service);

21 ‘‘(2) seek such assistance and support as may

22 be required in the performance of its duties from ap23 propriate Federal departments and agencies;

24 ‘‘(3) enter into contracts or make other ar25 rangements, as may be necessary for the conduct of
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1 the work of the Commission (without regard to sec2 tion 3709 of the Revised Statutes (41 U.S.C. 5));

3 ‘‘(4) make advance, progress, and other pay4 ments which relate to the work of the Commission;

5 ‘‘(5) provide transportation and subsistence for

6 persons serving without compensation; and

7 ‘‘(6) prescribe such rules and regulations as it

8 deems necessary with respect to the internal organi9 zation and operation of the Commission.

10 ‘‘(e) POWERS.—

11 ‘‘(1) OBTAINING OFFICIAL DATA.—The Com12 mission may secure directly from any department or

13 agency of the United States information necessary

14 to enable it to carry out this section. Upon request

15 of the Chairman, the head of that department or

16 agency shall furnish that information to the Com17 mission on an agreed upon schedule.

18 ‘‘(2) DATA COLLECTION.—In order to carry out

19 its functions, the Commission shall collect and as20 sess information to—

21 ‘‘(A) utilize existing information, both pub22 lished and unpublished, where possible, collected

23 and assessed either by its own staff or under

24 other arrangements made in accordance with

25 this section,
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1 ‘‘(B) carry out, or award grants or con2 tracts for, original research and experimen3 tation, where existing information is inad4 equate, and

5 ‘‘(C) adopt procedures allowing any inter6 ested party to submit information for the Com7 mission’s use in making reports and rec8 ommendations.

9 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

10 Comptroller General shall have unrestricted access

11 to all deliberations, records, and data of the Com12 mission, immediately upon request.

13 ‘‘(4) PERIODIC AUDIT.—The Commission shall

14 be subject to periodic audit by the General Account15 ing Office.

16 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—

17 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

18 Commission shall submit requests for appropriations

19 in the same manner as the Comptroller General sub20 mits requests for appropriations, but amounts ap21 propriated for the Commission shall be separate

22 from amounts appropriated for the Comptroller Gen23 eral.

24 ‘‘(2) AUTHORIZATION.—There are authorized to

25 be appropriated such sums as may be necessary to
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1 carry out the provisions of this section. 60 percent

2 of such appropriation shall be payable from the Fed3 eral Hospital Insurance Trust Fund, and 40 percent

4 of such appropriation shall be payable from the Fed5 eral Supplementary Medical Insurance Trust

6 Fund.’’.

7 (b) ABOLITION OF PROPAC AND PPRC.—

8 (1) PROPAC.—

9 (A) IN GENERAL.—Section 1886(e) (42

10 U.S.C. 1395ww(e)) is amended—

11 (i) by striking paragraphs (2) and (6);

12 and

13 (ii) in paragraph (3), by striking ‘‘(A)

14 The Commission’’ and all that follows

15 through ‘‘(B)’’.

16 (B) CONFORMING AMENDMENT.—Section

17 1862 (42 U.S.C. 1395y) is amended by striking

18 ‘‘Prospective Payment Assessment Commis19 sion’’ each place it appears in subsection

20 (a)(1)(D) and subsection (i) and inserting

21 ‘‘Medicare Payment Review Commission’’.

22 (2) PPRC.—

23 (A) IN GENERAL.—Title XVIII is amended

24 by striking section 1845 (42 U.S.C. 1395w–1).

25 (B) CONFORMING AMENDMENTS.—
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1 (i) Section 1834(b)(2) (42 U.S.C.

2 1395m(b)(2)) is amended by striking

3 ‘‘Physician Payment Review Commission’’

4 and inserting ‘‘Medicare Payment Review

5 Commission’’.

6 (ii) Section 1842(b) (42 U.S.C.

7 1395u(b)) is amended by striking ‘‘Physi8 cian Payment Review Commission’’ each

9 place it appears in paragraphs (9)(D) and

10 (14)(C)(i) and inserting ‘‘Medicare Pay11 ment Review Commission’’.

12 (iii) Section 1848 (42 U.S.C. 1395w–

13 4) is amended by striking ‘‘Physician Pay14 ment Review Commission’’ and inserting

15 ‘‘Medicare Payment Review Commission’’

16 each place it appears in paragraph

17 (2)(A)(ii), (2)(B)(iii), and (5) of subsection

18 (c), subsection (d)(2)(F), paragraphs

19 (1)(B), (3), and (4)(A) of subsection (f),

20 and paragraphs (6)(C) and (7)(C) of sub21 section (g).

22 (c) EFFECTIVE DATE; TRANSITION.—

23 (1) IN GENERAL.—The Comptroller General

24 shall first provide for appointment of members to

25 the Medicare Payment Review Commission (in this
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1 subsection referred to as ‘‘MPRC’’) by not later

2 than March 31, 1996.

3 (2) TRANSITION.—Effective on a date (not later

4 than 30 days after the date a majority of members

5 of the MPRC have first been appointed, the Pro6 spective Payment Assessment Commission (in this

7 subsection referred to as ‘‘ProPAC’’) and the Physi8 cian Payment Review Commission (in this subsection

9 referred to as ‘‘PPRC’’), and amendments made by

10 subsection (b), are terminated. The Comptroller

11 General, to the maximum extent feasible, shall pro12 vide for the transfer to the MPRC of assets and

13 staff of ProPAC and PPRC, without any loss of

14 benefits or seniority by virtue of such transfers.

15 Fund balances available to the ProPAC or PPRC

16 for any period shall be available to the MPRC for

17 such period for like purposes.

18 (3) CONTINUING RESPONSIBILITY FOR RE19 PORTS.—The MPRC shall be responsible for the

20 preparation and submission of reports required by

21 law to be submitted (and which have not been sub22 mitted by the date of establishment of the MPRC)

23 by the ProPAC and PPRC, and, for this purpose,

24 any reference in law to either such Commission is
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1 deemed, after the appointment of the MPRC, to

2 refer to the MPRC.

3 SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY

4 BOOM GENERATION ON THE MEDICARE PRO5 GRAM.

6 (a) ESTABLISHMENT.—There is established a com7 mission to be known as the Commission on the Effect of

8 the Baby Boom Generation on the Medicare Program (in

9 this section referred to as the ‘‘Commission’’).

10 (b) DUTIES.—

11 (1) IN GENERAL.—The Commission shall—

12 (A) examine the financial impact on the

13 medicare program of the significant increase in

14 the number of medicare eligible individuals

15 which will occur beginning approximately dur16 ing 2010 and lasting for approximately 25

17 years, and

18 (B) make specific recommendations to the

19 Congress respecting a comprehensive approach

20 to preserve the medicare program for the period

21 during which such individuals are eligible for

22 medicare.

23 (2) CONSIDERATIONS IN MAKING REC24 OMMENDATIONS.—In making its recommendations,

25 the Commission shall consider the following:
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1 (A) The amount and sources of Federal

2 funds to finance the medicare program, includ3 ing the potential use of innovative financing

4 methods.

5 (B) The most efficient and effective man6 ner of administering the program, including the

7 appropriateness of continuing the application of

8 the failsafe budget mechanism under section

9 1895 of the Social Security Act for fiscal years

10 after fiscal year 2002 and the appropriate long11 term growth rates for contributions electing

12 coverage under MedicarePlus under part C of

13 title XVIII of such Act.

14 (C) Methods used by other nations to re15 spond to comparable demographic patterns in

16 eligibility for health care benefits for elderly

17 and disabled individuals.

18 (D) Modifying age-based eligibility to cor19 respond to changes in age-based eligibility

20 under the OASDI program.

21 (E) Trends in employment-related health

22 care for retirees, including the use of medical

23 savings accounts and similar financing devices.

24 (c) MEMBERSHIP.—
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1 (1) APPOINTMENT.—The Commission shall be

2 composed of 15 members appointed as follows:

3 (A) The President shall appoint 3 mem4 bers.

5 (B) The Majority Leader of the Senate

6 shall appoint, after consultation with the minor7 ity leader of the Senate, 6 members, of whom

8 not more than 4 may be of the same political

9 party.

10 (C) The Speaker of the House of Rep11 resentatives shall appoint, after consultation

12 with the minority leader of the House of Rep13 resentatives, 6 members, of whom not more

14 than 4 may be of the same political party.

15 (2) CHAIRMAN AND VICE CHAIRMAN.—The

16 Commission shall elect a Chairman and Vice Chair17 man from among its members.

18 (3) VACANCIES.—Any vacancy in the member19 ship of the Commission shall be filled in the manner

20 in which the original appointment was made and

21 shall not affect the power of the remaining members

22 to execute the duties of the Commission.

23 (4) QUORUM.—A quorum shall consist of 8

24 members of the Commission, except that 4 members

25 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.

3 (8) ADMINISTRATIVE SUPPORT SERVICES.—

4 Upon the request of the Commission, the Adminis5 trator of General Services shall provide to the Com6 mission on a reimbursable basis such administrative

7 support services as the Commission may request.

8 (9) ACCEPTANCE OF DONATIONS.—The Com9 mission may accept, use, and dispose of gifts or do10 nations of services or property.

11 (10) PRINTING.—For purposes of costs relating

12 to printing and binding, including the cost of per13 sonnel detailed from the Government Printing Of14 fice, the Commission shall be deemed to be a com15 mittee of the Congress.

16 (f) REPORT.—Not later than May 1, 1997, the Com17 mission shall submit to Congress a report containing its

18 findings and recommendations regarding how to protect

19 and preserve the medicare program in a financially solvent

20 manner until 2030 (or, if later, throughout the period of

21 projected solvency of the Federal Old-Age and Survivors

22 Insurance Trust Fund). The report shall include detailed

23 recommendations for appropriate legislative initiatives re24 specting how to accomplish this objective.
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1 (g) TERMINATION.—The Commission shall terminate

2 60 days after the date of submission of the report required

3 in subsection (f).

4 (h) AUTHORIZATION OF APPROPRIATIONS.—There

5 are authorized to be appropriated $1,500,000 to carry out

6 this section. Amounts appropriated to carry out this sec7 tion shall remain available until expended.

8 SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR

9 OF HCFA.

10 (a) IN GENERAL.—Section 1117 (42 U.S.C. 1317)

11 is amended by striking ‘‘President by and with the advice

12 and consent of the Senate’’ and inserting ‘‘Secretary of

13 Health and Human Services’’.

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall take effect on the date of the enact16 ment of this Act and shall apply to Administrators ap17 pointed on or after the date of the enactment of this Act.

18 PART 5—TREATMENT OF HOSPITALS WHICH PAR19 TICIPATE IN PROVIDER-SPONSORED ORGA20 NIZATIONS

21 SEC. 15041. TREATMENT OF HOSPITALS WHICH PARTICI22 PATE IN PROVIDER-SPONSORED ORGANIZA23 TIONS.

24 (a) IN GENERAL.—Section 501 of the Internal Reve25 nue Code of 1986 (relating to exemption from tax on cor-
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1 porations, certain trusts, etc.) is amended by redesignat2 ing subsection (n) as subsection (o) and by inserting after

3 subsection (m) the following new subsection:

4 ‘‘(n) TREATMENT OF HOSPITALS PARTICIPATING IN

5 PROVIDER-SPONSORED ORGANIZATIONS.—An organiza6 tion shall not fail to be treated as organized and operated

7 exclusively for a charitable purpose for purposes of sub8 section (c)(3) solely because a hospital which is owned and

9 operated by such organization participates in a provider10 sponsored organization (as defined in section 1854(a)(1)

11 of the Social Security Act), whether or not the provider12 sponsored organization is exempt from tax. For purposes

13 of subsection (c)(3), any person with a material financial

14 interest in such a provider-sponsored organization shall be

15 treated as a private shareholder or individual with respect

16 to the hospital.’’

17 (b) EFFECTIVE DATE.—The amendment made by

18 subsection (a) shall take effect on the date of the enact19 ment of this Act.
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1 Subtitle B—Preventing Fraud and

2 Abuse

3 PART 1—GENERAL PROVISIONS

4 SEC. 15101. INCREASING AWARENESS OF FRAUD AND

5 ABUSE.

6 (a) BENEFICIARY OUTREACH EFFORTS.—The Sec7 retary of Health and Human Services (acting through the

8 Administrator of the Health Care Financing Administra9 tion and the Inspector General of the Department of

10 Health and Human Services) shall make ongoing efforts

11 (through public service announcements, publications, and

12 other appropriate methods) to alert individuals entitled to

13 benefits under the medicare program of the existence of

14 fraud and abuse committed against the program and the

15 costs to the program of such fraud and abuse, and of the

16 existence of the toll-free telephone line operated by the

17 Secretary to receive information on fraud and abuse com18 mitted against the program.

19 (b) CLARIFICATION OF REQUIREMENT TO PROVIDE

20 EXPLANATION OF MEDICARE BENEFITS.—The Secretary

21 shall provide an explanation of benefits under the medi22 care program with respect to each item or service for

23 which payment may be made under the program which

24 is furnished to an individual, without regard to whether
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1 or not a deductible or coinsurance may be imposed against

2 the individual with respect to the item or service.

3 (c) PROVIDER OUTREACH EFFORTS; PUBLICATION

4 OF FRAUD ALERTS.—

5 (1) SPECIAL FRAUD ALERTS.—

6 (A) IN GENERAL.—

7 (i) REQUEST FOR SPECIAL FRAUD

8 ALERTS.—Any person may present, at any

9 time, a request to the Secretary to issue

10 and publish a special fraud alert.

11 (ii) SPECIAL FRAUD ALERT DE12 FINED.—In this section, a ‘‘special fraud

13 alert’’ is a notice which informs the public

14 of practices which the Secretary considers

15 to be suspect or of particular concern

16 under the medicare program or a State

17 health care program (as defined in section

18 1128(h) of the Social Security Act).

19 (B) ISSUANCE AND PUBLICATION OF SPE20 CIAL FRAUD ALERTS.—

21 (i) INVESTIGATION.—Upon receipt of

22 a request for a special fraud alert under

23 subparagraph (A), the Secretary shall in24 vestigate the subject matter of the request

25 to determine whether a special fraud alert
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1 should be issued. If appropriate, the Sec2 retary (in consultation with the Attorney

3 General) shall issue a special fraud alert in

4 response to the request. All special fraud

5 alerts issued pursuant to this subpara6 graph shall be published in the Federal

7 Register.

8 (ii) CRITERIA FOR ISSUANCE.—In de9 termining whether to issue a special fraud

10 alert upon a request under subparagraph

11 (A), the Secretary may consider—

12 (I) whether and to what extent

13 the practices that would be identified

14 in the special fraud alert may result

15 in any of the consequences described

16 in 15214(b); and

17 (II) the extent and frequency of

18 the conduct that would be identified

19 in the special fraud alert.

20 (2) PUBLICATION OF ALL HCFA FRAUD ALERTS

21 IN FEDERAL REGISTER.—Each notice issued by the

22 Health Care Financing Administration which in23 forms the public of practices which the Secretary

24 considers to be suspect or of particular concern

25 under the medicare program or a State health care
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1 program (as defined in section 1128(h) of the Social

2 Security Act) shall be published in the Federal Reg3 ister, without regard to whether or not the notice

4 is issued by a regional office of the Health Care Fi5 nancing Administration.

6 SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.

7 (a) PROGRAM TO COLLECT INFORMATION ON FRAUD

8 AND ABUSE.—

9 (1) ESTABLISHMENT OF PROGRAM.—Not later

10 than 3 months after the date of the enactment of

11 this Act, the Secretary of Health and Human Serv12 ices (hereinafter in this subtitle referred to as the

13 ‘‘Secretary’’) shall establish a program under which

14 the Secretary shall encourage individuals to report

15 to the Secretary information on individuals and enti16 ties who are engaging or who have engaged in acts

17 or omissions which constitute grounds for the impo18 sition of a sanction under section 1128, section

19 1128A, or section 1128B of the Social Security Act,

20 or who have otherwise engaged in fraud and abuse

21 against the medicare program for which there is a

22 sanction provided under law. The program shall dis23 courage provision of, and not consider, information

24 which is frivolous or otherwise not relevant or mate25 rial to the imposition of such a sanction.
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1 (2) PAYMENT OF PORTION OF AMOUNTS COL2 LECTED.—If an individual reports information to

3 the Secretary under the program established under

4 paragraph (1) which serves as the basis for the col5 lection by the Secretary or the Attorney General of

6 any amount of at least $100 (other than any

7 amount paid as a penalty under section 1128B of

8 the Social Security Act), the Secretary may pay a

9 portion of the amount collected to the individual

10 (under procedures similar to those applicable under

11 section 7623 of the Internal Revenue Code of 1986

12 to payments to individuals providing information on

13 violations of such Code).

14 (b) PROGRAM TO COLLECT INFORMATION ON PRO15 GRAM EFFICIENCY.—

16 (1) ESTABLISHMENT OF PROGRAM.—Not later

17 than 3 months after the date of the enactment of

18 this Act, the Secretary shall establish a program

19 under which the Secretary shall encourage individ20 uals to submit to the Secretary suggestions on meth21 ods to improve the efficiency of the medicare pro22 gram.

23 (2) PAYMENT OF PORTION OF PROGRAM SAV24 INGS.—If an individual submits a suggestion to the

25 Secretary under the program established under
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1 paragraph (1) which is adopted by the Secretary and

2 which results in savings to the program, the Sec3 retary may make a payment to the individual of

4 such amount as the Secretary considers appropriate.

5 SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE

6 HEALTH MAINTENANCE ORGANIZATIONS.

7 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

8 ANY PROGRAM VIOLATIONS.—

9 (1) IN GENERAL.—Section 1876(i)(1) (42

10 U.S.C. 1395mm(i)(1)) is amended by striking ‘‘the

11 Secretary may terminate’’ and all that follows and

12 inserting the following: ‘‘in accordance with proce13 dures established under paragraph (9), the Secretary

14 may at any time terminate any such contract or may

15 impose the intermediate sanctions described in para16 graph (6)(B) or (6)(C) (whichever is applicable) on

17 the eligible organization if the Secretary determines

18 that the organization—

19 ‘‘(A) has failed substantially to carry out the

20 contract;

21 ‘‘(B) is carrying out the contract in a manner

22 inconsistent with the efficient and effective adminis23 tration of this section;
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1 ‘‘(C) is operating in a manner that is not in the

2 best interests of the individuals covered under the

3 contract; or

4 ‘‘(D) no longer substantially meets the applica5 ble conditions of subsections (b), (c), and (e).’’.

6 (2) OTHER INTERMEDIATE SANCTIONS FOR

7 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

8 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

9 adding at the end the following new subparagraph:

10 ‘‘(C) In the case of an eligible organization for which

11 the Secretary makes a determination under paragraph (1)

12 the basis of which is not described in subparagraph (A),

13 the Secretary may apply the following intermediate sanc14 tions:

15 ‘‘(i) civil money penalties of not more than

16 $25,000 for each determination under paragraph (1)

17 if the deficiency that is the basis of the determina18 tion has directly adversely affected (or has the sub19 stantial likelihood of adversely affecting) an individ20 ual covered under the organization’s contract;

21 ‘‘(ii) civil money penalties of not more than

22 $10,000 for each week beginning after the initiation

23 of procedures by the Secretary under paragraph (9)

24 during which the deficiency that is the basis of a de25 termination under paragraph (1) exists; and
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1 ‘‘(iii) suspension of enrollment of individuals

2 under this section after the date the Secretary noti3 fies the organization of a determination under para4 graph (1) and until the Secretary is satisfied that

5 the deficiency that is the basis for the determination

6 has been corrected and is not likely to recur.’’.

7 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

8 Section 1876(i) (42 U.S.C. 1395mm(i)) is amended

9 by adding at the end the following new paragraph:

10 ‘‘(9) The Secretary may terminate a contract with an

11 eligible organization under this section or may impose the

12 intermediate sanctions described in paragraph (6) on the

13 organization in accordance with formal investigation and

14 compliance procedures established by the Secretary under

15 which—

16 ‘‘(A) the Secretary provides the organization

17 with the opportunity to develop and implement a

18 corrective action plan to correct the deficiencies that

19 were the basis of the Secretary’s determination

20 under paragraph (1);

21 ‘‘(B) the Secretary shall impose more severe

22 sanctions on organizations that have a history of de23 ficiencies or that have not taken steps to correct de24 ficiencies the Secretary has brought to their atten25 tion;
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1 ‘‘(C) there are no unreasonable or unnecessary

2 delays between the finding of a deficiency and the

3 imposition of sanctions; and

4 ‘‘(D) 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 (4) CONFORMING AMENDMENTS.—(A) Section

10 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

11 amended by striking the second sentence.

12 (B) Section 1876(i)(6) (42 U.S.C.

13 1395mm(i)(6)) is further amended by adding at the

14 end the following new subparagraph:

15 ‘‘(D) The provisions of section 1128A (other than

16 subsections (a) and (b)) shall apply to a civil money pen17 alty under subparagraph (A) or (B) in the same manner

18 as they apply to a civil money penalty or proceeding under

19 section 1128A(a).’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 this section shall apply with respect to contract years be22 ginning on or after January 1, 1996.

23 SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.

24 Title XI (42 U.S.C. 1301 et seq.) is amended by in25 serting after section 1128B the following new section:
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1 ‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS

2 ‘‘SEC. 1129. (a) ESTABLISHMENT OF VOLUNTARY

3 DISCLOSURE PROGRAM.—Not later than 3 months after

4 the date of the enactment of this section, the Secretary

5 shall establish a program to encourage individuals and en6 tities to voluntarily disclose to the Secretary information

7 on acts or omissions of the individual or entity which con8 stitute grounds for the imposition of a sanction described

9 in section 1128, 1128A, or 1128B.

10 ‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If an

11 individual or entity voluntarily discloses information with

12 respect to an act or omission to the Secretary under sub13 section (a), the following rules shall apply:

14 ‘‘(1) The Secretary may waive, reduce, or other15 wise mitigate any sanction which would otherwise be

16 applicable to the individual or entity under section

17 1128, 1128A, or 1128B as a result of the act or

18 omission involved.

19 ‘‘(2) No qui tam action may be brought pursu20 ant to chapter 37 of title 31, United States Code,

21 against the individual or entity with respect to the

22 act or omission involved.’’.

23 SEC. 15105. REVISIONS TO CURRENT SANCTIONS.

24 (a) DOUBLING THE AMOUNT OF CIVIL MONETARY

25 PENALTIES.—The maximum amount of civil monetary
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1 penalties specified in section 1128A of the Social Security

2 Act or under title XVIII of such Act (as in effect on the

3 day before the date of the enactment of this Act) shall,

4 effective for violations occurring after the date of the en5 actment of this Act, be double the amount otherwise pro6 vided as of such date.

7 (b) ESTABLISHMENT OF MINIMUM PERIOD OF EX8 CLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUB9 JECT TO PERMISSIVE EXCLUSION.—Section 1128(c)(3)

10 (42 U.S.C. 1320a–7(c)(3)) is amended by adding at the

11 end the following new subparagraphs:

12 ‘‘(D) In the case of an exclusion of an individual or

13 entity under paragraph (1), (2), or (3) of subsection (b),

14 the period of the exclusion shall be 3 years, unless the

15 Secretary determines in accordance with regulations that

16 a shorter period is appropriate because of mitigating cir17 cumstances or that a longer period is appropriate because

18 of aggravating circumstances.

19 ‘‘(E) In the case of an exclusion of an individual or

20 entity under subsection (b)(4) or (b)(5), the period of the

21 exclusion shall not be less than the period during which

22 the individual’s or entity’s license to provide health care

23 is revoked, suspended, or surrendered, or the individual

24 or the entity is excluded or suspended from a Federal or

25 State health care program.
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1 ‘‘(F) In the case of an exclusion of an individual or

2 entity under subsection (b)(6)(B), the period of the exclu3 sion shall be not less than 1 year.’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply with respect to acts or omissions

6 occurring on or after January 1, 1996.

7 SEC. 15106. DIRECT SPENDING FOR ANTI-FRAUD ACTIVI8 TIES UNDER MEDICARE.

9 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO10 GRAM.—Title XVIII is amended by adding at the end the

11 following new section:

12 ‘‘MEDICARE INTEGRITY PROGRAM

13 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—

14 There is hereby established the Medicare Integrity Pro15 gram (hereafter in this section referred to as the ‘Pro16 gram’) under which the Secretary shall promote the integ17 rity of the medicare program by entering into contracts

18 in accordance with this section with eligible private entities

19 to carry out the activities described in subsection (b).

20 ‘‘(b) ACTIVITIES DESCRIBED.—The activities de21 scribed in this subsection are as follows:

22 ‘‘(1) Review of activities of providers of services

23 or other individuals and entities furnishing items

24 and services for which payment may be made under

25 this title (including skilled nursing facilities and

26 home health agencies), including medical and utiliza-
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1 tion review and fraud review (employing similar

2 standards, processes, and technologies used by pri3 vate health plans, including equipment and software

4 technologies which surpass the capability of the

5 equipment and technologies used in the review of

6 claims under this title as of the date of the enact7 ment of this section).

8 ‘‘(2) Audit of cost reports.

9 ‘‘(3) Determinations as to whether payment

10 should not be, or should not have been, made under

11 this title by reason of section 1862(b), and recovery

12 of payments that should not have been made.

13 ‘‘(4) Education of providers of services, bene14 ficiaries, and other persons with respect to payment

15 integrity and benefit quality assurance issues.

16 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

17 to enter into a contract under the Program to carry out

18 any of the activities described in subsection (b) if—

19 ‘‘(1) the entity has demonstrated capability to

20 carry out such activities;

21 ‘‘(2) in carrying out such activities, the entity

22 agrees to cooperate with the Inspector General of

23 the Department of Health and Human Services, the

24 Attorney General of the United States, and other

25 law enforcement agencies, as appropriate, in the in-
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1 vestigation and deterrence of fraud and abuse in re2 lation to this title and in other cases arising out of

3 such activities;

4 ‘‘(3) the entity’s financial holdings, interests, or

5 relationships will not interfere with its ability to per6 form the functions to be required by the contract in

7 an effective and impartial manner; and

8 ‘‘(4) the entity meets such other requirements

9 as the Secretary may impose.

10 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—

11 The Secretary shall enter into contracts under the Pro12 gram in accordance with such procedures as the Secretary

13 may by regulation establish, except that such procedures

14 shall include the following:

15 ‘‘(1) The Secretary shall determine the appro16 priate number of separate contracts which are nec17 essary to carry out the Program and the appropriate

18 times at which the Secretary shall enter into such

19 contracts.

20 ‘‘(2) The provisions of section 1153(e)(1) shall

21 apply to contracts and contracting authority under

22 this section, except that competitive procedures must

23 be used when entering into new contracts under this

24 section, or at any other time considered appropriate

25 by the Secretary.
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1 ‘‘(3) A contract under this section may be re2 newed without regard to any provision of law requir3 ing competition if the contractor has met or ex4 ceeded the performance requirements established in

5 the current contract.

6 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

7 Secretary shall by regulation provide for the limitation of

8 a contractor’s liability for actions taken to carry out a con9 tract under the Program, and such regulation shall, to the

10 extent the Secretary finds appropriate, employ the same

11 or comparable standards and other substantive and proce12 dural provisions as are contained in section 1157.

13 ‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI14 FRAUD AND ABUSE TRUST FUND.—For each fiscal year,

15 the Secretary shall transfer from the Federal Hospital In16 surance Trust Fund and the Federal Supplementary Med17 ical Insurance Trust Fund to the Medicare Anti-Fraud

18 and Abuse Trust Fund under subsection (g) such amounts

19 as are necessary to carry out the activities described in

20 subsection (b). Such transfer shall be in an allocation as

21 reasonably reflects the proportion of such expenditures as22 sociated with part A and part B.

23 ‘‘(g) MEDICARE ANTI-FRAUD AND ABUSE TRUST

24 FUND.—

25 ‘‘(1) ESTABLISHMENT.—
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1 ‘‘(A) IN GENERAL.—There is hereby estab2 lished in the Treasury of the United States the

3 Anti-Fraud and Abuse Trust Fund (hereafter

4 in this subsection referred to as the ‘Trust

5 Fund’). The Trust Fund shall consist of such

6 gifts and bequests as may be made as provided

7 in subparagraph (B) and such amounts as may

8 be deposited in the Trust Fund as provided in

9 subsection (f), paragraph (3), and title XI.

10 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS

11 AND BEQUESTS.—The Trust Fund is author12 ized to accept on behalf of the United States

13 money gifts and bequests made unconditionally

14 to the Trust Fund, for the benefit of the Trust

15 Fund or any activity financed through the

16 Trust Fund.

17 ‘‘(2) INVESTMENT.—

18 ‘‘(A) IN GENERAL.—The Secretary of the

19 Treasury shall invest such amounts of the Fund

20 as such Secretary determines are not required

21 to meet current withdrawals from the Fund in

22 government account serial securities.

23 ‘‘(B) USE OF INCOME.—Any interest de24 rived from investments under subparagraph (A)

25 shall be credited to the Fund.
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1 ‘‘(3) AMOUNTS DEPOSITED INTO TRUST

2 FUND.—In addition to amounts transferred under

3 subsection (f), there shall be deposited in the Trust

4 Fund—

5 ‘‘(A) that portion of amounts recovered in

6 relation to section 1128A arising out of a claim

7 under title XVIII as remains after application

8 of subsection (f)(2) (relating to repayment of

9 the Federal Hospital Insurance Trust Fund or

10 the Federal Supplementary Medical Insurance

11 Trust Fund) of that section, as may be applica12 ble,

13 ‘‘(B) fines imposed under section 1128B

14 arising out of a claim under this title, and

15 ‘‘(C) penalties and damages imposed (other

16 than funds awarded to a relator or for restitu17 tion) under sections 3729 through 3732 of title

18 31, United States Code (pertaining to false

19 claims) in cases involving claims relating to pro20 grams under title XVIII, XIX, or XXI.

21 ‘‘(4) DIRECT APPROPRIATION OF FUNDS TO

22 CARRY OUT PROGRAM.—

23 ‘‘(A) IN GENERAL.—There are appro24 priated from the Trust Fund for each fiscal

25 year such amounts as are necessary to carry
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1 out the Medicare Integrity Program under this

2 section, subject to subparagraph (B).

3 ‘‘(B) AMOUNTS SPECIFIED.—The amount

4 appropriated under subparagraph (A) for a fis5 cal year is as follows:

6 ‘‘(i) For fiscal year 1996, such

7 amount shall be not less than

8 $430,000,000 and not more than

9 $440,000,000.

10 ‘‘(ii) For fiscal year 1997, such

11 amount shall be not less than

12 $490,000,000 and not more than

13 $500,000,000.

14 ‘‘(iii) For fiscal year 1998, such

15 amount shall be not less than

16 $550,000,000 and not more than

17 $560,000,000.

18 ‘‘(iv) For fiscal year 1999, such

19 amount shall be not less than

20 $620,000,000 and not more than

21 $630,000,000.

22 ‘‘(v) For fiscal year 2000, such

23 amount shall be not less than

24 $670,000,000 and not more than

25 $680,000,000.
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1 ‘‘(vi) For fiscal year 2001, such

2 amount shall be not less than

3 $690,000,000 and not more than

4 $700,000,000.

5 ‘‘(vii) For fiscal year 2002, such

6 amount shall be not less than

7 $710,000,000 and not more than

8 $720,000,000.

9 ‘‘(5) ANNUAL REPORT.—The Secretary shall

10 submit an annual report to Congress on the amount

11 of revenue which is generated and disbursed by the

12 Trust Fund in each fiscal year.’’.

13 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL14 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO15 GRAM.—

16 (1) RESPONSIBILITIES OF FISCAL

17 INTERMEDIARIES UNDER PART A.—Section 1816

18 (42 U.S.C. 1395h) is amended by adding at the end

19 the following new subsection:

20 ‘‘(l) No agency or organization may carry out (or re21 ceive payment for carrying out) any activity pursuant to

22 an agreement under this section to the extent that the ac23 tivity is carried out pursuant to a contract under the Med24 icare Integrity Program under section 1893.’’.
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1 (2) RESPONSIBILITIES OF CARRIERS UNDER

2 PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is

3 amended by adding at the end the following new

4 paragraph:

5 ‘‘(6) No carrier may carry out (or receive payment

6 for carrying out) any activity pursuant to a contract under

7 this subsection to the extent that the activity is carried

8 out pursuant to a contract under the Medicare Integrity

9 Program under section 1893.’’.

10 (c) CONFORMING AMENDMENT.—Section

11 1128A(f)(3) (42 U.S.C. 1320a–7a(f)(3)) is amended by

12 striking ‘‘as miscellaneous receipts of the Treasury of the

13 United States’’ and inserting ‘‘in the Anti-Fraud and

14 Abuse Trust Fund established under section 1893(g)’’.

15 (d) DIRECT SPENDING FOR MEDICARE-RELATED AC16 TIVITIES OF INSPECTOR GENERAL.—Section 1893, as

17 added by subsection (a), is amended by adding at the end

18 the following new subsection:

19 ‘‘(h) DIRECT SPENDING FOR MEDICARE-RELATED

20 ACTIVITIES OF INSPECTOR GENERAL.—

21 ‘‘(1) IN GENERAL.—There are appropriated

22 from the Federal Hospital Insurance Trust Fund

23 and the Federal Supplementary Medical Insurance

24 Trust Fund to the Inspector General of the Depart25 ment of Health and Human Services for each fiscal
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1 year such amounts as are necessary to enable the

2 Inspector General to carry out activities relating to

3 the medicare program (as described in paragraph

4 (2)), subject to paragraph (3).

5 ‘‘(2) ACTIVITIES DESCRIBED.—The activities

6 described in this paragraph are as follows:

7 ‘‘(A) Prosecuting medicare-related matters

8 through criminal, civil, and administrative pro9 ceedings.

10 ‘‘(B) Conducting investigations relating to

11 the medicare program.

12 ‘‘(C) Performing financial and performance

13 audits of programs and operations relating to

14 the medicare program.

15 ‘‘(D) Performing inspections and other

16 evaluations relating to the medicare program.

17 ‘‘(E) Conducting provider and conumer

18 education activities regarding the requirements

19 of this title.

20 ‘‘(3) AMOUNTS SPECIFIED.—The amount ap21 propriated under paragraph (1) for a fiscal year is

22 as follows:

23 ‘‘(A) For fiscal year 1996, such amount

24 shall be $130,000,000.
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1 ‘‘(B) For fiscal year 1997, such amount

2 shall be $181,000,000.

3 ‘‘(C) For fiscal year 1998, such amount

4 shall be $204,000,000.

5 ‘‘(D) For each subsequent fiscal year, the

6 amount appropriated for the previous fiscal

7 year, increased by the percentage increase in

8 aggregate expenditures under this title for the

9 fiscal year involved over the previous fiscal year.

10 ‘‘(4) ALLOCATION OF PAYMENTS AMONG TRUST

11 FUNDS.—The appropriations made under paragraph

12 (1) shall be in an allocation as reasonably reflects

13 the proportion of such expenditures associated with

14 part A and part B.’’.

15 SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR

16 AUTHORIZATION FOR CERTAIN ITEMS OF DU17 RABLE MEDICAL EQUIPMENT.

18 (a) IN GENERAL.—Section 1834(a)(15) (42 U.S.C.

19 1395m(a)(15)), as amended by section 135(b) of the So20 cial Security Act Amendments of 1994, is amended by

21 adding at the end the following new subparagraphs:

22 ‘‘(D) APPLICATION BY CARRIERS.—A car23 rier may develop (and periodically update) a list

24 of items under subparagraph (A) and a list of

25 suppliers under subparagraph (B) in the same
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1 manner as the Secretary may develop (and peri2 odically update) such lists.

3 ‘‘(E) WAIVER OF PUBLICATION REQUIRE4 MENT.—A carrier may make an advance deter5 mination under subparagraph (C) with respect

6 to an item or supplier on a list developed by the

7 Secretary or the carrier without regard to

8 whether or not the Secretary has promulgated

9 a regulation with respect to the list, except that

10 the carrier may not make such an advance de11 termination with respect to an item or supplier

12 on a list until the expiration of the 30-day pe13 riod beginning on the date the Secretary or the

14 carrier places the item or supplier on the list.’’.

15 (b) EFFECTIVE DATE.—The amendment made by

16 subsection (a) shall take effect as if included in the enact17 ment of the Social Security Act Amendments of 1994.

18 SEC. 15108. NATIONAL HEALTH CARE ANTI-FRAUD TASK

19 FORCE.

20 (a) ESTABLISHMENT.—The Attorney General, in

21 consultation with the Secretary of Health and Human

22 Services, shall establish a national health care anti-fraud

23 task force (in this section referred to as the ‘‘task force’’).

24 The Attorney General shall establish the task force within

25 120 days after the date of the enactment of this Act.
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1 (b) COMPOSITION.—The task force shall include rep2 resentatives of Federal agencies involved in the investiga3 tion and prosecution of persons violating laws relating to

4 health care fraud and abuse, including at least one rep5 resentative from each of the following agencies:

6 (1) The Department of Justice and the Federal

7 Bureau of Investigation.

8 (2) The Department of Health and Human

9 Services and the Office of the Inspector General

10 within the Department.

11 (3) The office in the Department of Defense re12 sponsible for administration of the CHAMPUS pro13 gram.

14 (4) The Department of Veterans’ Affairs.

15 (5) The United States Postal Inspection Serv16 ice.

17 (6) The Internal Revenue Service.

18 The Attorney General (or the designee of the Attorney

19 General) shall serve as chair of the task force.

20 (c) DUTIES.—The task force shall coordinate Federal

21 law enforcement activities relating to health care fraud

22 and abuse in order to better control fraud and abuse in

23 the delivery of health care in the United States. Specifi24 cally, the task force shall coordinate activities—
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1 (1) in order to assure the effective targeting

2 and investigation of persons who organize, direct, fi3 nance, or otherwise knowingly engage in health care

4 fraud, and

5 (2) in order to assure full and effective coopera6 tion between Federal and State agencies involved in

7 health care fraud investigations.

8 (d) STAFF.—Each member of the task force who rep9 resents an agency shall be responsible for providing for

10 the detail (from the agency) of at least one full-time staff

11 person to staff the task force. Such detail shall be without

12 change in salary, compensation, benefits, and other em13 ployment-related matters.

14 SEC. 15109. STUDY OF ADEQUACY OF PRIVATE QUALITY AS15 SURANCE PROGRAMS.

16 (a) IN GENERAL.—The Administrator of the Health

17 Care Financing Administration (acting through the Direc18 tor of the Office of Research and Demonstrations) shall

19 enter into an agreement with a private entity to conduct

20 a study during the 5-year period beginning on the date

21 of the enactment of this Act of the adequacy of the quality

22 assurance programs and consumer protections used by the

23 MedicarePlus program under part C of title XVIII of the

24 Social Security Act (as inserted by section 15002(a)), and

25 shall include in the study an analysis of the effectiveness
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1 of such programs in protecting plan enrollees against the

2 risk of insufficient provision of benefits which may result

3 from utilization controls.

4 (b) REPORT.—Not later than 6 months after the con5 clusion of the 5-year period described in subsection (a),

6 the Administrator shall submit a report to Congress on

7 the study conducted under subsection (a).

8 SEC. 15110. PENALTY FOR FALSE CERTIFICATION FOR

9 HOME HEALTH SERVICES.

10 (a) IN GENERAL.—Section 1128A(b) (42 U.S.C.

11 1320a–7a(b)) is amended by adding at the end the follow12 ing new paragraph:

13 ‘‘(3)(A) Any physician who executes a document de14 scribed in subparagraph (B) with respect to an individual

15 knowing that all of the requirements referred to in such

16 subparagraph are not met with respect to the individual

17 shall be subject to a civil monetary penalty of not more

18 than the greater of—

19 ‘‘(i) $5,000, or

20 ‘‘(ii) three times the amount of the payments

21 under title XVIII for home health services which are

22 made pursuant to such certification.

23 ‘‘(B) A document described in this subparagraph is

24 any document that certifies, for purposes of title XVIII,

25 that an individual meets the requirements of section
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1 1814(a)(2)(C) or 1835(a)(2)(A) in the case of home

2 health services furnished to the individual.’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall apply to certifications made on or

5 after the date of the enactment of this Act.

6 SEC. 15111. PILOT PROJECTS.

7 The Secretary of Health and Human Services shall

8 establish and operate 5 pilot projects (in various geo9 graphic regions of the United States) under which the Sec10 retary shall implement innovative approaches to monitor

11 payment claims under the medicare program to detect

12 those claims that are wasteful or fraudulent.

