I

104TH CONGRESS

1ST SESSION H. R. 2425

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

the medicare program.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 29, 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.

Subtitle B—Preventing Fraud and Abuse

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. Consolidated funding for anti-fraud and abuse activities under

Medicare Integrity Program.

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

items of durable medical equipment.

Sec. 15108. Establishment of Health Care Anti-Fraud Task Force.

Sec. 15109. Study of adequacy of private quality assurance programs.

Subtitle C—Regulatory Relief

PART 1—PHYSICIAN OWNERSHIP REFERRAL REFORM

Sec. 15201. Repeal of prohibitions based on compensation arrangements.
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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. Clarification of and additions to exceptions to anti-kickback penalties.

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.

‘‘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.
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‘‘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.

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

Sec. 15513. 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.

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. Reduction in updates to payment amounts 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.

PART 2—PART B PREMIUM

Sec. 15611. Extension of part B premium.

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

Subtitle H—Provisions Relating to Medicare Parts A and B

PART 1—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.

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
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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.

Subtitle I—Clinical Laboratories

Sec. 15801. Exemption of physician office laboratories.

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.
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1 ‘‘(B) THROUGH A MEDICAREPLUS PROD2 UCT.—Through a MedicarePlus product (as de3 fined in paragraph (2)), which may be—

4 ‘‘(i) a high deductible/medisave prod5 uct (and a contribution into a

6 MedicarePlus medical savings account

7 (MSA)),

8 ‘‘(ii) a product offered by a provider9 sponsored organization,

10 ‘‘(iii) a product offered by an organi11 zation that is a union, Taft-Hartley plan,

12 or association, or

13 ‘‘(iv) a product providing for benefits

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

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

16 purposes this section and part C, the term

17 ‘MedicarePlus product’ means health benefits cov18 erage offered under a policy, contract, or plan by a

19 MedicarePlus organization (as defined in section

20 1851(a)) pursuant to and in accordance with a con21 tract under section 1857.

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

23 For purposes of this section and part C—

24 ‘‘(A) NON-MEDICAREPLUS OPTION.—An

25 individual who has made the election described
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1 in paragraph (1)(A) is considered to have elect2 ed the ‘Non-MedicarePlus option’.

3 ‘‘(B) MEDICAREPLUS OPTION.—An indi4 vidual who has made the election described in

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

6 MedicarePlus product is considered to have

7 elected the ‘MedicarePlus option’ for that prod8 uct.

9 ‘‘(b) SPECIAL RULES.—

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

11 the Secretary may otherwise provide, an individual is

12 eligible to elect a MedicarePlus product offered by a

13 MedicarePlus organization only if the organization

14 in relation to the product serves the geographic area

15 in which the individual resides.

16 ‘‘(2) AFFILIATION REQUIREMENTS FOR CER17 TAIN PRODUCTS.—

18 ‘‘(A) IN GENERAL.—Subject to subpara19 graph (B), an individual is eligible to elect a

20 MedicarePlus product offered by a limited en21 rollment MedicarePlus organization (as defined

22 in section 1852(c)(4)(E)) only if—

23 ‘‘(i) the individual is eligible under

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

25 and
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1 ‘‘(ii) in the case of a MedicarePlus or2 ganization that is a union sponsor or a

3 Taft-Hartley sponsor (as defined in section

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

5 this section a MedicarePlus product offered

6 by the sponsor during the first enrollment

7 period in which the individual was eligible

8 to make such election with respect to such

9 sponsor.

10 ‘‘(B) NO REELECTION AFTER

11 DISENROLLMENT FOR CERTAIN PRODUCTS.—

12 An individual is not eligible to elect a

13 MedicarePlus product offered by a

14 MedicarePlus organization that is union spon15 sor or a Taft-Hartley sponsor if the individual

16 previously had elected a MedicarePlus product

17 offered by the organization and had subse18 quently discontinued to elect such a product of19 fered by the organization.

20 ‘‘(3) SPECIAL RULE FOR CERTAIN ANNU21 ITANTS.—An individual is not eligible to elect a high

22 deductible/medisave product if the individual is enti23 tled to benefits under chapter 89 of title 5, United

24 States Code, as an annuitant or spouse of an annu25 itant.
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1 ‘‘(c) PROCESS FOR EXERCISING CHOICE.—

2 ‘‘(1) IN GENERAL.—The Secretary shall estab3 lish a process through which elections described in

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

5 form and manner in which such elections are made

6 and changed. Such elections shall be made or

7 changed only during coverage election periods speci8 fied under subsection (e) and shall become effective

9 as provided in subsection (f).

10 ‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec11 retary shall establish the process of electing coverage

12 under this section during the transition period (as

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

14 manner as will permit such an election for

15 MedicarePlus products in an area as soon as such

16 products become available in that area.

17 ‘‘(3) COORDINATION THROUGH MEDICAREPLUS

18 ORGANIZATIONS.—

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

20 permit an individual who wishes to elect a

21 MedicarePlus product offered by a

22 MedicarePlus organization to make such elec23 tion through the filing of an appropriate elec24 tion form with the organization.
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1 ‘‘(B) DISENROLLMENT.—Such process

2 shall permit an individual, who has elected a

3 MedicarePlus product offered by a

4 MedicarePlus organization and who wishes to

5 terminate such election, to terminate such elec6 tion through the filing of an appropriate elec7 tion form with the organization.

8 ‘‘(4) DEFAULT.—

9 ‘‘(A) INITIAL ELECTION.—

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

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

12 election during an initial election period

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

14 chosen the Non-MedicarePlus option.

15 ‘‘(ii) SEAMLESS CONTINUATION OF

16 COVERAGE.—The Secretary shall establish

17 procedures under which individuals who

18 are enrolled with a MedicarePlus organiza19 tion at the time of the initial election pe20 riod and who fail to elect to receive cov21 erage other than through the organization

22 are deemed to have elected an appropriate

23 MedicarePlus product offered by the orga24 nization.
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1 ‘‘(B) CONTINUING PERIODS.—An individ2 ual who has made (or deemed to have made) an

3 election under this section is considered to have

4 continued to make such election until such time

5 as—

6 ‘‘(i) the individual changes the elec7 tion under this section, or

8 ‘‘(ii) a MedicarePlus product is dis9 continued, if the individual had elected

10 such product at the time of the discontinu11 ation.

12 ‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO13 CIAL SECURITY TO PROMOTE EFFICIENT ADMINIS14 TRATION.—In order to promote the efficient admin15 istration of this section and the MedicarePlus pro16 gram under part C, the Secretary may enter into an

17 agreement with the Commissioner of Social Security

18 under which the Commissioner performs administra19 tive responsibilities relating to enrollment and

20 disenrollment in MedicarePlus products under this

21 section.

22 ‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO

23 PROMOTE INFORMED CHOICE.—

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

25 for activities under this subsection to disseminate
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1 broadly information to medicare beneficiaries (and

2 prospective medicare beneficiaries) on the coverage

3 options provided under this section in order to pro4 mote an active, informed selection among such op5 tions. Such information shall be made available on

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

7 date an individual would first attain eligibility for

8 medicare on the basis of age) as to permit individ9 uals to elect the MedicarePlus option during the ini10 tial election period described in subsection (e)(1).

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

12 Secretary shall, to the maximum extent feasible,

13 enter into contracts with appropriate non-Federal

14 entities to carry out activities under this subsection.

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

16 this subsection, the Secretary shall provide for at

17 least the following activities in all areas in which

18 MedicarePlus products are offered:

19 ‘‘(A) INFORMATION BOOKLET.—

20 ‘‘(i) IN GENERAL.—The Secretary

21 shall publish an information booklet and

22 disseminate the booklet to all individuals

23 eligible to elect the MedicarePlus option

24 under this section during coverage election

25 periods.
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1 ‘‘(ii) INFORMATION INCLUDED.—The

2 booklet shall include information presented

3 in plain English and in a standardized for4 mat regarding—

5 ‘‘(I) the benefits and premiums

6 for the various MedicarePlus products

7 in the areas involved;

8 ‘‘(II) the quality of such prod9 ucts, including consumer satisfaction

10 information; and

11 ‘‘(III) rights and responsibilities

12 of medicare beneficiaries under such

13 products.

14 ‘‘(iii) PERIODIC UPDATING.—The

15 booklet shall be updated on a regular basis

16 (not less often than once every 12 months)

17 to reflect changes in the availability of

18 MedicarePlus products and the benefits

19 and premiums for such products.

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

21 shall maintain a toll-free number for inquiries

22 regarding MedicarePlus options and the oper23 ation of part C.

24 ‘‘(C) GENERAL INFORMATION IN MEDI25 CARE HANDBOOK.—The Secretary shall include
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1 information about the MedicarePlus option pro2 vided under this section in the annual notice of

3 medicare benefits under section 1804.

