I 

108TH CONGRESS 

1ST SESSION H. R. 2904

To amend title XVIII of the Social Security Act to improve the provision 

of items and services provided to Medicare beneficiaries residing in rural 

areas. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 25, 2003

Mr. SMITH of Washington introduced the following bill; which was referred to 

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

on Energy and Commerce, for a period to be subsequently determined by 

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

A BILL

To amend title XVIII of the Social Security Act to improve 

the provision of items and services provided to Medicare 

beneficiaries residing in rural areas.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘MediFair Act of 

5 2003’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 
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1 (1) Regional inequities in medicare reimburse2 ment has created barriers to care for seniors and the 

3 disabled. 

4 (2) The regional inequities in medicare reim5 bursement penalize States that have cost-effective 

6 health care delivery systems and rewards those 

7 States with high utilization rates and that provide 

8 inefficient care. 

9 (3) Over a lifetime, those inequities can mean 

10 as much as a $50,000 difference in the cost of care 

11 provided per beneficiary. 

12 (4) Regional inequities have resulted in creating 

13 very different medicare programs for seniors and the 

14 disabled based on where they live. 

15 (5) Because the Medicare+Choice rate is based 

16 on the fee-for-service reimbursement rate, regional 

17 inequities have allowed some medicare beneficiaries 

18 access to plans with significantly more benefits in19 cluding prescription drugs. Beneficiaries in States 

20 with lower reimbursement rates have not benefited 

21 to the same degree as beneficiaries in other parts of 

22 the country. 

23 (6) Regional inequities in medicare reimburse24 ment have created an unfair competitive advantage 

25 for hospitals and other health care providers in 
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1 States that receive above average payments. Higher 

2 payments mean that those providers can pay higher 

3 salaries in a tight, competitive market. 

4 (7) Regional inequities in medicare reimburse5 ment can limit timely access to new technology for 

6 beneficiaries in States with lower reimbursement 

7 rates. 

8 (8) Regional inequities in medicare reimburse9 ment, if left unchecked, will reduce access to medi10 care services and impact healthy outcomes for bene11 ficiaries. 

12 (9) Regional inequities in medicare reimburse13 ment are not just a rural versus urban problem. 

14 Many States with large urban centers are at the bot15 tom of the national average for per beneficiary costs. 

16 SEC. 3. IMPROVING FAIRNESS OF PAYMENTS TO PRO17 VIDERS UNDER THE MEDICARE FEE-FOR18 SERVICE PROGRAM. 

19 Title XVIII of the Social Security Act (42 U.S.C. 

20 1395 et seq.) is amended by adding at the end the fol21 lowing new section: 

22 ‘‘IMPROVING PAYMENT EQUITY UNDER THE ORIGINAL

23 MEDICARE FEE-FOR-SERVICE PROGRAM

24 ‘‘SEC. 1897. (a) ESTABLISHMENT OF SYSTEM.—Not25 withstanding any other provision of law, the Secretary 

26 shall establish a system for making adjustments to the 
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1 amount of payment made to entities and individuals for 

2 items and services provided under the original medicare 

3 fee-for-service program under parts A and B. 

4 ‘‘(b) SYSTEM REQUIREMENTS.—

5 ‘‘(1) INCREASE FOR STATES BELOW THE NA6 TIONAL AVERAGE.—Under the system established 

7 under subsection (a), if a State average per bene8 ficiary amount for a year is less than the national 

9 average per beneficiary amount for such year, then 

10 the Secretary (beginning in 2004) shall increase the 

11 amount of applicable payments in such a manner as 

12 will result (as estimated by the Secretary) in the 

13 State average per beneficiary amount for the subse14 quent year being equal to the national average per 

15 beneficiary amount for such subsequent year. 