13 PART 2—CRIMINAL LAW PROVISIONS

14 SEC. 15121. OFFENSES INVOLVING FRAUD, FALSE STATE15 MENT, THEFT, OR EMBEZZLEMENT.

16 (a) IN GENERAL.—Part A of title XI is amended by

17 inserting after section 1128B the following:

18 ‘‘OFFENSES INVOLVING FRAUD, FALSE STATEMENT,

19 THEFT, OR EMBEZZLEMENT

20 ‘‘SEC. 1128C. (a) FRAUD.—Whoever knowingly and

21 willfully executes, or attempts to execute, a scheme or arti22 fice—

23 ‘‘(1) to defraud any person or entity in connec24 tion with the delivery of or payment for health care

25 benefits, items, or services under a program under
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1 title XVIII or a State health care program (as de2 fined in section 1128(h)), or

3 ‘‘(2) to obtain, by means of false or fraudulent

4 pretenses, representations, or promises, any of the

5 money or property owned by, or under the custody

6 or control of, any person or entity in connection with

7 the delivery of or payment for health care benefits,

8 items, or services under a program under title XVIII

9 or a State health care program, shall be fined under

10 title 18, United States Code, or imprisoned not more

11 than 10 years, or both. If the violation results in se12 rious bodily injury (as defined in section 1365(g)(3)

13 of title 18, United States Code), such person may be

14 imprisoned for any term of years.

15 ‘‘(b) FALSE STATEMENTS.—Whoever, in connection

16 with the delivery of or payment for health care benefits,

17 items, or services under a program under title XVIII or

18 a State health care program, knowingly and willfully—

19 ‘‘(1) falsifies, conceals, or covers up by any

20 trick, scheme, or device a material fact,

21 ‘‘(2) as to any material fact, makes any false,

22 fictitious, or fraudulent statements or representa23 tions, or

24 ‘‘(3) makes or uses any false writing or docu25 ment knowing the same to contain any false, ficti-
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1 tious, or fraudulent statement or entry that is mate2 rial,

3 shall be fined under title 18, United States Code, or im4 prisoned not more than 5 years, or both.

5 ‘‘(c) THEFT OR EMBEZZLEMENT.—Whoever willfully

6 embezzles, steals, or otherwise without authority willfully

7 and unlawfully converts to the use of any person other

8 than the rightful owner, or intentionally misapplies any

9 of the moneys, funds, securities, premiums, credits, prop10 erty, or other assets of under the custody or control of

11 any person or entity in connection with the delivery of or

12 payment for health care benefits, items, or services under

13 program under title XVIII or a State health care program,

14 shall be fined under title 18, United States Code, or im15 prisoned not more than 10 years, or both.’’.

16 (b) CONFORMING AMENDMENT.—Section 1128(h)

17 (42 U.S.C. 1320a–7(h)) is amended by striking ‘‘and

18 1128B’’ and inserting ‘‘, 1128B, and 1128C’’.

19 Subtitle C—Regulatory Relief

20 PART 1—PHYSICIAN OWNERSHIP REFERRAL

21 REFORM

22 SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM23 PENSATION ARRANGEMENTS.

24 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

25 1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that
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1 follows through ‘‘equity,’’ and inserting the following: ‘‘is

2 (except as provided in subsection (c)) an ownership or in3 vestment interest in the entity through equity,’’.

4 (b) CONFORMING AMENDMENTS.—Section 1877 (42

5 U.S.C. 1395nn) is amended as follows:

6 (1) In subsection (b)—

7 (A) in the heading, by striking ‘‘TO BOTH

8 OWNERSHIP AND COMPENSATION ARRANGE9 MENT PROHIBITIONS’’ and inserting ‘‘WHERE

10 FINANCIAL RELATIONSHIP EXISTS’’; and

11 (B) by redesignating paragraph (4) as

12 paragraph (7).

13 (2) In subsection (c)—

14 (A) by amending the heading to read as

15 follows: ‘‘EXCEPTION FOR OWNERSHIP OR IN16 VESTMENT INTEREST IN PUBLICLY TRADED

17 SECURITIES AND MUTUAL FUNDS’’; and

18 (B) in the matter preceding paragraph (1),

19 by striking ‘‘subsection (a)(2)(A)’’ and inserting

20 ‘‘subsection (a)(2)’’.

21 (3) In subsection (d)—

22 (A) by striking the matter preceding para23 graph (1);

24 (B) in paragraph (3), by striking ‘‘para25 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)—

7 (A) in the matter preceding paragraph (1),

8 by striking ‘‘ownership, investment, and com9 pensation’’ and inserting ‘‘ownership and in10 vestment’’;

11 (B) in paragraph (2), by striking ‘‘sub12 section (a)(2)(A)’’ and all that follows through

13 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub14 section (a)(2),’’; and

15 (C) in paragraph (2), by striking ‘‘or who

16 have such a compensation relationship with the

17 entity’’.

18 (6) In subsection (h)—

19 (A) by striking paragraphs (1), (2), and

20 (3);

21 (B) in paragraph (4)(A), by striking

22 clauses (iv) and (vi);

23 (C) in paragraph (4)(B), by striking

24 ‘‘RULES.—’’ and all that follows through ‘‘(ii)
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1 FACULTY’’ and inserting ‘‘RULES FOR FAC2 ULTY’’; and

3 (D) by adding at the end of paragraph (4)

4 the following new subparagraph:

5 ‘‘(C) MEMBER OF A GROUP.—A physician

6 is a ‘member’ of a group if the physician is an

7 owner or a bona fide employee, or both, of the

8 group.’’.

9 SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES

10 SUBJECT TO PROHIBITION.

11 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

12 1395nn(h)(6)) is amended by striking subparagraphs (B)

13 through (K) and inserting the following:

14 ‘‘(B) Parenteral and enteral nutrients,

15 equipment, and supplies.

16 ‘‘(C) Magnetic resonance imaging and

17 computerized tomography services.

18 ‘‘(D) Outpatient physical or occupational

19 therapy services.’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 1877(b)(2) (42 U.S.C.

22 1395nn(b)(2)) is amended in the matter preceding

23 subparagraph (A) by striking ‘‘services’’ and all that

24 follows through ‘‘supplies)—’’ and inserting ‘‘serv25 ices—’’.
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1 (2) Section 1877(h)(5)(C) (42 U.S.C.

2 1395nn(h)(5)(C)) is amended—

3 (A) by striking ‘‘, a request by a radiolo4 gist for diagnostic radiology services, and a re5 quest by a radiation oncologist for radiation

6 therapy,’’ and inserting ‘‘and a request by a ra7 diologist for magnetic resonance imaging or for

8 computerized tomography’’, and

9 (B) by striking ‘‘radiologist, or radiation

10 oncologist’’ and inserting ‘‘or radiologist’’.

11 SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMUL12 GATION OF REGULATIONS.

13 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

14 (42 U.S.C. 1395nn note) is amended—

15 (1) in paragraph (1), by striking ‘‘paragraph

16 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

17 (2) by adding at the end the following new

18 paragraph:

19 ‘‘(3) PROMULGATION OF REGULATIONS.—Not20 withstanding paragraphs (1) and (2), the amend21 ments made by this section shall not apply to any

22 referrals made before the effective date of final regu23 lations promulgated by the Secretary of Health and

24 Human Services to carry out such amendments.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall take effect as if included in the enact3 ment of OBRA–1993.

4 SEC. 15204. EXCEPTIONS TO PROHIBITION.

5 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN6 CILLARY SERVICES.—

7 (1) REPEAL OF SITE-OF-SERVICE REQUIRE8 MENT.—Section 1877 (42 U.S.C. 1395nn) is amend9 ed—

10 (A) by amending subparagraph (A) of sub11 section (b)(2) to read as follows:

12 ‘‘(A) that are furnished personally by the

13 referring physician, personally by a physician

14 who is a member of the same group practice as

15 the referring physician, or personally by individ16 uals who are under the general supervision of

17 the physician or of another physician in the

18 group practice, and’’, and

19 (B) by adding at the end of subsection (h)

20 the following new paragraph:

21 ‘‘(7) GENERAL SUPERVISION.—An individual is

22 considered to be under the ‘general supervision’ of a

23 physician if the physician (or group practice of

24 which the physician is a member) is legally respon25 sible for the services performed by the individual and
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1 for ensuring that the individual meets licensure and

2 certification requirements, if any, applicable under

3 other provisions of law, regardless of whether or not

4 the physician is physically present when the individ5 ual furnishes an item or service.’’.

6 (2) CLARIFICATION OF TREATMENT OF PHYSI7 CIAN OWNERS OF GROUP PRACTICE.—Section

8 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is

9 amended by striking ‘‘physician or such group prac10 tice’’ and inserting ‘‘physician, such group practice,

11 or the physician owners of such group practice’’.

12 (3) CONFORMING AMENDMENT.—Section

13 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

14 amending the heading to read as follows: ‘‘ANCIL15 LARY SERVICES FURNISHED PERSONALLY OR

16 THROUGH GROUP PRACTICE.—’’.

17 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

18 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

19 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

20 15201(b)(3)(C), is amended by striking ‘‘substantially all’’

21 and inserting ‘‘not less than 75 percent’’.

22 (c) REVISION OF EXCEPTION FOR CERTAIN MAN23 AGED CARE ARRANGEMENTS.—Section 1877(b)(3) (42

24 U.S.C. 1395nn(b)(3)) is amended—
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1 (1) in the heading by inserting ‘‘MANAGED

2 CARE ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;

3 (2) in the matter preceding subparagraph (A),

4 by striking ‘‘organization—’’ and inserting ‘‘organi5 zation, directly or through contractual arrangements

6 with other entities, to individuals enrolled with the

7 organization—’’;

8 (3) in subparagraph (A), by inserting ‘‘or part

9 C’’ after ‘‘section 1876’’;

10 (4) by striking ‘‘or’’ at the end of subparagraph

11 (C);

12 (5) by striking the period at the end of sub13 paragraph (D) and inserting a comma; and

14 (6) by adding at the end the following new sub15 paragraphs:

16 ‘‘(E) with a contract with a State to pro17 vide services under the State plan under title

18 XIX (in accordance with section 1903(m)) or a

19 State MediGrant plan under title XXI; or

20 ‘‘(F) which is a MedicarePlus organization

21 under part C or which provides or arranges for

22 the provision of health care items or services

23 pursuant to a written agreement between the

24 organization and an individual or entity if the

25 written agreement places the individual or en-
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1 tity at substantial financial risk for the cost or

2 utilization of the items or services which the in3 dividual or entity is obligated to provide, wheth4 er through a withhold, capitation, incentive

5 pool, per diem payment, or any other similar

6 risk arrangement which places the individual or

7 entity at substantial financial risk.’’.

8 (d) NEW EXCEPTION FOR SHARED FACILITY SERV9 ICES.—

10 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

11 1395nn(b)), as amended by section 15201(b)(3)(C),

12 is amended—

13 (A) by redesignating paragraphs (4)

14 through (7) as paragraphs (5) through (8); and

15 (B) by inserting after paragraph (3) the

16 following new paragraph:

17 ‘‘(4) SHARED FACILITY SERVICES.—In the case

18 of a designated health service consisting of a shared

19 facility service of a shared facility—

20 ‘‘(A) that is furnished—

21 ‘‘(i) personally by the referring physi22 cian who is a shared facility physician or

23 personally by an individual directly em24 ployed or under the general supervision of

25 such a physician,
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1 ‘‘(ii) by a shared facility in a building

2 in which the referring physician furnishes

3 substantially all of the services of the phy4 sician that are unrelated to the furnishing

5 of shared facility services, and

6 ‘‘(iii) to a patient of a shared facility

7 physician; and

8 ‘‘(B) that is billed by the referring physi9 cian or a group practice of which the physician

10 is a member.’’.

11 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

12 1395nn(h)), as amended by section 15201(b)(6), is

13 amended by inserting before paragraph (4) the fol14 lowing new paragraph:

15 ‘‘(1) SHARED FACILITY RELATED DEFINI16 TIONS.—

17 ‘‘(A) SHARED FACILITY SERVICE.—The

18 term ‘shared facility service’ means, with re19 spect to a shared facility, a designated health

20 service furnished by the facility to patients of

21 shared facility physicians.

22 ‘‘(B) SHARED FACILITY.—The term

23 ‘shared facility’ means an entity that furnishes

24 shared facility services under a shared facility

25 arrangement.
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1 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

2 term ‘shared facility physician’ means, with re3 spect to a shared facility, a physician (or a

4 group practice of which the physician is a mem5 ber) who has a financial relationship under a

6 shared facility arrangement with the facility.

7 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

8 The term ‘shared facility arrangement’ means,

9 with respect to the provision of shared facility

10 services in a building, a financial arrange11 ment—

12 ‘‘(i) which is only between physicians

13 who are providing services (unrelated to

14 shared facility services) in the same build15 ing,

16 ‘‘(ii) in which the overhead expenses

17 of the facility are shared, in accordance

18 with methods previously determined by the

19 physicians in the arrangement, among the

20 physicians in the arrangement, and

21 ‘‘(iii) which, in the case of a corpora22 tion, is wholly owned and controlled by

23 shared facility physicians.’’.

24 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

25 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—
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1 Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by

2 section 15201(b)(3)(C) and subsection (d)(1), is amend3 ed—

4 (1) by redesignating paragraphs (5) through

5 (8) as paragraphs (6) through (9); and

6 (2) by inserting after paragraph (4) the follow7 ing new paragraph:

8 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—

9 In the case of a designated health service furnished

10 in any area with respect to which the Secretary de11 termines that individuals residing in the area do not

12 have reasonable access to such a designated health

13 service for which subsection (a)(1) does not apply.’’.

14 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

15 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

16 U.S.C. 1395nn(b)), as amended by section

17 15201(b)(3)(C), subsection (d)(1), and subsection (e)(1),

18 is amended—

19 (1) by redesignating paragraphs (6) through

20 (9) as paragraphs (7) through (10); and

21 (2) by inserting after paragraph (5) the follow22 ing new paragraph:

23 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

24 SURGICAL CENTERS.—In the case of a designated
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1 health service furnished in an ambulatory surgical

2 center described in section 1832(a)(2)(F)(i).’’.

3 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

4 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42

5 U.S.C. 1395nn(b)), as amended by section

6 15201(b)(3)(C), subsection (d)(1), subsection (e)(1), and

7 subsection (f), is amended—

8 (1) by redesignating paragraphs (7) through

9 (10) as paragraphs (8) through (11); and

10 (2) by inserting after paragraph (6) the follow11 ing new paragraph:

12 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

13 FACILITIES.—In the case of a designated health

14 service furnished in a renal dialysis facility under

15 section 1881.’’.

16 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN

17 A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

18 amended by section 15201(b)(3)(C), subsection (d)(1),

19 subsection (e)(1), subsection (f), and subsection (g), is

20 amended—

21 (1) by redesignating paragraphs (8) through

22 (11) as paragraphs (9) through (12); and

23 (2) by inserting after paragraph (7) the follow24 ing new paragraph:
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1 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO2 GRAM.—In the case of a designated health service

3 furnished by a hospice program under section

4 1861(dd)(2).’’.

5 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN

6 A COMPREHENSIVE OUTPATIENT REHABILITATION FA7 CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

8 amended by section 15201(b)(3)(C), subsection (d)(1),

9 subsection (e)(1), subsection (f), subsection (g), and sub10 section (h), is amended—

11 (1) by redesignating paragraphs (9) through

12 (12) as paragraphs (10) through (13); and

13 (2) by inserting after paragraph (8) the follow14 ing new paragraph:

15 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN16 SIVE OUTPATIENT REHABILITATION FACILITY.—In

17 the case of a designated health service furnished in

18 a comprehensive outpatient rehabilitation facility (as

19 defined in section 1861(cc)(2)).’’.

20 (i) DEFINITION OF REFERRAL.—Section

21 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amend22 ed—

23 (1) by striking ‘‘an item or service’’ and insert24 ing ‘‘a designated health service’’, and
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1 (2) by striking ‘‘the item or service’’ and insert2 ing ‘‘the designated health service’’.

3 SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.

4 Section 1877 (42 U.S.C. 1395nn) is amended—

5 (1) by striking subsection (f); and

6 (2) by striking subsection (g)(5).

7 SEC. 15206. PREEMPTION OF STATE LAW.

8 Section 1877 (42 U.S.C. 1395nn) is amended by add9 ing at the end the following new subsection:

10 ‘‘(i) PREEMPTION OF STATE LAW.—This section pre11 empts State law to the extent State law is inconsistent

12 with this section.’’.

13 SEC. 15207. EFFECTIVE DATE.

14 Except as provided in section 15203(b), the amend15 ments made by this part shall apply to referrals made on

16 or after August 14, 1995, regardless of whether or not

17 regulations are promulgated to carry out such amend18 ments.

19 PART 2—OTHER MEDICARE REGULATORY

20 RELIEF

21 SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV22 ERAGE DATA BANK.

23 (a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–

24 14) is repealed.

25 (b) CONFORMING AMENDMENTS.—
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1 (1) MEDICARE.—Section 1862(b)(5) (42 U.S.C.

2 1395y(b)(5)) is amended—

3 (A) in subparagraph (B), by striking

4 ‘‘under—’’ and all that follows through the end

5 and inserting ‘‘subparagraph (A) for purposes

6 of carrying out this subsection.’’, and

7 (B) in subparagraph (C)(i), by striking

8 ‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara9 graph (B)’’.

10 (2) MEDICAID.—Section 1902(a)(25)(A)(i) (42

11 U.S.C. 1396a(a)(25)(A)(i)) is amended by striking

12 ‘‘including the use of’’ and all that follows through

13 ‘‘any additional measures’’.

14 (3) ERISA.—Section 101(f) of the Employee

15 Retirement Income Security Act of 1974 (29 U.S.C.

16 1021(f)) is repealed.

17 (4) DATA MATCHES.—Section 552a(a)(8)(B) of

18 title 5, United States Code, is amended—

19 (A) by adding ‘‘; or’’ at the end of clause

20 (v),

21 (B) by striking ‘‘or’’ at the end of clause

22 (vi), and

23 (C) by striking clause (vii).
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1 SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE2 QUIRED FOR IMPOSITION OF SANCTIONS.

3 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE4 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN5 ALTIES.—

6 (1) IN GENERAL.—Section 1128A(a) (42

7 U.S.C. 1320a–7a(a)) is amended—

8 (A) in paragraphs (1) and (2), by inserting

9 ‘‘knowingly’’ before ‘‘presents’’ each place it ap10 pears; and

11 (B) in paragraph (3), by striking ‘‘gives’’

12 and inserting ‘‘knowingly gives or causes to be

13 given’’.

14 (2) DEFINITION OF STANDARD.—Section

15 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(6) The term ‘should know’ means that a per18 son, with respect to information—

19 ‘‘(A) acts in deliberate ignorance of the

20 truth or falsity of the information; or

21 ‘‘(B) acts in reckless disregard of the truth

22 or falsity of the information,

23 and no proof of specific intent to defraud is re24 quired.’’.

25 (b) CLARIFICATION OF EFFECT AND APPLICATION

26 OF SAFE HARBOR EXCEPTIONS.—For purposes of section
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1 1128B(b)(3) of the Social Security Act, the specification

2 of any payment practice in regulations promulgated pur3 suant to section 14(a) of the Medicare and Medicaid Pro4 gram and Patient Protection Act of 1987 is—

5 (1) solely for the purpose of adding additional

6 exceptions to the types of conduct which are not

7 subject to an anti-kickback penalty under such sec8 tion and not for the purpose of limiting the scope of

9 such exceptions; and

10 (2) for the purpose of prescribing criteria for

11 qualifying for such an exception notwithstanding the

12 intent of the party involved.

13 (c) LIMITING IMPOSITION OF ANTI-KICKBACK PEN14 ALTIES TO ACTIONS WITH SIGNIFICANT PURPOSE TO IN15 DUCE REFERRALS.—Section 1128B(b)(2) (42 U.S.C.

16 1320a–7b(b)(2)) is amended in the matter preceding sub17 paragraph (A) by striking ‘‘to induce’’ and inserting ‘‘for

18 the significant purpose of inducing’’.

19 (d) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to acts or omissions occurring on

21 or after January 1, 1996.
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1 SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK

2 PENALTIES FOR MANAGED CARE ARRANGE3 MENTS.

4 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.

5 1320a–7b(b)(3)) is amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (D);

8 (2) by striking the period at the end of sub9 paragraph (E) and inserting ‘‘; and’’; and

10 (3) by adding at the end the following new sub11 paragraph:

12 ‘‘(F) any remuneration between an organization

13 and an individual or entity providing services pursu14 ant to a written agreement between the organization

15 and the individual or entity if the organization is a

16 MedicarePlus organization under part C of title

17 XVIII or if the written agreement places the individ18 ual or entity at substantial financial risk for the cost

19 or utilization of the items or services which the indi20 vidual or entity is obligated to provide, whether

21 through a withhold, capitation, incentive pool, per

22 diem payment, or any other similar risk arrange23 ment which places the individual or entity at sub24 stantial financial risk.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to acts or omissions occurring

3 on or after January 1, 1996.

4 SEC. 15214. SOLICITATION AND PUBLICATION OF MODI5 FICATIONS TO EXISTING SAFE HARBORS AND

6 NEW SAFE HARBORS.

7 (a) IN GENERAL.—

8 (1) SOLICITATIONS.—Not later than January 1,

9 1996, and not less than annually thereafter, the Sec10 retary of Health and Human Services shall publish

11 a notice in the Federal Register soliciting proposals,

12 which will be accepted during a 60-day period, for—

13 (A) modifications to existing safe harbors

14 issued pursuant to section 14(a) of the Medi15 care and Medicaid Patient and Program Protec16 tion Act of 1987;

17 (B) additional safe harbors specifying pay18 ment practices that shall not be treated as a

19 criminal offense under section 1128B(b) of the

20 Social Security Act and shall not serve as the

21 basis for an exclusion under section 1128(b)(7)

22 of such Act; and

23 (C) special fraud alerts to be issued pursu24 ant to section 15101(c).
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1 (2) PUBLICATION OF PROPOSED MODIFICA2 TIONS AND PROPOSED ADDITIONAL SAFE HAR3 BORS.—Not later than 120 days after receiving the

4 proposals described in subparagraphs (A) and (B) of

5 paragraph (1), the Secretary, after considering such

6 proposals in consultation with the Attorney General,

7 shall publish in the Federal Register proposed modi8 fications to existing safe harbors and proposed addi9 tional safe harbors, if appropriate, with a 60-day

10 comment period. After considering any public com11 ments received during this period, the Secretary

12 shall issue final rules modifying the existing safe

13 harbors and establishing new safe harbors, as appro14 priate.

15 (3) REPORT.—The Inspector General shall, in

16 an annual report to Congress or as part of the year17 end semiannual report required by section 5 of the

18 Inspector General Act of 1978, describe the propos19 als received under subparagraphs (A) and (B) of

20 paragraph (1) and explain which proposals were in21 cluded in the publication described in paragraph (2),

22 which proposals were not included in that publica23 tion, and the reasons for the rejection of the propos24 als that were not included.
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1 (b) CRITERIA FOR MODIFYING AND ESTABLISHING

2 SAFE HARBORS.—In modifying and establishing safe har3 bors under subsection (a)(2), the Secretary may consider

4 the extent to which providing a safe harbor for the speci5 fied payment practice may result in any of the following:

6 (1) An increase or decrease in access to health

7 care services.

8 (2) An increase or decrease in the quality of

9 health care services.

10 (3) An increase or decrease in patient freedom

11 of choice among health care providers.

12 (4) An increase or decrease in competition

13 among health care providers.

14 (5) An increase or decrease in the cost to health

15 care programs of the Federal Government.

16 (6) An increase or decrease in the potential

17 overutilization of health care services.

18 (7) Any other factors the Secretary deems ap19 propriate in the interest of preventing fraud and

20 abuse in health care programs of the Federal Gov21 ernment.
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1 SEC. 15215. ISSUANCE OF ADVISORY OPINIONS UNDER

2 TITLE XI.

3 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),

4 as amended by section 15104(a), is amended by inserting

5 after section 1129 the following new section:

6 ‘‘ADVISORY OPINIONS

7 ‘‘SEC. 1130. (a) ISSUANCE OF ADVISORY OPIN8 IONS.—The Secretary shall issue written advisory opinions

9 as provided in this section.

10 ‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—

11 The Secretary shall issue advisory opinions as to the fol12 lowing matters:

13 ‘‘(1) What constitutes prohibited remuneration

14 within the meaning of section 1128B(b).

15 ‘‘(2) Whether an arrangement or proposed ar16 rangement satisfies the criteria set forth in section

17 1128B(b)(3) for activities which do not result in

18 prohibited remuneration.

19 ‘‘(3) Whether an arrangement or proposed ar20 rangement satisfies the criteria which the Secretary

21 has established, or shall establish by regulation for

22 activities which do not result in prohibited remu23 neration.

24 ‘‘(4) What constitutes an inducement to reduce

25 or limit services to individuals entitled to benefits
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1 under title XVIII or title XIX or title XXI within

2 the meaning of section 1128B(b).

3 ‘‘(5) Whether any activity or proposed activity

4 constitutes grounds for the imposition of a sanction

5 under section 1128, 1128A, or 1128B.

6 ‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN7 IONS.—Such advisory opinions shall not address the fol8 lowing matters:

9 ‘‘(1) Whether the fair market value shall be, or

10 was paid or received for any goods, services or prop11 erty.

12 ‘‘(2) Whether an individual is a bona fide em13 ployee within the requirements of section 3121(d)(2)

14 of the Internal Revenue Code of 1986.

15 ‘‘(d) EFFECT OF ADVISORY OPINIONS.—

16 ‘‘(1) BINDING AS TO SECRETARY AND PARTIES

17 INVOLVED.—Each advisory opinion issued by the

18 Secretary shall be binding as to the Secretary and

19 the party or parties requesting the opinion.

20 ‘‘(2) FAILURE TO SEEK OPINION.—The failure

21 of a party to seek an advisory opinion may not be

22 introduced into evidence to prove that the party in23 tended to violate the provisions of sections 1128,

24 1128A, or 1128B.

25 ‘‘(e) REGULATIONS.—
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1 ‘‘(1) IN GENERAL.—Not later than 180 days

2 after the date of the enactment of this section, the

3 Secretary shall issue regulations to carry out this

4 section. Such regulations shall provide for—

5 ‘‘(A) the procedure to be followed by a

6 party applying for an advisory opinion;

7 ‘‘(B) the procedure to be followed by the

8 Secretary in responding to a request for an ad9 visory opinion;

10 ‘‘(C) the interval in which the Secretary

11 shall respond;

12 ‘‘(D) the reasonable fee to be charged to

13 the party requesting an advisory opinion; and

14 ‘‘(E) the manner in which advisory opin15 ions will be made available to the public.

16 ‘‘(2) SPECIFIC CONTENTS.—Under the regula17 tions promulgated pursuant to paragraph (1)—

18 ‘‘(A) the Secretary shall be required to re19 spond to a party requesting an advisory opinion

20 by not later than 30 days after the request is

21 received; and

22 ‘‘(B) the fee charged to the party request23 ing an advisory opinion shall be equal to the

24 costs incurred by the Secretary in responding to

25 the request.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to requests for advisory opinions

3 made on or after January 1, 1996.

4 SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND

5 CLAIMS PROCESSING REQUIREMENTS FOR

6 PHYSICIANS’ SERVICES.

7 Except as may be specifically provided by Congress,

8 the Secretary of Health and Human Services may not im9 plement any change in the requirements imposed on the

10 billing and processing of claims for payment for physi11 cians’ services under part B of the medicare program un12 less the Secretary notifies the individuals furnishing such

13 services of the change not later than 120 days before the

14 effective date of the change.

15 PART 3—PROMOTING PHYSICIAN SELF-POLICING

16 SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CER17 TAIN ACTIVITIES OF MEDICAL SELF-REGU18 LATORY ENTITIES.

19 (a) EXEMPTION DESCRIBED.—An activity relating to

20 the provision of health care services shall be exempt from

21 the antitrust laws, and any State law similar to the anti22 trust laws, if the activity is within the safe harbor de23 scribed in subsection (b).

24 (b) SAFE HARBOR FOR ACTIVITIES OF MEDICAL

25 SELF-REGULATORY ENTITIES.—
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1 (1) IN GENERAL.—The safe harbor referred to

2 in subsection (a) is, subject to paragraph (2), any

3 activity of a medical self-regulatory entity relating to

4 standard setting or standard enforcement activities

5 that are designed to promote the quality of health

6 care services provided to patients.

7 (2) EXCEPTION.—No activity of a medical self8 regulatory entity may be deemed to fall under the

9 safe harbor established under paragraph (1) if the

10 activity—

11 (A) is conducted for purposes of financial

12 gain, or

13 (B) interferes with the provision of health

14 care services by any health care provider who is

15 not a member of the specific profession which

16 is subject to the authority of the medical self17 regulatory entity.

18 (c) DEFINITIONS.—For purposes of this section:

19 (1) ANTITRUST LAWS.—The term ‘‘antitrust

20 laws’’ has the meaning given it in subsection (a) of

21 the first section of the Clayton Act (15 U.S.C.

22 12(a)), except that such term includes section 5 of

23 the Federal Trade Commission Act (15 U.S.C. 45)

24 to the extent such section applies to unfair methods

25 of competition.
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1 (2) HEALTH BENEFIT PLAN.—The term

2 ‘‘health benefit plan’’ means—

3 (A) a hospital or medical expense incurred

4 policy or certificate,

5 (B) a hospital or medical service plan con6 tract,

7 (C) a health maintenance subscriber con8 tract,

9 (D) a multiple employer welfare arrange10 ment or employee benefit plan (as defined

11 under the Employee Retirement Income Secu12 rity Act of 1974), or

13 (E) a MedicarePlus product (offered under

14 part C of title XVIII of the Social Security

15 Act),

16 that provides benefits with respect to health care

17 services.

18 (3) HEALTH CARE SERVICE.—The term ‘‘health

19 care service’’ means any service for which payment

20 may be made under a health benefit plan including

21 services related to the delivery or administration of

22 such service.

23 (4) MEDICAL SELF-REGULATORY ENTITY.—The

24 term ‘‘medical self-regulatory entity’’ means a medi25 cal society or association, a specialty board, a recog-
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1 nized accrediting agency, or a hospital medical staff,

2 and includes the members, officers, employees, con3 sultants, and volunteers or committees of such an

4 entity.

5 (5) HEALTH CARE PROVIDER.—The term

6 ‘‘health care provider’’ means any individual or en7 tity that is engaged in the delivery of health care

8 services in a State and that is required by State law

9 or regulation to be licensed or certified by the State

10 to engage in the delivery of such services in the

11 State.

12 (6) STANDARD SETTING OR STANDARD EN13 FORCEMENT ACTIVITIES.—The term ‘‘standard set14 ting or standard enforcement activities’’ means—

15 (A) accreditation of health care practition16 ers, health care providers, medical education in17 stitutions, or medical education programs,

18 (B) technology assessment and risk man19 agement activities,

20 (C) the development and implementation of

21 practice guidelines or practice parameters, or

22 (D) official peer review proceedings under23 taken by a hospital medical staff (or committee

24 thereof) or a medical society or association for

25 purposes of evaluating the professional conduct
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1 or quality of health care provided by a medical

2 professional.

3 Subtitle D—Medical Liability

4 Reform

5 PART 1—GENERAL PROVISIONS

6 SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY

7 ACTIONS.

8 (a) APPLICABILITY.—This subtitle shall apply with

9 respect to any health care liability action brought in any

10 State or Federal court, except that this subtitle shall not

11 apply to—

12 (1) an action for damages arising from a vac13 cine-related injury or death to the extent that title

14 XXI of the Public Health Service Act applies to the

15 action, or

16 (2) an action under the Employee Retirement

17 Income Security Act of 1974 (29 U.S.C. 1001 et

18 seq.).

19 (b) PREEMPTION.—This subtitle shall preempt any

20 State law to the extent such law is inconsistent with the

21 limitations contained in this subtitle. This subtitle shall

22 not preempt any State law that provides for defenses or

23 places limitations on a person’s liability in addition to

24 those contained in this subtitle or otherwise imposes great25 er restrictions than those provided in this subtitle.
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1 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

2 OF LAW OR VENUE.—Nothing in subsection (b) shall be

3 construed to—

4 (1) waive or affect any defense of sovereign im5 munity asserted by any State under any provision of

6 law;

7 (2) waive or affect any defense of sovereign im8 munity asserted by the United States;

9 (3) affect the applicability of any provision of

10 the Foreign Sovereign Immunities Act of 1976;

11 (4) preempt State choice-of-law rules with re12 spect to claims brought by a foreign nation or a citi13 zen of a foreign nation; or

14 (5) affect the right of any court to transfer

15 venue or to apply the law of a foreign nation or to

16 dismiss a claim of a foreign nation or of a citizen

17 of a foreign nation on the ground of inconvenient

18 forum.

19 (d) AMOUNT IN CONTROVERSY.—In an action to

20 which this subtitle applies and which is brought under sec21 tion 1332 of title 28, United States Code, the amount of

22 noneconomic damages or punitive damages, and attorneys’

23 fees or costs, shall not be included in determining whether

24 the matter in controversy exceeds the sum or value of

25 $50,000.
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1 (e) FEDERAL COURT JURISDICTION NOT ESTAB2 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

3 this subtitle shall be construed to establish any jurisdiction

4 in the district courts of the United States over health care

5 liability actions on the basis of section 1331 or 1337 of

6 title 28, United States Code.

7 SEC. 15302. DEFINITIONS.

8 As used in this subtitle:

9 (1) ACTUAL DAMAGES.—The term ‘‘actual dam10 ages’’ means damages awarded to pay for economic

11 loss.

12 (2) ALTERNATIVE DISPUTE RESOLUTION SYS13 TEM; ADR.—The term ‘‘alternative dispute resolution

14 system’’ or ‘‘ADR’’ means a system established

15 under Federal or State law that provides for the res16 olution of health care liability claims in a manner

17 other than through health care liability actions.

18 (3) CLAIMANT.—The term ‘‘claimant’’ means

19 any person who brings a health care liability action

20 and any person on whose behalf such an action is

21 brought. If such action is brought through or on be22 half of an estate, the term includes the claimant’s

23 decedent. If such action is brought through or on be24 half of a minor or incompetent, the term includes

25 the claimant’s legal guardian.
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1 (4) CLEAR AND CONVINCING EVIDENCE.—The

2 term ‘‘clear and convincing evidence’’ is that meas3 ure or degree of proof that will produce in the mind

4 of the trier of fact a firm belief or conviction as to

5 the truth of the allegations sought to be established.

6 Such measure or degree of proof is more than that

7 required under preponderance of the evidence but

8 less than that required for proof beyond a reason9 able doubt.

10 (5) COLLATERAL SOURCE PAYMENTS.—The

11 term ‘‘collateral source payments’’ means any

12 amount paid or reasonably likely to be paid in the

13 future to or on behalf of a claimant, or any service,

14 product, or other benefit provided or reasonably like15 ly to be provided in the future to or on behalf of a

16 claimant, as a result of an injury or wrongful death,

17 pursuant to—

18 (A) any State or Federal health, sickness,

19 income-disability, accident or workers’ com20 pensation Act;

21 (B) any health, sickness, income-disability,

22 or accident insurance that provides health bene23 fits or income-disability coverage;

24 (C) any contract or agreement of any

25 group, organization, partnership, or corporation
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1 to provide, pay for, or reimburse the cost of

2 medical, hospital, dental, or income disability

3 benefits; and

4 (D) any other publicly or privately funded

5 program.

6 (6) DRUG.—The term ‘‘drug’’ has the meaning

7 given such term in section 201(g)(1) of the Federal

8 Food, Drug, and Cosmetic Act (21 U.S.C.

9 321(g)(1)).

10 (7) ECONOMIC LOSS.—The term ‘‘economic

11 loss’’ means any pecuniary loss resulting from injury

12 (including the loss of earnings or other benefits re13 lated to employment, medical expense loss, replace14 ment services loss, loss due to death, burial costs,

15 and loss of business or employment opportunities),

16 to the extent recovery for such loss is allowed under

17 applicable State law.

18 (8) HARM.—The term ‘‘harm’’ means any le19 gally cognizable wrong or injury for which punitive

20 damages may be imposed.

21 (9) HEALTH BENEFIT PLAN.—The term

22 ‘‘health benefit plan’’ means—

23 (A) a hospital or medical expense incurred

24 policy or certificate,
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1 (B) a hospital or medical service plan con2 tract,

3 (C) a health maintenance subscriber con4 tract, or

5 (D) a MedicarePlus product (offered under

6 part C of title XVIII of the Social Security

7 Act),

8 that provides benefits with respect to health care

9 services.

10 (10) HEALTH CARE LIABILITY ACTION.—The

11 term ‘‘health care liability action’’ means a civil ac12 tion brought in a State or Federal court against a

13 health care provider, an entity which is obligated to

14 provide or pay for health benefits under any health

15 benefit plan (including any person or entity acting

16 under a contract or arrangement to provide or ad17 minister any health benefit), or the manufacturer,

18 distributor, supplier, marketer, promoter, or seller of

19 a medical product, in which the claimant alleges a

20 claim (including third party claims, cross claims,

21 counter claims, or distribution claims) based upon

22 the provision of (or the failure to provide or pay for)

23 health care services or the use of a medical product,

24 regardless of the theory of liability on which the
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1 claim is based or the number of plaintiffs, defend2 ants, or causes of action.

3 (11) HEALTH CARE LIABILITY CLAIM.—The

4 term ‘‘health care liability claim’’ means a claim in

5 which the claimant alleges that injury was caused by

6 the provision of (or the failure to provide) health

7 care services.

8 (12) HEALTH CARE PROVIDER.—The term

9 ‘‘health care provider’’ means any person that is en10 gaged in the delivery of health care services in a

11 State and that is required by the laws or regulations

12 of the State to be licensed or certified by the State

13 to engage in the delivery of such services in the

14 State.

15 (13) HEALTH CARE SERVICE.—The term

16 ‘‘health care service’’ means any service for which

17 payment may be made under a health benefit plan

18 including services related to the delivery or adminis19 tration of such service.

20 (14) MEDICAL DEVICE.—The term ‘‘medical de21 vice’’ has the meaning given such term in section

22 201(h) of the Federal Food, Drug, and Cosmetic

23 Act (21 U.S.C. 321(h)).

24 (15) NONECONOMIC DAMAGES.—The term

25 ‘‘noneconomic damages’’ means damages paid to an
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1 individual for pain and suffering, inconvenience,

2 emotional distress, mental anguish, loss of consor3 tium, injury to reputation, humiliation, and other

4 nonpecuniary losses.

5 (16) PERSON.—The term ‘‘person’’ means any

6 individual, corporation, company, association, firm,

7 partnership, society, joint stock company, or any

8 other entity, including any governmental entity.

9 (17) PRODUCT SELLER.—

10 (A) IN GENERAL.—Subject to subpara11 graph (B), the term ‘‘product seller’’ means a

12 person who, in the course of a business con13 ducted for that purpose—

14 (i) sells, distributes, rents, leases, pre15 pares, blends, packages, labels, or is other16 wise involved in placing, a product in the

17 stream of commerce, or

18 (ii) installs, repairs, or maintains the

19 harm-causing aspect of a product.

20 (B) EXCLUSION.—Such term does not in21 clude—

22 (i) a seller or lessor of real property;

23 (ii) a provider of professional services

24 in any case in which the sale or use of a

25 product is incidental to the transaction and
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1 the essence of the transaction is the fur2 nishing of judgment, skill, or services; or

3 (iii) any person who—

4 (I) acts in only a financial capac5 ity with respect to the sale of a prod6 uct; or

7 (II) leases a product under a

8 lease arrangement in which the selec9 tion, possession, maintenance, and op10 eration of the product are controlled

11 by a person other than the lessor.

12 (18) PUNITIVE DAMAGES.—The term ‘‘punitive

13 damages’’ means damages awarded against any per14 son not to compensate for actual injury suffered, but

15 to punish or deter such person or others from en16 gaging in similar behavior in the future.

17 (19) STATE.—The term ‘‘State’’ means each of

18 the several States, the District of Columbia, Puerto

19 Rico, the Virgin Islands, Guam, American Samoa,

20 the Northern Mariana Islands, and any other terri21 tory or possession of the United States.

22 SEC. 15303. EFFECTIVE DATE.

23 This subtitle will apply to any health care liability ac24 tion brought in a Federal or State court and to any health

25 care liability claim subject to an alternative dispute resolu-
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1 tion system, that is initiated on or after the date of enact2 ment of this subtitle, except that any health care liability

3 claim or action arising from an injury occurring prior to

4 the date of enactment of this subtitle shall be governed

5 by the applicable statute of limitations provisions in effect

6 at the time the injury occurred.

7 PART 2—UNIFORM STANDARDS FOR HEALTH

8 CARE LIABILITY ACTIONS

9 SEC. 15311. STATUTE OF LIMITATIONS.

10 A health care liability action may not be brought

11 after the expiration of the 2-year period that begins on

12 the date on which the alleged injury that is the subject

13 of the action was discovered or should reasonably have

14 been discovered, but in no case after the expiration of the

15 5-year period that begins on the date the alleged injury

16 occurred.

17 SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.

18 (a) TREATMENT OF NONECONOMIC DAMAGES.—

19 (1) LIMITATION ON NONECONOMIC DAMAGES.—

20 The total amount of noneconomic damages that may

21 be awarded to a claimant for losses resulting from

22 the injury which is the subject of a health care liabil23 ity action may not exceed $250,000, regardless of

24 the number of parties against whom the action is
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1 brought or the number of actions brought with re2 spect to the injury.