4 ‘‘(e) COVERAGE ELECTION PERIODS.—

5 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO

6 MAKE ELECTION.—

7 ‘‘(A) IN GENERAL.—In the case of an indi8 vidual who first becomes entitled to benefits

9 under part A and enrolled under part B after

10 the beginning of the transition period (as de11 fined in subparagraph (B)), the individual shall

12 make the election under this section during a

13 period (of a duration and beginning at a time

14 specified by the Secretary) at the first time the

15 individual both is entitled to benefits under part

16 A and enrolled under part B. Such period shall

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

18 an individual who elects a MedicarePlus prod19 uct during the period, coverage under the prod20 uct becomes effective as of the first date on

21 which the individual may receive such coverage.

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

23 this subsection, the term ‘transition period’

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

25 the period beginning on the first day of the first
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1 month in which a MedicarePlus product is first

2 made available to individuals in the area and

3 ending with the month preceding the beginning

4 of the first annual, coordinated election period

5 under paragraph (3).

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

7 paragraph (6)—

8 ‘‘(A) CONTINUOUS OPEN ENROLLMENT

9 INTO A MEDICAREPLUS OPTION.—During the

10 transition period, an individual who is eligible

11 to make an election under this section and who

12 has elected the non-MedicarePlus option may

13 change such election to a MedicarePlus option

14 at any time.

15 ‘‘(B) OPEN DISENROLLMENT BEFORE END

16 OF TRANSITION PERIOD.—

17 ‘‘(i) IN GENERAL.—During the transi18 tion period, an individual who has elected

19 a MedicarePlus option for a MedicarePlus

20 product may change such election to an21 other MedicarePlus product or to the non22 MedicarePlus option.

23 ‘‘(ii) SPECIAL RULE.—During the

24 transition period, an individual who has

25 elected a high deductible/medisave product
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1 may not change such election to a

2 MedicarePlus product that is not a high

3 deductible/medisave product unless the in4 dividual has had such election in effect for

5 12 months.

6 ‘‘(3) ANNUAL, COORDINATED ELECTION PE7 RIOD.—

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

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

10 election under this section may change such

11 election during annual, coordinated election pe12 riods.

13 ‘‘(B) ANNUAL, COORDINATED ELECTION

14 PERIOD.—For purposes of this section, the

15 term ‘annual, coordinated election period’

16 means, with respect to a calendar year (begin17 ning with 1998), the month of October before

18 such year.

19 ‘‘(C) MEDICAREPLUS HEALTH FAIR DUR20 ING OCTOBER, 1996.—In the month of October,

21 1996, the Secretary shall provide for a nation22 ally coordinated educational and publicity cam23 paign to inform individuals, who are eligible to

24 elect MedicarePlus products, about such prod25 ucts and the election process provided under
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1 this section (including the annual, coordinated

2 election periods that occur in subsequent years).

3 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OP4 TION.—

5 ‘‘(A) IN GENERAL.—In the case of an indi6 vidual who first elects a MedicarePlus option

7 (other than a high deductible/medisave product)

8 under this section, the individual may dis9 continue such election through the filing of an

10 appropriate notice during the 90-day period be11 ginning on the first day on which the individ12 ual’s coverage under the MedicarePlus product

13 under such option becomes effective.

14 ‘‘(B) EFFECT OF DISCONTINUATION OF

15 ELECTION.—An individual who discontinues an

16 election under this paragraph shall be deemed

17 at the time of such discontinuation to have

18 elected the non-MedicarePlus option.

19 ‘‘(5) SPECIAL ELECTION PERIODS.—An individ20 ual may discontinue an election of a MedicarePlus

21 product offered by a MedicarePlus organization

22 other than during an annual, coordinated election

23 period and make a new election under this section

24 if—
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1 ‘‘(A) the organization’s or product’s certifi2 cation under part C has been terminated or the

3 organization has terminated or otherwise dis4 continued providing the product;

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

6 elected a MedicarePlus product offered by a

7 MedicarePlus organization, the individual is no

8 longer eligible to elect the product because of a

9 change in the individual’s place of residence or

10 other change in circumstances (specified by the

11 Secretary, but not including termination of

12 membership in a qualified association in the

13 case of a product offered by a qualified associa14 tion or termination of the individual’s enroll15 ment on the basis described in clause (i) or (ii),

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

17 ‘‘(C) the individual demonstrates (in ac18 cordance with guidelines established by the Sec19 retary) that—

20 ‘‘(i) the organization offering the

21 product substantially violated a material

22 provision of the organization’s contract

23 under part C in relation to the individual

24 and the product; or
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1 ‘‘(ii) the organization (or an agent or

2 other entity acting on the organization’s

3 behalf) materially misrepresented the prod4 uct’s provisions in marketing the product

5 to the individual; or

6 ‘‘(D) the individual meets such other con7 ditions as the Secretary may provide.

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

9 MEDISAVE PRODUCTS.—Notwithstanding the pre10 vious provisions of this subsection, an individual may

11 elect a high deductible/medisave product only during

12 an annual, coordinated election period described in

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

14 1996.

15 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—

16 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE17 RIOD.—An election of coverage made during the ini18 tial coverage election period under subsection

19 (e)(1)(A) shall take effect upon the date the individ20 ual becomes entitled to benefits under part A and

21 enrolled under part B, except as the Secretary may

22 provide (consistent with section 1838) in order to

23 prevent retroactive coverage.

24 ‘‘(2) DURING TRANSITION; 90-DAY

25 DISENROLLMENT OPTION.—An election of coverage
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1 made under subsection (e)(2) and an election to dis2 continue a MedicarePlus option under subsection

3 (e)(4) at any time shall take effect with the first cal4 endar month following the date on which the election

5 is made.

6 ‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD

7 AND MEDISAVE ELECTION.—An election of coverage

8 made during an annual, coordinated election period

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

10 a high deductible/medisave product shall take effect

11 as of the first day of the following year.

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

13 made during any other period under subsection

14 (e)(5) shall take effect in such manner as the Sec15 retary provides in a manner consistent (to the extent

16 practicable) with protecting continuity of health ben17 efit coverage.

18 ‘‘(g) EFFECT OF ELECTION OF MEDICAREPLUS OP19 TION.—Subject to the provisions of section 1855(f), pay20 ments under a contract with a MedicarePlus organization

21 under section 1857(a) with respect to an individual elect22 ing a MedicarePlus product offered by the organization

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

24 the contract) would otherwise be payable under parts A

25 and B for items and services furnished to the individual.
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1 ‘‘(h) ADMINISTRATION.—

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

3 1805 and 1876 shall be administered through an op4 erating division (A) that is established or identified

5 by the Secretary in the Department of Health and

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

7 Health Care Financing Administration, and (C) the

8 primary function of which is the administration of

9 this part and such sections. The director of such di10 vision shall be of equal pay and rank to that of the

11 individual responsible for overall administration of

12 parts A and B.

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

14 shall transfer such personnel, administrative support

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

16 in the Health Care Financing Administration to the

17 operating division referred to in paragraph (1) as

18 are used in the administration of section 1876 and

19 as may be required to implement the provisions re20 ferred to in such paragraph promptly and effi21 ciently.’’.

22 SEC. 15002. MEDICAREPLUS PROGRAM.

23 (a) IN GENERAL.—Title XVIII is amended by redes24 ignating part C as part D and by inserting after part B

25 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 of this part for

9 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 a

19 MedicarePlus organization that is a union sponsor

20 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 ‘‘(c) PREPAID PAYMENT.—A MedicarePlus organiza4 tion shall be compensated (except for deductibles, coinsur5 ance, and copayments) for the provision of health care

6 services to enrolled members by a payment which is paid

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

8 care services are provided and which is fixed without re9 gard to the frequency, extent, or kind of health care serv10 ice actually provided to a member.

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

12 MedicarePlus organization shall assume full financial risk

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

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

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

16 that the organization—

17 ‘‘(1) may obtain insurance or make other ar18 rangements for the cost of providing to any enrolled

19 member such services the aggregate value of which

20 exceeds $5,000 in any year,

21 ‘‘(2) may obtain insurance or make other ar22 rangements for the cost of such services provided to

23 its enrolled members other than through the organi24 zation because medical necessity required their pro-
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1 vision before they could be secured through the orga2 nization,

3 ‘‘(3) may obtain insurance or make other ar4 rangements for not more than 90 percent of the

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

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

7 and

8 ‘‘(4) may make arrangements with physicians

9 or other health professionals, health care institu10 tions, or any combination of such individuals or in11 stitutions to assume all or part of the financial risk

12 on a prospective basis for the provision of basic

13 health services by the physicians or other health pro14 fessionals or through the institutions.

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

16 ‘‘(1) IN GENERAL.—Each MedicarePlus organi17 zation shall meet standards under section 1856 re18 lating to the financial solvency and capital adequacy

19 of the organization. Such standards shall take into

20 account the nature and type of MedicarePlus prod21 ucts offered by the organization.