16 ‘‘(2) REDUCTION FOR CERTAIN STATES ABOVE

17 THE NATIONAL AVERAGE TO ENHANCE QUALITY

18 CARE AND MAINTAIN BUDGET NEUTRALITY.—

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

20 ensure that the increase in payments under 

21 paragraph (1) does not cause the estimated 

22 amount of expenditures under this title for a 

23 year to increase or decrease from the estimated 

24 amount of expenditures under this title that 

25 would have been made in such year if this sec-
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1 tion had not been enacted by reducing the 

2 amount of applicable payments in each State 

3 that the Secretary determines has—

4 ‘‘(i) a State average per beneficiary 

5 amount for a year that is greater than the 

6 national average per beneficiary amount 

7 for such year; and 

8 ‘‘(ii) healthy outcome measurements 

9 or quality care measurements that indicate 

10 that a reduction in applicable payments 

11 would encourage more efficient use of, and 

12 reduce overuse of, items and services for 

13 which payment is made under this title. 

14 ‘‘(B) LIMITATION.—The Secretary shall 

15 not reduce applicable payments under subpara16 graph (A) to a State that—

17 ‘‘(i) has a State average per bene18 ficiary amount for a year that is greater 

19 than the national average per beneficiary 

20 amount for such year; and 

21 ‘‘(ii) has healthy outcome measure22 ments or quality care measurements that 

23 indicate that the applicable payments are 

24 being used to improve the access of bene25 ficiaries to quality care. 
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1 ‘‘(3) DETERMINATION OF AVERAGES.—

2 ‘‘(A) STATE AVERAGE PER BENEFICIARY

3 AMOUNT.—Each year (beginning in 2003), the 

4 Secretary shall determine a State average per 

5 beneficiary amount for each State which shall 

6 be equal to the Secretary’s estimate of the aver7 age amount of expenditures under the original 

8 medicare fee-for-service program under parts A 

9 and B for the year for a beneficiary enrolled 

10 under such parts that resides in the State. 

11 ‘‘(B) NATIONAL AVERAGE PER BENE12 FICIARY AMOUNT.—Each year (beginning in 

13 2003), the Secretary shall determine the na14 tional average per beneficiary amount which 

15 shall be equal to the average of the State aver16 age per beneficiary amount determined under 

17 subparagraph (A) for the year. 

18 ‘‘(4) DEFINITIONS.—In this section: 

19 ‘‘(A) APPLICABLE PAYMENTS.—The term 

20 ‘applicable payments’ means payments made to 

21 entities and individuals for items and services 

22 provided under the original medicare fee-for23 service program under parts A and B to bene24 ficiaries enrolled under such parts that reside in 

25 the State. 
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1 ‘‘(B) STATE.—The term ‘State’ has the 

2 meaning given such term in section 210(h). 

3 ‘‘(c) BENEFICIARIES HELD HARMLESS.—The provi4 sions of this section shall not affect—

5 ‘‘(1) the entitlement to items and services of a 

6 beneficiary under this title, including the scope of 

7 such items and services; or 

8 ‘‘(2) any liability of the beneficiary with respect 

9 to such items and services. 

10 ‘‘(d) REGULATIONS.—

11 ‘‘(1) IN GENERAL.—The Secretary, in consulta12 tion with the Medicare Payment Advisory Commis13 sion, shall promulgate regulations to carry out this 

14 section. 

15 ‘‘(2) PROTECTING RURAL COMMUNITIES.—In 

16 promulgating the regulations pursuant to paragraph 

17 (1), the Secretary shall give special consideration to 

18 rural areas.’’. 

19 SEC. 4. MEDPAC RECOMMENDATIONS ON HEALTHY OUT20 COMES AND QUALITY CARE. 

21 (a) RECOMMENDATIONS.—The Medicare Payment 

22 Advisory Commission established under section 1805 of 

23 the Social Security Act (42 U.S.C. 1395b–6) shall develop 

24 recommendations on policies and practices that, if imple25 mented, would encourage—
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1 (1) healthy outcomes and quality care under the 

2 medicare program in States with respect to which 

3 payments are reduced under section 1897(b)(2) of 

4 such Act (as added by section 3); and 

5 (2) the efficient use of payments made under 

6 the medicare program in such States. 

7 (b) SUBMISSION.—Not later than the date that is 9 

8 months after the date of enactment of this Act, the Com9 mission shall submit to Congress the recommendations de10 veloped under subsection (a).

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