3 (2) JOINT AND SEVERAL LIABILITY.—In any

4 health care liability action brought in State or Fed5 eral court, a defendant shall be liable only for the

6 amount of noneconomic damages attributable to

7 such defendant in direct proportion to such defend8 ant’s share of fault or responsibility for the claim9 ant’s actual damages, as determined by the trier of

10 fact. In all such cases, the liability of a defendant

11 for noneconomic damages shall be several and not

12 joint.

13 (b) TREATMENT OF PUNITIVE DAMAGES.—

14 (1) GENERAL RULE.—Punitive damages may,

15 to the extent permitted by applicable State law, be

16 awarded in any health care liability action for harm

17 in any Federal or State court against a defendant if

18 the claimant establishes by clear and convincing evi19 dence that the harm suffered was the result of con20 duct—

21 (A) specifically intended to cause harm, or

22 (B) conduct manifesting a conscious, fla23 grant indifference to the rights or safety of oth24 ers.
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1 (2) PROPORTIONAL AWARDS.—The amount of

2 punitive damages that may be awarded in any health

3 care liability action subject to this subtitle shall not

4 exceed 3 times the amount of damages awarded to

5 the claimant for economic loss, or $250,000, which6 ever is greater. This paragraph shall be applied by

7 the court and shall not be disclosed to the jury.

8 (3) APPLICABILITY.—This subsection shall

9 apply to any health care liability action brought in

10 any Federal or State court on any theory where pu11 nitive damages are sought. This subsection does not

12 create a cause of action for punitive damages. This

13 subsection does not preempt or supersede any State

14 or Federal law to the extent that such law would

15 further limit the award of punitive damages.

16 (4) BIFURCATION.—At the request of any

17 party, the trier of fact shall consider in a separate

18 proceeding whether punitive damages are to be

19 awarded and the amount of such award. If a sepa20 rate proceeding is requested, evidence relevant only

21 to the claim of punitive damages, as determined by

22 applicable State law, shall be inadmissible in any

23 proceeding to determine whether actual damages are

24 to be awarded.

25 (5) DRUGS AND DEVICES.—
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1 (A) IN GENERAL.—(i) Punitive damages

2 shall not be awarded against a manufacturer or

3 product seller of a drug or medical device which

4 caused the claimant’s harm where—

5 (I) such drug or device was subject to

6 premarket approval by the Food and Drug

7 Administration with respect to the safety

8 of the formulation or performance of the

9 aspect of such drug or device which caused

10 the claimant’s harm, or the adequacy of

11 the packaging or labeling of such drug or

12 device which caused the harm, and such

13 drug, device, packaging, or labeling was

14 approved by the Food and Drug Adminis15 tration; or

16 (II) the drug is generally recognized

17 as safe and effective pursuant to conditions

18 established by the Food and Drug Admin19 istration and applicable regulations, includ20 ing packaging and labeling regulations.

21 (ii) Clause (i) shall not apply in any case

22 in which the defendant, before or after pre23 market approval of a drug or device—

24 (I) intentionally and wrongfully with25 held from or misrepresented to the Food
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1 and Drug Administration information con2 cerning such drug or device required to be

3 submitted under the Federal Food, Drug,

4 and Cosmetic Act (21 U.S.C. 301 et seq.)

5 or section 351 of the Public Health Service

6 Act (42 U.S.C. 262) that is material and

7 relevant to the harm suffered by the claim8 ant, or

9 (II) made an illegal payment to an of10 ficial or employee of the Food and Drug

11 Administration for the purpose of securing

12 or maintaining approval of such drug or

13 device.

14 (B) PACKAGING.—In a health care liability

15 action for harm which is alleged to relate to the

16 adequacy of the packaging or labeling of a drug

17 which is required to have tamper-resistant

18 packaging under regulations of the Secretary of

19 Health and Human Services (including labeling

20 regulations related to such packaging), the

21 manufacturer or product seller of the drug shall

22 not be held liable for punitive damages unless

23 such packaging or labeling is found by the court

24 by clear and convincing evidence to be substan25 tially out of compliance with such regulations.
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1 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—

2 (1) GENERAL RULE.—In any health care liabil3 ity action in which the damages awarded for future

4 economic and noneconomic loss exceeds $50,000, a

5 person shall not be required to pay such damages in

6 a single, lump-sum payment, but shall be permitted

7 to make such payments periodically based on when

8 the damages are found likely to occur, as such pay9 ments are determined by the court.

10 (2) FINALITY OF JUDGMENT.—The judgment

11 of the court awarding periodic payments under this

12 subsection may not, in the absence of fraud, be re13 opened at any time to contest, amend, or modify the

14 schedule or amount of the payments.

15 (3) LUMP-SUM SETTLEMENTS.—This sub16 section shall not be construed to preclude a settle17 ment providing for a single, lump-sum payment.

18 (d) TREATMENT OF COLLATERAL SOURCE PAY19 MENTS.—

20 (1) INTRODUCTION INTO EVIDENCE.—In any

21 health care liability action, any defendant may intro22 duce evidence of collateral source payments. If any

23 defendant elects to introduce such evidence, the

24 claimant may introduce evidence of any amount paid

25 or contributed or reasonably likely to be paid or con-
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1 tributed in the future by or on behalf of the claim2 ant to secure the right to such collateral source pay3 ments.

4 (2) NO SUBROGATION.—No provider of collat5 eral source payments shall recover any amount

6 against the claimant or receive any lien or credit

7 against the claimant’s recovery or be equitably or le8 gally subrogated the right of the claimant in a

9 health care liability action.

10 (3) APPLICATION TO SETTLEMENTS.—This sub11 section shall apply to an action that is settled as well

12 as an action that is resolved by a fact finder.

13 SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.

14 Any ADR used to resolve a health care liability action

15 or claim shall contain provisions relating to statute of limi16 tations, non-economic damages, joint and several liability,

17 punitive damages, collateral source rule, and periodic pay18 ments which are identical to the provisions relating to

19 such matters in this subtitle.
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1 Subtitle E—Teaching Hospitals and

2 Graduate Medical Education

3 PART 1—TEACHING HOSPITAL AND GRADUATE

4 MEDICAL EDUCATION TRUST FUND

5 SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO

6 TEACHING HOSPITALS.

7 The Social Security Act (42 U.S.C. 300 et seq.) is

8 amended by adding after title XXI the following title:

9 ‘‘TITLE XXII—TEACHING HOSPITAL AND

10 GRADUATE MEDICAL EDUCATION TRUST FUND

11 ‘‘PART A—ESTABLISHMENT OF FUND

12 ‘‘SEC. 2201. ESTABLISHMENT OF FUND.

13 ‘‘(a) IN GENERAL.—There is established in the

14 Treasury of the United States a fund to be known as the

15 Teaching Hospital and Graduate Medical Education Trust

16 Fund (in this title referred to as the ‘Fund’), consisting

17 of amounts appropriated to the Fund in subsection (d)

18 and subsection (e)(3), amounts transferred to the Fund

19 under section 1886(j), and such gifts and bequests as may

20 be deposited in the Fund pursuant to subsection (f).

21 Amounts in the Fund are available until expended.

22 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

23 Fund are available to the Secretary for making payments

24 under section 2211.
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1 ‘‘(c) ACCOUNTS IN FUND.—There are established

2 within the Fund the following accounts:

3 ‘‘(1) The Indirect-Costs Medical Education Ac4 count.

5 ‘‘(2) The Medicare Direct-Costs Medical Edu6 cation Account.

7 ‘‘(3) The General Direct-Costs Medical Edu8 cation Account.

9 ‘‘(d) GENERAL TRANSFERS TO FUND.—

10 ‘‘(1) IN GENERAL.—For fiscal year 1997 and

11 each subsequent fiscal year, there are appropriated

12 to the Fund (effective on the applicable date under

13 paragraph (2)), out of any money in the Treasury

14 not otherwise appropriated, the following amounts

15 (as applicable to the fiscal year involved):

16 ‘‘(A) For fiscal year 1997,

17 $1,300,000,000.

18 ‘‘(B) For fiscal year 1998,

19 $1,500,000,000.

20 ‘‘(C) For fiscal year 1999, $2,300,000,000.

21 ‘‘(D) For fiscal year 2000,

22 $3,100,000,000.

23 ‘‘(E) For fiscal year 2001,

24 $3,600,000,000.
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1 ‘‘(F) For fiscal year 2002,

2 $4,000,000,000.

3 ‘‘(G) For fiscal year 2003 and each subse4 quent fiscal year, the greater of the amount ap5 propriated for the preceding fiscal year or an

6 amount equal to the product of—

7 ‘‘(i) the amount appropriated for the

8 preceding fiscal year; and

9 ‘‘(ii) 1 plus the percentage increase in

10 the nominal gross domestic product for the

11 one-year period ending upon July 1 of such

12 preceding fiscal year.

13 ‘‘(2) EFFECTIVE DATE FOR ANNUAL APPRO14 PRIATION.—For purposes of paragraph (1) (and for

15 purposes of section 2221(a)(1), and subsections

16 (b)(1)(A) and (c)(1)(A) of section 2231)), the appli17 cable date for a fiscal year is the first day of the fis18 cal year, exclusive of Saturdays, Sundays, and Fed19 eral holidays.

20 ‘‘(3) ALLOCATION AMONG CERTAIN AC21 COUNTS.—Of the amount appropriated in paragraph

22 (1) for a fiscal year—

23 ‘‘(A) there shall be allocated to the Indi24 rect-Costs Medical Education Account the per-
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1 centage determined under paragraph (4)(B);

2 and

3 ‘‘(B) there shall be allocated to the Gen4 eral Direct-Costs Medical Education Account

5 the percentage determined under paragraph

6 (4)(C).

7 ‘‘(4) DETERMINATION OF PERCENTAGES.—The

8 Secretary of Health and Human Services, acting

9 through the Administrator of the Health Care Fi10 nancing Administration, shall determine the follow11 ing:

12 ‘‘(A) The total amount of payments that

13 were made under subsections (d)(5)(B) and (h)

14 of section 1886 for fiscal year 1994.

15 ‘‘(B) The percentage of such total that was

16 constituted by payments under subsection

17 (d)(5)(B) of such section.

18 ‘‘(C) The percentage of such total that was

19 constituted by payments under subsection (h) of

20 such section.

21 ‘‘(e) INVESTMENT.—

22 ‘‘(1) IN GENERAL.—The Secretary of the

23 Treasury shall invest such amounts of the Fund as

24 such Secretary determines are not required to meet

25 current withdrawals from the Fund. Such invest-
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1 ments may be made only in interest-bearing obliga2 tions of the United States. For such purpose, such

3 obligations may be acquired on original issue at the

4 issue price, or by purchase of outstanding obliga5 tions at the market price.

6 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation

7 acquired by the Fund may be sold by the Secretary

8 of the Treasury at the market price.

9 ‘‘(3) AVAILABILITY OF INCOME.—Any interest

10 derived from obligations acquired by the Fund, and

11 proceeds from any sale or redemption of such obliga12 tions, are hereby appropriated to the Fund.

13 ‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—The

14 Fund may accept on behalf of the United States money

15 gifts and bequests made unconditionally to the Fund for

16 the benefit of the Fund or any activity financed through

17 the Fund.

18 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

19 ‘‘Subpart 1—Requirement of Payments

20 ‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOS21 PITALS.

22 ‘‘(a) IN GENERAL.—Subject to subsection (d), in the

23 case of each teaching hospital that in accordance with sub24 section (b) submits to the Secretary a payment document

25 for fiscal year 1997 or any subsequent fiscal year, the Sec-
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1 retary shall make payments for the year to the teaching

2 hospital for the costs of operating approved medical resi3 dency training programs. Such payments shall be made

4 from the Fund, and the total of the payments to the hos5 pital for the fiscal year shall equal the sum of the follow6 ing:

7 ‘‘(1) An amount determined under section 2221

8 (relating to the indirect costs of graduate medical

9 education).

10 ‘‘(2) An amount determined under section 2231

11 (relating to the direct costs of graduate medical edu12 cation).

13 ‘‘(b) PAYMENT DOCUMENT.—For purposes of sub14 section (a), a payment document is a document containing

15 such information as may be necessary for the Secretary

16 to make payments under such subsection to a teaching

17 hospital for a fiscal year. The document is submitted in

18 accordance with this subsection if the document is submit19 ted not later than the date specified by the Secretary, and

20 the document is in such form and is made in such manner

21 as the Secretary may require. The Secretary may require

22 that information under this subsection be submitted to the

23 Secretary in periodic reports.

24 ‘‘(c) ADMINISTRATOR OF PROGRAMS.—This part,

25 and the subsequent parts of this title, shall be carried out
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1 by the Secretary acting through the Administrator of the

2 Health Care Financing Administration.

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) AUTHORITY REGARDING PAYMENTS TO

5 CONSORTIA OF PROVIDERS.—In the case of pay6 ments under subsection (a) that are determined

7 under section 2231:

8 ‘‘(A) The requirement under such sub9 section to make the payments to teaching hos10 pitals is subject to the authority of the Sec11 retary under section 2233(a) to make payments

12 to qualifying consortia.

13 ‘‘(B) If the Secretary authorizes such a

14 consortium for purposes of section 2233(a),

15 subsections (a) and (b) of this section apply to

16 the consortium to the same extent and in the

17 same manner as the subsections apply to teach18 ing hospitals.

19 ‘‘(2) CERTAIN HOSPITALS.—Paragraph (1) of

20 subsection (a) is subject to sections 2222 and 2223

21 of subpart 2. Paragraph (2) of subsection (a) is sub22 ject to sections 2232 through 2234 of subpart 3.

23 ‘‘(e) APPROVED MEDICAL RESIDENCY TRAINING

24 PROGRAM.—For purposes of this title, the term ‘approved
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1 medical residency training program’ has the meaning

2 given such term in section 1886(h)(5)(A).

3 ‘‘Subpart 2—Amount Relating to Indirect Costs of

4 Graduate Medical Education

5 ‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN6 DIRECT COSTS.

7 ‘‘(a) IN GENERAL.—For purposes of section

8 2211(a)(1), the amount determined under this section for

9 a teaching hospital for a fiscal year is the product of—

10 ‘‘(1) the amount in the Indirect-Costs Medical

11 Education Account on the applicable date under sec12 tion 2201(d) (once the appropriation under such sec13 tion is made); and

14 ‘‘(2) the percentage determined for the hospital

15 under subsection (b).

16 ‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—

17 ‘‘(1) IN GENERAL.—For purposes of subsection

18 (a)(2), the percentage determined under this sub19 section for a teaching hospital is the mean average

20 of the respective percentages determined under para21 graph (3) for each fiscal year of the applicable pe22 riod (as defined in paragraph (2)), adjusted by the

23 Secretary (upward or downward, as the case may

24 be) on a pro rata basis to the extent necessary to

25 ensure that the sum of the percentages determined
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1 under this paragraph for all teaching hospitals is

2 equal to 100 percent. The preceding sentence is sub3 ject to sections 2222 and 2223.

4 ‘‘(2) APPLICABLE PERIOD REGARDING REL5 EVANT DATA; FISCAL YEARS 1992 THROUGH 1994.—

6 For purposes of this part, the term ‘applicable pe7 riod’ means the period beginning on the first day of

8 fiscal year 1992 and continuing through the end of

9 fiscal year 1994.

10 ‘‘(3) RESPECTIVE DETERMINATIONS FOR FIS11 CAL YEARS OF APPLICABLE PERIOD.—For purposes

12 of paragraph (1), the percentage determined under

13 this paragraph for a teaching hospital for a fiscal

14 year of the applicable period is the percentage con15 stituted by the ratio of—

16 ‘‘(A) the total amount of payments re17 ceived by the hospital under section

18 1886(d)(5)(B) for discharges occurring during

19 the fiscal year involved; to

20 ‘‘(B) the sum of the respective amounts

21 determined under subparagraph (A) for the fis22 cal year for all teaching hospitals.

23 ‘‘(c) AVAILABILITY OF DATA.—If a teaching hospital

24 received the payments specified in subsection (b)(3)(A)

25 during the applicable period but a complete set of the rel-
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1 evant data is not available to the Secretary for purposes

2 of determining an amount under such subsection for the

3 fiscal year involved, the Secretary shall for purposes of

4 such subsection make an estimate on the basis of such

5 data as are available to the Secretary for the applicable

6 period.

7 ‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING

8 DETERMINATION OF HOSPITAL-SPECIFIC

9 PERCENTAGE.

10 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS

11 1995 AND 1996.—

12 ‘‘(1) IN GENERAL.—In the case of a teaching

13 hospital whose first payments under section

14 1886(d)(5)(B) were for discharges occurring in fis15 cal year 1995 or in fiscal year 1996 (referred to in

16 this subsection individually as a ‘first payment

17 year’), the percentage determined under paragraph

18 (2) for the hospital is deemed to be the percentage

19 applicable under section 2221(b) to the hospital, ex20 cept that the percentage under paragraph (2) shall

21 be adjusted in accordance with section 2221(b)(1) to

22 the extent determined by the Secretary to be nec23 essary with respect to a sum that equals 100 per24 cent.
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1 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

2 purposes of paragraph (1), the percentage deter3 mined under this paragraph for a teaching hospital

4 is the percentage constituted by the ratio of the

5 amount determined under subparagraph (A) to the

6 amount determined under subparagraph (B), as fol7 lows:

8 ‘‘(A)(i) If the first payment year for the

9 hospital is fiscal year 1995, the amount deter10 mined under this subparagraph is the total

11 amount of payments received by the hospital

12 under section 1886(d)(5)(B) for discharges oc13 curring during fiscal year 1995.

14 ‘‘(ii) If the first payment year for the hos15 pital is fiscal year 1996, the amount determined

16 under this subparagraph is an amount equal to

17 an estimate by the Secretary of the total

18 amount of payments that would have been paid

19 to the hospital under section 1886(d)(5)(B) for

20 discharges occurring during fiscal year 1995 if

21 such section, as in effect for fiscal year 1996,

22 had applied to the hospital for discharges occur23 ring during fiscal year 1995.

24 ‘‘(B)(i) If the first payment year for the

25 hospital is fiscal year 1995, the amount deter-
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1 mined under this subparagraph is the aggregate

2 total of the payments received by teaching hos3 pitals under section 1886(d)(5)(B) for dis4 charges occurring during fiscal year 1995.

5 ‘‘(ii) If the first payment year for the hos6 pital is fiscal year 1996—

7 ‘‘(I) the Secretary shall make an esti8 mate in accordance with subparagraph

9 (A)(ii) for all teaching hospitals; and

10 ‘‘(II) the amount determined under

11 this subparagraph is the sum of the esti12 mates made by the Secretary under

13 subclause (I).

14 ‘‘(b) NEW TEACHING HOSPITALS.—

15 ‘‘(1) IN GENERAL.—Subject to paragraph (4),

16 in the case of a teaching hospital that did not re17 ceive payments under section 1886(d)(5)(B) for any

18 of the fiscal years 1992 through 1996, the percent19 age determined under paragraph (3) for the hospital

20 is deemed to be the percentage applicable under sec21 tion 2221(b) to the hospital, except that the percent22 age under paragraph (3) shall be adjusted in accord23 ance with section 2221(b)(1) to the extent deter24 mined by the Secretary to be necessary with respect

25 to a sum that equals 100 percent.
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1 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

2 DATA.—The determination under paragraph (3) of a

3 percentage for a teaching hospital described in para4 graph (1) shall be made for the most recent fiscal

5 year for which the Secretary has sufficient data to

6 make the determination (referred to in this sub7 section as the ‘designated fiscal year’).

8 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

9 purposes of paragraph (1), the percentage deter10 mined under this paragraph for the teaching hos11 pital involved is the percentage constituted by the

12 ratio of the amount determined under subparagraph

13 (A) to the amount determined under subparagraph

14 (B), as follows:

15 ‘‘(A) The amount determined under this

16 subparagraph is an amount equal to an esti17 mate by the Secretary of the total amount of

18 payments that would have been paid to the hos19 pital under section 1886(d)(5)(B) for the des20 ignated fiscal year if such section, as in effect

21 for the first fiscal year for which payments pur22 suant to this subsection are to be made to the

23 hospital, had applied to the hospital for the des24 ignated fiscal year.
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1 ‘‘(B) The Secretary shall make an estimate

2 in accordance with subparagraph (A) for all

3 teaching hospitals. The amount determined

4 under this subparagraph is the sum of the esti5 mates made by the Secretary under the preced6 ing sentence.

7 ‘‘(4) LIMITATION.—This subsection does not

8 apply to a teaching hospital described in paragraph

9 (1) if the hospital is in a State for which a dem10 onstration project under section 1814(b)(3) is in ef11 fect.

12 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case

13 of two or more teaching hospitals that have each received

14 payments pursuant to section 2221 for one or more fiscal

15 years and that undergo a consolidation or merger, the per16 centage applicable to the resulting teaching hospital for

17 purposes of section 2221(b) is the sum of the respective

18 percentages that would have applied pursuant to such sec19 tion if the hospitals had not undergone the consolidation

20 or merger.

21 ‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE22 GARDING TEACHING HOSPITALS IN CERTAIN

23 STATES.

24 ‘‘(a) IN GENERAL.—In the case of a teaching hospital

25 in a State for which a demonstration project under section
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1 1814(b)(3) is in effect, this section applies in lieu of sec2 tion 2221. For purposes of section 2211(a)(1), the amount

3 determined for such a teaching hospital for a fiscal year

4 is the product of—

5 ‘‘(1) the amount in the Indirect-Costs Medical

6 Education Account for the fiscal year pursuant to

7 the allocation under section 2201(d)(3)(A) for the

8 year; and

9 ‘‘(2) the percentage determined under sub10 section (b) for the hospital.

11 ‘‘(b) DETERMINATION OF PERCENTAGE.—For pur12 poses of subsection (a)(2):

13 ‘‘(1) The Secretary shall make an estimate of

14 the total amount of payments that would have been

15 received under section 1886(d)(5)(B) by the hospital

16 involved with respect to each of the fiscal years of

17 the applicable period if such section (as in effect for

18 such fiscal years) had applied to the hospital for

19 such years.

20 ‘‘(2) The percentage determined under this sub21 section for the hospital for a fiscal year is a mean

22 average percentage determined for the hospital in

23 accordance with the methodology of section

24 2221(b)(1), except that the estimate made by the

25 Secretary under paragraph (1) of this subsection for
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1 a fiscal year of the applicable period is deemed to be

2 the amount that applies for purposes of section

3 2221(b)(3)(A) for such year.

4 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

5 AMOUNTS.—In the case of a teaching hospital described

6 in subsection (a), this section does not authorize any pay7 ment to the hospital from amounts transferred to the

8 Fund under section 1886(j).

9 ‘‘(d) ADJUSTMENT REGARDING PAYMENTS TO

10 OTHER HOSPITALS.—In the case of a fiscal year for which

11 payments pursuant to subsection (a) are made to one or

12 more teaching hospitals, the following applies:

13 ‘‘(1) The Secretary shall determine a percent14 age equal to the sum of the respective percentages

15 determined for the hospitals under subsection (b).

16 ‘‘(2) The Secretary shall determine an amount

17 equal to the product of—

18 ‘‘(A) the percentage determined under

19 paragraph (1); and

20 ‘‘(B) the amount in the Indirect-Costs

21 Medical Education Account for the fiscal year

22 pursuant to the transfer under section

23 1886(j)(1).

24 ‘‘(3) The Secretary shall, for each hospital

25 (other than hospitals described in subsection (a)),
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1 make payments to the hospital in amounts whose

2 sum for the fiscal year is equal to the product of—

3 ‘‘(A) the amount determined under para4 graph (2); and

5 ‘‘(B) the percentage that applies to the

6 hospital for purposes of section 2221(b), except

7 that such percentage shall be adjusted in ac8 cordance with the methodology of section

9 2221(b)(1) to the extent determined by the Sec10 retary to be necessary with respect to a sum

11 that equals 100 percent.

12 ‘‘Subpart 3—Amount Relating to Direct Costs of

13 Graduate Medical Education

14 ‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI15 RECT COSTS.

16 ‘‘(a) IN GENERAL.—For purposes of section

17 2211(a)(2), the amount determined under this section for

18 a teaching hospital for a fiscal year is the sum of—

19 ‘‘(1) the amount determined under subsection

20 (b) (relating to the General Direct-Costs Medical

21 Education Account); and

22 ‘‘(2) the amount determined under subsection

23 (c) (relating to the Medicare Direct-Costs Medical

24 Education Account).

25 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—
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1 ‘‘(1) IN GENERAL.—For purposes of subsection

2 (a)(1), the amount determined under this subsection

3 for a teaching hospital for a fiscal year is the prod4 uct of—

5 ‘‘(A) the amount in the General Direct6 Costs Medical Education Account on the appli7 cable date under section 2201(d) (once the ap8 propriation under such section is made); and

9 ‘‘(B) the percentage determined for the

10 hospital under paragraph (2).

11 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (1)(B), the percentage determined under

14 this paragraph for a teaching hospital is the

15 mean average of the respective percentages de16 termined under subparagraph (B) for each fis17 cal year of the applicable period (as defined in

18 section 2221(b)(2)), adjusted by the Secretary

19 (upward or downward, as the case may be) on

20 a pro rata basis to the extent necessary to en21 sure that the sum of the percentages deter22 mined under this subparagraph for all teaching

23 hospitals is equal to 100 percent. The preceding

24 sentence is subject to sections 2232 through

25 2234.
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1 ‘‘(B) RESPECTIVE DETERMINATIONS FOR

2 FISCAL YEARS OF APPLICABLE PERIOD.—For

3 purposes of subparagraph (A), the percentage

4 determined under this subparagraph for a

5 teaching hospital for a fiscal year of the appli6 cable period is the percentage constituted by

7 the ratio of—

8 ‘‘(i) the total amount of payments re9 ceived by the hospital under section

10 1886(h) for cost reporting periods begin11 ning during the fiscal year involved; to

12 ‘‘(ii) the sum of the respective

13 amounts determined under clause (i) for

14 the fiscal year for all teaching hospitals.

15 ‘‘(3) AVAILABILITY OF DATA.—If a teaching

16 hospital received the payments specified in para17 graph (2)(B)(i) during the applicable period but a

18 complete set of the relevant data is not available to

19 the Secretary for purposes of determining an

20 amount under such paragraph for the fiscal year in21 volved, the Secretary shall for purposes of such

22 paragraph make an estimate on the basis of such

23 data as are available to the Secretary for the appli24 cable period.

25 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—
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1 ‘‘(1) IN GENERAL.—For purposes of subsection

2 (a)(2), the amount determined under this subsection

3 for a teaching hospital for a fiscal year is the prod4 uct of—

5 ‘‘(A) the amount in the Medicare Direct6 Costs Medical Education Account on the appli7 cable date under section 2201(d) (once the ap8 propriation under such section is made); and

9 ‘‘(B) the percentage determined for the

10 hospital under paragraph (2) for the fiscal year.

11 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—For

12 purposes of paragraph (1)(B), the percentage deter13 mined under this subsection for a teaching hospital

14 for a fiscal year is the percentage constituted by the

15 ratio of—

16 ‘‘(A) the estimate made by the Secretary

17 for the hospital for the fiscal year under section

18 1886(j)(2)(B); to

19 ‘‘(B) the sum of the respective estimates

20 referred to in subparagraph (A) for all teaching

21 hospitals.
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1 ‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING

2 DETERMINATION OF HOSPITAL-SPECIFIC

3 PERCENTAGE.

4 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS

5 1995 AND 1996.—

6 ‘‘(1) IN GENERAL.—In the case of a teaching

7 hospital whose first payments under section 1886(h)

8 were for the cost reporting period beginning in fiscal

9 year 1995 or in fiscal year 1996 (referred to in this

10 subsection individually as a ‘first payment year’),

11 the percentage determined under paragraph (2) for

12 the hospital is deemed to be the percentage applica13 ble under section 2231(b)(2) to the hospital, except

14 that the percentage under paragraph (2) shall be ad15 justed in accordance with section 2231(b)(2)(A) to

16 the extent determined by the Secretary to be nec17 essary with respect to a sum that equals 100 per18 cent.

19 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

20 purposes of paragraph (1), the percentage deter21 mined under this paragraph for a teaching hospital

22 is the percentage constituted by the ratio of the

23 amount determined under subparagraph (A) to the

24 amount determined under subparagraph (B), as fol25 lows:
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1 ‘‘(A)(i) If the first payment year for the

2 hospital is fiscal year 1995, the amount deter3 mined under this subparagraph is the total

4 amount of payments received by the hospital

5 under section 1886(h) for cost reporting periods

6 beginning in fiscal year 1995.

7 ‘‘(ii) If the first payment year for the hos8 pital is fiscal year 1996, the amount determined

9 under this subparagraph is an amount equal to

10 an estimate by the Secretary of the total

11 amount of payments that would have been paid

12 to the hospital under section 1886(h) for cost

13 reporting periods beginning in fiscal year 1995

14 if such section, as in effect for fiscal year 1996,

15 had applied to the hospital for fiscal year 1995.

16 ‘‘(B)(i) If the first payment year for the

17 hospital is fiscal year 1995, the amount deter18 mined under this subparagraph is the aggregate

19 total of the payments received by teaching hos20 pitals under section 1886(h) for cost reporting

21 periods beginning in fiscal year 1995.

22 ‘‘(ii) If the first payment year for the hos23 pital is fiscal year 1996—
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1 ‘‘(I) the Secretary shall make an esti2 mate in accordance with subparagraph

3 (A)(ii) for all teaching hospitals; and

4 ‘‘(II) the amount determined under

5 this subparagraph is the sum of the esti6 mates made by the Secretary under

7 subclause (I).

8 ‘‘(b) NEW TEACHING HOSPITALS.—

9 ‘‘(1) IN GENERAL.—Subject to paragraph (4),

10 in the case of a teaching hospital that did not re11 ceive payments under section 1886(h) for any of the

12 fiscal years 1992 through 1996, the percentage de13 termined under paragraph (3) for the hospital is

14 deemed to be the percentage applicable under section

15 2231(b)(2) to the hospital, except that the percent16 age under paragraph (3) shall be adjusted in accord17 ance with section 2231(b)(2)(A) to the extent deter18 mined by the Secretary to be necessary with respect

19 to a sum that equals 100 percent.

20 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

21 DATA.—The determination under paragraph (3) of a

22 percentage for a teaching hospital described in para23 graph (1) shall be made for the most recent fiscal

24 year for which the Secretary has sufficient data to
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1 make the determination (referred to in this sub2 section as the ‘designated fiscal year’).

3 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

4 purposes of paragraph (1), the percentage deter5 mined under this paragraph for the teaching hos6 pital involved is the percentage constituted by the

7 ratio of the amount determined under subparagraph

8 (A) to the amount determined under subparagraph

9 (B), as follows:

10 ‘‘(A) The amount determined under this

11 subparagraph is an amount equal to an esti12 mate by the Secretary of the total amount of

13 payments that would have been paid to the hos14 pital under section 1886(h) for the designated

15 fiscal year if such section, as in effect for the

16 first fiscal year for which payments pursuant to

17 this subsection are to be made to the hospital,

18 had applied to the hospital for cost reporting

19 periods beginning in the designated fiscal year.

20 ‘‘(B) The Secretary shall make an estimate

21 in accordance with subparagraph (A) for all

22 teaching hospitals. The amount determined

23 under this subparagraph is the sum of the esti24 mates made by the Secretary under the preced25 ing sentence.
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1 ‘‘(4) LIMITATION.—This subsection does not

2 apply to a teaching hospital described in paragraph

3 (1) if the hospital is in a State for which a dem4 onstration project under section 1814(b)(3) is in ef5 fect.

6 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case

7 of two or more teaching hospitals that have each received

8 payments pursuant to section 2231 for one or more fiscal

9 years and that undergo a consolidation or merger, the per10 centage applicable to the resulting teaching hospital for

11 purposes of section 2231(b) is the sum of the respective

12 percentages that would have applied pursuant to such sec13 tion if the hospitals had not undergone the consolidation

14 or merger.

15 ‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO

16 CONSORTIA OF PROVIDERS.

17 ‘‘(a) IN GENERAL.—In lieu of making payments to

18 teaching hospitals pursuant to section 2231, the Secretary

19 may make payments under this section to consortia that

20 meet the requirements of subsection (b).

21 ‘‘(b) QUALIFYING CONSORTIUM.—For purposes of

22 subsection (a), a consortium meets the requirements of

23 this subsection if the consortium is in compliance with the

24 following:
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1 ‘‘(1) The consortium consists of an approved

2 medical residency training program and one or more

3 of the following entities:

4 ‘‘(A) Schools of allopathic medicine or os5 teopathic medicine.

6 ‘‘(B) Teaching hospitals.

7 ‘‘(C) Other approved medical residency

8 training programs.

9 ‘‘(D) Federally qualified health centers.

10 ‘‘(E) Medical group practices.

11 ‘‘(F) Managed care entities.

12 ‘‘(G) Entities furnishing outpatient serv13 ices.

14 ‘‘(H) Such other entities as the Secretary

15 determines to be appropriate.

16 ‘‘(2) The members of the consortium have

17 agreed to participate in the programs of graduate

18 medical education that are operated by the entities

19 in the consortium.

20 ‘‘(3) With respect to the receipt by the consor21 tium of payments made pursuant to this section, the

22 members of the consortium have agreed on a method

23 for allocating the payments among the members.

24 ‘‘(4) The consortium meets such additional re25 quirements as the Secretary may establish.
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1 ‘‘(c) PAYMENTS FROM ACCOUNTS.—

2 ‘‘(1) IN GENERAL.—Subject to subsection (d),

3 the total of payments to a qualifying consortium for

4 a fiscal year pursuant to subsection (a) shall be the

5 sum of—

6 ‘‘(1) the aggregate amount determined for the

7 teaching hospitals of the consortium pursuant to

8 paragraph (1) of section 2231(a); and

9 ‘‘(2) an amount determined in accordance with

10 the methodology that applies pursuant to paragraph

11 (2) of such section, except that the estimate used for

12 purposes of subsection (c)(2)(A) of such section shall

13 be the estimate made for the consortium under sec14 tion 1886(j)(2)(C)(ii).

15 ‘‘(d) LIMITATION ON AGGREGATE TOTAL OF PAY16 MENTS TO CONSORTIA.—The aggregate total of the

17 amounts paid under subsection (c)(2) to qualifying consor18 tia for a fiscal year may not exceed the sum of—

19 ‘‘(1) the aggregate total of the amounts that

20 would have been paid under section 2231(c) for the

21 fiscal year to the teaching hospitals of the consortia

22 if the hospitals had not been participants in the con23 sortia; and

24 ‘‘(2) an amount equal to 1 percent of the

25 amount that applies under section 2231(c)(1)(A) for
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1 the fiscal year (relating to the Medicare Direct-Costs

2 Medical Education Account).

3 ‘‘(e) DEFINITION.—For purposes of this title, the

4 term ‘qualifying consortium’ means a consortium that

5 meets the requirements of subsection (b).

6 ‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE7 GARDING TEACHING HOSPITALS IN CERTAIN

8 STATES.

9 ‘‘(a) IN GENERAL.—In the case of a teaching hospital

10 in a State for which a demonstration project under section

11 1814(b)(3) is in effect, this section applies in lieu of sec12 tion 2231. For purposes of section 2211(a)(2), the amount

13 determined for a teaching hospital for a fiscal year is the

14 product of—

15 ‘‘(1) the amount in the General Direct-Costs

16 Medical Education Account on the applicable date

17 under section 2201(d) (once the appropriation under

18 such section is made); and

19 ‘‘(2) the percentage determined under sub20 section (b) for the hospital.

21 ‘‘(b) DETERMINATION OF PERCENTAGE.—For pur22 poses of subsection (a)(2):

23 ‘‘(1) The Secretary shall make an estimate of

24 the total amount of payments that would have been

25 received under section 1886(h) by the hospital in-
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1 volved with respect to each of the fiscal years of the

2 applicable period if such section (as in effect for

3 such fiscal years) had applied to the hospital for

4 such years.

5 ‘‘(2) The percentage determined under this sub6 section for the hospital for a fiscal year is a mean

7 average percentage determined for the hospital in

8 accordance with the methodology of section

9 2231(b)(2)(A), except that the estimate made by the

10 Secretary under paragraph (1) of this subsection for

11 a fiscal year of the applicable period is deemed to be

12 the amount that applies for purposes of section

13 2231(b)(2)(B)(i) for such year.

14 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

15 AMOUNTS.—In the case of a teaching hospital described

16 in subsection (a), this section does not authorize any pay17 ment to the hospital from amounts transferred to the

18 Fund under section 1886(j).

19 ‘‘Subpart 4—General Provisions

20 ‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.

21 ‘‘(a) COLLECTION OF DATA ON ACCURACY OF ESTI22 MATES.—The Secretary shall collect data on whether the

23 estimates made by the Secretary under section 1886(j) for

24 a fiscal year were substantially accurate.
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1 ‘‘(b) ADJUSTMENTS.—If the Secretary determines

2 under subsection (a) that an estimate for a fiscal year was

3 not substantially accurate, the Secretary shall, for the first

4 fiscal year beginning after the Secretary makes the deter5 mination—

6 ‘‘(1) make adjustments accordingly in transfers

7 to the Fund under section 1886(j); and

8 ‘‘(2) make adjustments accordingly in the

9 amount of payments to teaching hospitals pursuant

10 to 2231(c) (or, as applicable, to qualifying consortia

11 pursuant to section 2233(c)(2)).’’.

12 PART 2—AMENDMENTS TO MEDICARE PROGRAM

13 SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND

14 GRADUATE MEDICAL EDUCATION TRUST

15 FUND.

16 Section 1886 (42 U.S.C. 1395ww) is amended—

17 (1) in subsection (d)(5)(B), in the matter pre18 ceding clause (i), by striking ‘‘The Secretary shall

19 provide’’ and inserting the following: ‘‘For dis20 charges occurring on or before September 30, 1996,

21 the Secretary shall provide’’;

22 (2) in subsection (h)—

23 (A) in paragraph (1), in the first sentence,

24 by striking ‘‘the Secretary shall provide’’ and
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1 inserting ‘‘the Secretary shall, subject to para2 graph (6), provide’’; and

3 (B) by adding at the end the following

4 paragraph:

5 ‘‘(6) LIMITATION.—

6 ‘‘(A) IN GENERAL.—The authority to

7 make payments under this subsection applies

8 only with respect to cost reporting periods end9 ing on or before September 30, 1996, except as

10 provided in subparagraph (B).

11 ‘‘(B) RULE REGARDING PORTION OF LAST

12 COST REPORTING PERIOD.—In the case of a

13 cost reporting period that extends beyond Sep14 tember 30, 1996, payments under this sub15 section shall be made with respect to such por16 tion of the period as has lapsed as of such date.

17 ‘‘(C) RULE OF CONSTRUCTION.—This

18 paragraph may not be construed as authorizing

19 any payment under section 1861(v) with re20 spect to graduate medical education.’’; and

21 (3) by adding at the end the following sub22 section:

23 ‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND

24 GRADUATE MEDICAL EDUCATION TRUST FUND.—
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1 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU2 CATION.—

3 ‘‘(A) IN GENERAL.—From the Federal

4 Hospital Insurance Trust Fund, the Secretary

5 shall, for fiscal year 1997 and each subsequent

6 fiscal year, transfer to the Indirect-Costs Medi7 cal Education Account (under section 2201) an

8 amount determined by the Secretary in accord9 ance with subparagraph (B).

10 ‘‘(B) DETERMINATION OF AMOUNTS.—The

11 Secretary shall make an estimate for the fiscal

12 year involved of the nationwide total of the

13 amounts that would have been paid under sub14 section (d)(5)(B) to hospitals during the fiscal

15 year if such payments had not been terminated

16 for discharges occurring after September 30,

17 1996. For purposes of subparagraph (A), the

18 amount determined under this subparagraph

19 for the fiscal year is the estimate made by the

20 Secretary under the preceding sentence.

21 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

22 ‘‘(A) IN GENERAL.—From the Federal

23 Hospital Insurance Trust Fund and the Fed24 eral Supplementary Medical Insurance Trust

25 Fund, the Secretary shall, for fiscal year 1997
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1 and each subsequent fiscal year, transfer to the

2 Medicare Direct-Costs Medical Education Ac3 count (under section 2201) the sum of—

4 ‘‘(i) an amount determined by the

5 Secretary in accordance with subparagraph

6 (B); and

7 ‘‘(ii) as applicable, an amount deter8 mined by the Secretary in accordance with

9 subparagraph (C)(ii).

10 ‘‘(B) DETERMINATION OF AMOUNTS.—For

11 each hospital (other than a hospital that is a

12 member of a qualifying consortium referred to

13 in subparagraph (C)), the Secretary shall make

14 an estimate for the fiscal year involved of the

15 amount that would have been paid under sub16 section (h) to the hospital during the fiscal year

17 if such payments had not been terminated for

18 cost reporting periods ending on or before Sep19 tember 30, 1996. For purposes of subparagraph

20 (A)(i), the amount determined under this sub21 paragraph for the fiscal year is the sum of all

22 estimates made by the Secretary under the pre23 ceding sentence.