22 ‘‘(2) TREATMENT OF UNION AND TAFT-HART23 LEY SPONSORS.—An entity that is a union sponsor

24 or a Taft-Hartley sponsor is deemed to meet the re25 quirement of paragraph (1).
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1 ‘‘(f) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DE2 FINED.—

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

4 deductible/medisave product’ means a MedicarePlus

5 product that—

6 ‘‘(A) provides reimbursement for at least

7 the items and services described in section

8 1852(a)(1) in a year but only after the enrollee

9 incurs countable expenses (as specified under

10 the product) equal to the amount of a deduct11 ible (described in paragraph (2));

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

13 of such deductible) at least all amounts that

14 would have been payable under parts A and B

15 or by the enrollee if the enrollee had elected to

16 receive benefits through the provisions of such

17 parts; and

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

19 for a year and for all subsequent expenses for

20 benefits referred to in subparagraph (A) in the

21 year, for a level of reimbursement that is not

22 less than—

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

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

25 would have been paid (without regard to
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1 any deductibles or coinsurance) under

2 parts A and B with respect to such ex3 penses,

4 whichever is less. Such term does not include

5 the MedicarePlus MSA itself or any contribu6 tion into such account.

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

8 under a high deductible/medisave product—

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

10 more than $10,000; and

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

12 be not more than the maximum amount of such

13 deductible for the previous contract year under

14 this paragraph increased by the national aver15 age per capita growth rate under section

16 1855(c)(3) for the year.

17 If the amount of the deductible under subparagraph

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

19 rounded to the nearest multiple of $50.

20 ‘‘(g) ORGANIZATIONS TREATED AS MEDICAREPLUS

21 ORGANIZATIONS DURING TRANSITION.—Any of the fol22 lowing organizations shall be considered to qualify as a

23 MedicarePlus organization for contract years beginning

24 before January 1, 1998:
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1 ‘‘(1) HEALTH MAINTENANCE ORGANIZA2 TIONS.—An organization that is organized under the

3 laws of any State and that is a qualified health

4 maintenance organization (as defined in section

5 1310(d) of the Public Health Service Act), an orga6 nization recognized under State law as a health

7 maintenance organization, or a similar organization

8 regulated under State law for solvency in the same

9 manner and to the same extent as such a health

10 maintenance organization.

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

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

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

14 insurer for the offering of health benefit cov15 erage, or

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

17 service benefit plan,

18 but only for individuals residing in an area in which

19 the organization is licensed to offer health insurance

20 coverage.

21 ‘‘(3) CURRENT RISK-CONTRACTORS.—An orga22 nization that is an eligible organization (as defined

23 in section 1876(b)) and that has a risk-sharing con24 tract in effect under section 1876 as of the date of

25 the enactment of this section.
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1 ‘‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF

2 SERVICES, ENROLLMENT, AND PREMIUMS

3 ‘‘SEC. 1852. (a) BENEFITS COVERED.—

4 ‘‘(1) IN GENERAL.—Except as provided in sub5 section (b), in section 1851(f)(1) with respect to

6 high deductible/medisave products, and in section

7 1853(a), each MedicarePlus product offered under

8 this part shall provide benefits for at least the items

9 and services for which benefits are available under

10 parts A and B consistent with the standards for cov11 erage of such items and services applicable under

12 this title.

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

14 Notwithstanding any other provision of law, a

15 MedicarePlus organization may (in the case of the

16 provision of items and services to an individual

17 under this part under circumstances in which pay18 ment under this title is made secondary pursuant to

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

20 of such services to charge, in accordance with the

21 charges allowed under such law or policy—

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

23 other entity which under such law, plan, or pol24 icy is to pay for the provision of such services,

25 or
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1 ‘‘(B) such individual to the extent that the

2 individual has been paid under such law, plan,

3 or policy for such services.

4 ‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi5 zation may not deny, limit, or condition the coverage or

6 provision of benefits under this part based on the health

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

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

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

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

11 subsection, a MedicarePlus organization shall pro12 vide that at any time during which elections are ac13 cepted under section 1805 with respect to a

14 MedicarePlus product offered by the organization,

15 the organization will accept without restrictions indi16 viduals who are eligible to make such election.

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

18 that a MedicarePlus organization, in relation to a

19 MedicarePlus product it offers, has a capacity limit

20 and the number of eligible individuals who elect the

21 product under section 1805 exceeds the capacity

22 limit, the organization may limit the election of indi23 viduals of the product under such section but only

24 if priority in election is provided—
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1 ‘‘(A) first to such individuals as have elect2 ed the product at that time, and

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

4 a manner that does not discriminate among the

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

6 basis described in paragraph (1).

7 ‘‘(3) LIMITATION ON TERMINATION OF ELEC8 TION.—

9 ‘‘(A) IN GENERAL.—Subject to subpara10 graph (B), a MedicarePlus organization may

11 not for any reason terminate the election of any

12 individual under section 1805 for a

13 MedicarePlus product it offers.

14 ‘‘(B) BASIS FOR TERMINATION OF ELEC15 TION.—A MedicarePlus organization may ter16 minate an individual’s election under section

17 1805 with respect to a MedicarePlus product it

18 offers if—

19 ‘‘(i) any premiums required with re20 spect to such product are not paid on a

21 timely basis (consistent with standards

22 under section 1856 that provide for a

23 grace period for late payment of pre24 miums),
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1 ‘‘(ii) the individual has engaged in

2 disruptive behavior (as specified in such

3 standards), or

4 ‘‘(iii) the product is terminated with

5 respect to all individuals under this part.

6 Any individual whose election is so terminated

7 is deemed to have elected the Non-MedicarePlus

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

9 ‘‘(D) ORGANIZATION OBLIGATION WITH RE10 SPECT TO ELECTION FORMS.—Pursuant to a con11 tract under section 1858, each MedicarePlus organi12 zation receiving an election form under section

13 1805(c)(2) shall transmit to the Secretary (at such

14 time and in such manner as the Secretary may

15 specify) a copy of such form or such other informa16 tion respecting the election as the Secretary may

17 specify.

18 ‘‘(4) SPECIAL RULES FOR LIMITED ENROLL19 MENT MEDICAREPLUS ORGANIZATIONS.—

20 ‘‘(A) UNIONS.—

21 ‘‘(i) IN GENERAL.—Subject to sub22 paragraph (D), a union sponsor (as de23 fined in subsection (b)(2)) shall limit eligi24 bility of enrollees under this part for

25 MedicarePlus products it offers to individ-
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1 uals who are members of the sponsor and

2 affiliated with the sponsor through an em3 ployment relationship with any employer or

4 are the spouses of such members.

5 ‘‘(ii) UNION SPONSOR.—In this part

6 and section 1805, the term ‘union sponsor’

7 means an employee organization in relation

8 to a group health plan that is established

9 or maintained by the organization other

10 than pursuant to a collective bargaining

11 agreement.

12 ‘‘(B) TAFT-HARTLEY SPONSORS.—

13 ‘‘(i) IN GENERAL.—Subject to sub14 paragraph (D), a MedicarePlus organiza15 tion that is a Taft-Hartley sponsor (as de16 fined in clause (ii)) shall limit eligibility of

17 enrollees under this part for MedicarePlus

18 products it offers to individuals who are

19 entitled to obtain benefits through such

20 products under the terms of an applicable

21 collective bargaining agreement.

22 ‘‘(ii) TAFT-HARTLEY SPONSOR.—In

23 this part and section 1805, the term ‘Taft24 Hartley sponsor’ means, in relation to a

25 group health plan that is established or
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1 maintained by two or more employers or

2 jointly by one or more employers and one

3 or more employee organizations, the asso4 ciation, committee, joint board of trustees,

5 or other similar group of representatives of

6 parties who establish or maintain the plan.

7 ‘‘(C) QUALIFIED ASSOCIATIONS.—

8 ‘‘(i) IN GENERAL.—Subject to sub9 paragraph (D), a MedicarePlus organiza10 tion that is a qualified association (as de11 fined in clause (iii)) shall limit eligibility of

12 individuals under this part for products it

13 offers to individuals who are members of

14 the association (or who are spouses of such

15 individuals).

16 ‘‘(ii) LIMITATION ON TERMINATION

17 OF COVERAGE.—Such a qualifying associa18 tion offering a MedicarePlus product to an

19 individual may not terminate coverage of

20 the individual on the basis that the individ21 ual is no longer a member of the associa22 tion except pursuant to a change of elec23 tion during an open election period occur24 ring on or after the date of the termination

25 of membership.
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1 ‘‘(iii) QUALIFIED ASSOCIATION.—In

2 this part and section 1805, the term ‘quali3 fied association’ means an association, reli4 gious fraternal organization, or other orga5 nization (which may be a trade, industry,

6 or professional association, a chamber of

7 commerce, or a public entity association)

8 that the Secretary finds—

9 ‘‘(I) has been formed for pur10 poses other than the sale of any

11 health insurance and does not restrict

12 membership based on the health sta13 tus, claims experience, receipt of

14 health care, medical history, or lack of

15 evidence of insurability, of an individ16 ual,

17 ‘‘(II) does not exist solely or

18 principally for the purpose of selling

19 insurance, and

20 ‘‘(III) has at least 1,000 individ21 ual members or 200 employer mem22 bers.