24 ‘‘(C) ESTIMATES REGARDING QUALIFYING

25 CONSORTIA.—If the Secretary elects to author-
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1 ize one or more qualifying consortia for pur2 poses of section 2233(a), the Secretary shall

3 carry out the following:

4 ‘‘(i) The Secretary shall establish a

5 methodology for making payments to quali6 fying consortia with respect to the reason7 able direct costs of such consortia in carry8 ing out programs of graduate medical edu9 cation. The methodology shall be the meth10 odology established in subsection (h),

11 modified to the extent necessary to take

12 into account the participation in such pro13 grams of entities other than hospitals.

14 ‘‘(ii) For each qualifying consortium,

15 the Secretary shall make an estimate for

16 the fiscal year involved of the amount that

17 would have been paid to the consortium

18 during the fiscal year if, using the meth19 odology under clause (i), payments had

20 been made to the consortium for the fiscal

21 year as reimbursements with respect to

22 cost reporting periods. For purposes of

23 subparagraph (A)(ii), the amount deter24 mined under this clause for the fiscal year
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1 is the sum of all estimates made by the

2 Secretary under the preceding sentence.

3 ‘‘(D) ALLOCATION BETWEEN FUNDS.—In

4 providing for a transfer under subparagraph

5 (A) for a fiscal year, the Secretary shall provide

6 for an allocation of the amounts involved be7 tween part A and part B (and the trust funds

8 established under the respective parts) as rea9 sonably reflects the proportion of direct grad10 uate medical education costs of hospitals associ11 ated with the provision of services under each

12 respective part.

13 ‘‘(3) APPLICABILITY OF CERTAIN AMEND14 MENTS.—Amendments made to subsection (d)(5)(B)

15 and subsection (h) that are effective on or after Oc16 tober 1, 1996, apply only for purposes of estimates

17 under paragraphs (1) and (2) and for purposes of

18 determining the amount of payments under 2211.

19 Such amendments do not require any adjustment to

20 amounts paid under subsection (d)(5)(B) or (h) with

21 respect to fiscal year 1996 or any prior fiscal year.

22 ‘‘(4) RELATIONSHIP TO CERTAIN DEMONSTRA23 TION PROJECTS.—In the case of a State for which

24 a demonstration project under section 1814(b)(3) is

25 in effect, the Secretary, in making determinations of
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1 the rates of increase under such section, shall in2 clude all amounts transferred under this subsection.

3 Such amounts shall be so included to the same ex4 tent and in the same manner as amounts determined

5 under subsections (d)(5)(B) and (h) were included in

6 such determination under the provisions of this title

7 in effect on September 30, 1996.’’.

8 SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD9 ING GRADUATE MEDICAL EDUCATION.

10 (a) INDIRECT COSTS OF MEDICAL EDUCATION; AP11 PLICABLE PERCENTAGE.—

12 (1) MODIFICATION REGARDING 5.6 PERCENT.—

13 Section 1886(d)(5)(B)(ii) (42 U.S.C.

14 1395ww(d)(5)(B)(ii)) is amended—

15 (A) by striking ‘‘on or after October 1,

16 1988,’’ and inserting ‘‘on or after October 1,

17 1999,’’; and

18 (B) by striking ‘‘1.89’’ and inserting

19 ‘‘1.38’’.

20 (2) SPECIAL RULE REGARDING FISCAL YEARS

21 1996 THROUGH 1998; MODIFICATION REGARDING 6

22 PERCENT.—Section 1886(d)(5)(B)(ii), as amended

23 by paragraph (1), is amended by adding at the end

24 the following: ‘‘In the case of discharges occurring

25 on or after October 1, 1995, and before October 1,
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1 1999, the preceding sentence applies to the same ex2 tent and in the same manner as the sentence applies

3 to discharges occurring on or after October 1, 1999,

4 except that the term ‘1.38’ is deemed to be ‘1.48’.’’.

5 (3) CONFORMING AMENDMENT RELATING TO

6 DETERMINATION OF STANDARDIZED AMOUNTS.—

7 Section 1886(d)(2)(C)(i) (42 U.S.C.

8 1395ww(d)(2)(C)(i)) is amended by striking ‘‘1985’’

9 and inserting the following: ‘‘1985, but (for dis10 charges occurring after September 30, 1995) not

11 taking into account any reductions in such costs re12 sulting from the amendments made by section

13 15412(a) of the Medicare Preservation Act of

14 1995’’.

15 (b) DIRECT COSTS OF MEDICAL EDUCATION.—

16 (1) LIMITATION ON NUMBER OF FULL-TIME17 EQUIVALENT RESIDENTS.—Section 1886(h)(4) (42

18 U.S.C. 1395ww(h)(4)) is amended by adding at the

19 end the following new subparagraph:

20 ‘‘(F) LIMITATION ON NUMBER OF RESI21 DENTS FOR CERTAIN FISCAL YEARS.—

22 ‘‘(i) IN GENERAL.—Such rules shall

23 provide that for purposes of a cost report24 ing period beginning on or after October 1,

25 1995, and on or before September 30,
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1 2002, the number of full-time-equivalent

2 residents determined under this paragraph

3 with respect to an approved medical resi4 dency training program may not exceed

5 the number of full-time-equivalent resi6 dents with respect to the program as of

7 August 1, 1995 (except that this subpara8 graph applies only to approved medical

9 residency training programs in the fields of

10 allopathic medicine and osteopathic medi11 cine).

12 ‘‘(ii) DISPOSITION OF UNUSED RESI13 DENCY POSITIONS.—In the case of a cost

14 reporting period to which the limitation

15 under clause (i) applies, if for such a pe16 riod the number of full-time-equivalent

17 residents determined under this paragraph

18 with respect to an approved medical resi19 dency training program is less than the

20 maximum number applicable to the pro21 gram under such clause, the Secretary may

22 authorize for one or more other approved

23 medical residency training programs offset24 ting increases in the respective maximum

25 numbers that otherwise would be applica-
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1 ble under such clause to the programs. In

2 authorizing such increases with respect to

3 a cost reporting period, the Secretary shall

4 ensure that the national total of the re5 spective maximum numbers determined

6 under such clause with respect to approved

7 medical residency training programs is not

8 exceeded.’’.

9 (2) EXCLUSION OF RESIDENTS AFTER INITIAL

10 RESIDENCY PERIOD.—Section 1886(h)(4)(C) (42

11 U.S.C. 1395ww(h)(4)(C)) is amended to read as fol12 lows:

13 ‘‘(C) WEIGHTING FACTORS FOR RESI14 DENTS.—Effective for cost reporting periods

15 beginning on or after October 1, 1997, such

16 rules shall provide that, in the calculation of the

17 number of full-time-equivalent residents in an

18 approved residency program, the weighting fac19 tor for a resident who is in the initial residency

20 period (as defined in paragraph (5)(F)) is 1.0

21 and the weighting factor for a resident who has

22 completed such period is 0.0. (In the case of

23 cost reporting periods beginning before October

24 1, 1997, the weighting factors that apply in

25 such calculation are the weighting factors that
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1 were applicable under this subparagraph on the

2 day before the date of the enactment of the

3 Medicare Preservation Act of 1995.)’’.

4 (3) REDUCTIONS IN PAYMENTS FOR ALIEN

5 RESIDENTS.—Section 1886(h)(4) (42 U.S.C.

6 1395ww(h)(4)), as amended by paragraph (1), is

7 amended by adding at the end the following new

8 subparagraph:

9 ‘‘(G) SPECIAL RULES FOR ALIEN RESI10 DENTS.—In the case of individuals who are not

11 citizens or nationals of the United States, aliens

12 lawfully admitted to the United States for per13 manent residence, aliens admitted to the United

14 States as refugees, or citizens of Canada, in the

15 calculation of the number of full-time-equivalent

16 residents in an approved medical residency pro17 gram, the following rules shall apply with re18 spect to such individuals who are residents in

19 the program:

20 ‘‘(i) For a cost reporting period begin21 ning during fiscal year 1996, for each such

22 individual the Secretary shall apply a

23 weighting factor of .75.

24 ‘‘(ii) For a cost reporting period be25 ginning during fiscal year 1997, for each
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1 such individual the Secretary shall apply a

2 weighting factor of .50.

3 ‘‘(iii) For a cost reporting period be4 ginning during fiscal year 1998 or any

5 subsequent fiscal year, for each such indi6 vidual the Secretary shall apply a

7 weighting factor of .25.’’.

8 (4) EFFECTIVE DATE.—Except as provided oth9 erwise in this subsection (or in the amendments

10 made by this subsection), the amendments made by

11 this subsection apply to hospital cost reporting peri12 ods beginning on or after October 1, 1995.

13 PART 3—REFORM OF FEDERAL POLICIES RE14 GARDING TEACHING HOSPITALS AND GRAD15 UATE MEDICAL EDUCATION

16 SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR

17 RECOMMENDING POLICIES.

18 Title XXII of the Social Security Act, as added by

19 section 15401, is amended by adding at the end the follow20 ing part:
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1 ‘‘PART C—OTHER MATTERS

2 ‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING

3 OF TEACHING HOSPITALS AND GRADUATE

4 MEDICAL EDUCATION.

5 ‘‘(a) ESTABLISHMENT.—The Chair of the Medicare

6 Payment Review Commission under section 1806 shall es7 tablish a temporary advisory panel to be known as the Ad8 visory Panel on Financing for Teaching Hospitals and

9 Graduate Medical Education (in this section referred to

10 as the ‘Panel’).

11 ‘‘(b) DUTIES.—The Panel shall develop recommenda12 tions on whether and to what extent Federal policies re13 garding teaching hospitals and graduate medical edu14 cation should be reformed, including recommendations re15 garding the following:

16 ‘‘(1) The financing of graduate medical edu17 cation, including consideration of alternative broad18 based sources of funding for such education.

19 ‘‘(2) The financing of teaching hospitals, in20 cluding consideration of the difficulties encountered

21 by such hospitals as competition among health care

22 entities increases. Matters considered under this

23 paragraph shall include consideration of the effects

24 on teaching hospitals of the method of financing
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1 used for the MedicarePlus program under part C of

2 title XVIII.

3 ‘‘(3) The methodology for making payments for

4 graduate medical education, and the selection of en5 tities to receive the payments. Matters considered

6 under this paragraph shall include the following:

7 ‘‘(A) The methodology under part B for

8 making payments from the Fund, including the

9 use of data from the fiscal years 1992 through

10 1994, and including the methodology that ap11 plies with respect to consolidations and mergers

12 of participants in the program under such part

13 and with respect to the inclusion of additional

14 participants in the program.

15 ‘‘(B) Issues regarding children’s hospitals,

16 and approved medical residency training pro17 grams in pediatrics.

18 ‘‘(C) Whether and to what extent pay19 ments are being made (or should be made) for

20 graduate training in the various nonphysician

21 health professions.

22 ‘‘(4) Federal policies regarding international

23 medical graduates.

24 ‘‘(5) The dependence of schools of medicine on

25 service-generated income.
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1 ‘‘(6) The effects of the amendments made by

2 section 15412 of the Medicare Preservation Act of

3 1995, including adverse effects on teaching hospitals

4 that result from modifications in policies regarding

5 international medical graduates.

6 ‘‘(7) Whether and to what extent the needs of

7 the United States regarding the supply of physicians

8 will change during the 10-year period beginning on

9 October 1, 1995, and whether and to what extent

10 any such changes will have significant financial ef11 fects on teaching hospitals.

12 ‘‘(8) The appropriate number and mix of resi13 dents.

14 ‘‘(c) COMPOSITION.—Not later than three months

15 after being designated as the initial chair of the Medicare

16 Payment Review Commission, the Chair of the Commis17 sion shall appoint to the Panel 19 individuals who are not

18 members of the Commission, who are not officers or em19 ployees of the United States, and who possess expertise

20 on matters on which the Panel is to make recommenda21 tions under subsection (b). Such individuals shall include

22 the following:

23 ‘‘(1) Deans from allopathic and osteopathic

24 schools of medicine.
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1 ‘‘(2) Chief executive officers (or equivalent ad2 ministrative heads) from academic health centers,

3 integrated health care systems, approved medical

4 residency training programs, and teaching hospitals

5 that sponsor approved medical residency training

6 programs.

7 ‘‘(3) Chairs of departments or divisions from

8 allopathic and osteopathic schools of medicine,

9 schools of dentistry, and approved medical residency

10 training programs in oral surgery.

11 ‘‘(4) Individuals with leadership experience

12 from each of the fields of advanced practice nursing,

13 physician assistants, and podiatric medicine.

14 ‘‘(5) Individuals with substantial experience in

15 the study of issues regarding the composition of the

16 health care workforce of the United States.

17 ‘‘(6) Individuals with expertise on the financing

18 of health care.

19 ‘‘(7) Representatives from health insurance or20 ganizations and health plan organizations.

21 ‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE PAY22 MENT REVIEW COMMISSION.—From amounts appro23 priated under subsection (n), the Medicare Payment Re24 view Commission shall provide for the Panel such staff

25 and administrative support (including quarters for the
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1 Panel) as may be necessary for the Panel to carry out

2 the duties under subsection (b).

3 ‘‘(e) CHAIR.—The Panel shall designate a member of

4 the Panel to serve as the Chair of the Panel.

5 ‘‘(f) MEETINGS.—The Panel shall meet at the call of

6 the Chair or a majority of the members, except that the

7 first meeting of the Panel shall be held not later than

8 three months after the date on which appointments under

9 subsection (c) are completed.

10 ‘‘(g) TERMS.—The term of a member of the Panel

11 is the duration of the Panel.

12 ‘‘(h) VACANCIES.—

13 ‘‘(1) IN GENERAL.—A vacancy in the member14 ship of the Panel does not affect the power of the

15 remaining members to carry out the duties under

16 subsection (b). A vacancy in the membership of the

17 Panel shall be filled in the manner in which the

18 original appointment was made.

19 ‘‘(2) INCOMPLETE TERM.—If a member of the

20 Panel does not serve the full term applicable to the

21 member, the individual appointed to fill the resulting

22 vacancy shall be appointed for the remainder of the

23 term of the predecessor of the individual.

24 ‘‘(i) COMPENSATION; REIMBURSEMENT OF EX25 PENSES.—
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1 ‘‘(1) COMPENSATION.—Members of the Panel

2 shall receive compensation for each day (including

3 traveltime) engaged in carrying out the duties of the

4 Committee. Such compensation may not be in an

5 amount in excess of the daily equivalent of the an6 nual maximum rate of basic pay payable under the

7 General Schedule (under title 5, United States

8 Code) for positions above GS–15.

9 ‘‘(2) REIMBURSEMENT.—Members of the Panel

10 may, in accordance with chapter 57 of title 5, Unit11 ed States Code, be reimbursed for travel, subsist12 ence, and other necessary expenses incurred in car13 rying out the duties of the Panel.

14 ‘‘(j) CONSULTANTS.—The Panel may procure such

15 temporary and intermittent services of consultants under

16 section 3109(b) of title 5, United States Code, as the

17 Panel may determine to be useful in carrying out the du18 ties under subsection (b). The Panel may not procure serv19 ices under this subsection at any rate in excess of the daily

20 equivalent of the maximum annual rate of basic pay pay21 able under the General Schedule for positions above GS–

22 15. Consultants under this subsection may, in accordance

23 with chapter 57 of title 5, United States Code, be reim24 bursed for travel, subsistence, and other necessary ex-
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1 penses incurred for activities carried out on behalf of the

2 Panel pursuant to subsection (b).

3 ‘‘(k) POWERS.—

4 ‘‘(1) IN GENERAL.—For the purpose of carry5 ing out the duties of the Panel under subsection (b),

6 the Panel may hold such hearings, sit and act at

7 such times and places, take such testimony, and re8 ceive such evidence as the Panel considers appro9 priate.

10 ‘‘(2) OBTAINING OFFICIAL INFORMATION.—

11 Upon the request of the Panel, the heads of Federal

12 agencies shall furnish directly to the Panel informa13 tion necessary for the Panel to carry out the duties

14 under subsection (b).

15 ‘‘(3) USE OF MAILS.—The Panel may use the

16 United States mails in the same manner and under

17 the same conditions as Federal agencies.

18 ‘‘(l) REPORTS.—

19 ‘‘(1) FIRST INTERIM REPORT.—Not later than

20 one year after the date of the enactment of the Med21 icare Preservation Act of 1995, the Panel shall sub22 mit to the Congress a report providing the rec23 ommendations of the Panel regarding the matters

24 specified in paragraphs (1) through (4) of subsection

25 (b).
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1 ‘‘(2) SECOND INTERIM REPORT.—Not later

2 than 2 years after the date of enactment specified

3 in paragraph (1), the Panel shall submit to the Con4 gress a report providing the recommendations of the

5 Panel regarding the matters specified in paragraphs

6 (5) and (6) of subsection (b).

7 ‘‘(3) FINAL REPORT.—Not later than 3 years

8 after the date of enactment specified in paragraph

9 (1), the Panel shall submit to the Congress a final

10 report providing the recommendations of the Panel

11 under subsection (b).

12 ‘‘(m) DURATION.—The Panel terminates upon the

13 expiration of the 180-day period beginning on the date on

14 which the final report under subsection (l)(3) is submitted

15 to the Congress.

16 ‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—

17 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

18 for the purpose of carrying out this section, there

19 are authorized to be appropriated such sums as may

20 be necessary for each of the fiscal years 1996

21 through 1999.

22 ‘‘(2) LIMITATION.—The authorization of appro23 priations established in paragraph (1) is effective

24 only with respect to appropriations made from allo-
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1 cations under section 302(b) of the Congressional

2 Budget Act of 1974—

3 ‘‘(A) for the Subcommittee on Labor,

4 Health and Human Services, and Education,

5 Committee on Appropriations of the House of

6 Representatives, in the case of any bill, resolu7 tion, or amendment considered in the House;

8 and

9 ‘‘(B) for the Subcommittee on Labor,

10 Health and Human Services, and Education,

11 Committee on Appropriations of the Senate, in

12 the case of any bill, resolution, or amendment

13 considered in the Senate.’’.

14 Subtitle F—Provisions Relating to

15 Medicare Part A

16 PART 1—HOSPITALS

17 Subpart A—General Provisions Relating to Hospitals

18 SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS

19 HOSPITALS.

20 Section 1886(b)(3)(B)(i) (42 U.S.C.

21 1395ww(b)(3)(B)(i)) is amended by striking subclauses

22 (XI), (XII), and (XIII) and inserting the following:

23 ‘‘(XI) for fiscal year 1996, the market basket

24 percentage increase minus 2.5 percentage points for

25 hospitals in all areas,
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1 ‘‘(XII) for each of the fiscal years 1997 through

2 2002, the market basket percentage increase minus

3 2.0 percentage points for hospitals in all areas, and

4 ‘‘(XIII) for fiscal year 2003 and each subse5 quent fiscal year, the market basket percentage in6 crease for hospitals in all areas.’’.

7 SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE

8 PAYMENT ADJUSTMENTS.

9 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

10 1395ww(d)(5)(F)) is amended—

11 (1) in clause (ii), by striking ‘‘The amount’’

12 and inserting ‘‘Subject to clause (ix), the amount’’;

13 and

14 (2) by adding at the end the following new

15 clause:

16 ‘‘(ix) In the case of discharges occurring on or after

17 October 1, 1995, the additional payment amount other18 wise determined under clause (ii) shall be reduced as fol19 lows:

20 ‘‘(I) For discharges occurring on or after Octo21 ber 1, 1995, and on or before September 30, 1996,

22 by 20 percent.

23 ‘‘(II) For discharges occurring on or after Octo24 ber 1, 1996, and on or before September 30, 1997,

25 by 25 percent.
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1 ‘‘(III) For discharges occurring on or after Oc2 tober 1, 1997, by 30 percent.’’.

3 (b) CONFORMING AMENDMENT RELATING TO DE4 TERMINATION OF STANDARDIZED AMOUNTS.—Section

5 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is

6 amended by striking the period at the end and inserting

7 the following: ‘‘, and the Secretary shall not take into ac8 count any reductions in the amount of such additional

9 payments resulting from the amendments made by section

10 15502(a) of the Medicare Preservation Act of 1995.’’.

11 SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR

12 INPATIENT HOSPITAL SERVICES.

13 (a) REDUCTION IN PAYMENTS FOR PPS HOS14 PITALS.—

15 (1) CONTINUATION OF CURRENT REDUC16 TIONS.—Section 1886(g)(1)(A) (42 U.S.C.

17 1395ww(g)(1)(A)) is amended in the second sen18 tence—

19 (A) by striking ‘‘through 1995’’ and insert20 ing ‘‘through 2002’’; and

21 (B) by inserting after ‘‘10 percent reduc22 tion’’ the following: ‘‘(or a 15 percent reduction

23 in the case of payments during fiscal years

24 1996 through 2002)’’.
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1 (2) REDUCTION IN BASE PAYMENT RATES.—

2 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

3 is amended by adding at the end the following new

4 sentence: ‘‘In addition to the reduction described in

5 the preceding sentence, for discharges occurring

6 after September 30, 1995, the Secretary shall reduce

7 by 7.47 percent the unadjusted standard Federal

8 capital payment rate (as described in 42 CFR

9 412.308(c), as in effect on the date of the enactment

10 of the Medicare Preservation Act of 1995) and shall

11 reduce by 8.27 percent the unadjusted hospital-spe12 cific rate (as described in 42 CFR 412.328(e)(1),

13 as in effect on such date of enactment).’’.

14 (b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT

15 HOSPITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is

16 amended by adding at the end the following new para17 graph:

18 ‘‘(4)(A) Except as provided in subparagraph (B), in

19 determining the amount of the payments that may be

20 made under this title with respect to all the capital-related

21 costs of inpatient hospital services furnished during fiscal

22 years 1996 through 2002 of a hospital which is not a sub23 section (d) hospital or a subsection (d) Puerto Rico hos24 pital, the Secretary shall reduce the amounts of such pay25 ments otherwise determined under this title by 15 percent.
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1 ‘‘(B) Subparagraph (A) shall not apply to payments

2 with respect to the capital-related costs of any hospital

3 that is a sole community hospital (as defined in subsection

4 (d)(5)(D)(iii) or a rural primary care hospital (as defined

5 in section 1861(mm)(1)).’’.

6 (c) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL7 RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.

8 1395ww(g)(1)) is amended—

9 (1) by redesignating subparagraph (C) as sub10 paragraph (D), and

11 (2) by inserting after subparagraph (B) the fol12 lowing:

13 ‘‘(C)(i) For discharges occurring after September 30,

14 1995, such system shall provide for an adjustment in an

15 amount equal to the amount determined under clause (iv)

16 for capital-related tax costs for each hospital that is eligi17 ble for such adjustment.

18 ‘‘(ii) Subject to clause (iii), a hospital is eligible for

19 an adjustment under this subparagraph, with respect to

20 discharges occurring in a fiscal year, if the hospital—

21 ‘‘(I) is a hospital that may otherwise receive

22 payments under this subsection,

23 ‘‘(II) is not a public hospital, and

24 ‘‘(III) incurs capital-related tax costs for the

25 fiscal year.
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1 ‘‘(iii)(I) In the case of a hospital that first incurs cap2 ital-related tax costs in a fiscal year after fiscal year 1992

3 because of a change from nonproprietary to proprietary

4 status or because the hospital commenced operation after

5 such fiscal year, the first fiscal year for which the hospital

6 shall be eligible for such adjustment is the second full fis7 cal year following the fiscal year in which the hospital first

8 incurs such costs.

9 ‘‘(II) In the case of a hospital that first incurs cap10 ital-related tax costs in a fiscal year after fiscal year 1992

11 because of a change in State or local tax laws, the first

12 fiscal year for which the hospital shall be eligible for such

13 adjustment is the fourth full fiscal year following the fiscal

14 year in which the hospital first incurs such costs.

15 ‘‘(iv) The per discharge adjustment under this clause

16 shall be equal to the hospital-specific capital-related tax

17 costs per discharge of a hospital for fiscal year 1992 (or,

18 in the case of a hospital that first incurs capital-related

19 tax costs for a fiscal year after fiscal year 1992, for the

20 first full fiscal year for which such costs are incurred),

21 updated to the fiscal year to which the adjustment applies.

22 Such per discharge adjustment shall be added to the Fed23 eral capital rate, after such rate has been adjusted as de24 scribed in 42 CFR 412.312 (as in effect on the date of

25 the enactment of the Medicare Preservation Act of 1995),
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1 and before such rate is multiplied by the applicable Fed2 eral rate percentage.

3 ‘‘(v) For purposes of this subparagraph, capital-relat4 ed tax costs include—

5 ‘‘(I) the costs of taxes on land and depreciable

6 assets owned by a hospital (or related organization)

7 and used for patient care,

8 ‘‘(II) payments in lieu of such taxes (made by

9 hospitals that are exempt from taxation), and

10 ‘‘(III) the costs of taxes paid by a hospital (or

11 related organization) as lessee of land, buildings, or

12 fixed equipment from a lessor that is unrelated to

13 the hospital (or related organization) under the

14 terms of a lease that requires the lessee to pay all

15 expenses (including mortgage, interest, and amorti16 zation) and leaves the lessor with an amount free of

17 all claims (sometimes referred to as a ‘net net net’

18 or ‘triple net’ lease).

19 In determining the adjustment required under clause (i),

20 the Secretary shall not take into account any capital-relat21 ed tax costs of a hospital to the extent that such costs

22 are based on tax rates and assessments that exceed those

23 for similar commercial properties.

24 ‘‘(vi) The system shall provide that the Federal cap25 ital rate for any fiscal year after September 30, 1995,
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1 shall be reduced by a percentage sufficient to ensure that

2 the adjustments required to be paid under clause (i) for

3 a fiscal year neither increase nor decrease the total

4 amount that would have been paid under this system but

5 for the payment of such adjustments for such fiscal year.’’.

6 (d) REVISION OF EXCEPTIONS PROCESS UNDER

7 PROSPECTIVE PAYMENT SYSTEM FOR CERTAIN

8 PROJECTS.—

9 (1) IN GENERAL.—Section 1886(g)(1) (42

10 U.S.C. 1395ww(g)(1)), as amended by subsection

11 (c), is amended—

12 (A) by redesignating subparagraph (D) as

13 subparagraph (E), and

14 (B) by inserting after subparagraph (C)

15 the following:

16 ‘‘(D) The exceptions under the system provided by

17 the Secretary under subparagraph (B)(iii) shall include

18 the provision of exception payments under the special ex19 ceptions process provided under 42 CFR 412.348(g) (as

20 in effect on September 1, 1995), except that the Secretary

21 shall revise such process as follows:

22 ‘‘(i) A hospital with at least 100 beds which is

23 located in an urban area shall be eligible under such

24 process without regard to its disproportionate pa25 tient percentage under subsection (d)(5)(F) or
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1 whether it qualifies for additional payment amounts

2 under such subsection.

3 ‘‘(ii) The minimum payment level for qualifying

4 hospitals shall be 85 percent.

5 ‘‘(iii) A hospital shall be considered to meet the

6 requirement that it completes the project involved no

7 later than the end of the hospital’s last cost report8 ing period beginning after October 1, 2001, if—

9 ‘‘(I) the hospital has obtained a certificate

10 of need for the project approved by the State or

11 a local planning authority, and

12 ‘‘(II) by September 1, 1995, the hospital

13 has expended on the project at least $750,000

14 or 10 percent of the estimated cost of the

15 project.

16 ‘‘(iv) The amount of the exception payment

17 made shall not be reduced by any offsetting

18 amounts.’’.

19 (2) CONFORMING AMENDMENT.—Section

20 1886(g)(1)(B)(iii) (42 U.S.C. 1395ww(g)(1)(B)(iii))

21 is amended by striking ‘‘may provide’’ and inserting

22 ‘‘shall provide (in accordance with subparagraph

23 (D))’’.
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1 SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT

2 MEDICAL EDUCATION.

3 For provisions modifying medicare payment policies

4 regarding graduate medical education, see part 2 of sub5 title E.

6 SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.

7 (a) UPDATES.—Section 1886(b)(3)(B)(ii)(V) (42

8 U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended by striking

9 ‘‘thorugh 1997’’ and inserting ‘‘through 2002’’.

10 (b) REBASING FOR CERTAIN LONG-TERM CARE HOS11 PITALS.—

12 (1) IN GENERAL.—Section 1886(b)(3) (42

13 U.S.C. 1395ww(b)(3)) is amended—

14 (A) in subparagraph (A), by striking ‘‘and

15 (E)’’ and inserting ‘‘(E), and (F)’’;

16 (B) in subparagraph (B)(ii), by striking

17 ‘‘(A) and (E)’’ and inserting ‘‘(A), (E), and

18 (F)’’; and

19 (C) by adding at the end the following new

20 subparagraph:

21 ‘‘(F)(i) In the case of a qualified long-term care hos22 pital (as defined in clause (ii)), the term ‘target amount’

23 means—

24 ‘‘(I) with respect to the first 12-month cost re25 porting period in which this subparagraph is applied

26 to the hospital, the allowable operating costs of inpa-
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1 tient hospital services (as defined in subsection

2 (a)(4)) recognized under this title for the hospital

3 for the 12-month cost reporting period beginning

4 during fiscal year 1991; or

5 ‘‘(II) with respect to a later cost reporting pe6 riod, the target amount for the preceding cost re7 porting period, increase by the applicable percentage

8 increase under subparagraph (B)(ii) for that later

9 cost reporting period.

10 ‘‘(ii) In clause (i), a ‘qualified long-term care hospital’

11 means, with respect to a cost reporting period, a hospital

12 described in clause (iv) of subsection (d)(1)(B) during fis13 cal year 1995 for which the hospital’s allowable operating

14 costs of inpatient hospital services recognized under this

15 title for each of the two most recent previous 12-month

16 cost reporting periods exceeded the hospital’s target

17 amount determined under this paragraph for such cost re18 porting periods, if the hospital—

19 ‘‘(I) has a disproportionate patient percentage

20 during such cost reporting period (as determined by

21 the Secretary under subsection (d)(5)(F)(vi) as if

22 the hospital were a subsection (d) hospital) of at

23 least 25 percent, or

24 ‘‘(II) is located in a State for which no payment

25 is made under the State plan under title XIX for
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1 days of inpatient hospital services furnished to any

2 individual in excess of the limit on the number of

3 days of such services furnished to the individual for

4 which payment may be made under this title.’’.

5 (2) EFFECTIVE DATE.—The amendment made

6 by paragraph (1) shall apply to discharges occurring

7 during cost reporting periods beginning on or after

8 October 1, 1995.

9 (c) TREATMENT OF CERTAIN LONG-TERM CARE

10 HOSPITALS LOCATED WITHIN OTHER HOSPITALS.—

11 (1) IN GENERAL.—Section 1886(d)(1)(B) (42

12 U.S.C. 1395ww(d)(1)(B)) is amended in the matter

13 following clause (v) by striking the period and in14 serting the following: ‘‘, or a hospital classified by

15 the Secretary as a long-term care hospital on or be16 fore September 30, 1995, and located in the same

17 building as, or on the same campus as, another hos18 pital.’’.

19 (2) STUDY BY REVIEW COMMISSION.—Not later

20 than 12 months after the date a majority of the

21 members of the Medicare Payment Review Commis22 sion are first appointed, the Commission shall sub23 mit a report to Congress containing recommenda24 tions for appropriate revisions in the treatment of

25 long-term care hospitals located in the same building
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1 as or on the same campus as another hospital for

2 purposes of section 1886 of the Social Security Act.

3 (3) EFFECTIVE DATE.—The amendment made

4 by paragraph (1) shall apply to discharges occurring

5 on or after October 1, 1995.

6 (d) STUDY OF PROSPECTIVE PAYMENT SYSTEM FOR

7 REHABILITATION HOSPITALS AND UNITS.—

8 (1) IN GENERAL.—After consultation with the

9 Prospective Payment Assessment Commission, pro10 viders of rehabilitation services, and other appro11 priate parties, the Secretary of Health and Human

12 Services shall submit to Congress, by not later than

13 June 1, 1996, a report on the advisability and fea14 sibility of providing for payment based on a prospec15 tive payment system for inpatient services of reha16 bilitation hospitals and units under the medicare

17 program.

18 (2) ITEMS INCLUDED.—The report shall include

19 the following:

20 (A) The available and preferred systems of

21 classifying rehabilitation patients relative to du22 ration and intensity of inpatient services, in23 cluding the use of functional-related groups

24 (FRGs).
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1 (B) The means of calculating medicare

2 program payments to reflect such patient re3 quirements.

4 (C) Other appropriate adjustments which

5 should be made, such as for geographic vari6 ations in wages and other costs and outliers.

7 (D) A timetable under which such a sys8 tem might be introduced.

9 (E) Whether such a system should be ap10 plied to other types of providers of inpatient re11 habilitation services.

12 SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR

13 ENROLLEES’ BAD DEBTS.

14 (a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.

15 1395x(v)(1)) is amended by adding at the end the follow16 ing new subparagraph:

17 ‘‘(T)(i) In determining such reasonable costs for hos18 pitals, the amount of bad debts otherwise treated as allow19 able costs which are attributable to the deductibles and

20 coinsurance amounts under this title shall be reduced by—

21 ‘‘(I) 75 percent for cost reporting periods begin22 ning during fiscal year 1996,

23 ‘‘(II) 60 percent for cost reporting periods be24 ginning during fiscal year 1997, and
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1 ‘‘(III) 50 percent for subsequent cost reporting

2 periods.

3 ‘‘(ii) Clause (i) shall not apply with respect to bad

4 debt of a hospital described in section 1886(d)(1)(B)(iv)

5 if the debt is attributable to uncollectable deductible and

6 coinsurance payments owed by individuals enrolled in a

7 State plan under title XIX or under the MediGrant pro8 gram under title XXI.’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 subsection (a) shall apply to hospital cost reporting peri11 ods beginning on or after October 1, 1995.

12 SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS13 THROUGH.

14 Effective as if included in the enactment of OBRA–

15 1989, section 6011(d) of such Act (as amended by section

16 13505 of OBRA–1993) is amended by striking ‘‘and shall

17 expire September 30, 1994’’.

18 SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION

19 OF CHRISTIAN SCIENCE PROVIDERS.

20 (a) HOSPITALS.—Section 1861(e) (42 U.S.C.

21 1395x(e)) is amended in the sixth sentence by inserting

22 after ‘‘Massachusetts,’’ the following: ‘‘or by the Commis23 sion for Accreditation of Christian Science Nursing Orga24 nizations/Facilities, Inc.,’’.
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1 (b) SKILLED NURSING FACILITIES.—Section

2 1861(y)(1) is amended by inserting after ‘‘Massachu3 setts,’’ the following: ‘‘or by the Commission for Accredita4 tion of Christian Science Nursing Organizations/Facilities,

5 Inc.,’’.

6 Subpart B—Provisions Relating to Rural Hospitals

7 SEC. 15511. SOLE COMMUNITY HOSPITALS.

8 (a) UPDATE.—Section 1886(b)(3)(B)(iv) (42 U.S.C.

9 1395ww(b)(3)(B)(iv)) is amended—

10 (A) in subclause (III), by striking ‘‘and’’ at

11 the end; and

12 (B) by striking subclause (IV) and insert13 ing the following:

14 ‘‘(IV) for each of the fiscal years 1996 through

15 2000, the market basket percentage increase minus

16 1 percentage points, and

17 ‘‘(V) for fiscal year 2001 and each subsequent

18 fiscal year, the applicable percentage increase under

19 clause (i).’’.

20 (b) STUDY OF IMPACT OF SOLE COMMUNITY HOS21 PITAL DESIGNATIONS.—

22 (1) STUDY.—The Medicare Payment Review

23 Commission shall conduct a study of the impact of

24 the designation of hospitals as sole community hos25 pitals under the medicare program on the delivery of
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1 health care services to individuals in rural areas, and

2 shall include in the study an analysis of the charac3 teristics of the hospitals designated as such sole

4 community hospitals under the program.

5 (2) REPORT.—Not later than 12 months after

6 the date a majority of the members of the Commis7 sion are first appointed, the Commission shall sub8 mit to Congress a report on the study conducted

9 under paragraph (1).

10 SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND

11 RPC HOSPITALS.

12 Paragraphs (1)(A)(i) and (2)(A)(i) of section 1820(i)

13 (42 U.S.C. 1395i–4(i)) are each amended by striking the

14 semicolon at the end and inserting the following: ‘‘, or in

15 a State which the Secretary finds would receive a grant

16 under such subsection during a fiscal year if funds were

17 appropriated for grants under such subsection for the fis18 cal year;’’.

19 SEC. 15513. ESTABLISHMENT OF RURAL EMERGENCY AC20 CESS CARE HOSPITALS.

21 (a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x)

22 is amended by adding at the end the following new sub23 section:
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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 facil22 ity.

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 (b) REQUIRING RURAL EMERGENCY ACCESS CARE

24 HOSPITALS TO MEET HOSPITAL ANTI-DUMPING RE25 QUIREMENTS.—Section 1867(e)(5) (42 U.S.C.
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1 1395dd(e)(5)) is amended by striking ‘‘1861(mm)(1))’’

2 and inserting ‘‘1861(mm)(1)) and a rural emergency ac3 cess care hospital (as defined in section 1861(oo)(1))’’.

4 (c) REFERENCE TO PAYMENT PROVISIONS UNDER

5 PART B.—For provisions relating to payment for rural

6 emergency access care hospital services under part B, see

7 section 15607.

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to fiscal years beginning on or

10 after October 1, 1995.

11 SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN12 TERS.

13 (a) PROHIBITING DENIAL OF REQUEST FOR RECLAS14 SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—

15 (1) IN GENERAL.—Section 1886(d)(10)(D) (42

16 U.S.C. 1395ww(d)(10)(D)) is amended—

17 (A) by redesignating clause (iii) as clause

18 (iv); and

19 (B) by inserting after clause (ii) the follow20 ing new clause:

21 ‘‘(iii) Under the guidelines published by the Secretary

22 under clause (i), in the case of a hospital which is classi23 fied by the Secretary as a rural referral center under para24 graph (5)(C), the Board may not reject the application

25 of the hospital under this paragraph on the basis of any
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1 comparison between the average hourly wage of the hos2 pital and the average hourly wage of hospitals in the area

3 in which it is located.’’.

4 (2) EFFECTIVE DATE.—Notwithstanding sec5 tion 1886(d)(10)(C)(ii) of the Social Security Act, a

6 hospital may submit an application to the Medicare

7 Geographic Classification Review Board during the

8 30-day period beginning on the date of the enact9 ment of this Act requesting a change in its classi10 fication for purposes of determining the area wage

11 index applicable to the hospital under section

12 1886(d)(3)(D) of such Act for fiscal year 1997, if

13 the hospital would be eligible for such a change in

14 its classification under the standards described in

15 section 1886(d)(10)(D) (as amended by paragraph

16 (1)) but for its failure to meet the deadline for appli17 cations under section 1886(d)(10)(C)(ii).

18 (b) CONTINUING TREATMENT OF PREVIOUSLY DES19 IGNATED CENTERS.—Any hospital classified as a rural re20 ferral center by the Secretary of Health and Human Serv21 ices under section 1886(d)(5)(C) of the Social Security

22 Act for fiscal year 1994 shall be classified as such a rural

23 referral center for fiscal year 1996 and each subsequent

24 fiscal year.
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1 SEC. 15515. FLOOR ON AREA WAGE INDEX.

2 (a) IN GENERAL.—For purposes of section

3 1886(d)(3)(E) of the Social Security Act for discharges

4 occurring on or after October 1, 1995, the area wage index

5 applicable under such section to any hospital which is not

6 located in a rural area (as defined in section

7 1886(d)(2)(D) of such Act) may not be less than the aver8 age of the area wage indices applicable under such section

9 to hospitals located in rural areas in the State in which

10 the hospital is located.

11 (b) BUDGET-NEUTRALITY IN IMPLEMENTATION.—

12 The Secretary of Health and Human Services shall adjust

13 the area wage indices referred to in subsection (a) for hos14 pitals not described in such subsection in a manner which

15 assures that the aggregate payments made under section

16 1886(d) of the Social Security Act in a fiscal year for the

17 operating costs of inpatient hospital services are not great18 er or less than those which would have been made in the

19 year if this section did not apply.

20 PART 2—PAYMENTS TO SKILLED NURSING

21 FACILITIES

22 SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.

23 (a) CLARIFICATION OF DEFINITION OF ROUTINE

24 SERVICE COSTS.—Section 1888 (42 U.S.C. 1395yy) is

25 amended by adding at the end the following new sub26 section:
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1 ‘‘(e) For purposes of this section, the ‘routine service

2 costs’ of a skilled nursing facility are all costs which are

3 attributable to nursing services, room and board, adminis4 trative costs, other overhead costs, and all other ancillary

5 services (including supplies and equipment), excluding

6 costs attributable to covered non-routine services subject

7 to payment limits under section 1888A.’’.