23 Such term includes a subsidiary or cor24 poration that is wholly owned by one or

25 more qualified organizations.
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1 ‘‘(D) LIMITATION.—Rules of eligibility to

2 carry out the previous subparagraphs of this

3 paragraph shall not have the effect of denying

4 eligibility to individuals on the basis of health

5 status, claims experience, receipt of health care,

6 medical history, or lack of evidence of insurabil7 ity.

8 ‘‘(E) LIMITED ENROLLMENT

9 MEDICAREPLUS ORGANIZATION.—In this part

10 and section 1805, the term ‘limited enrollment

11 MedicarePlus organization’ means a

12 MedicarePlus organization that is a union spon13 sor, Taft-Hartley sponsor, or a qualified asso14 ciation.

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

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

17 and ‘group health plan’ have the meanings

18 given such terms for purposes of part 6 of sub19 title B of title I of the Employee Retirement In20 come Security Act of 1974.

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

22 ‘‘(1) IN GENERAL.—Each MedicarePlus organi23 zation shall file with the Secretary each year, in a

24 form and manner and at a time specified by the Sec25 retary—
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Subtitle A, Part 1

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

2 for coverage under each MedicarePlus product

3 it offers under this part in each payment area

4 (as determined for purposes of section 1855) in

5 which the product is being offered; and

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

7 the product in each such area.

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

9 amount of the premium charged by a MedicarePlus

10 organization for a MedicarePlus product offered in

11 a payment area to an individual under this part

12 shall be equal to the amount (if any) by which—

13 ‘‘(A) the amount of the premium for the

14 product for the area and period involved, as

15 submitted under paragraph (1), exceeds

‘‘(B) 1 16 ⁄12 of the annual MedicarePlus capi17 tation rate specified in section 1855(b)(2) for

18 the area and period involved.

19 ‘‘(3) UNIFORM PREMIUM.—

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

21 subparagraph (B), the premiums charged by a

22 MedicarePlus organization under this part may

23 not vary among individuals who reside in the

24 same payment area.
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1 ‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/

2 MEDISAVE PRODUCTS.—A MedicarePlus organi3 zation shall establish premiums for any high de4 ductible/medisave product it offers in a payment

5 area in a manner consistent with and based on

6 each of the risk adjustment categories estab7 lished for purposes of determining the amount

8 of the payment to MedicarePlus organizations

9 under section 1855(b)(1).

10 ‘‘(4) TERMS AND CONDITIONS OF IMPOSING

11 PREMIUMS.—Each MedicarePlus organization shall

12 permit the payment of monthly premiums on a

13 monthly basis and may terminate election of individ14 uals for a MedicarePlus product for failure to make

15 premium payments only in accordance with sub16 section (c)(3)(B).

17 ‘‘(e) REQUIREMENT FOR ADDITIONAL BENEFITS,

18 PART B PREMIUM DISCOUNT REBATES, OR BOTH.—

19 ‘‘(1) REQUIREMENT.—

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

21 organization (in relation to a MedicarePlus

22 product it offers) shall provide that if there is

23 an excess amount (as defined in subparagraph

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

25 to the succeeding provisions of this subsection,
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1 the organization shall provide to individuals

2 such additional benefits (as the organization

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

4 monthly basis) of the part B monthly premium,

5 or a combination thereof, in a total value which

6 is at least equal to the adjusted excess amount

7 (as defined in subparagraph (C)).

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

9 this paragraph, the ‘excess amount’, for an or10 ganization for a product, is the amount (if any)

11 by which—

12 ‘‘(i) the average of the capitation pay13 ments made to the organization under this

14 part for the product at the beginning of

15 contract year, exceeds

16 ‘‘(ii) the actuarial value of the mini17 mum benefits described in subsection

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

19 under this part, as determined based upon

20 an adjusted community rate described in

21 paragraph (5).

22 ‘‘(C) ADJUSTED EXCESS AMOUNT.—For

23 purposes of this paragraph, the ‘adjusted excess

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

25 the excess amount reduced to reflect any
41

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1 amount withheld and reserved for the organiza2 tion for the year under paragraph (3).

3 ‘‘(D) NO APPLICATION TO HIGH DEDUCT4 IBLE/MEDISAVE PRODUCT.—Subparagraph (A)

5 shall not apply to a high deductible/medisave

6 product.

7 ‘‘(E) UNIFORM APPLICATION.—This para8 graph shall be applied uniformly for all enroll9 ees for a product in a service area.

10 ‘‘(F) CONSTRUCTION.—Nothing in this

11 subsection shall be construed as preventing a

12 MedicarePlus organization from providing

13 health care benefits that are in addition to the

14 benefits otherwise required to be provided under

15 this paragraph and from imposing a premium

16 for such additional benefits.

17 ‘‘(2) LIMITATION ON AMOUNT OF PART B PRE18 MIUM DISCOUNT REBATE.—In no case shall the

19 amount of a part B premium discount rebate under

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

21 the amount of premiums imposed under part B (not

22 taking into account section 1839(b) (relating to pen23 alty for late enrollment) or 1839(h) (relating to af24 fluence testing)), for the individual for the month.

25 Except as provided in the previous sentence, a
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1 MedicarePlus organization is not authorized to pro2 vide for cash or other monetary rebates as an in3 ducement for enrollment or otherwise.

4 ‘‘(3) STABILIZATION FUND.—A MedicarePlus

5 organization may provide that a part of the value of

6 an excess actuarial amount described in paragraph

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

8 Insurance Trust Fund and in the Federal Supple9 mentary Medical Insurance Trust Fund (in such

10 proportions as the Secretary determines to be appro11 priate) by the Secretary for subsequent annual con12 tract periods, to the extent required to stabilize and

13 prevent undue fluctuations in the additional benefits

14 and rebates offered in those subsequent periods by

15 the organization in accordance with such paragraph.

16 Any of such value of amount reserved which is not

17 provided as additional benefits described in para18 graph (1)(A) to individuals electing the

19 MedicarePlus product in accordance with such para20 graph prior to the end of such periods, shall revert

21 for the use of such trust funds.

22 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

23 DATA.—For purposes of this subsection, if the Sec24 retary finds that there is insufficient enrollment ex25 perience (including no enrollment experience in the
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1 case of a provider-sponsored organization) to deter2 mine an average of the capitation payments to be

3 made under this part at the beginning of a contract

4 period, the Secretary may determine such an aver5 age based on the enrollment experience of other con6 tracts entered into under this part.

7 ‘‘(5) ADJUSTED COMMUNITY RATE.—

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

9 subsection, subject to subparagraph (B), the

10 term ‘adjusted community rate’ for a service or

11 services means, at the election of a

12 MedicarePlus organization, either—

13 ‘‘(i) the rate of payment for that serv14 ice or services which the Secretary annu15 ally determines would apply to an individ16 ual electing a MedicarePlus product under

17 this part if the rate of payment were deter18 mined under a ‘community rating system’

19 (as defined in section 1302(8) of the Pub20 lic Health Service Act, other than subpara21 graph (C)), or

22 ‘‘(ii) such portion of the weighted ag23 gregate premium, which the Secretary an24 nually estimates would apply to such an in25 dividual, as the Secretary annually esti-
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1 mates is attributable to that service or

2 services,

3 but adjusted for differences between the utiliza4 tion characteristics of the individuals electing

5 coverage under this part and the utilization

6 characteristics of the other enrollees with the

7 organization (or, if the Secretary finds that

8 adequate data are not available to adjust for

9 those differences, the differences between the

10 utilization characteristics of individuals select11 ing other MedicarePlus coverage, or individuals

12 in the area, in the State, or in the United

13 States, eligible to elect MedicarePlus coverage

14 under this part and the utilization characteris15 tics of the rest of the population in the area, in

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

17 ‘‘(B) SPECIAL RULE FOR PROVIDER-SPON18 SORED ORGANIZATIONS.—In the case of a

19 MedicarePlus organization that is a provider20 sponsored organization, the adjusted community

21 rate under subparagraph (A) for a

22 MedicarePlus product may be computed (in a

23 manner specified by the Secretary) using data

24 in the general commercial marketplace or (dur25 ing a transition period) based on the costs in-
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1 curred by the organization in providing such a

2 product.

3 ‘‘(f) RULES REGARDING PHYSICIAN PARTICIPA4 TION.—

5 ‘‘(1) PROCEDURES.—Each MedicarePlus orga6 nization shall establish reasonable procedures relat7 ing to the participation (under an agreement be8 tween a physician and the organization) of physi9 cians under MedicarePlus products offered by the

10 organization under this part. Such procedures shall

11 include—

12 ‘‘(A) providing notice of the rules regard13 ing participation,

14 ‘‘(B) providing written notice of participa15 tion decisions that are adverse to physicians,

16 and

17 ‘‘(C) providing a process within the organi18 zation for appealing adverse decisions, including

19 the presentation of information and views of the

20 physician regarding such decision.

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

22 MedicarePlus organization shall consult with physi23 cians who have entered into participation agree24 ments with the organization regarding the organiza-
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1 tion’s medical policy, quality, and medical manage2 ment procedures.