8 (b) CONFORMING AMENDMENT.—Section 1888 (42

9 U.S.C. 1395yy) is amended in the heading by inserting

10 ‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERVICE’’.

11 SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE12 MENT OF COVERED NON-ROUTINE SERVICES.

13 (a) IN GENERAL.—Title XVIII is amended by insert14 ing after section 1888 the following new section:

15 ‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT OF

16 COVERED NON-ROUTINE SERVICES OF SKILLED

17 NURSING FACILITIES

18 ‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of

19 this section:

20 ‘‘(1) COVERED NON-ROUTINE SERVICES.—The

21 term ‘covered non-routine services’ means post-hos22 pital extended care services consisting of any of the

23 following:

24 ‘‘(A) Physical or occupational therapy or

25 speech-language pathology services, or res-
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1 piratory therapy, including supplies and support

2 services incident to such services and therapy.

3 ‘‘(B) Prescription drugs.

4 ‘‘(C) Complex medical equipment.

5 ‘‘(D) Intravenous therapy and solutions

6 (including enteral and parenteral nutrients,

7 supplies, and equipment).

8 ‘‘(E) Radiation therapy.

9 ‘‘(F) Diagnostic services, including labora10 tory, radiology (including computerized tomog11 raphy services and imaging services), and pul12 monary services.

13 ‘‘(2) SNF MARKET BASKET PERCENTAGE IN14 CREASE.—The term ‘SNF market basket percentage

15 increase’ for a fiscal year means a percentage equal

16 to the percentage increase in routine service cost

17 limits for the year under section 1888(a).

18 ‘‘(3) STAY.—The term ‘stay’ means, with re19 spect to an individual who is a resident of a skilled

20 nursing facility, a period of continuous days during

21 which the facility provides extended care services for

22 which payment may be made under this title with

23 respect to the individual during the individual’s spell

24 of illness.
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1 ‘‘(b) NEW PAYMENT METHOD FOR COVERED NON2 ROUTINE SERVICES.—

3 ‘‘(1) IN GENERAL.—Subject to subsection (c), a

4 skilled nursing facility shall receive interim pay5 ments under this title for covered non-routine serv6 ices furnished to an individual during a cost report7 ing period beginning during a fiscal year (after fiscal

8 year 1996) in an amount equal to the reasonable

9 cost of providing such services in accordance with

10 section 1861(v). The Secretary may adjust such pay11 ments if the Secretary determines (on the basis of

12 such estimated information as the Secretary consid13 ers appropriate) that payments to the facility under

14 this paragraph for a cost reporting period would

15 substantially exceed the cost reporting period limit

16 determined under subsection (c)(1)(B).

17 ‘‘(2) RESPONSIBILITY OF SKILLED NURSING

18 FACILITY TO MANAGE BILLINGS.—

19 ‘‘(A) CLARIFICATION RELATING TO PART A

20 BILLING.—In the case of a covered non-routine

21 service furnished to an individual who (at the

22 time the service is furnished) is a resident of a

23 skilled nursing facility who is entitled to cov24 erage under section 1812(a)(2) for such service,

25 the skilled nursing facility shall submit a claim
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1 for payment under this title for such service

2 under part A (without regard to whether or not

3 the item or service was furnished by the facility,

4 by others under arrangement with them made

5 by the facility, under any other contracting or

6 consulting arrangement, or otherwise).

7 ‘‘(B) PART B BILLING.—In the case of a

8 covered non-routine service (other than a port9 able X-ray or portable electrocardiogram treat10 ed as a physician’s service for purposes of sec11 tion 1848(j)(3)) furnished to an individual who

12 (at the time the service is furnished) is a resi13 dent of a skilled nursing facility who is not enti14 tled to coverage under section 1812(a)(2) for

15 such service but is entitled to coverage under

16 part B for such service, the skilled nursing fa17 cility shall submit a claim for payment under

18 this title for such service under part B (without

19 regard to whether or not the item or service

20 was furnished by the facility, by others under

21 arrangement with them made by the facility,

22 under any other contracting or consulting ar23 rangement, or otherwise).

24 ‘‘(C) MAINTAINING RECORDS ON SERVICES

25 FURNISHED TO RESIDENTS.—Each skilled nurs-
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1 ing facility receiving payments for extended

2 care services under this title shall document on

3 the facility’s cost report all covered non-routine

4 services furnished to all residents of the facility

5 to whom the facility provided extended care

6 services for which payment was made under

7 part A during a fiscal year (beginning with fis8 cal year 1996) (without regard to whether or

9 not the services were furnished by the facility,

10 by others under arrangement with them made

11 by the facility, under any other contracting or

12 consulting arrangement, or otherwise).

13 ‘‘(c) RECONCILIATION OF AMOUNTS.—

14 ‘‘(1) LIMIT BASED ON PER STAY LIMIT AND

15 NUMBER OF STAYS.—

16 ‘‘(A) IN GENERAL.—If a skilled nursing fa17 cility has received aggregate payments under

18 subsection (b) for covered non-routine services

19 during a cost reporting period beginning during

20 a fiscal year in excess of an amount equal to

21 the cost reporting period limit determined

22 under subparagraph (B), the Secretary shall re23 duce the payments made to the facility with re24 spect to such services for cost reporting periods

25 beginning during the following fiscal year in an
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1 amount equal to such excess. The Secretary

2 shall reduce payments under this subparagraph

3 at such times and in such manner during a fis4 cal year as the Secretary finds necessary to

5 meet the requirement of this subparagraph.

6 ‘‘(B) COST REPORTING PERIOD LIMIT.—

7 The cost reporting period limit determined

8 under this subparagraph is an amount equal to

9 the product of—

10 ‘‘(i) the per stay limit applicable to

11 the facility under subsection (d) for the pe12 riod; and

13 ‘‘(ii) the number of stays beginning

14 during the period for which payment was

15 made to the facility for such services.

16 ‘‘(C) PROSPECTIVE REDUCTION IN PAY17 MENTS.—In addition to the process for reduc18 ing payments described in subparagraph (A),

19 the Secretary may reduce payments made to a

20 facility under this section during a cost report21 ing period if the Secretary determines (on the

22 basis of such estimated information as the Sec23 retary considers appropriate) that payments to

24 the facility under this section for the period will

25 substantially exceed the cost reporting period
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1 limit for the period determined under this para2 graph.

3 ‘‘(2) INCENTIVE PAYMENTS.—

4 ‘‘(A) IN GENERAL.—If a skilled nursing fa5 cility has received aggregate payments under

6 subsection (b) for covered non-routine services

7 during a cost reporting period beginning during

8 a fiscal year in an amount that is less than the

9 amount determined under paragraph (1)(B),

10 the Secretary shall pay the skilled nursing facil11 ity in the following fiscal year an incentive pay12 ment equal to 50 percent of the difference be13 tween such amounts, except that the incentive

14 payment may not exceed 5 percent of the aggre15 gate payments made to the facility under sub16 section (b) for the previous fiscal year (without

17 regard to subparagraph (B)).

18 ‘‘(B) INSTALLMENT INCENTIVE PAY19 MENTS.—The Secretary may make installment

20 payments during a fiscal year to a skilled nurs21 ing facility based on the estimated incentive

22 payment that the facility would be eligible to re23 ceive with respect to such fiscal year.

24 ‘‘(d) DETERMINATION OF FACILITY PER STAY

25 LIMIT.—
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1 ‘‘(1) LIMIT FOR FISCAL YEAR 1997.—

2 ‘‘(A) IN GENERAL.—Except as provided in

3 subparagraph (B), the Secretary shall establish

4 separate per stay limits for hospital-based and

5 freestanding skilled nursing facilities for the 12-

6 month cost reporting period beginning during

7 fiscal year 1997 that are equal to the sum of—

8 ‘‘(i) 50 percent of the facility-specific

9 stay amount for the facility (as determined

10 under subsection (e)) for the last 12-month

11 cost reporting period ending on or before

12 September 30, 1994, increased (in a

13 compounded manner) by the SNF market

14 basket percentage increase for fiscal years

15 1995 through 1997; and

16 ‘‘(ii) 50 percent of the average of all

17 facility-specific stay amounts for all hos18 pital-based facilities or all freestanding fa19 cilities (whichever is applicable) during the

20 cost reporting period described in clause

21 (i), increased (in a compounded manner)

22 by the SNF market basket percentage in23 crease for fiscal years 1995 through 1997.

24 ‘‘(B) FACILITIES NOT HAVING 1994 COST

25 REPORTING PERIOD.—In the case of a skilled
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1 nursing facility for which payments were not

2 made under this title for covered non-routine

3 services for the last 12-month cost reporting pe4 riod ending on or before September 30, 1994,

5 the per stay limit for the 12-month cost report6 ing period beginning during fiscal year 1997

7 shall be twice the amount determined under

8 subparagraph (A)(ii).

9 ‘‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS.—

10 The per stay limit for a skilled nursing facility for

11 a 12-month cost reporting period beginning during

12 a fiscal year after fiscal year 1997 is equal to the

13 per stay limit established under this subsection for

14 the 12-month cost reporting period beginning during

15 the previous fiscal year, increased by the SNF mar16 ket basket percentage increase for such subsequent

17 fiscal year minus 2 percentage points.

18 ‘‘(3) REBASING OF AMOUNTS.—

19 ‘‘(A) IN GENERAL.—The Secretary shall

20 provide for an update to the facility-specific

21 amounts used to determine the per stay limits

22 under this subsection for cost reporting periods

23 beginning on or after October 1, 1999, and

24 every 2 years thereafter.
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1 ‘‘(B) TREATMENT OF FACILITIES NOT

2 HAVING REBASED COST REPORTING PERIODS.—

3 Paragraph (1)(B) shall apply with respect to a

4 skilled nursing facility for which payments were

5 not made under this title for covered non-rou6 tine services for the 12-month cost reporting

7 period used by the Secretary to update facility8 specific amounts under subparagraph (A) in the

9 same manner as such paragraph applies with

10 respect to a facility for which payments were

11 not made under this title for covered non-rou12 tine services for the last 12-month cost report13 ing period ending on or before September 30,

14 1994.

15 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY

16 AMOUNTS.—The ‘facility-specific stay amount’ for a

17 skilled nursing facility for a cost reporting period is the

18 sum of—

19 ‘‘(1) the average amount of payments made to

20 the facility under part A during the period which are

21 attributable to covered non-routine services fur22 nished during a stay; and

23 ‘‘(2) the Secretary’s best estimate of the aver24 age amount of payments made under part B during

25 the period for covered non-routine services furnished
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1 to all residents of the facility to whom the facility

2 provided extended care services for which payment

3 was made under part A during the period (without

4 regard to whether or not the services were furnished

5 by the facility, by others under arrangement with

6 them made by the facility, under any other contract7 ing or consulting arrangement, or otherwise), as es8 timated by the Secretary.

9 ‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—

10 ‘‘(1) IN GENERAL.—In applying subsection (b)

11 to covered non-routine services furnished during a

12 stay beginning during a cost reporting period begin13 ning during a fiscal year to a resident of a skilled

14 nursing facility who requires intensive nursing or

15 therapy services, the per stay limit determined for

16 the fiscal year under the methodology for such resi17 dent shall be the per stay limit developed under

18 paragraph (2) instead of the per stay limit deter19 mined under subsection (d)(1)(A).

20 ‘‘(2) PER STAY LIMIT FOR INTENSIVE NEED

21 RESIDENTS.—Not later than June 30, 1996, the

22 Secretary, after consultation with the Medicare Pay23 ment Review Commission and skilled nursing facility

24 experts, shall develop and publish a methodology for

25 determining on an annual basis a per stay limit for
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1 residents of a skilled nursing facility who require in2 tensive nursing or therapy services.

3 ‘‘(3) BUDGET NEUTRALITY.—The Secretary

4 shall adjust payments under subsection (b) in a

5 manner that ensures that total payments for covered

6 non-routine services under this section are not great7 er or less than total payments for such services

8 would have been but for the application of para9 graph (1).

10 ‘‘(g) SPECIAL TREATMENT FOR MEDICARE LOW

11 VOLUME SKILLED NURSING FACILITIES.—This section

12 shall not apply with respect to a skilled nursing facility

13 for which payment is made for routine service costs during

14 a cost reporting period on the basis of prospective pay15 ments under section 1888(d).

16 ‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS.—

17 ‘‘(1) IN GENERAL.—The Secretary may make

18 exceptions and adjustments to the cost reporting

19 limits applicable to a skilled nursing facility under

20 subsection (c)(1)(B) for a cost reporting period, ex21 cept that the total amount of any additional pay22 ments made under this section for covered non-rou23 tine services during the cost reporting period as a

24 result of such exceptions and adjustments may not

25 exceed 5 percent of the aggregate payments made to
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1 all skilled nursing facilities for covered non-routine

2 services during the cost reporting period (determined

3 without regard to this paragraph).

4 ‘‘(2) BUDGET NEUTRALITY.—The Secretary

5 shall adjust payments under subsection (b) in a

6 manner that ensures that total payments for covered

7 non-routine services under this section are not great8 er or less than total payments for such services

9 would have been but for the application of para10 graph (1).

11 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before

12 furnishing a covered non-routine service consisting of an

13 X-ray service for which payment may be made under part

14 A or part B to a resident, a skilled nursing facility shall

15 consider whether furnishing the service through a provider

16 of portable X-ray service services would be appropriate,

17 taking into account the cost effectiveness of the service

18 and the convenience to the resident.’’.

19 (b) CONFORMING AMENDMENT.—Section 1814(b)

20 (42 U.S.C. 1395f(b)) is amended in the matter preceding

21 paragraph (1) by striking ‘‘1813 and 1886’’ and inserting

22 ‘‘1813, 1886, 1888, and 1888A’’.

23 SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.

24 (a) MAINTAINING SAVINGS RESULTING FROM TEM25 PORARY FREEZE ON PAYMENT INCREASES.—
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1 (1) BASING UPDATES TO PER DIEM COST LIM2 ITS ON LIMITS FOR FISCAL YEAR 1993.—

3 (A) IN GENERAL.—The last sentence of

4 section 1888(a) (42 U.S.C. 1395yy(a)) is

5 amended by inserting before the period at the

6 end the following: ‘‘(except that such updates

7 may not take into account any changes in the

8 routine service costs of skilled nursing facilities

9 occurring during cost reporting periods which

10 began during fiscal year 1994 or fiscal year

11 1995)’’.

12 (B) NO EXCEPTIONS PERMITTED BASED

13 ON AMENDMENT.—The Secretary of Health and

14 Human Services shall not consider the amend15 ment made by subparagraph (A) in making any

16 adjustments pursuant to section 1888(c) of the

17 Social Security Act.

18 (2) PAYMENTS DETERMINED ON PROSPECTIVE

19 BASIS.—Any change made by the Secretary of

20 Health and Human Services in the amount of any

21 prospective payment paid to a skilled nursing facility

22 under section 1888(d) of the Social Security Act for

23 cost reporting periods beginning on or after October

24 1, 1995, may not take into account any changes in

25 the costs of services occurring during cost reporting
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1 periods which began during fiscal year 1994 or fiscal

2 year 1995.

3 (b) ESTABLISHMENT OF SCHEDULE FOR MAKING

4 ADJUSTMENTS TO LIMITS.—Section 1888(c) (42 U.S.C.

5 1395yy(c)) is amended by striking the period at the end

6 of the second sentence and inserting ‘‘, and may only make

7 adjustments under this subsection with respect to a facil8 ity which applies for an adjustment during an annual ap9 plication period established by the Secretary.’’.

10 (c) LIMITATION ON AGGREGATE INCREASE IN PAY11 MENTS RESULTING FROM ADJUSTMENTS TO LIMITS.—

12 Section 1888(c) (42 U.S.C. 1395yy(c)) is amended—

13 (1) by striking ‘‘(c) The Secretary’’ and insert14 ing ‘‘(c)(1) Subject to paragraph (2), the Sec15 retary’’; and

16 (2) by adding at the end the following new

17 paragraph:

18 ‘‘(2) The Secretary may not make any adjustments

19 under this subsection in the limits set forth in subsection

20 (a) for a cost reporting period beginning during a fiscal

21 year to the extent that the total amount of the additional

22 payments made under this title as a result of such adjust23 ments is greater than an amount equal to—

24 ‘‘(A) for cost reporting periods beginning dur25 ing fiscal year 1997, the total amount of the addi-
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1 tional payments made under this title as a result of

2 adjustments under this subsection for cost reporting

3 periods beginning during fiscal year 1996 increased

4 by the SNF market basket percentage increase (as

5 defined in section 1888A(e)(3)) for fiscal year 1997;

6 and

7 ‘‘(B) for cost reporting periods beginning dur8 ing a subsequent fiscal year, the amount determined

9 under this paragraph for the previous fiscal year in10 creased by the SNF market basket percentage in11 crease for such subsequent fiscal year.’’.

12 (d) IMPOSITION OF LIMITS FOR ALL COST REPORT13 ING PERIODS.—Section 1888(a) (42 U.S.C. 1395yy(a)) is

14 amended in the matter preceding paragraph (1) by insert15 ing after ‘‘extended care services’’ the following: ‘‘(for any

16 cost reporting period for which payment is made under

17 this title to the skilled nursing facility for such services)’’.

18 SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RE19 LATED COSTS.

20 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

21 amended by section 15506, is amended by adding at the

22 end the following new subparagraph:

23 ‘‘(U) Such regulations shall provide that, in deter24 mining the amount of the payments that may be made

25 under this title with respect to all the capital-related costs
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1 of skilled nursing facilities, the Secretary shall reduce the

2 amounts of such payments otherwise established under

3 this title by 15 percent for payments attributable to por4 tions of cost reporting periods occurring during fiscal

5 years 1996 through 2002.’’.

6 SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID

7 FOR UNDER PART B.

8 (a) REQUIRING PAYMENT FOR ALL ITEMS AND

9 SERVICES TO BE MADE TO FACILITY.—

10 (1) IN GENERAL.—The first sentence of section

11 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended—

12 (A) by striking ‘‘and (D)’’ and inserting

13 ‘‘(D)’’; and

14 (B) by striking the period at the end and

15 inserting the following: ‘‘, and (E) in the case

16 of an item or service (other than physicians’

17 services and other than a portable X-ray or

18 portable electrocardiogram treated as a physi19 cian’s service for purposes of section

20 1848(j)(3)) furnished to an individual who (at

21 the time the item or service is furnished) is a

22 resident of a skilled nursing facility, payment

23 shall be made to the facility (without regard to

24 whether or not the item or service was fur25 nished by the facility, by others under arrange-
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1 ment with them made by the facility, or other2 wise).’’.

3 (2) EXCLUSION FOR ITEMS AND SERVICES NOT

4 BILLED BY FACILITY.—Section 1862(a) (42 U.S.C.

5 1395y(a)) is amended—

6 (A) by striking ‘‘or’’ at the end of para7 graph (14);

8 (B) by striking the period at the end of

9 paragraph (15) and inserting ‘‘; or’’; and

10 (C) by inserting after paragraph (15) the

11 following new paragraph:

12 ‘‘(16) where such expenses are for covered non13 routine services (as defined in section 1888A(a)(1))

14 (other than a portable X-ray or portable electro15 cardiogram treated as a physician’s service for pur16 poses of section 1848(j)(3)) furnished to an individ17 ual who is a resident of a skilled nursing facility and

18 for which the claim for payment under this title is

19 not submitted by the facility.’’.

20 (3) CONFORMING AMENDMENT.—Section

21 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended by

22 striking ‘‘(2);’’ and inserting ‘‘(2) and section

23 1842(b)(6)(E);’’.

24 (b) REDUCTION IN PAYMENTS FOR ITEMS AND SERV25 ICES FURNISHED BY OR UNDER ARRANGEMENTS WITH
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1 FACILITIES.—Section 1861(v)(1) (42 U.S.C.

2 1395x(v)(1)), as amended by sections 15506 and 15524,

3 is amended by adding at the end the following new sub4 paragraph:

5 ‘‘(V) In the case of an item or service furnished by

6 a skilled nursing facility (or by others under arrangement

7 with them made by a skilled nursing facility) for which

8 payment is made under part B in an amount determined

9 in accordance with section 1833(a)(2)(B), the Secretary

10 shall reduce the reasonable cost for such item or service

11 otherwise determined under clause (i)(I) of such section

12 by 5.8 percent for payments attributable to portions of

13 cost reporting periods occurring during fiscal years 1996

14 through 2002.’’.

15 SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE16 VISED NURSING HOME REFORM STANDARDS.

17 (a) IN GENERAL.—Section 1819(a)(3) (42 U.S.C.

18 1395i–3(a)(3)) is amended to read as follows:

19 ‘‘(3)(A) is certified by the Secretary as meeting

20 the standards established under subsection (b), or

21 (B) is a State-certified facility (as defined in sub22 section (d)).’’.

23 (b) REQUIREMENTS DESCRIBED.—Section 1819 (42

24 U.S.C. 1395i–3) is amended by striking subsections (b)

25 through (i) and inserting the following:
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1 ‘‘(b) STANDARDS FOR AND CERTIFICATION OF FA2 CILITIES.—

3 ‘‘(1) STANDARDS FOR FACILITIES.—

4 ‘‘(A) IN GENERAL.—The Secretary shall

5 provide for the establishment and maintenance

6 of standards consistent with the contents de7 scribed in subparagraph (B) for skilled nursing

8 facilities which furnish services for which pay9 ment may be made under this title.

10 ‘‘(B) CONTENTS OF STANDARDS.—The

11 standards established for facilities under this

12 paragraph shall contain provisions relating to

13 the following items:

14 ‘‘(i) The treatment of resident medical

15 records.

16 ‘‘(ii) Policies, procedures, and bylaws

17 for operation.

18 ‘‘(iii) Quality assurance systems.

19 ‘‘(iv) Resident assessment procedures,

20 including care planning and outcome eval21 uation.

22 ‘‘(v) The assurance of a safe and ade23 quate physical plant for the facility.

24 ‘‘(vi) Qualifications for staff sufficient

25 to provide adequate care.
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1 ‘‘(vii) Utilization review.

2 ‘‘(viii) The protection and enforce3 ment of resident rights described in sub4 paragraph (C).

5 ‘‘(C) RESIDENT RIGHTS DESCRIBED.—The

6 resident rights described in this subparagraph

7 are the rights of residents to the following:

8 ‘‘(i) To exercise the individual’s rights

9 as a resident of the facility and as a citizen

10 or resident of the United States.

11 ‘‘(ii) To receive notice of rights and

12 services.

13 ‘‘(iii) To be protected against the mis14 use of resident funds.

15 ‘‘(iv) To be provided privacy and con16 fidentiality.

17 ‘‘(v) To voice grievances.

18 ‘‘(vi) To examine the results of inspec19 tions under the certification program.

20 ‘‘(vii) To refuse to perform services

21 for the facility.

22 ‘‘(viii) To be provided privacy in com23 munications and to receive mail.

24 ‘‘(ix) To have the facility provide im25 mediate access to any resident by any rep-
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1 resentative of the certification program,

2 the resident’s individual physician, the

3 State long term care ombudsman, and any

4 person the resident has designated as a

5 visitor.

6 ‘‘(x) To retain and use personal prop7 erty.

8 ‘‘(xi) To be free from abuse, including

9 verbal, sexual, physical and mental abuse,

10 corporal punishment, and involuntary se11 clusion.

12 ‘‘(xii) To be provided with prior writ13 ten notice of a pending transfer or dis14 charge.

15 ‘‘(D) REQUIRING NOTICE AND COM16 MENT.—The standards established for facilities

17 under this paragraph may only take effect after

18 the Secretary has provided the public with no19 tice and an opportunity for comment.

20 ‘‘(2) CERTIFICATION PROGRAM.—

21 ‘‘(A) IN GENERAL.—The Secretary shall

22 provide for the establishment and operation of

23 a program consistent with the requirements of

24 subparagraph (B) for the certification of skilled

25 nursing facilities which meet the standards es-
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1 tablished under paragraph (1) and the decerti2 fication of facilities which fail to meet such

3 standards.

4 ‘‘(B) REQUIREMENTS FOR PROGRAM.—In

5 addition to any other requirements the Sec6 retary may impose, in establishing and operat7 ing the certification program under subpara8 graph (A), the Secretary shall ensure the fol9 lowing:

10 ‘‘(i) The Secretary shall ensure public

11 access (as defined by the Secretary) to the

12 certification program’s evaluations of par13 ticipating facilities, including compliance

14 records and enforcement actions and other

15 reports by the Secretary regarding the

16 ownership, compliance histories, and serv17 ices provided by certified facilities.

18 ‘‘(ii) Not less often than every 4

19 years, the Secretary shall audit its expendi20 tures under the program, through an en21 tity designated by the Secretary which is

22 not affiliated with the program, as des23 ignated by the Secretary.

24 ‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—
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1 ‘‘(1) AUTHORITY.—In addition to any other au2 thority, where the Secretary determines that a nurs3 ing facility which is certified for participation under

4 this title (whether certified by the Secretary as

5 meeting the standards established under subsection

6 (b) or a State-ceritified facility) no longer or does

7 not substantially meet the requirements for such a

8 facility under this title as specified under subsection

9 (b) and further determines that the facility’s defi10 ciencies—

11 ‘‘(A) immediately jeopardize the health and

12 safety of its residents, the Secretary shall at

13 least provide for the termination of the facility’s

14 certification for participation under this title, or

15 ‘‘(B) do not immediately jeopardize the

16 health and safety of its residents, the Secretary

17 may, in lieu of providing for terminating the fa18 cility’s certification for participation under the

19 plan, provide lesser sanctions including one that

20 provides that no payment will be made under

21 this title with respect to any individual admit22 ted to such facility after a date specified by the

23 Secretary.

24 ‘‘(2) NOTICE.—The Secretary shall not make

25 such a decision with respect to a facility until the fa-
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1 cility has had a reasonable opportunity, following the

2 initial determination that it no longer or does not

3 substantially meet the requirements for such a facil4 ity under this title, to correct its deficiencies, and,

5 following this period, has been given reasonable no6 tice and opportunity for a hearing.

7 ‘‘(3) EFFECTIVENESS.—The Secretary’s deci8 sion to deny payment may be made effective only

9 after such notice to the public and to the facility as

10 may be provided for by the Secretary, and its effec11 tiveness shall terminate (A) when the Secretary

12 finds that the facility is in substantial compliance

13 (or is making good faith efforts to achieve substan14 tial compliance) with the requirements for such a fa15 cility under this title, or (B) in the case described

16 in paragraph (1)(B), with the end of the eleventh

17 month following the month such decision is made ef18 fective, whichever occurs first. If a facility to which

19 clause (B) of the previous sentence applies still fails

20 to substantially meet the provisions of the respective

21 section on the date specified in such clause, the Sec22 retary shall terminate such facility’s certification for

23 participation under this title effective with the first

24 day of the first month following the month specified

25 in such clause.
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1 ‘‘(d) STATE-CERTIFIED FACILITY DEFINED.—In

2 subsection (a), a ‘State-certified facility’ means a facility

3 licensed or certified as a skilled nursing facility by the

4 State in which it is located, or a facility which otherwise

5 meets the requirements applicable to providers of nursing

6 facility services under the State plan under title XIX or

7 the MediGrant program under title XXI.’’.

8 (c) CONFORMING AMENDMENTS.—(1) Section

9 1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is amended by

10 striking the second sentence.

11 (2) Section 1864 (42 U.S.C. 1395aa) is amended by

12 striking subsection (d).

13 (3) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is

14 amended by striking ‘‘1819(c)(2)(E),’’.

15 (4) Section 1883(f) (42 U.S.C. 1395tt(f)) is amend16 ed—

17 (A) in the second sentence, by striking ‘‘such a

18 hospital’’ and inserting ‘‘a hospital which enters into

19 an agreement with the Secretary under this section’’;

20 and

21 (B) by striking the first sentence.

22 (d) EFFECTIVE DATE.—The amendments made by

23 this section shall apply with respect to cost reporting peri24 ods beginning on or after October 1, 1995.
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1 SEC. 15527. MEDICAL REVIEW PROCESS.

2 In order to ensure that medicare beneficiaries are

3 furnished appropriate extended care services, the Sec4 retary of Health and Human Services shall establish and

5 implement a thorough medical review process to examine

6 the effects of the amendments made by this part on the

7 quality of extended care services furnished to medicare

8 beneficiaries. In developing such a medical review process,

9 the Secretary shall place a particular emphasis on the

10 quality of non-routine covered services for which payment

11 is made under section 1888A of the Social Security Act.

12 SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM13 MISSION.

14 Not later than October 1, 1997, the Medicare Pay15 ment Review Commission shall submit to Congress a re16 port on the system under which payment is made under

17 the medicare program for extended care services furnished

18 by skilled nursing facilities, and shall include in the report

19 the following:

20 (1) An analysis of the effect of the methodology

21 established under section 1888A of the Social Secu22 rity Act (as added by section 15522) on the pay23 ments for, and the quality of, extended care services

24 under the medicare program.

25 (2) An analysis of the advisability of determin26 ing the amount of payment for covered non-routine
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1 services of facilities (as described in such section) on

2 the basis of the amounts paid for such services when

3 furnished by suppliers under part B of the medicare

4 program.

5 (3) An analysis of the desirability of maintain6 ing separate limits for hospital-based and freestand7 ing facilities in the costs of extended care services

8 recognized as reasonable under the medicare pro9 gram.

10 (4) An analysis of the quality of services fur11 nished by skilled nursing facilities.

12 (5) An analysis of the adequacy of the process

13 and standards used to provide exceptions to the lim14 its described in paragraph (3).

15 SEC. 15529. EFFECTIVE DATE.

16 Except as otherwise provided in this part, the amend17 ments made by this part shall apply to services furnished

18 during cost reporting periods (or portions of cost reporting

19 periods) beginning on or after October 1, 1996.
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1 PART 3—CLARIFICATION OF CREDITS TO PART A

2 TRUST FUND

SEC. 15531. CLARIFICATION OF AMOUNT OF TAXES CREDITED TO FEDERAL HOSPITAL INSURANCE

TRUST FUND.

Section 121(e)(1)(B) of the Social Security Amendments of 1983 (Public Law 98–21) is amended by adding

at the end the following: ‘‘The Secretary of the Treasury

shall carry out this subparagraph without regard to any

amendments to this subsection or to section 86 of the Internal Revenue Code of 1986 which take effect on or

after January 1, 1994.’’.

3 Subtitle G—Provisions Relating to

4 Medicare Part B

5 PART 1—PAYMENT REFORMS

6 SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.

7 (a) REPLACEMENT OF VOLUME PERFORMANCE

8 STANDARD WITH SUSTAINABLE GROWTH RATE.—Section

9 1848(f) (42 U.S.C. 1395w–4(f)) is amended to read as

10 follows:

11 ‘‘(f) SUSTAINABLE GROWTH RATE.—

12 ‘‘(1) SPECIFICATION OF GROWTH RATE.—

13 ‘‘(A) FISCAL YEAR 1996.—The sustainable

14 growth rate for all physicians’ services for fiscal

15 year 1996 shall be equal to the product of—
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1 ‘‘(i) 1 plus the Secretary’s estimate of

2 the percentage change in the medicare eco3 nomic index for 1996 (described in the

4 fourth sentence of section 1842(b)(3)) (di5 vided by 100),

6 ‘‘(ii) 1 plus the Secretary’s estimate of

7 the percentage change (divided by 100) in

8 the average number of individuals enrolled

9 under this part (other than private plan

10 enrollees) from fiscal year 1995 to fiscal

11 year 1996,

12 ‘‘(iii) 1 plus the Secretary’s estimate

13 of the projected percentage growth in real

14 gross domestic product per capita (divided

15 by 100) from fiscal year 1995 to fiscal

16 year 1996, plus 2 percentage points, and

17 ‘‘(iv) 1 plus the Secretary’s estimate

18 of the percentage change (divided by 100)

19 in expenditures for all physicians’ services

20 in fiscal year 1996 (compared with fiscal

21 year 1995) which will result from changes

22 in law, determined without taking into ac23 count estimated changes in expenditures

24 due to changes in the volume and intensity

25 of physicians’ services or changes in ex-
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1 penditures resulting from changes in the

2 update to the conversion factor under sub3 section (d),

4 minus 1 and multiplied by 100.

5 ‘‘(B) SUBSEQUENT FISCAL YEARS.—The

6 sustainable growth rate for all physicians’ serv7 ices for fiscal year 1997 and each subsequent

8 fiscal year shall be equal to the product of—

9 ‘‘(i) 1 plus the Secretary’s estimate of

10 the percentage change in the medicare eco11 nomic index for the fiscal year involved

12 (described in the fourth sentence of section

13 1842(b)(3)) (divided by 100),

14 ‘‘(ii) 1 plus the Secretary’s estimate of

15 the percentage change (divided by 100) in

16 the average number of individuals enrolled

17 under this part (other than private plan

18 enrollees) from the previous fiscal year to

19 the fiscal year involved,

20 ‘‘(iii) 1 plus the Secretary’s estimate

21 of the projected percentage growth in real

22 gross domestic product per capita (divided

23 by 100) from the previous fiscal year to

24 the fiscal year involved, plus 2 percentage

25 points, and
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1 ‘‘(iv) 1 plus the Secretary’s estimate

2 of the percentage change (divided by 100)

3 in expenditures for all physicians’ services

4 in the fiscal year (compared with the pre5 vious fiscal year) which will result from

6 changes in law (including changes made by

7 the Secretary in response to section 1895),

8 determined without taking into account es9 timated changes in expenditures due to

10 changes in the volume and intensity of

11 physicians’ services or changes in expendi12 tures resulting from changes in the update

13 to the conversion factor under subsection

14 (d)(3),

15 minus 1 and multiplied by 100.

16 ‘‘(2) EXCLUSION OF SERVICES FURNISHED TO

17 PRIVATE PLAN ENROLLEES.—In this subsection, the

18 term ‘physicians’ services’ with respect to a fiscal

19 year does not include services furnished to an indi20 vidual enrolled under this part who has elected to re21 ceive benefits under this title for the fiscal year

22 through a MedicarePlus product offered under part

23 C or through enrollment with an eligible organiza24 tion with a risk-sharing contract under section

25 1876.’’.
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1 (b) ESTABLISHING UPDATE TO CONVERSION FAC2 TOR TO MATCH SPENDING UNDER SUSTAINABLE

3 GROWTH RATE.—

4 (1) IN GENERAL.—Section 1848(d) (42 U.S.C.

5 1395w–4(d)) is amended—

6 (A) by striking paragraph (2);

7 (B) by amending paragraph (3) to read as

8 follows:

9 ‘‘(3) UPDATE.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (E), for purposes of this section the up12 date for a year (beginning with 1997) is equal

13 to the product of—

14 ‘‘(i) 1 plus the Secretary’s estimate of

15 the percentage increase in the medicare

16 economic index (described in the fourth

17 sentence of section 1842(b)(3)) for the

18 year (divided by 100), and

19 ‘‘(ii) 1 plus the Secretary’s estimate of

20 the update adjustment factor for the year

21 (divided by 100),

22 minus 1 and multiplied by 100.

23 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

24 ‘update adjustment factor’ for a year is equal to

25 the quotient of—
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1 ‘‘(i) the difference between (I) the

2 sum of the allowed expenditures for physi3 cians’ services furnished during each of the

4 years 1995 through the year involved and

5 (II) the sum of the amount of actual ex6 penditures for physicians’ services fur7 nished during each of the years 1995

8 through the previous year; divided by

9 ‘‘(ii) the Secretary’s estimate of al10 lowed expenditures for physicians’ services

11 furnished during the year.

12 ‘‘(C) DETERMINATION OF ALLOWED EX13 PENDITURES.—For purposes of subparagraph

14 (B), allowed expenditures for physicians’ serv15 ices shall be determined as follows (as esti16 mated by the Secretary):

17 ‘‘(i) In the case of allowed expendi18 tures for 1995, such expenditures shall be

19 equal to actual expenditures for services

20 furnished during the 12-month period end21 ing with June of 1995.

22 ‘‘(ii) In the case of allowed expendi23 tures for 1996 and each subsequent year,

24 such expenditures shall be equal to allowed

25 expenditures for the previous year, in-
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1 creased by the sustainable growth rate

2 under subsection (f) for the fiscal year

3 which begins during the year.

4 ‘‘(D) DETERMINATION OF ACTUAL EX5 PENDITURES.—For purposes of subparagraph

6 (B), the amount of actual expenditures for phy7 sicians’ services furnished during a year shall

8 be equal to the amount of expenditures for such

9 services during the 12-month period ending

10 with June of the previous year.

11 ‘‘(E) RESTRICTION ON VARIATION FROM

12 MEDICARE ECONOMIC INDEX.—

13 ‘‘(i) IN GENERAL.—Notwithstanding

14 the amount of the update adjustment fac15 tor determined under subparagraph (B)

16 for a year, the update in the conversion

17 factor under this paragraph for the year

18 may not be—

19 ‘‘(I) greater than 103 percent of

20 1 plus the Secretary’s estimate of the

21 percentage increase in the medicare

22 economic index (described in the

23 fourth sentence of section 1842(b)(3))

24 for the year (divided by 100); or
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1 ‘‘(II) less than the applicable per2 centage limit of 1 plus the Secretary’s

3 estimate of the percentage increase in

4 the medicare economic index (de5 scribed in the fourth sentence of sec6 tion 1842(b)(3)) for the year (divided

7 by 100).

8 ‘‘(ii) APPLICABLE PERCENTAGE

9 LIMIT.—In clause (i)(II), the ‘applicable

10 percentage limit’ for a year is—

11 ‘‘(I) for 1997, 93 percent;

12 ‘‘(II) for 1998, 92.25 percent;

13 and

14 ‘‘(III) for 1999 and each suc15 ceeding year, 92 percent.’’; and

16 (C) by adding at the end the following new

17 paragraph:

18 ‘‘(4) REPORTING REQUIREMENTS.—

19 ‘‘(A) IN GENERAL.—Not later than No20 vember 1 of each year (beginning with 1996),

21 the Secretary shall transmit to the Congress a

22 report that describes the update in the conver23 sion factor for physicians’ services (as defined

24 in subsection (f)(3)(A)) in the following year.
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1 ‘‘(B) COMMISSION REVIEW.—The Medicare

2 Payment Review Commission shall review the

3 report submitted under subparagraph (A) for a

4 year and shall submit to the Congress, by not

5 later than December 1 of the year, a report

6 containing its analysis of the conversion factor

7 for the following year.’’.

8 (2) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to physicians’ services

10 furnished on or after January 1, 1996.

11 (c) ESTABLISHMENT OF SINGLE CONVERSION FAC12 TOR FOR 1996.—

13 (1) IN GENERAL.—Section 1848(d)(1) (42

14 U.S.C. 1395w–4(d)(1)) is amended—

15 (A) by redesignating subparagraph (C) as

16 subparagraph (D); and

17 (B) by inserting after subparagraph (B)

18 the following new subparagraph:

19 ‘‘(C) SPECIAL RULE FOR 1996.—For

20 1996, the conversion factor under this sub21 section shall be $35.42 for all physicians’ serv22 ices.’’.

23 (2) CONFORMING AMENDMENTS.—Section 1848

24 (42 U.S.C. 1395w–4), as amended by paragraph (1),

25 is amended—
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1 (A) by striking ‘‘(or factors)’’ each place it

2 appears in subsection (d)(1)(A) and

3 (d)(1)(D)(ii);

4 (B) in subsection (d)(1)(A), by striking ‘‘or

5 updates’’;

6 (C) in subsection (d)(1)(D)(ii), by striking

7 ‘‘(or updates)’’; and

8 (D) in subsection (i)(1)(C), by striking

9 ‘‘conversion factors’’ and inserting ‘‘the conver10 sion factor’’.

11 SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY12 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

13 SERVICES.

14 (a) AMBULATORY SURGICAL CENTER PROCE15 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

16 1395l(i)(3)(B)(i)(II)) is amended—

17 (1) by striking ‘‘of 80 percent’’; and

18 (2) by striking the period at the end and insert19 ing the following: ‘‘, less the amount a provider may

20 charge as described in clause (ii) of section

21 1866(a)(2)(A).’’.

22 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE23 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

24 1395l(n)(1)(B)(i)(II)) is amended—

25 (1) by striking ‘‘of 80 percent’’; and
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1 (2) by striking the period at the end and insert2 ing the following: ‘‘, less the amount a provider may

3 charge as described in clause (ii) of section

4 1866(a)(2)(A).’’.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to services furnished during por7 tions of cost reporting periods occurring on or after Octo8 ber 1, 1995.

9 SEC. 15603. PAYMENTS FOR DURABLE MEDICAL EQUIP10 MENT.

11 (a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS

12 OF DURABLE MEDICAL EQUIPMENT.—

13 (1) FREEZE IN UPDATE FOR COVERED

14 ITEMS.—Section 1834(a)(14) (42 U.S.C.

15 1395m(a)(14)) is amended—

16 (A) by striking ‘‘and’’ at the end of sub17 paragraph (A);

18 (B) in subparagraph (B)—

19 (i) by striking ‘‘a subsequent year’’

20 and inserting ‘‘1993, 1994, and 1995’’,

21 and

22 (ii) by striking the period at the end

23 and inserting a semicolon; and

24 (C) by adding at the end the following:
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1 ‘‘(C) for each of the years 1996 through

2 2002, 0 percentage points; and

3 ‘‘(D) for a subsequent year, the percentage

4 increase in the consumer price index for all

5 urban consumers (U.S. urban average) for the

6 12-month period ending with June of the pre7 vious year.’’.