3 ‘‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE

4 PLANS.—

5 ‘‘(A) IN GENERAL.—Each MedicarePlus

6 organization may not operate any physician in7 centive plan (as defined in subparagraph (B))

8 unless the following requirements are met:

9 ‘‘(i) No specific payment is made di10 rectly or indirectly under the plan to a

11 physician or physician group as an induce12 ment to reduce or limit medically necessary

13 services provided with respect to a specific

14 individual enrolled with the organization.

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

16 physician group at substantial financial

17 risk (as determined by the Secretary) for

18 services not provided by the physician or

19 physician group, the organization—

20 ‘‘(I) provides stop-loss protection

21 for the physician or group that is ade22 quate and appropriate, based on

23 standards developed by the Secretary

24 that take into account the number of

25 physicians placed at such substantial
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1 financial risk in the group or under

2 the plan and the number of individ3 uals enrolled with the organization

4 who receive services from the physi5 cian or the physician group, and

6 ‘‘(II) conducts periodic surveys of

7 both individuals enrolled and individ8 uals previously enrolled with the orga9 nization to determine the degree of

10 access of such individuals to services

11 provided by the organization and sat12 isfaction with the quality of such serv13 ices.

14 ‘‘(iii) The organization provides the

15 Secretary with descriptive information re16 garding the plan, sufficient to permit the

17 Secretary to determine whether the plan is

18 in compliance with the requirements of this

19 subparagraph.

20 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE21 FINED.—In this paragraph, the term ‘physician

22 incentive plan’ means any compensation ar23 rangement between a MedicarePlus organiza24 tion and a physician or physician group that

25 may directly or indirectly have the effect of re-
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1 ducing or limiting services provided with respect

2 to individuals enrolled with the organization

3 under this part.

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

5 organization shall provide the Secretary with such infor6 mation on the organization and each MedicarePlus prod7 uct it offers as may be required for the preparation of

8 the information booklet described in section

9 1805(d)(2)(A).

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

11 BENEFITS UNDER A MEDICAREPLUS PRODUCT.—Noth12 ing in this part shall be construed as preventing a State

13 from coordinating benefits under its MediGrant program

14 under title XXI with those provided under a MedicarePlus

15 product in a manner that assures continuity of a full16 range of acute care and long-term care services to poor

17 elderly or disabled individuals eligible for benefits under

18 this title and under such program.

19 ‘‘PATIENT PROTECTION STANDARDS

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

21 MedicarePlus organization shall disclose in clear, accurate,

22 and standardized form, information regarding all of the

23 following for each MedicarePlus product it offers:

24 ‘‘(1) Benefits under the MedicarePlus product

25 offered, including exclusions from coverage and, if it

26 is a high deductible/medisave product, a comparison
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1 of benefits under such a product with benefits under

2 other MedicarePlus products.

3 ‘‘(2) Rules regarding prior authorization or

4 other review requirements that could result in

5 nonpayment.

6 ‘‘(3) Potential liability for cost-sharing for out7 of-network services.

8 ‘‘(4) The number, mix, and distribution of par9 ticipating providers.

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

11 including premiums, deductibles, co-payments, and

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

13 and services (both in and out of network).

14 ‘‘(6) Statistics on enrollee satisfaction with the

15 product and organization, including rates of

16 reenrollment.

17 ‘‘(7) Enrollee rights and responsibilities, includ18 ing the grievance process provided under subsection

19 (f).

20 ‘‘(8) A statement that the use of the 911 emer21 gency telephone number is appropriate in emergency

22 situations and an explanation of what constitutes an

23 emergency situation.
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1 Such information shall be disclosed to each enrollee under

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

3 thereafter.

4 ‘‘(b) ACCESS TO SERVICES.—

5 ‘‘(1) IN GENERAL.—A MedicarePlus organiza6 tion offering a MedicarePlus product may restrict

7 the providers from whom the benefits under the

8 product are provided so long as—

9 ‘‘(A) the organization makes such benefits

10 available and accessible to each individual elect11 ing the product within the product service area

12 with reasonable promptness and in a manner

13 which assures continuity in the provision of

14 benefits;

15 ‘‘(B) when medically necessary the organi16 zation makes such benefits available and acces17 sible 24 hours a day and 7 days a week;

18 ‘‘(C) the product provides for reimburse19 ment with respect to services which are covered

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

21 are provided to such an individual other than

22 through the organization, if—

23 ‘‘(i) the services were medically nec24 essary and immediately required because of
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1 an unforeseen illness, injury, or condition,

2 and

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

4 circumstances to obtain the services

5 through the organization; and

6 ‘‘(D) coverage is provided for emergency

7 services (as defined in paragraph (4)) without

8 regard to prior authorization or the emergency

9 care provider’s contractual relationship with the

10 organization.

11 ‘‘(2) MINIMUM PAYMENT LEVELS WHERE PRO12 VIDING POINT-OF-SERVICE COVERAGE.—If a

13 MedicarePlus product provides benefits for items

14 and services (not described in paragraph (1)(C))

15 through a network of providers and also permits

16 payment to be made under the product for such

17 items and services not provided through such a net18 work, the payment level under the product with re19 spect to such items and services furnished outside

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

21 effective cost-sharing rate is 50 percent, at least 35

22 percent) of the lesser of—

23 ‘‘(A) the payment basis (determined with24 out regard to deductibles and cost-sharing) that
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1 would have applied for such items and services

2 under parts A and B, or

3 ‘‘(B) the amount charged by the entity fur4 nishing such items and services.

5 ‘‘(3) PROTECTION OF ENROLLEES FOR CERTAIN

6 OUT-OF-NETWORK SERVICES.—

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

8 case of physicians’ services or renal dialysis

9 services described in subparagraph (C) which

10 are furnished by a participating physician or

11 provider of services or renal dialysis facility to

12 an individual enrolled with a MedicarePlus or13 ganization under this section, the applicable

14 participation agreement is deemed to provide

15 that the physician or provider of services or

16 renal dialysis facility will accept as payment in

17 full from the organization the amount that

18 would be payable to the physician or provider of

19 services or renal dialysis facility under part B

20 and from the individual under such part, if the

21 individual were not enrolled with such an orga22 nization under this part.

23 ‘‘(B) NONPARTICIPATING PROVIDERS.—In

24 the case of physicians’ services described in sub25 paragraph (C) which are furnished by a
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1 nonparticipating physician, the limitations on

2 actual charges for such services otherwise appli3 cable under part B (to services furnished by in4 dividuals not enrolled with a MedicarePlus or5 ganization under this section) shall apply in the

6 same manner as such limitations apply to serv7 ices furnished to individuals not enrolled with

8 such an organization.

9 ‘‘(C) SERVICES DESCRIBED.—The physi10 cians’ services or renal dialysis services de11 scribed in this subparagraph are physicians’

12 services or renal dialysis services which are fur13 nished to an enrollee of a MedicarePlus organi14 zation under this part by a physician, provider

15 of services, or renal dialysis facility who is not

16 under a contract with the organization.

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

18 In this subsection, the term ‘emergency services’

19 means, with respect to an individual enrolled with an

20 organization, covered inpatient and outpatient serv21 ices that—

22 ‘‘(A) are furnished by an appropriate

23 source other than the organization,

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

25 injury or sudden illness, and
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1 ‘‘(C) are needed because the time required

2 to reach the organization’s providers or suppli3 ers would have meant risk of permanent dam4 age to the patient’s health.

5 ‘‘(c) CONFIDENTIALITY AND ACCURACY OF EN6 ROLLEE RECORDS.—Each MedicarePlus organization

7 shall establish procedures—

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

9 identifiable enrollee information, and

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

11 records for enrollees.

12 ‘‘(d) QUALITY ASSURANCE PROGRAM.—

13 ‘‘(1) IN GENERAL.—Each MedicarePlus organi14 zation must have arrangements, established in ac15 cordance with regulations of the Secretary, for an

16 ongoing quality assurance program for health care

17 services it provides to such individuals.

18 ‘‘(2) ELEMENTS OF PROGRAM.—The quality as19 surance program shall—

20 ‘‘(A) stress health outcomes;

21 ‘‘(B) provide for the establishment of writ22 ten protocols for utilization review, based on

23 current standards of medical practice;

24 ‘‘(C) provide review by physicians and

25 other health care professionals of the process
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1 followed in the provision of such health care

2 services;

3 ‘‘(D) monitors and evaluates high volume

4 and high risk services and the care of acute and

5 chronic conditions;

6 ‘‘(E) evaluates the continuity and coordi7 nation of care that enrollees receive,

8 ‘‘(F) has mechanisms to detect both under9 utilization and overutilization of services,

10 ‘‘(G) after identifying areas for improve11 ment, establishes or alters practice parameters,

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

13 assesses the effectiveness of such action

14 through systematic follow-up,

15 ‘‘(I) makes available information on quality

16 and outcomes measures to facilitate beneficiary

17 comparison and choice of health coverage op18 tions (in such form and on such quality and

19 outcomes measures as the Secretary determines

20 to be appropriate), and

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

22 its effectiveness.