8 (2) UPDATE FOR ORTHOTICS AND PROSTHET9 ICS.—Section 1834(h)(4)(A) (42 U.S.C.

10 1395m(h)(4)(A)) is amended—

11 (A) by striking ‘‘and’’ at the end of clause

12 (iii);

13 (B) by redesignating clause (iv) as clause

14 (v); and

15 (C) by inserting after clause (iii) the fol16 lowing new clause:

17 ‘‘(iv) for each of the years 1996

18 through 2002, 1 percent, and’’.

19 (b) OXYGEN AND OXYGEN EQUIPMENT.—Section

20 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—

21 (1) by striking ‘‘and’’ at the end of clause (iii);

22 (2) in clause (iv)—

23 (A) by striking ‘‘a subsequent year’’ and

24 inserting ‘‘1993, 1994, and 1995’’, and
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1 (B) by striking the period at the end and

2 inserting a semicolon; and

3 (3) by adding at the end the following new

4 clauses:

5 ‘‘(v) in 1996, is 80 percent of the na6 tional limited monthly payment rate com7 puted under subparagraph (B) for the item

8 for the year; and

9 ‘‘(vi) in a subsequent year, is the na10 tional limited monthly payment rate com11 puted under subparagraph (B) for the item

12 for the year.’’.

13 (c) PAYMENT FOR UPGRADED DURABLE MEDICAL

14 EQUIPMENT.—Section 1834(a) (42 U.S.C. 1395m(a)) is

15 amended by inserting after paragraph (15) the following

16 new paragraph:

17 ‘‘(16) PAYMENT FOR CERTAIN UPGRADED

18 ITEMS.—

19 ‘‘(A) INDIVIDUAL’S RIGHT TO CHOOSE UP20 GRADED ITEM.—Notwithstanding any other

21 provision of this title, effective on the date on

22 which the Secretary issues regulations under

23 subparagraph (C), payment may be made under

24 this part for an upgraded item of durable medi25 cal equipment in the same manner as payment
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1 may be made for a standard item of durable

2 medical equipment.

3 ‘‘(B) PAYMENTS TO SUPPLIER.—In the

4 case of the purchase or rental of an upgraded

5 item under subparagraph (A)—

6 ‘‘(i) the supplier shall receive payment

7 under this subsection with respect to such

8 item as if such item were a standard item;

9 and

10 ‘‘(ii) the individual purchasing or

11 renting the item shall pay the supplier an

12 amount equal to the difference between the

13 supplier’s charge and the amount under

14 clause (i).

15 In no event may the supplier’s charge for an

16 upgraded item exceed the applicable fee sched17 ule amount (if any) for such item.

18 ‘‘(C) CONSUMER PROTECTION SAFE19 GUARDS.—The Secretary shall issue regulations

20 providing for consumer protection standards

21 with respect to the furnishing of upgraded

22 equipment under subparagraph (A). Such regu23 lations shall provide for—

24 ‘‘(i) full disclosure by the supplier of

25 the availability and price of standard items
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1 and proof of receipt of such disclosure in2 formation by the beneficiary before the fur3 nishing of the upgraded item;

4 ‘‘(ii) conditions of participation for

5 suppliers of upgraded items, including con6 ditions relating to billing procedures;

7 ‘‘(iii) sanctions (including exclusion)

8 of suppliers who are determined to have

9 engaged in coercive or abusive practices;

10 and

11 ‘‘(iv) such other safeguards as the

12 Secretary determines are necessary.’’.

13 (d) PAYMENT FREEZE FOR PARENTERAL AND EN14 TERAL NUTRIENTS, SUPPLIES, AND EQUIPMENT.—In de15 termining the amount of payment under part B of title

16 XVIII of the Social Security Act with respect to parenteral

17 and enteral nutrients, supplies, and equipment during

18 each of the years 1996 through 2002, the charges deter19 mined to be reasonable with respect to such nutrients,

20 supplies, and equipment may not exceed the charges deter21 mined to be reasonable with respect to such nutrients,

22 supplies, and equipment during 1993.
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1 SEC. 15604. REDUCTION IN UPDATES TO PAYMENT

2 AMOUNTS FOR CLINICAL DIAGNOSTIC LAB3 ORATORY TESTS.

4 (a) CHANGE IN UPDATE.—Section

5 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))

6 is amended by striking ‘‘1994 and 1995’’ and inserting

7 ‘‘1994 through 2002’’.

8 (b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec9 tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend10 ed—

11 (1) in clause (vi), by striking ‘‘and’’ at the end;

12 (2) in clause (vii)—

13 (A) by inserting ‘‘and before January 1,

14 1997,’’ after ‘‘1995,’’, and

15 (B) by striking the period at the end and

16 inserting ‘‘, and’’; and

17 (3) by adding at the end the following new

18 clause:

19 ‘‘(viii) after December 31, 1996, is equal to 65

20 percent of such median.’’.

21 SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

22 COSTS OF HOSPITAL OUTPATIENT SERVICES.

23 (a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT24 ED COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

25 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through

26 1998’’ and inserting ‘‘through 2002’’.
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1 (b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—

2 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

3 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through

4 1998’’ and inserting ‘‘through 2002’’.

5 SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR6 GICAL CENTER SERVICES.

7 The Secretary of Health and Human Services shall

8 not provide for any inflation update in the payment

9 amounts under subparagraphs (A) and (B) of section

10 1833(i)(2) of the Social Security Act for any of the fiscal

11 years 1996 through 2002.

12 SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.

13 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

14 (42 U.S.C. 1395k(a)(2)) is amended—

15 (1) by striking ‘‘and’’ at the end of subpara16 graph (I);

17 (2) by striking the period at the end of sub18 paragraph (J) and inserting ‘‘; and’’; and

19 (3) by adding at the end the following new sub20 paragraph:

21 ‘‘(K) rural emergency access care hospital

22 services (as defined in section 1861(oo)(2)).’’.

23 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

24 RURAL PRIMARY CARE HOSPITAL SERVICES.—
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1 (1) IN GENERAL.—Section 1833(a)(6) (42

2 U.S.C. 1395l(a)(6)) is amended by striking ‘‘serv3 ices,’’ and inserting ‘‘services and rural emergency

4 access care hospital services,’’.

5 (2) PAYMENT METHODOLOGY DESCRIBED.—

6 Section 1834(g) (42 U.S.C. 1395m(g)) is amend7 ed—

8 (A) in the heading, by striking ‘‘SERV9 ICES’’ and inserting ‘‘SERVICES AND RURAL

10 EMERGENCY ACCESS CARE HOSPITAL SERV11 ICES’’; and

12 (B) by adding at the end the following new

13 sentence: ‘‘The amount of payment for rural

14 emergency access care hospital services provided

15 during a year shall be determined using the ap16 plicable method provided under this subsection

17 for determining payment for outpatient rural

18 primary care hospital services during the

19 year.’’.

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to services furnished on or after

22 October 1, 1995.
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1 SEC. 15608. ENSURING PAYMENT FOR PHYSICIAN AND

2 NURSE FOR JOINTLY FURNISHED ANESTHE3 SIA SERVICES.

4 (a) PAYMENT FOR JOINTLY FURNISHED SINGLE

5 CASE.—

6 (1) PAYMENT TO PHYSICIAN.—Section

7 1848(a)(4) (42 U.S.C. 1395w–4(a)(4)) is amended

8 by adding at the end the following new subpara9 graph:

10 ‘‘(C) PAYMENT FOR SINGLE CASE.—Not11 withstanding section 1862(a)(1)(A), with re12 spect to physicians’ services consisting of the

13 furnishing of anesthesia services for a single

14 case that are furnished jointly with a certified

15 registered nurse anesthetist, if the carrier de16 termines that the use of both the physician and

17 the nurse anesthetist to furnish the anesthesia

18 service was not medically necessary, the fee

19 schedule amount for the physicians’ services

20 shall be equal to 50 percent (or 55 percent, in

21 the case of services furnished during 1996 or

22 1997) of the fee schedule amount applicable

23 under this section for anesthesia services per24 sonally performed by the physician alone (with25 out regard to this subparagraph). Nothing in

26 this subparagraph may be construed to affect
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1 the application of any provision of law regard2 ing balance billing.’’.

3 (2) PAYMENT TO CRNA.—Section 1833(l)(4)(B)

4 (42 U.S.C. 1395l(l)(4)(B)) is amended by adding at

5 the end the following new clause:

6 ‘‘(iv) Notwithstanding section 1862(a)(1)(A), in the

7 case of services of a certified registered nurse anesthetist

8 consisting of the furnishing of anesthesia services for a

9 single case that are furnished jointly with a physician, if

10 the carrier determines that the use of both the physician

11 and the nurse anesthetist to furnish the anesthesia service

12 was not medically necessary, the fee schedule amount for

13 the services furnished by the certified registered nurse an14 esthetist shall be equal to 50 percent (or 40 percent, in

15 the case of services furnished during 1996 or 1997) of

16 the fee schedule amount applicable under section 1848 for

17 anesthesia services personally performed by the physician

18 alone (without regard to this clause).’’.

19 (b) EFFECTIVE DATE.—The amendments made by

20 subsections (a) shall apply to services furnished on or after

21 July 1, 1996.

22 SEC. 15609. STATEWIDE FEE SCHEDULE AREA FOR PHYSI23 CIANS’ SERVICES.

24 (a) IN GENERAL.—Notwithstanding section

25 1848(j)(2) of the Social Security Act, in the case of the
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1 State of Wisconsin, the Secretary of Health and Human

2 Services shall treat the State as a single fee schedule area

3 for purposes of determining the fee schedule amount (as

4 referred to in section 1848(a) of such Act) for physicians’

5 services (as defined in section 1848(j)(3) of such Act)

6 under part B of the medicare program.

7 (b) BUDGET-NEUTRALITY.—Notwithstanding any

8 provision of part B of title XVIII of the Social Security

9 Act, the Secretary shall carry out subsection (a) in a man10 ner that ensures that total payments for physicians’ serv11 ices (as so defined) furnished by physicians in Wisconsin

12 during a year are not greater or less than total payments

13 for such services would have been but for this section.

14 (c) CONSTRUCTION.—Nothing in this section shall be

15 construed as limiting the availability (to the Secretary, the

16 appropriate agency or organization with a contract under

17 section 1842 of such Act, or physicians in the State of

18 Wisconsin) of otherwise applicable administrative proce19 dures for modifying the fee schedule area or areas in the

20 State after implementation of subsection (a).

21 (d) EFFECTIVE DATE.—This section shall apply with

22 respect to physicians’ services furnished on or after Janu23 ary 1, 1997.
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1 SEC. 15609A. ESTABLISHMENT OF FEE SCHEDULE FOR AM2 BULANCE SERVICES.

3 (a) PAYMENT IN ACCORDANCE WITH FEE SCHED4 ULE.—Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is

5 amended—

6 (1) by striking ‘‘and (P)’’ and inserting ‘‘(P)’’;

7 and

8 (2) by striking the semicolon at the end and in9 serting the following: ‘‘, and (Q) with respect to am10 bulance service, the amounts paid shall be 80 per11 cent of the lesser of the actual charge for the serv12 ices or the amount determined by a fee schedule es13 tablished by the Secretary for the purposes of this

14 subparagraph (in accordance with section 15608(b)

15 of the Medicare Preservation Act);’’.

16 (b) REQUIREMENTS FOR ESTABLISHMENT OF FEE

17 SCHEDULE.—

18 (1) IN GENERAL.—The Secretary of Health and

19 Human Services shall establish the fee schedule for

20 ambulance services under section 1833(a)(1)(Q) of

21 the Social Security Act (as added by subsection (a))

22 through a negotiated rulemaking process described

23 in title 5, United States Code, and in accordance

24 with the requirements of this subsection.
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1 (2) CONSIDERATIONS.—In establishing the fee

2 schedule for ambulance services, the Secretary

3 shall—

4 (A) establish mechanisms to control in5 creases in expenditures for ambulance services

6 under part B of the medicare program which

7 fairly reflect the changing nature of the ambu8 lance service industry;

9 (B) establish definitions for ambulance

10 services which promote efficiency and link pay11 ments (including fees for assessment and treat12 ment services) to the type of service provided;

13 (C) take into account regional differences

14 which affect cost and productivity, including

15 differences in the costs of resources and the

16 costs of uncompensated care;

17 (D) apply dynamic adjustments to pay18 ment rates to account for inflation, demo19 graphic changes in the population of medicare

20 beneficiaries, and changes in the number of

21 providers of ambulance services participating in

22 the medicare program; and

23 (E) phase in the application of the pay24 ment rates under the fee schedule in an effi25 cient and fair manner.
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1 (3) SAVINGS.—In establishing the fee schedule

2 for ambulance services, the Secretary shall—

3 (A) ensure that the aggregate amount of

4 payments made for ambulance services under

5 part B of the medicare program during 1998

6 does not exceed the aggregate amount of pay7 ments which would have been made for such

8 services under part B of the program during

9 1998 if the amendments made by this section

10 were not in effect; and

11 (B) set the payment amounts provided

12 under the fee schedule for services furnished in

13 1999 and each subsequent year at amounts

14 equal to the payment amounts under the fee

15 schedule for service furnished during the pre16 vious year, increased by the percentage increase

17 in the consumer price index for all urban con18 sumers (U.S. city average) for the 12-month

19 period ending with June of the previous year.

20 (4) CONSULTATION.—In establishing the fee

21 schedule for ambulance services, the Secretary shall

22 consult regularly with the American Ambulance As23 sociation, the National Association of State Medical

24 Directors, and other national organizations rep25 resenting individuals and entities who furnish or reg-
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1 ulate ambulance services, and shall share with such

2 associations and organizations the data and data

3 analysis used in establishing the fee schedule, includ4 ing data on variations in payments for ambulance

5 services under part B of the medicare program for

6 years prior to 1998 among geographic areas and

7 types of ambulance service providers.

8 (c) EFFECTIVE DATE.—The amendment made by

9 subsection (a) and the fee schedule described in subsection

10 (b) shall apply to ambulance services furnished on or after

11 January 1, 1998.

12 SEC. 15609B. STANDARDS FOR PHYSICAL THERAPY SERV13 ICES FURNISHED BY PHYSICIANS.

14 (a) APPLICATION OF STANDARDS FOR OTHER PRO15 VIDERS OF PHYSICAL THERAPY SERVICES TO SERVICES

16 FURNISHED BY PHYSICIANS.—Section 1862(a) (42

17 U.S.C. 1395y(a)), as amended by section 15525(a)(2), is

18 amended

19 (1) by striking ‘‘or’’ at the end of paragraph

20 (15);

21 (2) by striking the period at the end of para22 graph (16) and inserting ‘‘; or’’; and

23 (3) by inserting after paragraph (16) the fol24 lowing new paragraph:
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1 ‘‘(17) in the case of physicians’ services under

2 section 1848(j)(3) consisting of outpatient physical

3 therapy services or outpatient occupational therapy

4 services, which are furnished by a physician who

5 does not meet the requirements applicable under sec6 tion 1861(p) to a clinic or rehabilitation agency fur7 nishing such services.’’.

8 (b) CONFORMING AMENDMENT.—Section 1848(j)(3)

9 (42 U.S.C. 1395w–4(j)(3)) is amended by inserting ‘‘(sub10 ject to section 1862(a)(17))’’ after ‘‘(2)(D)’’.

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to services furnished on or after

13 January 1, 1996.

14 PART 2—PART B PREMIUM

15 SEC. 15611. EXTENSION OF PART B PREMIUM.

16 (a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.

17 1395r(e)(1)) is amended—

18 (1) in subparagraph (A)—

19 (A) by striking ‘‘and prior to January

20 1999’’, and

21 (B) by inserting ‘‘(or, if higher, the per22 cent described in subparagraph (C))’’ after ‘‘50

23 percent’’; and

24 (2) by adding at the end the following new sub25 paragraph:
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1 ‘‘(C) For purposes of subparagraph (A), the percent

2 described in this subparagraph is the ratio (expressed as

3 a percentage) of the monthly premium established under

4 this section for months in 1995 to the monthly actuarial

5 rate for enrollees age 65 and over applicable to such

6 months (as specified in the most recent report of the

7 Board of Trustees of the Federal Supplementary Medical

8 Insurance Trust Fund published prior to the date of the

9 enactment of the Medicare Preservation Act of 1995).’’.

10 (b) EFFECTIVE DATE.—The amendments made by

11 subsection (a) apply to premiums for months beginning

12 with January 1996.

13 SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE

14 SUBSIDY.

15 (a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r)

16 is amended by adding at the end the following:

17 ‘‘(h)(1) Notwithstanding the previous subsections of

18 this section, in the case of an individual whose modified

19 adjusted gross income for a taxable year ending with or

20 within a calendar year (as initially determined by the Sec21 retary in accordance with paragraph (3)) exceeds the

22 threshold amount described in paragraph (5)(B), the Sec23 retary shall increase the amount of the monthly premium

24 for months in the calendar year by an amount equal to

25 the difference between—
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1 ‘‘(A) 200 percent of the monthly actuarial rate

2 for enrollees age 65 and over as determined under

3 subsection (a)(1) for that calendar year; and

4 ‘‘(B) the total of the monthly premiums paid by

5 the individual under this section (determined without

6 regard to subsection (b)) during such calendar year.

7 ‘‘(2) In the case of an individual described in para8 graph (1) whose modified adjusted gross income exceeds

9 the threshold amount by less than $25,000, the amount

10 of the increase in the monthly premium applicable under

11 paragraph (1) shall be an amount which bears the same

12 ratio to the amount of the increase described in paragraph

13 (1) (determined without regard to this paragraph) as such

14 excess bears to $25,000. In the case of a joint return filed

15 under section 6013 of the Internal Revenue Code of 1986

16 by spouses both of whom are enrolled under this part, the

17 previous sentence shall be applied by substituting

18 ‘$50,000’ for ‘$25,000’. The preceding provisions of this

19 paragraph shall not apply to any individual whose thresh20 old amount is zero.

21 ‘‘(3) The Secretary shall make an initial determina22 tion of the amount of an individual’s modified adjusted

23 gross income for a taxable year ending with or within a

24 calendar year for purposes of this subsection as follows:
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1 ‘‘(A) Not later than October 1 of the year pre2 ceding the year, the Secretary shall provide notice to

3 each individual whom the Secretary finds (on the

4 basis of the individual’s actual modified adjusted

5 gross income for the most recent taxable year for

6 which such information is available or other informa7 tion provided to the Secretary by the Secretary of

8 the Treasury) will be subject to an increase under

9 this subsection that the individual will be subject to

10 such an increase, and shall include in such notice

11 the Secretary’s estimate of the individual’s modified

12 adjusted gross income for the year.

13 ‘‘(B) If, during the 30-day period beginning on

14 the date notice is provided to an individual under

15 subparagraph (A), the individual provides the Sec16 retary with information on the individual’s antici17 pated modified adjusted gross income for the year,

18 the amount initially determined by the Secretary

19 under this paragraph with respect to the individual

20 shall be based on the information provided by the

21 individual.

22 ‘‘(C) If an individual does not provide the Sec23 retary with information under subparagraph (B), the

24 amount initially determined by the Secretary under

25 this paragraph with respect to the individual shall be
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1 the amount included in the notice provided to the in2 dividual under subparagraph (A).

3 ‘‘(4)(A) If the Secretary determines (on the basis of

4 final information provided by the Secretary of the Treas5 ury) that the amount of an individual’s actual modified

6 adjusted gross income for a taxable year ending with or

7 within a calendar year is less than or greater than the

8 amount initially determined by the Secretary under para9 graph (3), the Secretary shall increase or decrease the

10 amount of the individual’s monthly premium under this

11 section (as the case may be) for months during the following calendar year by an amount equal to 1 12 ⁄12 of the dif13 ference between—

14 ‘‘(i) the total amount of all monthly premiums

15 paid by the individual under this section during the

16 previous calendar year; and

17 ‘‘(ii) the total amount of all such premiums

18 which would have been paid by the individual during

19 the previous calendar year if the amount of the indi20 vidual’s modified adjusted gross income initially de21 termined under paragraph (3) were equal to the ac22 tual amount of the individual’s modified adjusted

23 gross income determined under this paragraph.

24 ‘‘(B) In the case of an individual who is not enrolled

25 under this part for any calendar year for which the indi-
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1 vidual’s monthly premium under this section for months

2 during the year would be increased pursuant to subpara3 graph (A) if the individual were enrolled under this part

4 for the year, the Secretary may take such steps as the

5 Secretary considers appropriate to recover from the indi6 vidual the total amount by which the individual’s monthly

7 premium for months during the year would have been in8 creased under subparagraph (A) if the individual were en9 rolled under this part for the year.

10 ‘‘(C) In the case of a deceased individual for whom

11 the amount of the monthly premium under this section

12 for months in a year would have been decreased pursuant

13 to subparagraph (A) if the individual were not deceased,

14 the Secretary shall make a payment to the individual’s

15 surviving spouse (or, in the case of an individual who does

16 not have a surviving spouse, to the individual’s estate) in

17 an amount equal to the difference between—

18 ‘‘(i) the total amount by which the individual’s

19 premium would have been decreased for all months

20 during the year pursuant to subparagraph (A); and

21 ‘‘(ii) the amount (if any) by which the individ22 ual’s premium was decreased for months during the

23 year pursuant to subparagraph (A).

24 ‘‘(5) In this subsection, the following definitions

25 apply:
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1 ‘‘(A) The term ‘modified adjusted gross income’

2 means adjusted gross income (as defined in section

3 62 of the Internal Revenue Code of 1986)—

4 ‘‘(i) determined without regard to sections

5 135, 911, 931, and 933 of such Code, and

6 ‘‘(ii) increased by the amount of interest

7 received or accrued by the taxpayer during the

8 taxable year which is exempt from tax under

9 such Code.

10 ‘‘(B) The term ‘threshold amount’ means—

11 ‘‘(i) except as otherwise provided in this

12 paragraph, $75,000,

13 ‘‘(ii) $125,000, in the case of a joint re14 turn (as defined in section 7701(a)(38) of such

15 Code), and

16 ‘‘(iii) zero in the case of a taxpayer who—

17 ‘‘(I) is married at the close of the tax18 able year but does not file a joint return

19 (as so defined) for such year, and

20 ‘‘(II) does not live apart from his

21 spouse at all times during the taxable

22 year.’’.

23 (b) CONFORMING AMENDMENT.—Section 1839(f)

24 (42 U.S.C. 1395r(f)) is amended by striking ‘‘if an indi25 vidual’’ and inserting the following: ‘‘if an individual
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1 (other than an individual subject to an increase in the

2 monthly premium under this section pursuant to sub3 section (h))’’.

4 (c) REPORTING REQUIREMENTS FOR SECRETARY OF

5 THE TREASURY.—

6 (1) IN GENERAL.—Subsection (l) of section

7 6103 of the Internal Revenue Code of 1986 (relating

8 to confidentiality and disclosure of returns and re9 turn information) is amended by adding at the end

10 the following new paragraph:

11 ‘‘(15) DISCLOSURE OF RETURN INFORMATION

12 TO CARRY OUT INCOME-RELATED REDUCTION IN

13 MEDICARE PART B PREMIUM.—

14 ‘‘(A) IN GENERAL.—The Secretary may,

15 upon written request from the Secretary of

16 Health and Human Services, disclose to officers

17 and employees of the Health Care Financing

18 Administration return information with respect

19 to a taxpayer who is required to pay a monthly

20 premium under section 1839 of the Social Secu21 rity Act. Such return information shall be lim22 ited to—

23 ‘‘(i) taxpayer identity information

24 with respect to such taxpayer,
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1 ‘‘(ii) the filing status of such tax2 payer,

3 ‘‘(iii) the adjusted gross income of

4 such taxpayer,

5 ‘‘(iv) the amounts excluded from such

6 taxpayer’s gross income under sections 135

7 and 911,

8 ‘‘(v) the interest received or accrued

9 during the taxable year which is exempt

10 from the tax imposed by chapter 1 to the

11 extent such information is available, and

12 ‘‘(vi) the amounts excluded from such

13 taxpayer’s gross income by sections 931

14 and 933 to the extent such information is

15 available.

16 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

17 INFORMATION.—Return information disclosed

18 under subparagraph (A) may be used by offi19 cers and employees of the Health Care Financ20 ing Administration only for the purposes of,

21 and to the extent necessary in, establishing the

22 appropriate monthly premium under section

23 1839 of the Social Security Act.’’

24 (2) CONFORMING AMENDMENT.—Paragraphs

25 (3)(A) and (4) of section 6103(p) of such Code are
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1 each amended by striking ‘‘or (14)’’ each place it ap2 pears and inserting ‘‘(14), or (15)’’.

3 (d) EFFECTIVE DATE.—The amendments made by

4 subsections (a) and (b) shall apply to the monthly pre5 mium under section 1839 of the Social Security Act for

6 months beginning with January 1997.

7 PART 3—ADMINISTRATION AND BILLING OF

8 LABORATORY SERVICES

9 SEC. 15621. ADMINISTRATIVE SIMPLIFICATION FOR LAB10 ORATORY SERVICES.

11 (a) IN GENERAL.—Not later than 1 year after the

12 date of the enactment of this Act, the Secretary of Health

13 and Human Services (in accordance with the process de14 scribed in subsection (b)) shall adopt uniform coverage,

15 administration, and payment policies for clinical diag16 nostic laboratory tests under part B of the medicare pro17 gram.

18 (b) PROCESS FOR ADOPTION OF POLICIES.—The

19 Secretary shall adopt uniform policies under subsection

20 (a) in accordance with the following process:

21 (1) The Secretary shall select from carriers

22 with whom the Secretary has a contract under part

23 B during 1995 15 medical directors, who will meet

24 and develop recommendations for such uniform poli25 cies. The medical directors selected shall represent
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1 various geographic areas and have a varied range of

2 experience in relevant medical fields, including pa3 thology and clinical laboratory practice.

4 (2) The medical directors selected under para5 graph (1) shall consult with independent experts in

6 each major discipline of clinical laboratory medicine,

7 including clinical laboratory personnel, bioanalysts,

8 pathologists, and practicing physicians. The medical

9 directors shall also solicit comments from other indi10 viduals and groups who wish to participate, includ11 ing consumers and other affected parties. This proc12 ess shall be conducted as a negotiated rulemaking

13 under title 5, United States Code.

14 (3) Under the negotiated rulemaking, the rec15 ommendations for uniform policies shall be designed

16 to simplify and reduce unnecessary administrative

17 burdens in connection with the following:

18 (A) Beneficiary information required to be

19 submitted with each claim.

20 (B) Physicians’ obligations regarding docu21 mentation requirements and recordkeeping.

22 (C) Procedures for filing claims and for

23 providing remittances by electronic media.

24 (D) The performance of post-payment re25 view of test claims.
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1 (E) The prohibition of the documentation

2 of medical necessity except when determined to

3 be appropriate after identification of aberrant

4 utilization pattern through focused medical re5 view.

6 (F) Beneficiary responsibility for payment.

7 (4) During the pendency of the adoption by the

8 Secretary of the uniform policies, fiscal

9 intermediaries and carriers under the medicare pro10 gram may not implement any new requirement relat11 ing to the submission of a claim for clinical diag12 nostic laboratory tests retroactive to January 1,

13 1995, and carriers may not initiate any new cov14 erage, administrative, or payment policy unless the

15 policy promotes the goal of administrative simplifica16 tion of requirements imposed on clinical laboratories

17 in accordance with the Secretary’s promulgation of

18 the negotiated rulemaking.

19 (5) Not later than 6 months after the date of

20 the enactment of this Act, the medical directors shall

21 submit their recommendations to the Secretary, and

22 the Secretary shall publish the recommendations and

23 solicit public comment using negotiated rulemaking

24 in accordance with title 5, United States Code. The

25 Secretary shall publish final uniform policies for cov-
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1 erage, administration, and payment of claims for

2 clinical diagnostic laboratory tests, effective after the

3 expiration of the 180-day period which begins on the

4 date of publication.

5 (6) After the publication of the final uniform

6 policies, the Secretary shall implement identical uni7 form documentation and processing policies for all

8 clinical diagnostic laboratory tests paid under the

9 medicare program through fiscal intermediaries or

10 carriers.

11 (c) OPTIONAL SELECTION OF SINGLE CARRIER.—Ef12 fective for claims submitted after the expiration of the 90-

13 day period which begins on the date of the enactment of

14 this Act, an independent laboratory may select a single

15 carrier for the processing of all of its claims for payment

16 under part B of the medicare program, without regard to

17 the location where the laboratory or the patient or pro18 vider involved resides or conducts business. Such election

19 of a single carrier shall be made by the clinical laboratory

20 and an agreement made between the carrier and the lab21 oratory shall be forwarded to the Secretary of Health and

22 Human Services. Nothing in this subsection shall be con23 strued to require a laboratory to select a single carrier

24 under this subsection.
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1 SEC. 15622. RESTRICTIONS ON DIRECT BILLING FOR LAB2 ORATORY SERVICES.

3 (a) REQUIREMENT FOR DIRECT BILLING.—Section

4 1833(h) (42 U.S.C. 1395l(h)) is amended by adding at

5 the end the following new paragraph:

6 ‘‘(7)(A) Effective for services furnished on or October

7 1, 1996, an individual or entity that performs clinical lab8 oratory diagnostic tests shall not present or cause to be

9 presented a claim, bill, or demand for payment to any per10 son, other than the individual receiving such services or

11 the health plan designated by such person, except that (i)

12 in the case of a test performed by one laboratory at the

13 request of another laboratory, which meets the require14 ments of clause (i), (ii), or (iii) of paragraph (5)(A), pay15 ment may be made to the requesting laboratory, and (ii)

16 the Secretary may by regulation establish appropriate ex17 ceptions to the requirement of this subparagraph.

18 ‘‘(B)(i) Any person that collects any amounts that

19 were billed in violation of paragraph (7)(A) above shall

20 be liable for such amounts to the person from whom such

21 amounts were collected.

22 ‘‘(ii) Any person that furnishes clinical laboratory

23 services for which payment is made under paragraph

24 (1)(D)(i) or paragraph (2)(D)(i) that knowingly violates

25 subparagraph (A) is subject to a civil money penalty of

26 not more than $10,000 for each such violation. The provi-
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1 sions of section 1128A (other than subsections (a) and

2 (b)) shall apply to a civil money penalty under this para3 graph in the same manner as such provisions apply with

4 respect to a penalty or proceeding under section 1128A(a).

5 ‘‘(iii)(I) Any individual or entity that the Secretary

6 determines has repeatedly violated subparagraph (A) may

7 be excluded from participation in any Federal health care

8 program. The provisions of section 1128A (other than

9 subsections (a) and (b)) shall apply to an exclusion under

10 this paragraph in the same manner as such provisions

11 apply with respect to a penalty or proceeding under section

12 1128A(a).

13 ‘‘(II) The provisions of section 1128(e) of the Social

14 Security Act shall apply to any exclusion under clause

15 (iii)(I) in the same manner as such provisions apply to

16 a proceeding under section 1128.

17 ‘‘(iv) If the Secretary finds, after a reasonable notice

18 and opportunity for a hearing, that a laboratory which

19 holds a certificate pursuant to section 353 of the Public

20 Health Service Act has on a repeated basis violated sub21 paragraph (A), the Secretary may suspend, revoke, or

22 limit such certification in accordance with the procedures

23 established in section 353(k) of Public Health Service Act.

24 ‘‘(C) For purposes of this paragraph, the following

25 definitions shall apply:
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1 ‘‘(i) The term ‘Federal health care program’

2 means—

3 ‘‘(I) any plan or program that provides

4 health benefits, whether directly, through insur5 ance, or otherwise, which is funded, in whole or

6 in part, by the United States Government; or

7 ‘‘(II) any State health care program, as

8 defined in section 1128(h).

9 ‘‘(ii) The term ‘health plan’ means any hospital

10 or medical service policy or certificate, hospital or

11 medical service plan contract, or health maintenance

12 organization contract offered by an insurer, except

13 that such term does not include any of the following:

14 ‘‘(I) Coverage only for accident, dental, vi15 sion, disability income, or long-term care insur16 ance, or any combination thereof.

17 ‘‘(II) Medicare supplemental health insur18 ance.

19 ‘‘(III) Coverage issued as a supplement to

20 liability insurance.

21 ‘‘(IV) Liability insurance, including general

22 liability insurance and automobile liability in23 surance.

24 ‘‘(V) Worker’s compensation or similar in25 surance.
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1 ‘‘(VI) Automobile medical-payment insur2 ance.

3 ‘‘(VII) Coverage for a specified disease or

4 illness.

5 ‘‘(VIII) A hospital or fixed indemnity pol6 icy.

7 (b) LOOK BACK PROVISIONS TO ASSURE SAVINGS.—

8 (1) IN GENERAL.—Section 1833(h)(4)(B) (42

9 U.S.C. 1395l(h)(4)(B)), as amended by section

10 15604(b), is amended—

11 (A) in clause (vii), by striking ‘‘and’’ at the

12 end;

13 (B) in clause (viii)—

14 (i) by inserting ‘‘and before January

15 1, 2000,’’ after ‘‘1996,’’, and

16 (ii) by striking the period at the end

17 and inserting ‘‘, and’’; and

18 (C) by adding at the end the following new

19 clause:

20 ‘‘(ix) after December 31, 1999, is equal to such

21 percentage of such median as the Secretary estab22 lishes under paragraph (8)(B), or, if the Secretary

23 does not act under paragraph (8)(B), is equal to 65

24 percent of such median.’’.
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1 (2) PROCESS FOR REDUCTIONS.—Section

2 1833(h) (42 U.S.C. 1395l(h)), as amended by sub3 section (a), is amended by adding at the end the fol4 lowing new paragraph:

5 ‘‘(8)(A) On July 31, 1999, the Secretary shall esti6 mate—

7 ‘‘(i) the amount of expenditures under this sec8 tion for clinical diagnostic laboratory tests which will

9 be made in the period from January 1, 1997,

10 through September 30, 2002, and

11 ‘‘(ii) the amount of expenditures which would

12 have been made under this section for clinical diag13 nostic laboratory tests in the period from January 1,

14 1997, through September 30, 2002, if paragraph (7)

15 had not been enacted.

16 ‘‘(B) If the amount estimated under subparagraph

17 (A)(i) is greater than 97 percent of the amount estimated

18 under subparagraph (A)(ii), the Secretary shall establish

19 a limitation amount under paragraph (4)(B)(ix) such that,

20 when such limitation amount is considered, the amount

21 estimated under subparagraph (A)(i) is 97 percent of the

22 amount estimated under subparagraph (A)(ii).

23 ‘‘(C) The Director of the Congressional Budget Office

24 (hereafter in this subparagraph referred to as the ‘Direc25 tor’) shall—
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1 ‘‘(i) independently estimate the amounts speci2 fied in subparagraph (A) and compute any limitation

3 amount required under subparagraph (B), and

4 ‘‘(ii) submit a report on such estimates and

5 computation to Congress not later than August 31,

6 1999.

7 The Secretary shall provide the Director with such data

8 as the Director reasonably requires to prepare such esti9 mates and computation.’’.

10 PART 4—QUALITY STANDARDS FOR DURABLE

11 MEDICAL EQUIPMENT

12 SEC. 15631. RECOMMENDATIONS FOR QUALITY STANDARDS

13 FOR DURABLE MEDICARE EQUIPMENT.

14 (a) APPOINTMENT OF TASK FORCE BY SEC15 RETARY.—

16 (1) IN GENERAL.—The Secretary of Health and

17 Human Services shall establish a broadly based task

18 force to develop recommendations for quality stand19 ards for durable medical equipment under part B of

20 the medicare program.

21 (2) COMPOSITION.—The task force shall include

22 individuals selected by the Secretary from represent23 atives of suppliers of items of durable medical equip24 ment under part B, consumers, and other users of

25 such equipment. In appointing members, the Sec-
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1 retary shall assure representation from various geo2 graphic regions of the United States.

3 (3) NO COMPENSATION FOR SERVICE.—Mem4 bers of the task force shall not receive any com5 pensation for service on the task force.

6 (4) TERMINATION.—The task force shall termi7 nate 30 days after it submits the report described in

8 subsection (b).

9 (b) REPORT.—Not later than 1 year after the date

10 of the enactment of this Act, the task force established

11 under subsection (a) shall submit to the Secretary its rec12 ommendations for quality standards for durable medicare

13 equipment under part B of the medicare program.

14 Subtitle H—Provisions Relating to

15 Medicare Parts A and B

16 PART 1—PAYMENTS FOR HOME HEALTH

17 SERVICES

18 SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.

19 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

20 seq.), as amended by section 15106, is amended by adding

21 at the end the following new section:

22 ‘‘PAYMENT FOR HOME HEALTH SERVICES

23 ‘‘SEC. 1894. (a) IN GENERAL.—

24 ‘‘(1) PER VISIT PAYMENTS.—Subject to sub25 section (c), the Secretary shall make per visit pay26 ments beginning with fiscal year 1997 to a home
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1 health agency in accordance with this section for

2 each type of home health service described in para3 graph (2) furnished to an individual who at the time

4 the service is furnished is under a plan of care by

5 the home health agency under this title (without re6 gard to whether or not the item or service was fur7 nished by the agency or by others under arrange8 ment with them made by the agency, or otherwise).

9 ‘‘(2) TYPES OF SERVICES.—The types of home

10 health services described in this paragraph are the

11 following:

12 ‘‘(A) Part-time or intermittent nursing

13 care provided by or under the supervision of a

14 registered professional nurse.

15 ‘‘(B) Physical therapy.

16 ‘‘(C) Occupational therapy.

17 ‘‘(D) Speech-language pathology services.

18 ‘‘(E) Medical social services under the di19 rection of a physician.

20 ‘‘(F) To the extent permitted in regula21 tions, part-time or intermittent services of a

22 home health aide who has successfully com23 pleted a training program approved by the Sec24 retary.
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1 ‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR

2 EACH TYPE OF SERVICES.—

3 ‘‘(1) IN GENERAL.—The Secretary shall, sub4 ject to paragraph (3), establish a per visit payment

5 rate for a home health agency in an area for each

6 type of home health service described in subsection

7 (a)(2). Such rate shall be equal to the national per

8 visit payment rate determined under paragraph (2)

9 for each such type, except that the labor-related por10 tion of such rate shall be adjusted by the area wage

11 index applicable under section 1886(d)(3)(E) for the

12 area in which the agency is located (as determined

13 without regard to any reclassification of the area

14 under section 1886(d)(8)(B) or a decision of the

15 Medicare Geographic Classification Review Board or

16 the Secretary under section 1886(d)(10) for cost re17 porting periods beginning after October 1, 1995).

18 ‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—

19 The national per visit payment rate for each type of

20 service described in subsection (a)(2)—

21 ‘‘(A) for fiscal year 1997, is an amount

22 equal to the national average amount paid per

23 visit under this title to home health agencies for

24 such type of service during the most recent 12-

25 month cost reporting period ending on or before
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1 June 30, 1994, increased (in a compounded

2 manner) by the home health market basket per3 centage increase for fiscal years 1995, 1996,

4 and 1997; and

5 ‘‘(B) for each subsequent fiscal year, is an

6 amount equal to the national per visit payment

7 rate in effect for the preceding fiscal year, in8 creased by the home health market basket per9 centage increase for such subsequent fiscal year

10 minus 2 percentage points.

11 ‘‘(3) REBASING OF RATES.—The Secretary

12 shall provide for an update to the national per visit

13 payment rates under this subsection for cost report14 ing periods beginning not later than the first day of

15 the fifth fiscal year which begins after fiscal year

16 1997, and not later than every 5 years thereafter, to

17 reflect the most recent available data.

18 ‘‘(4) HOME HEALTH MARKET BASKET PER19 CENTAGE INCREASE.—For purposes of this sub20 section, the term ‘home health market basket per21 centage increase’ means, with respect to a fiscal

22 year, a percentage (estimated by the Secretary be23 fore the beginning of the fiscal year) determined and

24 applied with respect to the types of home health

25 services described in subsection (a)(2) in the same
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1 manner as the market basket percentage increase

2 under section 1886(b)(3)(B)(iii) is determined and

3 applied to inpatient hospital services for the fiscal

4 year.

5 ‘‘(c) PER EPISODE LIMIT.—

6 ‘‘(1) AGGREGATE LIMIT.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 paragraph (2), a home health agency may not

9 receive aggregate per visit payments under sub10 section (a) for a fiscal year in excess of an

11 amount equal to the sum of the following prod12 ucts determined for each case-mix category for

13 which the agency receives payments:

14 ‘‘(i) The number of episodes of each

15 case-mix category during the fiscal year;

16 multiplied by

17 ‘‘(ii) the per episode limit determined

18 for such case-mix category for such fiscal

19 year.

20 ‘‘(B) ESTABLISHMENT OF PER EPISODE

21 LIMITS.—

22 ‘‘(i) IN GENERAL.—The per episode

23 limit for a fiscal year for any case-mix cat24 egory for the area in which a home health

25 agency is located is equal to—
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1 ‘‘(I) the mean number of visits

2 for each type of home health service

3 described in subsection (a)(2) fur4 nished during an episode of such case5 mix category in such area during fis6 cal year 1994, adjusted by the case7 mix adjustment factor determined in

8 clause (ii) for the fiscal year involved;

9 multiplied by

10 ‘‘(II) the per visit payment rate

11 established under subsection (b) for

12 such type of home health service for

13 the fiscal year for which the deter14 mination is being made.

15 ‘‘(ii) CASE MIX ADJUSTMENT FAC16 TOR.—For purposes of clause (i), the case17 mix adjustment factor for a year is the

18 factor determined by the Secretary to as19 sure that aggregate payments for home

20 health services under this section during

21 the year will not exceed the payment for

22 such services during the previous year as a

23 result of changes in the number and type

24 of home health visits within case-mix cat25 egories over the previous year.
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1 ‘‘(iii) REBASING OF PER EPISODE

2 AMOUNTS.—Beginning with fiscal year

3 1999 and every 2 years thereafter, the Sec4 retary shall revise the mean number of

5 home health visits determined under clause

6 (i)(I) for each type of home health service

7 visit described in subsection (a)(2) fur8 nished during an episode in a case-mix cat9 egory to reflect the most recently available

10 data on the number of visits.

11 ‘‘(iv) DETERMINATION OF APPLICA12 BLE AREA.—For purposes of determining

13 per episode limits under this subpara14 graph, the area in which a home health

15 agency is considered to be located shall be

16 such area as the Secretary finds appro17 priate for purposes of this subparagraph.

18 ‘‘(C) CASE-MIX CATEGORY.—For purposes

19 of this paragraph, the term ‘case-mix category’

20 means each of the 18 case-mix categories estab21 lished under the Phase II Home Health Agency

22 Prospective Payment Demonstration Project

23 conducted by the Health Care Financing Ad24 ministration. The Secretary may develop an al-
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1 ternate methodology for determining case-mix

2 categories.

3 ‘‘(D) EPISODE.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 this paragraph, the term ‘episode’ means

6 the continuous 120-day period that—

7 ‘‘(I) begins on the date of an in8 dividual’s first visit for a type of home

9 health service described in subsection

10 (a)(2) for a case-mix category, and

11 ‘‘(II) is immediately preceded by

12 a 60-day period in which the individ13 ual did not receive visits for a type of

14 home health service described in sub15 section (a)(2).

16 ‘‘(ii) TREATMENT OF EPISODES SPAN17 NING COST REPORTING PERIODS.—The

18 Secretary shall provide for such rules as

19 the Secretary considers appropriate regard20 ing the treatment of episodes under this

21 paragraph which begin during a cost re22 porting period and end in a subsequent

23 cost reporting period.

24 ‘‘(E) EXEMPTIONS AND EXCEPTIONS.—

25 The Secretary may provide for exemptions and
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1 exceptions to the limits established under this

2 paragraph for a fiscal year as the Secretary

3 deems appropriate, to the extent such exemp4 tions and exceptions do not result in greater

5 payments under this section than the exemp6 tions and exceptions provided under section

7 1861(v)(1)(L)(ii) in fiscal year 1994, increased

8 by the home health market basket percentage

9 increase for the fiscal year involved (as defined

10 in subsection (b)(4)).

11 ‘‘(2) RECONCILIATION OF AMOUNTS.—

12 ‘‘(A) OVERPAYMENTS TO HOME HEALTH

13 AGENCIES.—Subject to subparagraph (B), if a

14 home health agency has received aggregate per

15 visit payments under subsection (a) for a fiscal

16 year in excess of the amount determined under

17 paragraph (1) with respect to such home health

18 agency for such fiscal year, the Secretary shall

19 reduce payments under this section to the home

20 health agency in the following fiscal year in

21 such manner as the Secretary considers appro22 priate (including on an installment basis) to re23 capture the amount of such excess.
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1 ‘‘(B) EXCEPTION FOR HOME HEALTH

2 SERVICES FURNISHED OVER A PERIOD GREAT3 ER THAN 165 DAYS.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 subparagraph (A), the amount of aggre6 gate per visit payments determined under

7 subsection (a) shall not include payments

8 for home health visits furnished to an indi9 vidual on or after a continuous period of

10 more than 165 days after an individual be11 gins an episode described in subsection

12 (c)(1)(D) (if such period is not interrupted

13 by the beginning of a new episode).

14 ‘‘(ii) REQUIREMENT OF CERTIFI15 CATION.—Clause (i) shall not apply if the

16 agency has not obtained a physician’s cer17 tification with respect to the individual re18 quiring such visits that includes a state19 ment that the individual requires such con20 tinued visits, the reason for the need for

21 such visits, and a description of such serv22 ices furnished during such visits.

23 ‘‘(C) SHARE OF SAVINGS.—

24 ‘‘(i) BONUS PAYMENTS.—If a home

25 health agency has received aggregate per
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1 visit payments under subsection (a) for a

2 fiscal year in an amount less than the

3 amount determined under paragraph (1)

4 with respect to such home health agency

5 for such fiscal year, the Secretary shall pay

6 such home health agency a bonus payment

7 equal to 50 percent of the difference be8 tween such amounts in the following fiscal

9 year, except that the bonus payment may

10 not exceed 5 percent of the aggregate per

11 visit payments made to the agency for the

12 year.

13 ‘‘(ii) INSTALLMENT BONUS PAY14 MENTS.—The Secretary may make install15 ment payments during a fiscal year to a

16 home health agency based on the estimated

17 bonus payment that the agency would be

18 eligible to receive with respect to such fis19 cal year.

20 ‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary

21 shall implement a medical review process (with a particu22 lar emphasis on fiscal years 1997 and 1998) for the sys23 tem of payments described in this section that shall pro24 vide an assessment of the pattern of care furnished to in25 dividuals receiving home health services for which pay-
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1 ments are made under this section to ensure that such

2 individuals receive appropriate home health services. Such

3 review process shall focus on low-cost cases described in

4 subsection (e)(3) and cases described in subsection

5 (c)(2)(B) and shall require recertification by

6 intermediaries at 30, 60, 90, 120, and 165 days into an

7 episode described in subsection (c)(1)(D).

8 ‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR9 CUMVENTION OF LIMITS.—

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

11 for appropriate adjustments to payments to home

12 health agencies under this section to ensure that

13 agencies do not circumvent the purpose of this sec14 tion by—

15 ‘‘(A) discharging patients to another home

16 health agency or similar provider;

17 ‘‘(B) altering corporate structure or name

18 to avoid being subject to this section or for the

19 purpose of increasing payments under this title;

20 or

21 ‘‘(C) undertaking other actions considered

22 unnecessary for effective patient care and in23 tended to achieve maximum payments under

24 this title.
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1 ‘‘(2) TRACKING OF PATIENTS THAT SWITCH

2 HOME HEALTH AGENCIES DURING EPISODE.—

3 ‘‘(A) DEVELOPMENT OF SYSTEM.—The

4 Secretary shall develop a system that tracks

5 home health patients that receive home health

6 services described in subsection (a)(2) from

7 more than 1 home health agency during an epi8 sode described in subsection (c)(1)(D).

9 ‘‘(B) ADJUSTMENT OF PAYMENTS.—The

10 Secretary shall adjust payments under this sec11 tion to each home health agency that furnishes

12 an individual with a type of home health service

13 described in subsection (a)(2) to ensure that

14 aggregate payments on behalf of such individual

15 during such episode do not exceed the amount

16 that would be paid under this section if the in17 dividual received such services from a single

18 home health agency.

19 ‘‘(3) LOW-COST CASES.—The Secretary shall

20 develop a system designed to adjust payments to a

21 home health agency for a fiscal year to eliminate any

22 increase in growth of the percentage of low-cost epi23 sodes for which home health services are furnished

24 by the agency over such percentage determined for

25 the agency for the 12-month cost reporting period
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1 ending on June 30, 1994. The Secretary shall define

2 a low-cost episode in a manner that provides that a

3 home health agency has an incentive to be cost effi4 cient in delivering home health services and that the

5 volume of such services does not increase as a result

6 of factors other than patient needs.

7 ‘‘(f) REPORT BY MEDICARE PAYMENT REVIEW COM8 MISSION.—During the first 3 years in which payments are

9 made under this section, the Medicare Payment Review

10 Commission shall annually submit a report to Congress

11 on the effectiveness of the payment methodology estab12 lished under this section that shall include recommenda13 tions regarding the following:

14 ‘‘(1) Case-mix and volume increases.

15 ‘‘(2) Quality monitoring of home health agency

16 practices.

17 ‘‘(3) Whether a capitated payment for home

18 care patients receiving care during a continuous pe19 riod exceeding 165 days is warranted.

20 ‘‘(4) Whether public providers of service are

21 adequately reimbursed.

22 ‘‘(5) The adequacy of the exemptions and ex23 ceptions to the limits provided under subsection

24 (c)(1)(E).
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1 ‘‘(6) The appropriateness of the methods pro2 vided under this section to adjust the per episode

3 limits and annual payment updates to reflect

4 changes in the mix of services, number of visits, and

5 assignment to case categories to reflect changing

6 patterns of home health care.

7 ‘‘(7) The geographic areas used to determine

8 the per episode limits.

9 ‘‘(g) NO EFFECT ON NON-MEDICARE SERVICES.—

10 Nothing in this section may be construed to affect the pro11 vision of or payment for home health services for which

12 payment is not made under this title.’’.

13 (b) PAYMENT FOR PROSTHETICS AND ORTHOTICS

14 UNDER PART A.—Section 1814(k) (42 U.S.C. 1395f(k))

15 is amended—

16 (1) by inserting ‘‘and prosthetics and orthotics’’

17 after ‘‘durable medical equipment’’; and

18 (2) by inserting ‘‘and 1834(h), respectively’’

19 after ‘‘1834(a)(1)’’.

20 (c) CONFORMING AMENDMENTS.—

21 (1) PAYMENTS UNDER PART A.—Section

22 1814(b) (42 U.S.C. 1395f(b)), as amended by sec23 tion 15522(b), is amended in the matter preceding

24 paragraph (1) by striking ‘‘1888 and 1888A’’ and

25 inserting ‘‘1888, 1888A, and 1894’’.
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1 (2) TREATMENT OF ITEMS AND SERVICES PAID

2 UNDER PART B.—

3 (A) PAYMENTS UNDER PART B.—Section

4 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amend5 ed—

6 (i) by amending subparagraph (A) to

7 read as follows:

8 ‘‘(A) with respect to home health serv9 ices—

10 ‘‘(i) that are a type of home health

11 service described in section 1894(a)(2),

12 and which are furnished to an individual

13 who (at the time the item or service is fur14 nished) is under a plan of care of a home

15 health agency, the amount determined

16 under section 1894; or

17 ‘‘(ii) that are not described in clause

18 (i) (other than a covered osteoporosis

19 drug) (as defined in section 1861(kk)), the

20 lesser of—

21 ‘‘(I) the reasonable cost of such

22 services, as determined under section

23 1861(v), or

24 ‘‘(II) the customary charges with

25 respect to such services;’’.
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1 (ii) by striking ‘‘and’’ at the end of

2 subparagraph (E);

3 (iii) by adding ‘‘and’’ at the end of

4 subparagraph (F); and

5 (iv) by adding at the end the following

6 new subparagraph:

7 ‘‘(G) with respect to items and services de8 scribed in section 1861(s)(10)(A), the lesser

9 of—

10 ‘‘(i) the reasonable cost of such serv11 ices, as determined under section 1861(v),

12 or

13 ‘‘(ii) the customary charges with re14 spect to such services,

15 or, if such services are furnished by a public

16 provider of services, or by another provider

17 which demonstrates to the satisfaction of the

18 Secretary that a significant portion of its pa19 tients are low-income (and requests that pay20 ment be made under this provision), free of

21 charge or at nominal charges to the public, the

22 amount determined in accordance with section

23 1814(b)(2);’’.

24 (B) REQUIRING PAYMENT FOR ALL ITEMS

25 AND SERVICES TO BE MADE TO AGENCY.—
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1 (i) IN GENERAL.—The first sentence

2 of section 1842(b)(6) (42 U.S.C.

3 1395u(b)(6)), as amended by section

4 15525(a)(1), is amended—

5 (I) by striking ‘‘and (E)’’ and in6 serting ‘‘(E)’’; and

7 (II) by striking the period at the

8 end and inserting the following: ‘‘,

9 and (F) in the case of types of home

10 health services described in section

11 1894(a)(2) furnished to an individual

12 who (at the time the item or service is

13 furnished) is under a plan of care of

14 a home health agency, payment shall

15 be made to the agency (without re16 gard to whether or not the item or

17 service was furnished by the agency,

18 by others under arrangement with

19 them made by the agency, or other20 wise).’’.

21 (ii) CONFORMING AMENDMENT.—Sec22 tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)),

23 as amended by section 15525(a)(3), is

24 amended by striking ‘‘section

25 1842(b)(6)(E);’’ and inserting ‘‘subpara-
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1 graphs (E) and (F) of section

2 1842(b)(6);’’.

3 (C) EXCLUSIONS FROM COVERAGE.—Sec4 tion 1862(a) (42 U.S.C. 1395y(a)), as amended

5 by section 15525(a)(2) and section 15609B(a),

6 is amended—

7 (i) by striking ‘‘or’’ at the end of

8 paragraph (16);

9 (ii) by striking the period at the end

10 of paragraph (17) and inserting ‘‘; or’’;

11 and

12 (iii) by adding at the end the follow13 ing new paragraph:

14 ‘‘(18) where such expenses are for home health

15 services furnished to an individual who is under a

16 plan of care of the home health agency if the claim

17 for payment for such services is not submitted by

18 the agency.’’.

19 (3) SUNSET OF REASONABLE COST LIMITA20 TIONS.—Section 1861(v)(1)(L) (42 U.S.C.

21 1395x(v)(1)(L)) is amended by adding at the end

22 the following new clause:

23 ‘‘(iv) This subparagraph shall apply only to services

24 furnished by home health agencies during cost reporting

25 periods ending on or before September 30, 1996.’’.
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1 (d) LIMITATION ON PART A COVERAGE.—

2 (1) IN GENERAL.—Section 1812(a)(3) (42

3 U.S.C. 1395d(a)(3)) is amended by striking the

4 semicolon and inserting ‘‘for up to 165 days during

5 any spell of illness;’’.

6 (2) CONFORMING AMENDMENT.—Section

7 1812(b) (42 U.S.C. 1395d(b)) is amended—

8 (A) by striking ‘‘or’’ at the end of para9 graph (2),

10 (B) by striking the period at the end of

11 paragraph (3) and inserting ‘‘; or’’, and

12 (C) 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 165 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 (4) EFFECTIVE DATE.—The amendments made

12 by this subsection shall apply to spells of illness be13 ginning on or after October 1, 1995.

14 (e) EFFECTIVE DATE.—Except as provided in sub15 section (d)(4), the amendments made by this section shall

16 apply to cost reporting periods beginning on or after Octo17 ber 1, 1996.

18 SEC. 15702. MAINTAINING SAVINGS RESULTING FROM TEM19 PORARY FREEZE ON PAYMENT INCREASES

20 FOR HOME HEALTH SERVICES.

21 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

22 LIMITS FOR FISCAL YEAR 1993.—Section

23 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

24 amended by adding at the end the following sentence: ‘‘In

25 establishing limits under this subparagraph, the Secretary
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1 may not take into account any changes in the costs of

2 the provision of services furnished by home health agencies

3 with respect to cost reporting periods which began on or

4 after July 1, 1994, and before July 1, 1996.’’.

5 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND6 MENT.—The Secretary of Health and Human Services

7 shall not consider the amendment made by subsection (a)

8 in making any exemptions and exceptions pursuant to sec9 tion 1861(v)(1)(L)(ii) of the Social Security Act.

10 SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF

11 LACK OF KNOWLEDGE OF EXCLUSION FROM

12 COVERAGE FOR HOME HEALTH AGENCIES.

13 Section 9305(g)(3) of OBRA–1986, as amended by

14 section 426(d) of the Medicare Catastrophic Coverage Act

15 of 1988 and section 4207(b)(3) of OBRA–1990 (as re16 numbered by section 160(d)(4) of the Social Security Act

17 Amendments of 1994), is amended by striking ‘‘December

18 31, 1995’’ and inserting ‘‘September 30, 1996’’.

19 SEC. 15704. REPORT ON RECOMMENDATIONS FOR PAY20 MENTS AND CERTIFICATION FOR HOME

21 HEALTH SERVICES OF CHRISTIAN SCIENCE

22 PROVIDERS.

23 Not later than July 1, 1996, the Secretary of Health

24 and Human Services shall submit recommendations to

25 Congress regarding an appropriate methodology for mak-
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1 ing payments under the medicare program for home

2 health services furnished by Christian Science providers

3 who meet applicable requirements of the First Church of

4 Christ, Scientist, Boston, Massachusetts, and appropriate

5 criteria for the certification of such providers for purposes

6 of the medicare program.

7 SEC. 15705. EXTENSION OF PERIOD OF HOME HEALTH

8 AGENCY CERTIFICATION.

9 Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A))

10 is amended—

11 (1) by striking ‘‘15 months’’ and inserting ‘‘36

12 months’’; and

13 (2) by striking the second sentence and insert14 ing the following: ‘‘The Secretary shall establish a

15 frequency for surveys of home health agencies within

16 this 36-month interval commensurate with the need

17 to assure the delivery of quality home health serv18 ices.’’.

19 PART 2—MEDICARE SECONDARY PAYER

20 IMPROVEMENTS

21 SEC. 15711. EXTENSION AND EXPANSION OF EXISTING RE22 QUIREMENTS.

23 (a) DATA MATCH.—

24 (1) Section 1862(b)(5)(C) (42 U.S.C.

25 1395y(b)(5)(C)) is amended by striking clause (iii).
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1 (2) Section 6103(l)(12) of the Internal Revenue

2 Code of 1986 is amended by striking subparagraph

3 (F).

4 (b) APPLICATION TO DISABLED INDIVIDUALS IN

5 LARGE GROUP HEALTH PLANS.—

6 (1) IN GENERAL.—Section 1862(b)(1)(B) (42

7 U.S.C. 1395y(b)(1)(B)) is amended—

8 (A) in clause (i), by striking ‘‘clause (iv)’’

9 and inserting ‘‘clause (iii)’’,

10 (B) by striking clause (iii), and

11 (C) by redesignating clause (iv) as clause

12 (iii).

13 (2) CONFORMING AMENDMENTS.—Paragraphs

14 (1) through (3) of section 1837(i) (42 U.S.C.

15 1395p(i)) and the second sentence of section

16 1839(b) (42 U.S.C. 1395r(b)) are each amended by

17 striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears

18 and inserting ‘‘1862(b)(1)(B)(iii)’’.

19 (c) EXPANSION OF PERIOD OF APPLICATION TO IN20 DIVIDUALS WITH END STAGE RENAL DISEASE.—Section

21 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—

22 (1) in the first sentence, by striking ‘‘12-

23 month’’ each place it appears and inserting ‘‘24-

24 month’’, and

25 (2) by striking the second sentence.
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1 SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

2 (a) PERMITTING RECOVERY AGAINST THIRD PARTY

3 ADMINISTRATORS OF PRIMARY PLANS.—Section

4 1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is

5 amended—

6 (1) by striking ‘‘under this subsection to pay’’

7 and inserting ‘‘(directly, as a third-party adminis8 trator, or otherwise) to make payment’’, and

9 (2) by adding at the end the following: ‘‘The

10 United States may not recover from a third-party

11 administrator under this clause in cases where the

12 third-party administrator would not be able to re13 cover the amount at issue from the employer or

14 group health plan for whom it provides administra15 tive services due to the insolvency or bankruptcy of

16 the employer or plan.’’.

17 (b) EXTENSION OF CLAIMS FILING PERIOD.—Sec18 tion 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amend19 ed by adding at the end the following new clause:

20 ‘‘(v) CLAIMS-FILING PERIOD.—Not21 withstanding any other time limits that

22 may exist for filing a claim under an em23 ployer group health plan, the United

24 States may seek to recover conditional pay25 ments in accordance with this subpara26 graph where the request for payment is
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1 submitted to the entity required or respon2 sible under this subsection to pay with re3 spect to the item or service (or any portion

4 thereof) under a primary plan within the

5 3-year period beginning on the date on

6 which the item or service was furnished.’’.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to items and services furnished on

9 or after the date of the enactment of this Act.

10 SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF

11 POLICY REGARDING ESRD BENEFICIARIES

12 ENROLLED IN PRIMARY PLANS.

13 For purposes of carrying out section 1862(b)(1)(C)

14 of the Social Security Act, the Secretary of Health and

15 Human Services shall apply the policy directive issued by

16 the Administrator of the Health Care Financing Adminis17 tration on April 24, 1995, only with respect to items and

18 services furnished on or after such date.

19 PART 3—FAILSAFE

20 SEC. 15721. FAILSAFE BUDGET MECHANISM.

21 (a) IN GENERAL.—Title XVIII, as amended by sec22 tions 15106(a) and 15701(a), is amended by adding at

23 the end the following new section:

24 ‘‘FAILSAFE BUDGET MECHANISM

25 ‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT AD26 JUSTMENTS TO ACHIEVE MEDICARE BUDGET TAR-
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1 GETS.—If the Secretary determines under subsection

2 (e)(3)(C) before a fiscal year (beginning with fiscal year

3 1998) that—

4 ‘‘(1) the fee-for-service expenditures (as defined

5 in subsection (f)) for a sector of medicare services

6 (as defined in subsection (b)) for the fiscal year, will

7 exceed

8 ‘‘(2) the allotment specified under subsection

9 (c)(2) for such fiscal year (taking into account any

10 adjustment in the allotment under subsection (h) for

11 that fiscal year),

12 then, notwithstanding any other provision of this title,

13 there shall be an adjustment (consistent with subsection

14 (d)) in applicable payment rates or payments for items

15 and services included in the sector in the fiscal year so

16 that such expenditures for the sector for the year will be

reduced by 1331 17 ⁄3 percent of the amount of such excess.

18 ‘‘(b) SECTORS OF MEDICARE SERVICES DE19 SCRIBED.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, items and services included under each of the

22 following subparagraphs shall be considered to be a

23 separate ‘sector’ of medicare services:

24 ‘‘(A) Inpatient hospital services.

25 ‘‘(B) Home health services.
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1 ‘‘(C) Extended care services (for inpatients

2 of skilled nursing facilities).

3 ‘‘(D) Hospice care.

4 ‘‘(E) Physicians’ services (including serv5 ices and supplies described in section

6 1861(s)(2)(A)) and services of other health care

7 professionals (including certified registered

8 nurse anesthetists, nurse practitioners, physi9 cian assistants, and clinical psychologists) for

10 which separate payment is made under this

11 title.

12 ‘‘(F) Outpatient hospital services and am13 bulatory facility services.

14 ‘‘(G) Durable medical equipment and sup15 plies, including prosthetic devices and orthotics.

16 ‘‘(H) Diagnostic tests (including clinical

17 laboratory services and x-ray services).

18 ‘‘(I) Other items and services.

19 ‘‘(2) CLASSIFICATION OF ITEMS AND SERV20 ICES.—The Secretary shall classify each type of

21 items and services covered and paid for separately

22 under this title into one of the sectors specified in

23 paragraph (1). After publication of such classifica24 tion under subsection (e)(1), the Secretary is not au-
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1 thorized to make substantive changes in such classi2 fication.

3 ‘‘(c) ALLOTMENT.—

4 ‘‘(1) ALLOTMENTS FOR EACH SECTOR.—For

5 purposes of this section, subject to subsection (h)(1),

6 the allotment for a sector of medicare services for

7 a fiscal year is equal to the product of—

8 ‘‘(A) the total allotment for the fiscal year

9 established under paragraph (2), and

10 ‘‘(B) the allotment proportion (specified

11 under paragraph (3)) for the sector and fiscal

12 year involved.

13 ‘‘(2) TOTAL ALLOTMENT.—

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

15 section, the total allotment for a fiscal year is

16 equal to—

17 ‘‘(i) the medicare benefit budget for

18 the fiscal year (as specified under subpara19 graph (B)), reduced by

20 ‘‘(ii) the amount of payments the Sec21 retary estimates will be made in the fiscal

22 year under the MedicarePlus program

23 under part C.

24 In making the estimate under clause (ii), the

25 Secretary shall take into account estimated en-
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1 rollment and demographic profile of individuals

2 electing MedicarePlus products.

3 ‘‘(B) MEDICARE BENEFIT BUDGET.—For

4 purposes of this subsection, subject to subpara5 graph (C), the ‘medicare benefit budget’—

6 ‘‘(i) for fiscal year 1997 is $208.0 bil7 lion;

8 ‘‘(ii) for fiscal year 1998 is $217.1

9 billion;

10 ‘‘(iii) for fiscal year 1999 is $228.4

11 billion;

12 ‘‘(iv) for fiscal year 2000 is $246.4

13 billion;

14 ‘‘(v) for fiscal year 2001 is $265.5 bil15 lion;

16 ‘‘(vi) for fiscal year 2002 is $288.0

17 billion; and

18 ‘‘(vii) for a subsequent fiscal year is

19 equal to the medicare benefit budget under

20 this subparagraph for the preceding fiscal

21 year increased by the product of (I) 1.05,

22 and (II) 1 plus the annual percentage in23 crease in the average number of medicare

24 beneficiaries from the previous fiscal year

25 to the fiscal year involved.
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1 ‘‘(3) MEDICARE ALLOTMENT PROPORTION DE2 FINED.—

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

4 section and with respect to a sector of medicare

5 services for a fiscal year, the term ‘medicare al6 lotment proportion’ means the ratio of—

7 ‘‘(i) the baseline-projected medicare

8 expenditures (as determined under sub9 paragraph (B)) for the sector for the fiscal

10 year, to

11 ‘‘(ii) the sum of such baseline expendi12 tures for all such sectors for the fiscal

13 year.

14 ‘‘(B) BASELINE-PROJECTED MEDICARE

15 EXPENDITURES.—In this paragraph, the ‘base16 line, projected medicare expenditures’ for a sec17 tor of medicare services—

18 ‘‘(i) for fiscal year 1996 is equal to

19 fee-for-service expenditures for such sector

20 during fiscal year 1995, increased by the

21 baseline annual growth rate for such sector

22 of medicare services for fiscal year 1996

23 (as specified in table in subparagraph (C));

24 and
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1 ‘‘(ii) for a subsequent fiscal year is

2 equal to the baseline-projected medicare

3 expenditures under this subparagraph for

4 the sector for the previous fiscal year in5 creased by the baseline annual growth rate

6 for such sector for the fiscal year involved

7 (as specified in such table).

8 ‘‘(C) BASELINE ANNUAL GROWTH

9 RATES.—The following table specifies the base10 line annual growth rates for each of the sectors

11 for different fiscal years:

‘‘For the following sector—

Baseline annual growth rates for fiscal year—

1996 1997 1998 1999 2000 2001

2002

and

thereafter

(A) Inpatient hospital services ......... 5.7% 5.6% 6.0% 6.1% 5.7% 5.5% 5.2%

(B) Home health services ................. 17.2% 15.1% 11.7% 9.1% 8.4% 8.1% 7.9%

(C) Extended care services .............. 19.7% 12.3% 9.3% 8.7% 8.6% 8.4% 8.0%

(D) Hospice care .............................. 32.0% 24.0% 18.0% 15.0% 12.0% 10.0% 9.0%

(E) Physicians’ services ................... 12.4% 9.7% 8.7% 9.0% 9.3% 9.6% 10.1%

(F) Outpatient hospital services ...... 14.7% 13.9% 14.5% 15.0% 14.1% 13.9% 14.0%

(G) Durable medical equipment and

supplies ............................................. 16.1% 15.5% 13.7% 12.4% 13.2% 13.9% 14.5%

(H) Diagnostic tests ......................... 13.1% 11.3% 11.0% 11.4% 11.4% 11.5% 11.9%

(I) Other items and services ............ 11.2% 10.2% 10.9% 12.0% 11.6% 11.6% 11.8%

12 ‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—

13 ‘‘(1) IN GENERAL.—Subject to the succeeding

14 provisions of this subsection, the Secretary shall

15 apply a payment reduction for a sector for a fiscal

16 year in such a manner as to—

17 ‘‘(A) make a change in payment rates (to

18 the maximum extent practicable) at the time
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1 payment rates are otherwise changed or subject

2 to change for that fiscal year; and

3 ‘‘(B) provide for the full appropriate ad4 justment so that the fee-for-service expenditures

5 for the sector for the fiscal year will approxi6 mate (and not exceed) the allotment for the sec7 tor for the fiscal year.

8 ‘‘(2) TAKING INTO ACCOUNT VOLUME AND

9 CASH FLOW.—In providing for an adjustment in

10 payments under this subsection for a sector for a

11 fiscal year, the Secretary shall take into account (in

12 a manner consistent with actuarial projections)—

13 ‘‘(A) the impact of such an adjustment on

14 the volume or type of services provided in such

15 sector (and other sectors), and

16 ‘‘(B) the fact that an adjustment may

17 apply to items and services furnished in a fiscal

18 year (payment for which may occur in a subse19 quent fiscal year),

20 in a manner that is consistent with assuring that

21 total fee-for-services expenditures for each sector for

22 the fiscal year will not exceed the allotment under

23 subsection (c)(1) for such sector for such year.

24 ‘‘(3) PROPORTIONALITY OF REDUCTIONS WITH25 IN A SECTOR.—In making adjustments under this
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1 subsection in payment for items and services in2 cluded within a sector of medicare services for a fis3 cal year, the Secretary shall provide for such an ad4 justment that results (to the maximum extent fea5 sible) in the same percentage reductions in aggre6 gate Federal payments under parts A and B for the

7 different classes of items and services included with8 in the sector for the fiscal year.

9 ‘‘(4) APPLICATION TO PAYMENTS MADE BASED

10 ON PROSPECTIVE PAYMENT RATES DETERMINED ON

11 A FISCAL YEAR BASIS.—

12 ‘‘(A) IN GENERAL.—In applying subsection

13 (a) with respect to items and services for which

14 payment is made under part A or B on the

15 basis of rates that are established on a prospec16 tive basis for (and in advance of) a fiscal year,

17 the Secretary shall provide for the payment ad18 justment under such subsection through an ap19 propriate reduction in such rates established for

20 items and services furnished (or, in the case of

21 payment for operating costs of inpatient hos22 pital services of subsection (d) hospitals and

23 subsection (d) Puerto Rico hospitals (as defined

24 in paragraphs (1)(B) and (9)(A) of section
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1 1886(d)), discharges occurring) during such

2 year.

3 ‘‘(B) DESCRIPTION OF APPLICATION TO

4 SPECIFIC SERVICES.—The payment adjustment

5 described in subparagraph (A) applies for a fis6 cal year to at least the following:

7 ‘‘(i) UPDATE FACTOR FOR PAYMENT

8 FOR OPERATING COSTS OF INPATIENT

9 HOSPITAL SERVICES OF PPS HOSPITALS.—

10 To the computation of the applicable per11 centage increase specified in section

12 1886(d)(3)(B)(i) for discharges occurring

13 in the fiscal year.

14 ‘‘(ii) HOME HEALTH SERVICES.—To

15 the extent payment amounts for home

16 health services are based on per visit pay17 ment rates under section 1894, to the com18 putation of the increase in the national per

19 visit payment rates established for the year

20 under section 1894(b)(2)(B).

21 ‘‘(iii) HOSPICE CARE.—To the update

22 of payment rates for hospice care under

23 section 1814(i) for services furnished dur24 ing the fiscal year.
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1 ‘‘(iv) UPDATE FACTOR FOR PAYMENT

2 OF OPERATING COSTS OF INPATIENT HOS3 PITAL SERVICES OF PPS-EXEMPT HOS4 PITALS.—To the computation of the target

5 amount under section 1886(b)(3) for dis6 charges occurring during the fiscal year.

7 ‘‘(v) COVERED NON-ROUTINE SERV8 ICES OF SKILLED NURSING FACILITIES.—

9 To the computation of the facility per stay

10 limits for the year under section 1888A(d)

11 for covered non-routine services of a skilled

12 nursing facility (as described in such sec13 tion).

14 ‘‘(5) APPLICATION TO PAYMENTS MADE BASED

15 ON PROSPECTIVE PAYMENT RATES DETERMINED ON

16 A CALENDAR YEAR BASIS.—

17 ‘‘(A) IN GENERAL.—In applying subsection

18 (a) for a fiscal year with respect to items and

19 services for which payment is made under part

20 A or B on the basis of rates that are estab21 lished on a prospective basis for (and in ad22 vance of) a calendar year, the Secretary shall

23 provide for the payment adjustment under such

24 subsection through an appropriate reduction in

25 such rates established for items and services
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1 furnished at any time during such calendar

2 year as follows:

3 ‘‘(i) For fiscal year 1997, the reduc4 tion shall be made for payment rates dur5 ing calendar year 1997 in a manner so as

6 to achieve the necessary payment reduc7 tions for such fiscal year for items and

8 services furnished during the first 3 quar9 ters of calendar year 1997.

10 ‘‘(ii) For a subsequent fiscal year, the

11 reduction shall be made for payment rates

12 during the calendar year in which the fis13 cal year ends in a manner so as to achieve

14 the necessary payment reductions for such

15 fiscal year for items and services furnished

16 during the first 3 quarters of the calendar

17 year, but also taking into account the pay18 ment reductions made in the first quarter

19 of the fiscal year resulting from payment

20 reductions made under this paragraph for

21 the previous calendar year.

22 ‘‘(iii) Payment rate reductions ef23 fected under this subparagraph for a cal24 endar year and applicable to the last 3

25 quarters of the fiscal year in which the cal-
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1 endar year ends shall continue to apply

2 during the first quarter of the succeeding

3 fiscal year.

4 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

5 The payment adjustment described in subpara6 graph (A) applies for a fiscal year to at least

7 the following:

8 ‘‘(i) UPDATE IN CONVERSION FACTOR

9 FOR PHYSICIANS’ SERVICES.—To the com10 putation of the conversion factor under

11 subsection (d) of section 1848 used in the

12 fee schedule established under subsection

13 (b) of such section, for items and services

14 furnished during the calendar year in

15 which the fiscal year ends.

16 ‘‘(ii) PAYMENT RATES FOR OTHER

17 HEALTH CARE PROFESSIONALS.—To the

18 computation of payments for professional

19 services of certified registered nurse anes20 thetists under section 1833(l), nurse mid21 wives, physician assistants, nurse practi22 tioners and clinical nurse specialists under

23 section 1833(r), clinical psychologists, clin24 ical social workers, physical or occupational

25 therapists, and any other health profes-
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1 sionals for which payment rates are based

2 (in whole or in part) on payments for phy3 sicians’ services, for services furnished dur4 ing the calendar year in which the fiscal

5 year ends.

6 ‘‘(iii) UPDATE IN LAB FEE SCHED7 ULE.—To the computation of the fee

8 schedule amount under section 1833(h)(2)

9 for clinical diagnostic laboratory services

10 furnished during the calendar year in

11 which the fiscal year ends.

12 ‘‘(iv) UPDATE IN REASONABLE

13 CHARGES FOR VACCINES.—To the com14 putation of the reasonable charge for vac15 cines described in section 1861(s)(10) for

16 vaccines furnished during the calendar

17 year in which the fiscal year ends.

18 ‘‘(v) DURABLE MEDICAL EQUIPMENT19 RELATED ITEMS.—To the computation of

20 the payment basis under section

21 1834(a)(1)(B) for covered items described

22 in section 1834(a)(13), for items furnished

23 during the calendar year in which the fis24 cal year ends.
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1 ‘‘(vi) RADIOLOGIST SERVICES.—To

2 the computation of conversion factors for

3 radiologist services under section 1834(b),

4 for services furnished during the calendar

5 year in which the fiscal year ends.

6 ‘‘(vii) SCREENING MAMMOGRAPHY.—

7 To the computation of payment rates for

8 screening mammography under section

9 1834(c)(1)(C)(ii), for screening mammog10 raphy performed during the calendar year

11 in which the fiscal year ends.

12 ‘‘(viii) PROSTHETICS AND

13 ORTHOTICS.—To the computation of the

14 amount to be recognized under section

15 1834(h) for payment for prosthetic devices

16 and orthotics and prosthetics, for items

17 furnished during the calendar year in

18 which the fiscal year ends.

19 ‘‘(ix) SURGICAL DRESSINGS.—To the

20 computation of the payment amount re21 ferred to in section 1834(i)(1)(B) for sur22 gical dressings, for items furnished during

23 the calendar year in which the fiscal year

24 ends.
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1 ‘‘(x) PARENTERAL AND ENTERAL NU2 TRITION.—To the computation of reason3 able charge screens for payment for paren4 teral and enteral nutrition under section

5 1834(h), for nutrients furnished during the

6 calendar year in which the fiscal year ends.

7 ‘‘(xi) AMBULANCE SERVICES.—To the

8 computation of limits on reasonable

9 charges for ambulance services, for services

10 furnished during the calendar year in

11 which the fiscal year ends.

12 ‘‘(6) APPLICATION TO PAYMENTS MADE BASED

13 ON COSTS DURING A COST REPORTING PERIOD.—

14 ‘‘(A) IN GENERAL.—In applying subsection

15 (a) for a fiscal year with respect to items and

16 services for which payment is made under part

17 A or B on the basis of costs incurred for items

18 and services in a cost reporting period, the Sec19 retary shall provide for the payment adjustment

20 under such subsection for a fiscal year through

21 an appropriate proportional reduction in the

22 payment for costs for such items and services

23 incurred at any time during each cost reporting

24 period any part of which occurs during the fis25 cal year involved, but only (for each such cost
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1 reporting period) in the same proportion as the

2 fraction of the cost reporting period that occurs

3 during the fiscal year involved.

4 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

5 The payment adjustment described in subpara6 graph (A) applies for a fiscal year to at least

7 the following:

8 ‘‘(i) CAPITAL-RELATED COSTS OF

9 HOSPITAL SERVICES.—To the computation

10 of payment amounts for inpatient and out11 patient hospital services under sections

12 1886(g) and 1861(v) for portions of cost

13 reporting periods occurring during the fis14 cal year.

15 ‘‘(ii) OPERATING COSTS FOR PPS-EX16 EMPT HOSPITALS.—To the computation of

17 payment amounts under section 1886(b)

18 for operating costs of inpatient hospital

19 services of PPS-exempt hospitals for por20 tions of cost reporting periods occurring

21 during the fiscal year.

22 ‘‘(iii) DIRECT GRADUATE MEDICAL

23 EDUCATION.—To the computation of pay24 ment amounts under section 1886(h) for

25 reasonable costs of direct graduate medical
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1 education costs for portions of cost report2 ing periods occurring during the fiscal

3 year.

4 ‘‘(iv) INPATIENT RURAL PRIMARY

5 CARE HOSPITAL SERVICES.—To the com6 putation of payment amounts under sec7 tion 1814(j) for inpatient rural primary

8 care hospital services for portions of cost

9 reporting periods occurring during the fis10 cal year.

11 ‘‘(v) EXTENDED CARE SERVICES OF A

12 SKILLED NURSING FACILITY.—To the com13 putation of payment amounts under sec14 tion 1861(v) for post-hospital extended

15 care services of a skilled nursing facility

16 (other than covered non-routine services

17 subject to section 1888A) for portions of

18 cost reporting periods occurring during the

19 fiscal year.

20 ‘‘(vi) REASONABLE COST CON21 TRACTS.—To the computation of payment

22 amounts under section 1833(a)(1)(A) for

23 organizations for portions of cost reporting

24 periods occurring during the fiscal year.
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1 ‘‘(vii) HOME HEALTH SERVICES.—

2 Subject to paragraph (4)(B)(ii), for pay3 ment amounts for home health services, for

4 portions of cost reporting periods occurring

5 during such fiscal year.

6 ‘‘(7) OTHER.—In applying subsection (a) for a

7 fiscal year with respect to items and services for

8 which payment is made under part A or B on a

9 basis not described in a previous paragraph of this

10 subsection, the Secretary shall provide for the pay11 ment adjustment under such subsection through an

12 appropriate proportional reduction in the payments

13 (or payment bases for items and services furnished)

14 during the fiscal year.

15 ‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—The

16 Secretary shall provide for such proportional adjust17 ment in any limits on payment established under

18 part A or B for payment for items and services with19 in a sector as may be appropriate based on (and in

20 order to properly carry out) the adjustment on the

21 amount of payment under this subsection in the sec22 tor.

23 ‘‘(9) REFERENCES TO PAYMENT RATES.—Ex24 cept as the Secretary may provide, any reference in

25 this title (other than this section) to a payment rate
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1 is deemed a reference to such a rate as adjusted

2 under this subsection.