23 ‘‘(e) COVERAGE DETERMINATIONS.—

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

25 MedicarePlus organization shall make determina-
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1 tions regarding authorization requests for non2 emergency care on a timely basis, depending on the

3 urgency of the situation.

4 ‘‘(2) APPEALS.—

5 ‘‘(A) IN GENERAL.—Appeals from a deter6 mination of an organization denying coverage

7 shall be decided within 30 days of the date of

8 receipt of medical information, but not later

9 than 60 days after the date of the decision.

10 ‘‘(B) PHYSICIAN DECISION ON CERTAIN

11 APPEALS.—Appeal decisions relating to a deter12 mination to deny coverage based on a lack of

13 medical necessity shall be made only by a physi14 cian.

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

16 such a determination involving a life-threaten17 ing or emergency situation shall be decided on

18 an expedited basis.

19 ‘‘(f) GRIEVANCES AND APPEALS.—

20 ‘‘(1) GRIEVANCE MECHANISM.—Each

21 MedicarePlus organization must provide meaningful

22 procedures for hearing and resolving grievances be23 tween the organization (including any entity or indi24 vidual through which the organization provides

25 health care services) and enrollees under this part.
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1 ‘‘(2) APPEALS.—An enrollee with an organiza2 tion under this part who is dissatisfied by reason of

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

4 which the enrollee believes is entitled and at no

5 greater charge than the enrollee believes is required

6 to pay is entitled, if the amount in controversy is

7 $100 or more, to a hearing before the Secretary to

8 the same extent as is provided in section 205(b), and

9 in any such hearing the Secretary shall make the or10 ganization a party. If the amount in controversy is

11 $1,000 or more, the individual or organization shall,

12 upon notifying the other party, be entitled to judicial

13 review of the Secretary’s final decision as provided

14 in section 205(g), and both the individual and the

15 organization shall be entitled to be parties to that

16 judicial review. In applying sections 205(b) and

17 205(g) as provided in this subparagraph, and in ap18 plying section 205(l) thereto, any reference therein

19 to the Commissioner of Social Security or the Social

20 Security Administration shall be considered a ref21 erence to the Secretary or the Department of Health

22 and Human Services, respectively.

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

24 Each MedicarePlus organization shall meet the require-
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1 ment of section 1866(f) (relating to maintaining written

2 policies and procedures respecting advance directives).

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

4 ‘‘(1) SUBMISSION.—Each MedicarePlus organi5 zation may not distribute marketing materials un6 less—

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

8 distribution the organization has submitted the

9 material to the Secretary for review, and

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

11 distribution of such material.

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

13 under section 1856 shall include guidelines for the

14 review of all such material submitted and under

15 such guidelines the Secretary shall disapprove such

16 material if the material is materially inaccurate or

17 misleading or otherwise makes a material misrepre18 sentation.

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

20 In the case of material that is submitted under sub21 paragraph (A)(i) to the Secretary or a regional office

22 of the Department of Health and Human Services

23 and the Secretary or the office has not disapproved

24 the distribution of marketing materials under sub25 paragraph (A)(ii) with respect to a MedicarePlus
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1 product in an area, the Secretary is deemed not to

2 have disapproved such distribution in all other areas

3 covered by the product and organization.

4 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

5 PRACTICES.—Each MedicarePlus organization shall

6 conform to fair marketing standards in relation to

7 MedicarePlus products offered under this part, in8 cluded in the standards established under section

9 1856. Such standards shall include a prohibition

10 against an organization (or agent of such an organi11 zation) completing any portion of any election form

12 under section 1805 on behalf of any individual.

13 ‘‘PROVIDER-SPONSORED ORGANIZATIONS

14 ‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA15 TION DEFINED.—

16 ‘‘(1) IN GENERAL.—In this part, the term ‘pro17 vider-sponsored organization’ means a public or pri18 vate entity that (in accordance with standards estab19 lished under subsection (b)) is a provider, or group

20 of affiliated providers, that provides a substantial

21 proportion (as defined by the Secretary under such

22 standards) of the health care items and services

23 under the contract under this part directly through

24 the provider or affiliated group of providers.
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1 ‘‘(2) SUBSTANTIAL PROPORTION.—In defining

2 what is a ‘substantial proportion’ for purposes of

3 paragraph (1), the Secretary—

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

5 such an organization to assume responsibility

6 for a substantial proportion of services in order

7 to assure financial stability and the practical

8 difficulties in such an organization integrating

9 a very wide range of service providers; and

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

11 relevant differences among organizations, such

12 as their location in an urban or rural area.

13 ‘‘(3) AFFILIATION.—For purposes of this sub14 section, a provider is ‘affiliated’ with another pro15 vider if, through contract, ownership, or otherwise—

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

17 controls, is controlled by, or is under common

18 control with the other,

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

20 lawful combination under which each provider

21 shares, directly or indirectly, substantial finan22 cial risk in connection with their operations,

23 ‘‘(C) both providers are part of a con24 trolled group of corporations under section

25 1563 of the Internal Revenue Code of 1986, or
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1 ‘‘(D) both providers are part of an affili2 ated service group under section 414 of such

3 Code.

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

5 (3), control is presumed to exist if one party, di6 rectly or indirectly, owns, controls, or holds the

7 power to vote, or proxies for, not less than 51 per8 cent of the voting rights or governance rights of an9 other.

10 ‘‘(b) PROCESS FOR ESTABLISHING STANDARDS FOR

11 PROVIDER-SPONSORED ORGANIZATIONS.—For process of

12 establishing of standards for provider-sponsored organiza13 tions, see section 1856(c).

14 ‘‘(c) PROCESS FOR STATE CERTIFICATION OF PRO15 VIDER-SPONSORED ORGANIZATIONS.—For process of

16 State certification of provider-sponsored organizations, see

17 section 1857(c).

18 ‘‘(d) CONDITIONS FOR PREEMPTION FROM STATE

19 INSURANCE LICENSING REQUIREMENTS.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (3), notwithstanding any other provision of

22 law, in the case of a provider-sponsored organization

23 with respect to a State that—

24 ‘‘(A) only enrolls in the State individuals

25 who are entitled to benefits under this title, and
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1 ‘‘(B) cannot do business as a MedicarePlus

2 organization in the State because that State by

3 law, regulation, or otherwise—

4 ‘‘(i) requires that the organization

5 meet requirements for insurers of health

6 services or health maintenance organiza7 tions doing business in the State with re8 spect to initial capitalization and establish9 ment of financial reserves against insol10 vency, or

11 ‘‘(ii) imposes requirements that would

12 prohibit the entity from complying with the

13 applicable requirements of this part,

14 such requirements shall not apply to the organiza15 tion so as to prevent it from operating as a

16 MedicarePlus organization under this part.

17 ‘‘(2) NOT TREATING CERTAIN INDIVIDUALS AS

18 ENROLLEES.—For purposes of paragraph (1)(A), an

19 individual who—

20 ‘‘(A) is a participant or beneficiary of an

21 employee welfare benefit plan to which section

22 514(a) of the Employee Retirement Income Se23 curity Act of 1974 applies, and
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1 ‘‘(B) receives health services from a pro2 vider-sponsored organization under an arrange3 ment with the plan,

4 shall be considered to be enrolled with the employee

5 welfare benefit plan and shall not be considered to

6 be enrolled with the organization.

7 ‘‘(3) TREATMENT OF STATES WITH APPROVED

8 CERTIFICATION PROGRAMS.—

9 ‘‘(A) IN GENERAL.—In the case of an or10 ganization that is operating in an approved

11 State (as defined in subparagraph (C)), the

12 provisions of paragraph (1) and section 1851(b)

13 shall not apply.

14 ‘‘(B) EFFECTIVE DATE.—Subparagraph

15 (A) shall apply—

16 ‘‘(i) in the case of an entity that has

17 a contract under this part in effect as of

18 the date the State becomes an approved

19 State, at the end of the first contract year

20 that begins after such date, or

21 ‘‘(ii) in the case of any other entity,

22 for contract years that begin after such

23 date.

24 ‘‘(C) APPROVED STATE DEFINED.—In this

25 paragraph, the term ‘approved State’ means a
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1 State with a certification program approved

2 under section 1857(c) with respect to provider3 sponsored organizations in the State.

4 ‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS

5 ‘‘SEC. 1855. (a) PAYMENTS.—

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

7 section 1858 the Secretary shall pay to each

8 MedicarePlus organization, with respect to coverage

9 of an individual under this part in a payment area

10 for a month, an amount equal to the monthly ad11 justed MedicarePlus capitation rate (as provided

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

13 for that area.

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

15 shall annually determine, and shall announce (in a

16 manner intended to provide notice to interested par17 ties) not later than September 7 before the calendar

18 year concerned—

19 ‘‘(A) the annual MedicarePlus capitation

20 rate for each payment area for the year, and

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

22 such rates under subsection (b) for payments

23 for months in that year.

24 ‘‘(3) ADVANCE NOTICE OF METHODOLOGICAL

25 CHANGES.—At least 45 days before making the an26 nouncement under paragraph (2) for a year, the
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1 Secretary shall provide for notice to MedicarePlus

2 organizations of proposed changes to be made in the

3 methodology or benefit coverage assumptions from

4 the methodology and assumptions used in the pre5 vious announcement and shall provide such organi6 zations an opportunity to comment on such proposed

7 changes.

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

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

10 the Secretary shall include an explanation of the as11 sumptions (including any benefit coverage assump12 tions) and changes in methodology used in the an13 nouncement in sufficient detail so that MedicarePlus

14 organizations can compute monthly adjusted

15 MedicarePlus capitation rates for classes of individ16 uals located in each payment area which is in whole

17 or in part within the service area of such an organi18 zation.

19 ‘‘(b) MONTHLY ADJUSTED MEDICAREPLUS CAPITA20 TION RATE.—

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, the ‘monthly adjusted MedicarePlus capitation

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

24 for an individual in a payment area (specified under

25 paragraph (3)) and in a class (established under
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paragraph (4)), is 1 1 ⁄12 of the annual MedicarePlus

2 capitation rate specified in paragraph (2) for that

3 area for the year, adjusted to reflect the actuarial

4 value of benefits under this title with respect to indi5 viduals in such class compared to the national aver6 age for individuals in all classes.

7 ‘‘(2) ANNUAL MEDICAREPLUS CAPITATION

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

9 MedicarePlus capitation rate for a payment area for

10 a year is equal to the annual MedicarePlus capita11 tion rate for the area for the previous year (or, in

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

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

14 the area for 1995) increased by the per capita

15 growth rate for that area and year (as determined

16 under subsection (c)).

17 ‘‘(3) PAYMENT AREA DEFINED.—In this sec18 tion, the term ‘payment area’ means a county (or

19 equivalent area specified by the Secretary), except

20 that in the case of the population group described in

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

22 State.

23 ‘‘(4) CLASSES.—

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

25 section, the Secretary shall define appropriate
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1 classes of enrollees, consistent with paragraph

2 (5), based on age, gender, welfare status, insti3 tutionalization, and such other factors as the

4 Secretary determines to be appropriate, so as to

5 ensure actuarial equivalence. The Secretary

6 may add to, modify, or substitute for such

7 classes, if such changes will improve the deter8 mination of actuarial equivalence.

9 ‘‘(B) RESEARCH.—The Secretary shall

10 conduct such research as may be necessary to

11 provide for greater accuracy in the adjustment

12 of capitation rates under this subsection. Such

13 research may include research into the addition

14 or modification of classes under subparagraph

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

16 report on such research by not later than Janu17 ary 1, 1997.

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

19 carrying out paragraph (4) and this section, the Sec20 retary shall recognize the following separate popu21 lation groups:

22 ‘‘(A) AGED.—Individuals 65 years of age

23 or older who are not described in subparagraph

24 (C).
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1 ‘‘(B) DISABLED.—Disabled individuals

2 who are under 65 years of age and not de3 scribed in subparagraph (C).

4 ‘‘(C) INDIVIDUALS WITH END STAGE

5 RENAL DISEASE.—Individuals who are deter6 mined to have end stage renal disease.

7 ‘‘(c) PER CAPITA GROWTH RATES.—

8 ‘‘(1) FOR 1996.—

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

10 section and subject to subparagraph (B), the

11 per capita growth rates for 1996, for a payment

12 area assigned to a service utilization cohort

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

14 ‘‘(i) LOWEST SERVICE UTILIZATION

15 COHORT.—For areas assigned to the low16 est service utilization cohort, 9.7 percent.

17 ‘‘(ii) LOWER SERVICE UTILIZATION

18 COHORT.—For areas assigned to the lower

19 service utilization cohort, 8.0 percent.

20 ‘‘(iii) MEDIAN SERVICE UTILIZATION

21 COHORT.—For areas assigned to the me22 dian service utilization cohort, 5.3 percent.

23 ‘‘(iv) HIGHER SERVICE UTILIZATION

24 COHORT.—For areas assigned to the high25 er service utilization cohort, 4.7 percent.
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1 ‘‘(v) HIGHEST SERVICE UTILIZATION

2 COHORT.—For areas assigned to the high3 est service utilization cohort, 4.0 percent.

4 ‘‘(B) BUDGET NEUTRAL ADJUSTMENT.—

5 The Secretary shall adjust the per capita

6 growth rates specified in subparagraph (A) for

7 all the areas by such uniform factor as may be

8 necessary to assure that the total capitation

9 payments under this section during 1996 are

10 the same as the amount such payments would

11 have been if the per capita growth rate for all

12 such areas for 1996 were equal to the national

13 average per capita growth rate, specified in

14 paragraph (3) for 1996.

15 ‘‘(2) FOR SUBSEQUENT YEARS.—

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

17 section and subject to subparagraph (B), the

18 Secretary shall compute a per capita growth

19 rate for each year after 1996, for each payment

20 area as assigned to a service utilization cohort

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

23 ‘‘(i) MEDIAN SERVICE UTILIZATION

24 COHORT SET AT NATIONAL AVERAGE PER

25 CAPITA GROWTH RATE.—The per capita
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1 growth rate for areas assigned to the me2 dian service utilization cohort for the year

3 shall be the national average per capita

4 growth rate for the year (as specified

5 under paragraph (3)).

6 ‘‘(ii) HIGHEST SERVICE UTILIZATION

7 COHORT SET AT 75 PERCENT OF NATIONAL

8 AVERAGE PER CAPITA GROWTH RATE.—

9 The per capita growth rate for areas as10 signed to the highest service utilization co11 hort for the year shall be 75 percent of the

12 national average per capita growth rate for

13 the year.

14 ‘‘(iii) LOWEST SERVICE UTILIZATION

15 COHORT SET AT 187.5 PERCENT OF NA16 TIONAL AVERAGE PER CAPITA GROWTH

17 RATE.—The per capita growth rate for

18 areas assigned to the lowest service utiliza19 tion cohort for the year shall be 187.5 per20 cent of the national average per capita

21 growth rate for the year.

22 ‘‘(iv) LOWER SERVICE UTILIZATION

23 COHORT SET AT 150 PERCENT OF NA24 TIONAL AVERAGE PER CAPITA GROWTH

25 RATE.—
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1 ‘‘(I) IN GENERAL.—Subject to

2 subclause (II), the per capita growth

3 rate for areas assigned to the lower

4 service utilization cohort for the year

5 shall be 150 percent of the national

6 average per capita growth rate for the

7 year.

8 ‘‘(II) ADJUSTMENT.—If the Sec9 retary has established under clause

10 (v) the per capita growth rate for

11 areas assigned to the higher service

12 utilization cohort for the year at 75

13 percent of the national average per

14 capita growth rate, the Secretary may

15 provide for a reduced per capita

16 growth rate under subclause (I) to the

17 extent necessary to comply with sub18 paragraph (B).

19 ‘‘(v) HIGHER SERVICE UTILIZATION

20 COHORT.—The per capita growth rate for

21 areas assigned to the higher service utiliza22 tion cohort for set year shall be such per23 cent (not less than 75 percent) of the na24 tional average per capita growth rate, as
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1 the Secretary may determine consistent

2 with subparagraph (B).

3 ‘‘(B) AVERAGE PER CAPITA GROWTH RATE

4 AT NATIONAL AVERAGE TO ASSURE BUDGET

5 NEUTRALITY.—The Secretary shall compute per

6 capita growth rates for a year under subpara7 graph (A) in a manner so that the weighted av8 erage per capita growth rate for all areas for

9 the year (weighted to reflect the number of

10 medicare beneficiaries in each area) is equal to

11 the national average per capita growth rate

12 under paragraph (3) for the year.

13 ‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH

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

15 per capita growth rate’ for—

16 ‘‘(A) 1996 is 5.3 percent,

17 ‘‘(B) 1997 is 3.8 percent,

18 ‘‘(C) 1998 is 4.6 percent,

19 ‘‘(D) 1999 is 4.3 percent,

20 ‘‘(E) 2000 is 3.8 percent,

21 ‘‘(F) 2001 is 5.5 percent,

22 ‘‘(G) 2002 is 5.6 percent, and

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

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

25 UTILIZATION COHORTS.—
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1 ‘‘(1) IN GENERAL.—For purposes of determin2 ing per capita growth rates under subsection (c) for

3 areas for a year, the Secretary shall assign each pay4 ment area to a service utilization cohort (based on

5 the service utilization index value for that area de6 termined under paragraph (2)) as follows:

7 ‘‘(A) LOWEST SERVICE UTILIZATION CO8 HORT.—Areas with a service utilization index

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

10 lowest service utilization cohort.

11 ‘‘(B) LOWER SERVICE UTILIZATION CO12 HORT.—Areas with a service utilization index

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

14 assigned to the lower service utilization cohort.