3 ‘‘(e) PUBLICATION OF DETERMINATIONS; JUDICIAL

4 REVIEW.—

5 ‘‘(1) ONE-TIME PUBLICATION OF SECTORS AND

6 GENERAL PAYMENT ADJUSTMENT METHODOLOGY.—

7 Not later than October 1, 1996, the Secretary shall

8 publish in the Federal Register the classification of

9 medicare items and services into the sectors of medi10 care services under subsection (b) and the general

11 methodology to be used in applying payment adjust12 ments to the different classes of items and services

13 within the sectors.

14 ‘‘(2) INCLUSION OF INFORMATION IN PRESI15 DENT’S BUDGET.—

16 ‘‘(A) IN GENERAL.—With respect to fiscal

17 years beginning with fiscal year 1999, the

18 President shall include in the budget submitted

19 under section 1105 of title 31, United States

20 Code, information on—

21 ‘‘(i) the fee-for-service expenditures,

22 within each sector, for the second previous

23 fiscal year, and how such expenditures

24 compare to the adjusted sector allotment

25 for that sector for that fiscal year; and
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1 ‘‘(ii) actual annual growth rates for

2 fee-for-service expenditures in the different

3 sectors in the second previous fiscal year.

4 ‘‘(B) RECOMMENDATIONS REGARDING

5 GROWTH FACTORS.—The President may include

6 in such budget for a fiscal year (beginning with

7 fiscal year 1998) recommendations regarding

8 percentages that should be applied (for one or

9 more fiscal years beginning with that fiscal

10 year) instead of the baseline annual growth

11 rates under subsection (c)(3)(C). Such rec12 ommendations shall take into account medically

13 appropriate practice patterns.

14 ‘‘(3) DETERMINATIONS CONCERNING PAYMENT

15 ADJUSTMENTS.—

16 ‘‘(A) RECOMMENDATIONS OF COMMIS17 SION.—By not later than March 1 of each year

18 (beginning with 1997), the Medicare Payment

19 Review Commission shall submit to the Sec20 retary and the Congress a report that analyzes

21 the previous operation (if any) of this section

22 and that includes recommendations concerning

23 the manner in which this section should be ap24 plied for the following fiscal year.
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1 ‘‘(B) PRELIMINARY NOTICE BY SEC2 RETARY.—Not later than May 15 preceding the

3 beginning of each fiscal year (beginning with

4 fiscal year 1998), the Secretary shall publish in

5 the Federal Register a notice containing the

6 Secretary’s preliminary determination, for each

7 sector of medicare services, concerning the fol8 lowing:

9 ‘‘(i) The projected allotment under

10 subsection (c) for such sector for the fiscal

11 year.

12 ‘‘(ii) Whether there will be a payment

13 adjustment for items and services included

14 in such sector for the fiscal year under

15 subsection (a).

16 ‘‘(iii) If there will be such an adjust17 ment, the size of such adjustment and the

18 methodology to be used in making such a

19 payment adjustment for classes of items

20 and services included in such sector.

21 ‘‘(iv) Beginning with fiscal year 1999,

22 the fee-for-service expenditures for such

23 sector for the second preceding fiscal year.

24 Such notice shall include an explanation of the

25 basis for such determination. Determinations
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1 under this subparagraph and subparagraph (C)

2 shall be based on the best data available at the

3 time of such determinations.

4 ‘‘(C) FINAL DETERMINATION.—Not later

5 than September 1 preceding the beginning of

6 each fiscal year (beginning with fiscal year

7 1998), the Secretary shall publish in the Fed8 eral Register a final determination, for each

9 sector of medicare services, concerning the mat10 ters described in subparagraph (B) and an ex11 planation of the reasons for any differences be12 tween such determination and the preliminary

13 determination for such fiscal year published

14 under subparagraph (B).

15 ‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI16 CIAL REVIEW.—There shall be no administrative or

17 judicial review under section 1878 or otherwise of—

18 ‘‘(A) the classification of items and serv19 ices among the sectors of medicare services

20 under subsection (b),

21 ‘‘(B) the determination of the amounts of

22 allotments for the different sectors of medicare

23 services under subsection (c),
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1 ‘‘(C) the determination of the amount (or

2 method of application) of any payment adjust3 ment under subsection (d), or

4 ‘‘(D) any adjustment in an allotment ef5 fected under subsection (h).

6 ‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—

7 In this section, the term ‘fee-for-service expenditures’, for

8 items and services within a sector of medicare services in

9 a fiscal year, means amounts payable for such items and

10 services which are furnished during the fiscal year, and—

11 ‘‘(1) includes types of expenses otherwise reim12 bursable under parts A and B (including administra13 tive costs incurred by organizations described in sec14 tions 1816 and 1842) with respect to such items and

15 services, and

16 ‘‘(2) does not include amounts paid under part

17 C.

18 ‘‘(g) EXPEDITED PROCESS FOR ADJUSTMENT OF

19 SECTOR GROWTH RATES.—

20 ‘‘(1) OPTIONAL INCLUSION OF LEGISLATIVE

21 PROPOSAL.—The President may include in rec22 ommendations under subsection (e)(2)(B) submitted

23 with respect to a fiscal year a specific legislative pro24 posal that provides only for the substitution of per25 centages specified in the proposal for one or more of
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1 the baseline annual growth rates (specified in the

2 table in subsection (c)(3)(C) or in a previous legisla3 tive proposal under this subsection) for that fiscal

4 year or any subsequent fiscal year.

5 ‘‘(2) CONGRESSIONAL CONSIDERATION.—

6 ‘‘(A) IN GENERAL.—The percentages con7 tained in a legislative proposal submitted under

8 paragraph (1) shall apply under this section if

9 a joint resolution (described in subparagraph

10 (B)) approving such proposal is enacted, in ac11 cordance with the provisions of subparagraph

12 (C), before the end of the 60-day period begin13 ning on the date on which such proposal was

14 submitted. For purposes of applying the preced15 ing sentence and subparagraphs (B) and (C),

16 the days on which either House of Congress is

17 not in session because of an adjournment of

18 more than three days to a day certain shall be

19 excluded in the computation of a period.

20 ‘‘(B) JOINT RESOLUTION OF APPROVAL.—

21 A joint resolution described in this subpara22 graph means only a joint resolution which is in23 troduced within the 10-day period beginning on

24 the date on which the President submits a pro25 posal under paragraph (1) and—
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1 ‘‘(i) which does not have a preamble;

2 ‘‘(ii) the matter after the resolving

3 clause of which is as follows: ‘That Con4 gress approves the proposal of the Presi5 dent providing for substitution of percent6 ages for certain baseline annual growth

7 rates under section 1895 of the Social Se8 curity Act, as submitted by the President

9 on lllllll.’, the blank space

10 being filled in with the appropriate date;

11 and

12 ‘‘(iii) the title of which is as follows:

13 ‘Joint resolution approving Presidential

14 proposal to substitute certain specified per15 centages for baseline annual growth rates

16 under section 1895 of the Social Security

17 Act, as submitted by the President on

18 lllllll.’, the blank space being

19 filled in with the appropriate date.

20 ‘‘(C) PROCEDURES FOR CONSIDERATION

21 OF RESOLUTION OF APPROVAL.—Subject to

22 subparagraph (D), the provisions of section

23 2908 (other than subsection (a)) of the Defense

24 Base Closure and Realignment Act of 1990

25 shall apply to the consideration of a joint reso-
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1 lution described in subparagraph (B) in the

2 same manner as such provisions apply to a joint

3 resolution described in section 2908(a) of such

4 Act.

5 ‘‘(D) SPECIAL RULES.—For purposes of

6 applying subparagraph (C) with respect to such

7 provisions—

8 ‘‘(i) any reference to the Committee

9 on Armed Services of the House of Rep10 resentatives shall be deemed a reference to

11 an appropriate Committee of the House of

12 Representatives (specified by the Speaker

13 of the House of Representatives at the

14 time of submission of a legislative proposal

15 under paragraph (1)) and any reference to

16 the Committee on Armed Services of the

17 Senate shall be deemed a reference to the

18 Committee on Finance of the Senate;

19 ‘‘(ii) any reference to a resolution of

20 which a committee shall be discharged

21 from further consideration shall be deemed

22 to be a reference to the first such resolu23 tion introduced; and

24 ‘‘(iii) any reference to the date on

25 which the President transmits a report
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1 shall be deemed a reference to the date on

2 which the President submits the legislative

3 proposal under paragraph (1).

4 ‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO

5 REFLECT ACTUAL EXPENDITURES.—

6 ‘‘(1) IN GENERAL.—If the Secretary determines

7 under subsection (e)(3)(B) with respect to a particu8 lar fiscal year (beginning with fiscal year 1999) that

9 the fee-for-service expenditures for a sector of medi10 care services for the second preceding fiscal year—

11 ‘‘(A) exceeded the adjusted allotment for

12 such sector for such year (as defined in para13 graph (2)), then the allotment for the sector for

14 the particular fiscal year shall be reduced by

1331 15 ⁄3 percent of the amount of such excess, or

16 ‘‘(B) was less than the adjusted allotment

17 for such sector for such year, then the allot18 ment for the sector for the particular fiscal year

19 shall be increased by the amount of such defi20 cit.

21 ‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al22 lotment under this paragraph for a sector for a fis23 cal year is—

24 ‘‘(A) the amount that would be computed

25 as the allotment under subsection (c) for the
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1 sector for the fiscal year if the actual amount

2 of payments made in the fiscal year under the

3 MedicarePlus program under part C in the fis4 cal year were substituted for the amount de5 scribed in subsection (c)(2)(A)(ii) for that fiscal

6 year,

7 ‘‘(B) adjusted to take into account the

8 amount of any adjustment under paragraph (1)

9 for that fiscal year (based on expenditures in

10 the second previous fiscal year).

11 ‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN NA12 TIONAL COVERAGE DETERMINATIONS.—In the case of a

13 national coverage determination that the Secretary

14 projects will result in significant additional expenditures

15 under this title (taking into account any substitution for

16 existing procedures or technologies), such determination

17 shall not become effective before the beginning of the fiscal

18 year that begins after the date of such determination and

19 shall apply to contracts under part C entered into (or re20 newed) after the date of such determination.’’.

21 (b) REPORT OF TRUSTEES ON GROWTH RATE IN

22 PART A EXPENDITURES.—Section 1817 (42 U.S.C.

23 1395i) is amended by adding at the end the following new

24 subsection:
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1 ‘‘(k) Each annual report provided in subsection (b)(2)

2 shall include information regarding the annual rate of

3 growth in program expenditures that would be required

4 to maintain the financial solvency of the Trust Fund and

5 the extent to which the provisions of section 1895 restrain

6 the rate of growth of expenditures under this part in order

7 to achieve such solvency.’’.

8 PART 4—ADMINISTRATIVE SIMPLIFICATION

9 SEC. 15731. STANDARDS FOR MEDICARE INFORMATION

10 TRANSACTIONS AND DATA ELEMENTS.

11 Title XVIII, as amended by section 15031, is amend12 ed by inserting after section 1806 the following new sec13 tion:

14 ‘‘STANDARDS FOR MEDICARE INFORMATION

15 TRANSACTIONS AND DATA ELEMENTS

16 ‘‘SEC. 1807. (a) ADOPTION OF STANDARDS FOR

17 DATA ELEMENTS.—

18 ‘‘(1) IN GENERAL.—Pursuant to subsection (b),

19 the Secretary shall adopt standards for information

20 transactions and data elements of medicare informa21 tion and modifications to the standards under this

22 section that are—

23 ‘‘(A) consistent with the objective of reduc24 ing the administrative costs of providing and

25 paying for health care; and
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1 ‘‘(B) developed or modified by a standard

2 setting organization (as defined in subsection

3 (h)(8)).

4 ‘‘(2) SPECIAL RULE RELATING TO DATA ELE5 MENTS.—The Secretary may adopt or modify a

6 standard relating to data elements that is different

7 from the standard developed by a standard setting

8 organization, if—

9 ‘‘(A) the different standard or modification

10 will substantially reduce administrative costs to

11 health care providers and health plans com12 pared to the alternative; and

13 ‘‘(B) the standard or modification is pro14 mulgated in accordance with the rulemaking

15 procedures of subchapter III of chapter 5 of

16 title 5, United States Code.

17 ‘‘(3) SECURITY STANDARDS FOR HEALTH IN18 FORMATION NETWORK.—

19 ‘‘(A) IN GENERAL.—Each person, who

20 maintains or transmits medicare information or

21 data elements of medicare information and is

22 subject to this section, shall maintain reason23 able and appropriate administrative, technical,

24 and physical safeguards—
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1 ‘‘(i) to ensure the integrity and con2 fidentiality of the information;

3 ‘‘(ii) to protect against any reasonably

4 anticipated—

5 ‘‘(I) threats or hazards to the se6 curity or integrity of the information;

7 and

8 ‘‘(II) unauthorized uses or disclo9 sures of the information; and

10 ‘‘(iii) to otherwise ensure compliance

11 with this section by the officers and em12 ployees of such person.

13 ‘‘(B) SECURITY STANDARDS.—The Sec14 retary shall establish security standards and

15 modifications to such standards with respect to

16 medicare information network services, health

17 plans, and health care providers that—

18 ‘‘(i) take into account—

19 ‘‘(I) the technical capabilities of

20 record systems used to maintain medi21 care information;

22 ‘‘(II) the costs of security meas23 ures;
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1 ‘‘(III) the need for training per2 sons who have access to medicare in3 formation; and

4 ‘‘(IV) the value of audit trails in

5 computerized record systems; and

6 ‘‘(ii) ensure that a medicare informa7 tion network service, if it is part of a larg8 er organization, has policies and security

9 procedures which isolate the activities of

10 such service with respect to processing in11 formation in a manner that prevents unau12 thorized access to such information by

13 such larger organization.

14 The security standards established by the Sec15 retary shall be based on the standards devel16 oped or modified by standard setting organiza17 tions. If such standards do not exist, the Sec18 retary shall rely on the recommendations of the

19 Medicare Information Advisory Committee (es20 tablished under subsection (g)) and shall con21 sult with appropriate government agencies and

22 private organizations in accordance with para23 graph (5).

24 ‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The

25 Secretary shall establish specifications for imple-
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1 menting each of the standards and the modifications

2 to the standards adopted pursuant to paragraph (1)

3 or (3).

4 ‘‘(5) ASSISTANCE TO THE SECRETARY.—In

5 complying with the requirements of this section, the

6 Secretary shall rely on recommendations of the Med7 icare Information Advisory Committee established

8 under subsection (g) and shall consult with appro9 priate Federal and State agencies and private orga10 nizations. The Secretary shall publish in the Federal

11 Register the recommendations of the Medicare Infor12 mation Advisory Committee regarding the adoption

13 of a standard under this section.

14 ‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS

15 AND DATA ELEMENTS.—

16 ‘‘(1) IN GENERAL.—The Secretary shall adopt

17 standards for transactions and data elements to

18 make medicare information uniformly available to be

19 exchanged electronically, that is—

20 ‘‘(A) appropriate for the following financial

21 and administrative transactions: claims (includ22 ing coordination of benefits) or equivalent en23 counter information, enrollment and

24 disenrollment, eligibility, premium payments,

25 and referral certification and authorization; and
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1 ‘‘(B) related to other financial and admin2 istrative transactions determined appropriate by

3 the Secretary consistent with the goals of im4 proving the operation of the health care system

5 and reducing administrative costs.

6 ‘‘(2) UNIQUE HEALTH IDENTIFIERS.—

7 ‘‘(A) ADOPTION OF STANDARDS.—The

8 Secretary shall adopt standards providing for a

9 standard unique health identifier for each indi10 vidual, employer, health plan, and health care

11 provider for use in the medicare information

12 system. In developing unique health identifiers

13 for each health plan and health care provider,

14 the Secretary shall take into account multiple

15 uses for identifiers and multiple locations and

16 specialty classifications for health care provid17 ers.

18 ‘‘(B) PENALTY FOR IMPROPER DISCLO19 SURE.—A person who knowingly uses or causes

20 to be used a unique health identifier under sub21 paragraph (A) for a purpose that is not author22 ized by the Secretary shall—

23 ‘‘(i) be fined not more than $50,000,

24 imprisoned not more than 1 year, or both;

25 or
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1 ‘‘(ii) if the offense is committed under

2 false pretenses, be fined not more than

3 $100,000, imprisoned not more than 5

4 years, or both.

5 ‘‘(3) CODE SETS.—

6 ‘‘(A) IN GENERAL.—The Secretary, in con7 sultation with the Medicare Information Advi8 sory Committee, experts from the private sec9 tor, and Federal and State agencies, shall—

10 ‘‘(i) select code sets for appropriate

11 data elements from among the code sets

12 that have been developed by private and

13 public entities; or

14 ‘‘(ii) establish code sets for such data

15 elements if no code sets for the data ele16 ments have been developed.

17 ‘‘(B) DISTRIBUTION.—The Secretary shall

18 establish efficient and low-cost procedures for

19 distribution (including electronic distribution) of

20 code sets and modifications made to such code

21 sets under subsection (c)(2).

22 ‘‘(4) ELECTRONIC SIGNATURE.—

23 ‘‘(A) IN GENERAL.—The Secretary, after

24 consultation with the Medicare Information Ad25 visory Committee, shall promulgate regulations
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1 specifying procedures for the electronic trans2 mission and authentication of signatures, com3 pliance with which will be deemed to satisfy

4 Federal and State statutory requirements for

5 written signatures with respect to information

6 transactions required by this section and writ7 ten signatures on enrollment and disenrollment

8 forms.

9 ‘‘(B) PAYMENTS FOR SERVICES AND PRE10 MIUMS.—Nothing in this section shall be con11 strued to prohibit the payment of health care

12 services or health plan premiums by debit, cred13 it, payment card or numbers, or other electronic

14 means.

15 ‘‘(5) TRANSFER OF INFORMATION BETWEEN

16 HEALTH PLANS.—The Secretary shall develop rules

17 and procedures—

18 ‘‘(A) for determining the financial liability

19 of health plans when health care benefits are

20 payable under two or more health plans; and

21 ‘‘(B) for transferring among health plans

22 appropriate standard data elements needed for

23 the coordination of benefits, the sequential

24 processing of claims, and other data elements
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1 for individuals who have more than one health

2 plan.

3 ‘‘(6) COORDINATION OF BENEFITS.—If, at the

4 end of the 5-year period beginning on the date of the

5 enactment of this section, the Secretary determines

6 that additional transaction standards for coordinat7 ing benefits are necessary to reduce administrative

8 costs or duplicative (or inappropriate) payment of

9 claims, the Secretary shall establish further trans10 action standards for the coordination of benefits be11 tween health plans.

12 ‘‘(7) PROTECTION OF TRADE SECRETS.—Ex13 cept as otherwise required by law, the standards

14 adopted under this section shall not require disclo15 sure of trade secrets or confidential commercial in16 formation by an entity operating a medicare infor17 mation network.

18 ‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—

19 ‘‘(1) INITIAL STANDARDS.—Not later than 18

20 months after the date of the enactment of this sec21 tion, the Secretary shall adopt standards relating to

22 the information transactions, data elements of medi23 care information and security described in sub24 sections (a) and (b).
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1 ‘‘(2) ADDITIONS AND MODIFICATIONS TO

2 STANDARDS.—

3 ‘‘(A) IN GENERAL.—The Secretary shall

4 review the standards adopted under this section

5 and shall adopt additional or modified stand6 ards, that have been developed or modified by

7 a standard setting organization, as determined

8 appropriate, but not more frequently than once

9 every 12 months. Any addition or modification

10 to such standards shall be completed in a man11 ner which minimizes the disruption and cost of

12 compliance.

13 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

14 CODE SETS.—

15 ‘‘(i) IN GENERAL.—The Secretary

16 shall ensure that procedures exist for the

17 routine maintenance, testing, enhancement,

18 and expansion of code sets.

19 ‘‘(ii) ADDITIONAL RULES.—If a code

20 set is modified under this paragraph, the

21 modified code set shall include instructions

22 on how data elements of medicare informa23 tion that were encoded prior to the modi24 fication may be converted or translated so

25 as to preserve the informational value of
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1 the data elements that existed before the

2 modification. Any modification to a code

3 set under this paragraph shall be imple4 mented in a manner that minimizes the

5 disruption and cost of complying with such

6 modification.

7 ‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—

8 ‘‘(1) IN GENERAL.—If a person desires to con9 duct any of the information transactions described

10 in subsection (b)(1) with a health plan as a standard

11 transaction, the health plan shall conduct such

12 standard transaction in a timely manner and the in13 formation transmitted or received in connection with

14 such transaction shall be in the form of standard

15 data elements of medicare information.

16 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

17 health plan may satisfy the requirement imposed on

18 such plan under paragraph (1) by directly transmit19 ting standard data elements of medicare information

20 or submitting nonstandard data elements to a medi21 care information network service for processing into

22 standard data elements and transmission.

23 ‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE24 QUIREMENTS.—Not later than 24 months after the

25 date on which standards are adopted under sub-
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1 sections (a) and (b) with respect to any type of in2 formation transaction or data element of medicare

3 information or with respect to security, a health plan

4 shall comply with the requirements of this section

5 with respect to such transaction or data element.

6 ‘‘(4) COMPLIANCE WITH MODIFIED STAND7 ARDS.—If the Secretary adopts a modified standard

8 under subsection (a) or (b), a health plan shall be

9 required to comply with the modified standard at

10 such time as the Secretary determines appropriate

11 taking into account the time needed to comply due

12 to the nature and extent of the modification. How13 ever, the time determined appropriate under the pre14 ceding sentence shall be not earlier than the last day

15 of the 180-day period beginning on the date such

16 modified standard is adopted. The Secretary may ex17 tend the time for compliance for small health plans,

18 if the Secretary determines such extension is appro19 priate.

20 ‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY

21 WITH REQUIREMENTS AND STANDARDS.—

22 ‘‘(1) GENERAL PENALTY.—

23 ‘‘(A) IN GENERAL.—Except as provided in

24 paragraph (2), the Secretary shall impose on
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1 any person that violates a requirement or

2 standard—

3 ‘‘(i) with respect to medicare informa4 tion transactions, data elements of medi5 care information, or security imposed

6 under subsection (a) or (b); or

7 ‘‘(ii) with respect to health plans im8 posed under subsection (d);

9 a penalty of not more than $100 for each such

10 violation of a specific standard or requirement,

11 but the total amount imposed for all such viola12 tions of a specific standard or requirement dur13 ing the calendar year shall not exceed $25,000.

14 ‘‘(B) PROCEDURES.—The provisions of

15 section 1128A (other than subsections (a) and

16 (b) and the second sentence of subsection (f))

17 shall apply to the imposition of a civil money

18 penalty under this paragraph in the same man19 ner as such provisions apply to the imposition

20 of a penalty under such section 1128A.

21 ‘‘(C) DENIAL OF PAYMENT.—Except as

22 provided in paragraph (2), the Secretary may

23 deny payment under this title for an item or

24 service furnished by a person if the person fails

25 to comply with an applicable requirement or
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1 standard for medicare information relating to

2 that item or service.

3 ‘‘(2) LIMITATIONS.—

4 ‘‘(A) NONCOMPLIANCE NOT DISCOV5 ERED.—A penalty may not be imposed under

6 paragraph (1) if it is established to the satisfac7 tion of the Secretary that the person liable for

8 the penalty did not know, and by exercising rea9 sonable diligence would not have known, that

10 such person failed to comply with the require11 ment or standard described in paragraph (1).

12 ‘‘(B) FAILURES DUE TO REASONABLE

13 CAUSE.—

14 ‘‘(i) IN GENERAL.—Except as pro15 vided in clause (ii), a penalty may not be

16 imposed under paragraph (1) if—

17 ‘‘(I) the failure to comply was

18 due to reasonable cause and not to

19 willful neglect; and

20 ‘‘(II) the failure to comply is cor21 rected during the 30-day period begin22 ning on the first date the person liable

23 for the penalty knew, or by exercising

24 reasonable diligence would have
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1 known, that the failure to comply oc2 curred.

3 ‘‘(ii) EXTENSION OF PERIOD.—

4 ‘‘(I) NO PENALTY.—The period

5 referred to in clause (i)(II) may be ex6 tended as determined appropriate by

7 the Secretary based on the nature and

8 extent of the failure to comply.

9 ‘‘(II) ASSISTANCE.—If the Sec10 retary determines that a health plan

11 failed to comply because such plan

12 was unable to comply, the Secretary

13 may provide technical assistance to

14 such plan during the period described

15 in clause (i)(II). Such assistance shall

16 be provided in any manner determined

17 appropriate by the Secretary.

18 ‘‘(C) REDUCTION.—In the case of a failure

19 to comply which is due to reasonable cause and

20 not to willful neglect, any penalty under para21 graph (1) that is not entirely waived under sub22 paragraph (B) may be waived to the extent that

23 the payment of such penalty would be excessive

24 relative to the compliance failure involved.

25 ‘‘(f) EFFECT ON STATE LAW.—
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1 ‘‘(1) GENERAL EFFECT.—

2 ‘‘(A) GENERAL RULE.—Except as provided

3 in subparagraph (B), a provision, requirement,

4 or standard under this section shall supersede

5 any contrary provision of State law, including a

6 provision of State law that requires medical or

7 health plan records (including billing informa8 tion) to be maintained or transmitted in written

9 rather than electronic form.

10 ‘‘(B) EXCEPTIONS.—A provision, require11 ment, or standard under this section shall not

12 supersede a contrary provision of State law if

13 the Secretary determines that the provision of

14 State law should be continued for any reason,

15 including for reasons relating to prevention of

16 fraud and abuse or regulation of controlled sub17 stances.

18 ‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in

19 this section shall be construed to invalidate or limit

20 the authority, power, or procedures established

21 under any law providing for the reporting of disease

22 or injury, child abuse, birth, or death, public health

23 surveillance, or public health investigation or inter24 vention.
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1 ‘‘(g) MEDICARE INFORMATION ADVISORY COMMIT2 TEE.—

3 ‘‘(1) ESTABLISHMENT.—There is established a

4 committee to be known as the Medicare Information

5 Advisory Committee (in this subsection referred to

6 as the ‘committee’).

7 ‘‘(2) DUTIES.—The committee shall—

8 ‘‘(A) advise the Secretary in the develop9 ment of standards under this section; and

10 ‘‘(B) be generally responsible for advising

11 the Secretary and the Congress on the status

12 and the future of the medicare information net13 work.

14 ‘‘(3) MEMBERSHIP.—

15 ‘‘(A) IN GENERAL.—The committee shall

16 consist of 9 members of whom—

17 ‘‘(i) 3 shall be appointed by the Presi18 dent;

19 ‘‘(ii) 3 shall be appointed by the

20 Speaker of the House of Representatives

21 after consultation with the minority leader

22 of the House of Representatives; and

23 ‘‘(iii) 3 shall be appointed by the

24 President pro tempore of the Senate after
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1 consultation with the minority leader of

2 the Senate.

3 The appointments of the members shall be

4 made not later than 60 days after the date of

5 the enactment of this section. The President

6 shall designate 1 member as the Chair.

7 ‘‘(B) EXPERTISE.—The membership of the

8 committee shall consist of individuals who are

9 of recognized standing and distinction in the

10 areas of information systems, information

11 networking and integration, consumer health,

12 or health care financial management, and who

13 possess the demonstrated capacity to discharge

14 the duties imposed on the committee.

15 ‘‘(C) TERMS.—Each member of the com16 mittee shall be appointed for a term of 5 years,

17 except that the members first appointed shall

18 serve staggered terms such that the terms of

19 not more than 3 members expire at one time.

20 ‘‘(D) INITIAL MEETING.—Not later than

21 30 days after the date on which a majority of

22 the members have been appointed, the commit23 tee shall hold its first meeting.

24 ‘‘(4) REPORTS.—Not later than 1 year after the

25 date of the enactment of this section, and annually
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1 thereafter, the committee shall submit to Congress

2 and the Secretary a report regarding—

3 ‘‘(A) the extent to which entities using the

4 medicare information network are meeting the

5 standards adopted under this section and work6 ing together to form an integrated network that

7 meets the needs of its users;

8 ‘‘(B) the extent to which such entities are

9 meeting the security standards established pur10 suant to this section and the types of penalties

11 assessed for noncompliance with such stand12 ards;

13 ‘‘(C) any problems that exist with respect

14 to implementation of the medicare information

15 network; and

16 ‘‘(D) the extent to which timetables under

17 this section are being met.

18 Reports made under this subsection shall be made

19 available to health care providers, health plans, and

20 other entities that use the medicare information net21 work to exchange medicare information.

22 ‘‘(h) DEFINITIONS.—For purposes of this section:

23 ‘‘(1) CODE SET.—The term ‘code set’ means

24 any set of codes used for encoding data elements,
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1 such as tables of terms, enrollment information, and

2 encounter data.

3 ‘‘(2) COORDINATION OF BENEFITS.—The term

4 ‘coordination of benefits’ means determining and co5 ordinating the financial obligations of health plans

6 when health care benefits are payable under such a

7 plan and under this title (including under a

8 MedicarePlus product).

9 ‘‘(3) MEDICARE INFORMATION.—The term

10 ‘medicare information’ means any information that

11 relates to the enrollment of individuals under this

12 title (including information relating to elections of

13 MedicarePlus products under section 1805) and the

14 provision of health benefits (including benefits pro15 vided under such products) under this title.

16 ‘‘(4) MEDICARE INFORMATION NETWORK.—The

17 term ‘medicare information network’ means the

18 medicare information system that is formed through

19 the application of the requirements and standards

20 established under this section.

21 ‘‘(5) MEDICARE INFORMATION NETWORK SERV22 ICE.—The term ‘medicare information network serv23 ice’ means a public or private entity that—
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1 ‘‘(A) processes or facilitates the processing

2 of nonstandard data elements of medicare infor3 mation into standard data elements;

4 ‘‘(B) provides the means by which persons

5 may meet the requirements of this section; or

6 ‘‘(C) provides specific information process7 ing services.

8 ‘‘(6) HEALTH PLAN.—The term ‘health plan’

9 means a plan which provides, or pays the cost of,

10 health benefits. Such term includes the following, or

11 any combination thereof:

12 ‘‘(A) Part A or part B of this title, and in13 cludes a MedicarePlus product.

14 ‘‘(B) The medicaid program under title

15 XIX and the MediGrant program under title

16 XXI.

17 ‘‘(C) A medicare supplemental policy (as

18 defined in section 1882(g)(1)).

19 ‘‘(D) Worker’s compensation or similar in20 surance.

21 ‘‘(E) Automobile or automobile medical22 payment insurance.

23 ‘‘(F) A long-term care policy, other than a

24 fixed indemnity policy.
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1 ‘‘(G) The Federal Employees Health Bene2 fit Plan under chapter 89 of title 5, United

3 States Code.

4 ‘‘(H) An employee welfare benefit plan, as

5 defined in section 3(1) of the Employee Retire6 ment Income Security Act of 1974 (29 U.S.C.

7 1002(1)), but only to the extent the plan is es8 tablished or maintained for the purpose of pro9 viding health benefits.

10 ‘‘(7) INDIVIDUALLY IDENTIFIABLE MEDICARE

11 INFORMATION.—The term ‘individually identifiable

12 medicare information’ means medicare enrollment

13 information, including demographic information col14 lected from an individual, that—

15 ‘‘(A) is created or received by a health care

16 provider, health plan, employer, or medicare in17 formation network service, and

18 ‘‘(B) identifies an individual.

19 ‘‘(8) STANDARD SETTING ORGANIZATION.—The

20 term ‘standard setting organization’ means a stand21 ard setting organization accredited by the American

22 National Standards Institute.

23 ‘‘(9) STANDARD TRANSACTION.—The term

24 ‘standard transaction’ means, when referring to an

25 information transaction or to data elements of medi-
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1 care information, any transaction that meets the re2 quirements and implementation specifications adopt3 ed by the Secretary under subsections (a) and (b).’’.

4 PART 5—OTHER PROVISIONS RELATING TO

5 PARTS A AND B

6 SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF

7 ITEMS AND SERVICES ASSOCIATED WITH

8 CERTAIN MEDICAL DEVICES APPROVED FOR

9 INVESTIGATIONAL USE.

10 (a) COVERAGE.—Nothing in title XVIII of the Social

11 Security Act may be construed to prohibit coverage under

12 part A or part B of the medicare program of items and

13 services associated with the use of a medical device in the

14 furnishing of inpatient hospital services (as defined for

15 purposes of part A of the medicare program) solely on the

16 grounds that the device is not an approved device, if—

17 (1) the device is an investigational device; and

18 (2) the device is used instead of an approved

19 device.

20 (b) CLARIFICATION OF PAYMENT AMOUNT.—Not21 withstanding any other provision of title XVIII of the So22 cial Security Act, the amount of payment made under the

23 medicare program for any item or service associated with

24 the use of an investigational device in the furnishing of

25 inpatient hospital services (as defined for purposes of part
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1 A of the medicare program) may not exceed the amount

2 of the payment which would have been made under the

3 program for the item or service if the item or service were

4 associated with the use of an approved device.

5 (c) DEFINITIONS.—In this section—

6 (1) the term ‘‘approved device’’ means a medi7 cal device which has been approved for marketing

8 under pre-market approval under the Federal Food,

9 Drug, and Cosmetic Act or cleared for marketing

10 under a 510(k) notice under such Act; and

11 (2) the term ‘‘investigational device’’ means a

12 medical device (other than a device described in

13 paragraph (1)) which is approved for investigational

14 use under section 520(g) of the Federal Food, Drug,

15 and Cosmetic Act.

16 SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.

17 (a) IN GENERAL.—Section 1862(a) (42 U.S.C.

18 1395y(a)), as amended by section 15525(a)(2), section

19 15609B(a), and section 15701(c)(2)(C), is amended—

20 (1) by striking ‘‘or’’ at the end of paragraph

21 (17),

22 (2) by striking the period at the end of para23 graph (18) and inserting ‘‘; or’’, and

24 (3) by inserting after paragraph (18) the fol25 lowing new paragraph:
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1 ‘‘(19) where such expenses are for items or

2 services, or to assist in the purchase, in whole or in

3 part, of health benefit coverage that includes items

4 or services, for the purpose of causing, or assisting

5 in causing, the death, suicide, euthanasia, or mercy

6 killing of a person.’’.

7 (b) EFFECTIVE DATE.—The amendments made by

8 subsection (a) shall apply to payment for items and serv9 ices furnished on or after the date of the enactment of

10 this Act.

11 SEC. 15743. COMPETITIVE BIDDING FOR CERTAIN ITEMS

12 AND SERVICES.

13 (a) ESTABLISHMENT OF DEMONSTRATION.—Not

14 later than 1 year after the date of the enactment of this

15 Act, the Secretary of Health and Human Services shall

16 establish and operate over a 2-year period a demonstration

17 project in 2 geographic regions selected by the Secretary

18 under which (notwithstanding any provision of title XVIII

19 of the Social Security Act to the contrary) the amount

20 of payment made under the medicare program for a se21 lected item or service (other than clinical diagnostic lab22 oratory tests) furnished in the region shall be equal to the

23 price determined pursuant to a competitive bidding proc24 ess which meets the requirements of subsection (b).
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1 (b) REQUIREMENTS FOR COMPETITIVE BIDDING

2 PROCESS.—The competitive bidding process used under

3 the demonstration project under this section shall meet

4 such requirements as the Secretary may impose to ensure

5 the cost-effective delivery to medicare beneficiaries in the

6 project region of items and services of high quality.

7 (c) DETERMINATION OF SELECTED ITEMS OR SERV8 ICES.—The Secretary shall select items and services to be

9 subject to the demonstration project under this section if

10 the Secretary determines that the use of competitive bid11 ding with respect to the item or service under the project

12 will be appropriate and cost-effective. In determining the

13 items or services to be selected, the Secretary shall consult

14 with an advisory taskforce which includes representatives

15 of providers and suppliers of items and services (including

16 small business providers and suppliers) in each geographic

17 region in which the project will be effective.

18 SEC. 15744. DISCLOSURE OF CRIMINAL CONVICTIONS RE19 LATING TO PROVISION OF HOME HEALTH

20 SERVICES.

21 (a) IN GENERAL.—Section 1891 (42 U.S.C.

22 1395bbb) is amended by adding at the end the following

23 new subsection:

24 ‘‘(g) The Secretary, and each State or local survey

25 agency or other State agency responsible for monitoring
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1 compliance of home health agencies with requirements,

2 shall make available, upon request of any person, informa3 tion the Secretary or agency has on individuals who have

4 been convicted of felonies relating to the provision of home

5 health services.’’.

6 (b) EFFECTIVE DATE.—The amendment made by

7 subsection (a) shall take effect on the date of the enact8 ment of this Act.

9 SEC. 15745. REQUIRING RENAL DIALYSIS FACILITIES TO

10 MAKE SERVICES AVAILABLE ON A 24-HOUR

11 BASIS.

12 (a) IN GENERAL.—Section 1881(b)(1) (42 U.S.C.

13 1395rr(b)(1)) is amended by striking the period at the end

14 and inserting the following: ‘‘, together with a requirement

15 (in the case of a renal dialysis facility) that the facility

16 make institutional dialysis services and supplies available

17 on a 24-hour basis (either directly or through arrange18 ments with providers of services or other renal dialysis fa19 cilities that meet the requirements of such subparagraph)

20 and that the facility provide notice informing its patients

21 of the other providers of services or renal dialysis facilities

22 (if any) with whom the facility has made such arrange23 ments.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to items and services furnished

3 on or after January 1, 1996.

4 Subtitle I—Clinical Laboratories

5 SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA6 TORIES.

7 Section 353(d) of the Public Health Service Act (42

8 U.S.C. 263a(d)) is amended—

9 (1) by redesignating paragraphs (2), (3), and

10 (4) as paragraphs (3), (4), and (5) and by adding

11 after paragraph (1) the following:

12 ‘‘(2) EXEMPTION OF PHYSICIAN OFFICE LAB13 ORATORIES.—

14 ‘‘(A) IN GENERAL.—Except as provided in

15 subparagraph (B), a clinical laboratory in a

16 physician’s office (including an office of a group

17 of physicians) which is directed by a physician

18 and in which examinations and procedures are

19 either performed by a physician or by individ20 uals supervised by a physician solely as an ad21 junct to other services provided by the physi22 cian’s office is exempt from this section.

23 ‘‘(B) EXCEPTION.—A clinical laboratory

24 described in subparagraph (A) is not exempt
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1 from this section when it performs a pap smear

2 (Papanicolaou Smear) analysis.

3 ‘‘(C) DEFINITION.—For purposes of sub4 paragraph (A), the term ‘physician’ has the

5 same meaning as is prescribed for such term by

6 section 1861(r) of the Social Security Act (42

7 U.S.C. 1395x(r)).’’;

8 (2) in paragraph (3) (as so redesignated) by

9 striking ‘‘(3)’’ and inserting ‘‘(4)’’; and

10 (3) in paragraphs (4) and (5) (as so redesig11 nated) by striking ‘‘(2)’’ and inserting ‘‘(3)’’.

12 Subtitle J—Lock-Box Provisions

13 for Medicare Part B Savings

14 from Growth Reductions

15 SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH RE16 DUCTION TRUST FUND FOR PART B SAVINGS.

17 Part B of title XVIII is amended by inserting after

18 section 1841 the following new section:

19 ‘‘MEDICARE GROWTH REDUCTION TRUST FUND

20 ‘‘SEC. 1841A. (a)(1) There is hereby created on the

21 books of the Treasury of the United States a trust fund

22 to be known as the ‘Federal Medicare Growth Reduction

23 Trust Fund’ (in this section referred to as the ‘Trust

24 Fund’). The Trust Fund shall consist of such gifts and

25 bequests as may be made as provided in section 201(i)(1)

26 and amounts appropriated under paragraph (2).
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1 ‘‘(2) There are hereby appropriated to the Trust

2 Fund, out of any amounts in the Treasury not otherwise

3 appropriated, amounts equivalent to 100 percent of the

4 Secretary’s estimate of the reductions in outlays under

5 this part that are attributable to the Medicare Preserva6 tion Act of 1995. The amounts appropriated by the pre7 ceding sentence shall be transferred from time to time (not

8 less frequently than monthly) from the general fund in the

9 Treasury to the Trust Fund.

10 ‘‘(3)(A) Subject to subparagraph (B), with respect to

11 monies transferred to the Trust Fund, no transfers, au12 thorizations of appropriations, or appropriations are per13 mitted.

14 ‘‘(B) Beginning with fiscal year 2003, the Secretary

15 may expend funds in the Trust Fund to carry out this

16 title, but only to the extent provided by Congress in ad17 vance through a specific amendment to this section.

18 ‘‘(b) The provisions of subsections (b) through (e) of

19 section 1841 shall apply to the Trust Fund in the same

20 manner as they apply to the Federal Supplementary Medi21 cal Insurance Trust Fund, except that the Board of Trust22 ees and Managing Trustee of the Trust Fund shall be

23 composed of the members of the Board of Trustees and
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1 the Managing Trustee, respectively, of the Federal Supple2 mentary Medical Insurance Trust Fund.’’.

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