15 ‘‘(C) MEDIAN SERVICE UTILIZATION CO16 HORT.—Areas with a service utilization index

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

18 assigned to the median service utilization co19 hort.

20 ‘‘(D) HIGHER SERVICE UTILIZATION CO21 HORT.—Areas with a service utilization index

22 value of at least 1.10 but less than 1.20 shall

23 be assigned to the higher service utilization co24 hort.
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1 ‘‘(E) HIGHEST SERVICE UTILIZATION CO2 HORT.—Areas with a service utilization index

3 value of at least 1.20 shall be assigned to the

4 highest service utilization cohort.

5 ‘‘(2) DETERMINATION OF SERVICE UTILIZATION

6 INDEX VALUES.—In order to determine the per cap7 ita growth rate for a payment area for each year

8 (beginning with 1996), the Secretary shall determine

9 for such area and year a service utilization index

10 value, which is equal to—

11 ‘‘(A) the annual MedicarePlus capitation

12 rate under this section for the area for the year

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

14 case of 1996, the average annual per capita

15 rate of payment (described in section

16 1876(a)(1)(C)) for the area for 1995); divided

17 by

18 ‘‘(B) the input-price-adjusted annual na19 tional MedicarePlus capitation rate (as deter20 mined under paragraph (3)) for that area for

21 the year in which the determination is made.

22 ‘‘(3) DETERMINATION OF INPUT-PRICE-AD23 JUSTED RATES.—

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (2), the ‘input-price-adjusted annual na-
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1 tional MedicarePlus capitation rate’ for a pay2 ment area for a year is equal to the sum, for

3 all the types of medicare services (as classified

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

5 type) of—

6 ‘‘(i) the national standardized

7 MedicarePlus capitation rate (determined

8 under subparagraph (B)) for the year,

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

10 the year which is attributable to such type

11 of services, and

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

13 year and that type of services) the relative

14 input price of such services in the area

15 compared to the national average input

16 price of such services.

17 In applying clause (iii), the Secretary shall, sub18 ject to subparagraph (C), apply those indices

19 under this title that are used in applying (or

20 updating) national payment rates for specific

21 areas and localities.

22 ‘‘(B) NATIONAL STANDARDIZED

23 MEDICAREPLUS CAPITATION RATE.—In this

24 paragraph, the ‘national standardized
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1 MedicarePlus capitation rate’ for a year is

2 equal to—

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

4 of the product of (I) the annual

5 MedicarePlus capitation rate for that year

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

7 (II) the average number of medicare bene8 ficiaries residing in that area in the year;

9 divided by

10 ‘‘(ii) the total average number of med11 icare beneficiaries residing in all the pay12 ment areas for that year.

13 ‘‘(C) SPECIAL RULES FOR 1996.—In apply14 ing this paragraph for 1996—

15 ‘‘(i) medicare services shall be divided

16 into 2 types of services: part A services

17 and part B services;

18 ‘‘(ii) the proportions described in sub19 paragraph (A)(ii) for such types of services

20 shall be 66 percent and 34 percent respec21 tively;

22 ‘‘(iii) for the part A services, 70 per23 cent of payments attributable to such serv24 ices shall be adjusted by the index used

25 under section 1886(d)(3)(E) to adjust pay-
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1 ment rates for relative hospital wage levels

2 for hospitals located in the payment area

3 involved;

4 ‘‘(iv) for part B services—

5 ‘‘(I) 66 percent of payments at6 tributable to such services shall be ad7 justed by the index of the geographic

8 area factors under section 1848(e)

9 used to adjust payment rates for phy10 sicians’ services furnished in the pay11 ment area, and

12 ‘‘(II) of the remaining 34 percent

13 of the amount of such payments, 70

14 percent shall be adjusted by the index

15 described in clause (iii);

16 ‘‘(v) the index values shall be com17 puted based only on the beneficiary popu18 lation described in subsection (b)(5)(A).

19 The Secretary may continue to apply the rules

20 described in this subparagraph (or similar

21 rules) for 1997.

22 ‘‘(e) PAYMENT PROCESS.—

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

24 the Secretary shall make monthly payments under

25 this section in advance and in accordance with the
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1 rate determined under subsection (a) to the plan for

2 each individual enrolled with a MedicarePlus organi3 zation under this part.

4 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF

5 ENROLLEES.—

6 ‘‘(A) IN GENERAL.—The amount of pay7 ment under this subsection may be retroactively

8 adjusted to take into account any difference be9 tween the actual number of individuals enrolled

10 with an organization under this part and the

11 number of such individuals estimated to be so

12 enrolled in determining the amount of the ad13 vance payment.

14 ‘‘(B) SPECIAL RULE FOR CERTAIN EN15 ROLLEES.—

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

17 (ii), the Secretary may make retroactive

18 adjustments under subparagraph (A) to

19 take into account individuals enrolled dur20 ing the period beginning on the date on

21 which the individual enrolls with a

22 MedicarePlus organization under a product

23 operated, sponsored, or contributed to by

24 the individual’s employer or former em25 ployer (or the employer or former employer
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1 of the individual’s spouse) and ending on

2 the date on which the individual is enrolled

3 in the organization under this part, except

4 that for purposes of making such retro5 active adjustments under this subpara6 graph, such period may not exceed 90

7 days.

8 ‘‘(ii) EXCEPTION.—No adjustment

9 may be made under clause (i) with respect

10 to any individual who does not certify that

11 the organization provided the individual

12 with the disclosure statement described in

13 section 1853(a) at the time the individual

14 enrolled with the organization.

15 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

16 HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—

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

18 who has elected a high deductible/medisave product,

19 notwithstanding the preceding provisions of this sec20 tion—

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

22 MedicarePlus organization offering the high de23 ductible/medisave product shall not exceed the

24 premium for the product, and
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1 ‘‘(B) subject to paragraph (2), the dif2 ference between the amount of payment that

3 would otherwise be made and the amount of

4 payment to such organization shall be made di5 rectly into a MedicarePlus MSA established

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

7 under paragraph (2).

8 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

9 MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE10 QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In

11 the case of an individual who has elected coverage

12 under a high deductible/medisave product, no pay13 ment shall be made under paragraph (1)(B) on be14 half of an individual for a month unless the individ15 ual—

16 ‘‘(A) has established before the beginning

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

18 Secretary may specify) a MedicarePlus MSA

19 (as defined in section 137(b) of the Internal

20 Revenue Code of 1986), and

21 ‘‘(B) if the individual has established more

22 than one MedicarePlus MSA, has designated

23 one of such accounts as the individual’s

24 MedicarePlus MSA for purposes of this part.
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1 Under rules under this section, such an individual

2 may change the designation of such account under

3 subparagraph (B) for purposes of this part.

4 ‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS

5 ACCOUNT CONTRIBUTION.—In the case of an indi6 vidual electing a high deductible/medisave product

7 effective beginning with a month in a year, the

8 amount of the contribution to the MedicarePlus

9 MSA on behalf of the individual for that month and

10 all successive months in the year shall be deposited

11 during that first month. In the case of a termination

12 of such an election as of a month before the end of

13 a year, the Secretary shall provide for a procedure

14 for the recovery of deposits attributable to the re15 maining months in the year.

16 ‘‘(g) PAYMENTS FROM TRUST FUND.—The payment

17 to a MedicarePlus organization under this section for indi18 viduals enrolled under this part with the organization, and

19 payments to a MedicarePlus MSA under subsection

20 (f)(1)(B), shall be made from the Federal Hospital Insur21 ance Trust Fund and the Federal Supplementary Medical

22 Insurance Trust Fund in such proportion as the Secretary

23 determines reflects the relative weight that benefits under

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

25 of the total benefits under this title.
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1 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS2 PITAL STAYS.—In the case of an individual who is receiv3 ing inpatient hospital services from a subsection (d) hos4 pital (as defined in section 1886(d)(1)(B)) as of the effec5 tive date of the individual’s—

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

7 product offered by a MedicarePlus organization—

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

9 date of the individual’s discharge shall be made

10 under this title through the MedicarePlus prod11 uct or Non-MedicarePlus option (as the case

12 may be) elected before the election with such

13 organization,

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

15 financially responsible for payment for such

16 services until the date after the date of the indi17 vidual’s discharge, and

18 ‘‘(C) the organization shall nonetheless be

19 paid the full amount otherwise payable to the

20 organization under this part; or

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

22 MedicarePlus organization under this part—

23 ‘‘(A) the organization shall be financially

24 responsible for payment for such services after
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1 such date and until the date of the individual’s

2 discharge,

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

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

5 by succeeding the MedicarePlus organization,

6 and

7 ‘‘(C) the terminated organization shall not

8 receive any payment with respect to the individ9 ual under this part during the period the indi10 vidual is not enrolled.

11 ‘‘ESTABLISHMENT OF STANDARDS FOR MEDICAREPLUS

12 ORGANIZATIONS AND PRODUCTS

13 ‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO STATE14 REGULATED ORGANIZATIONS AND PRODUCTS.—

15 ‘‘(1) RECOMMENDATIONS OF NAIC.—The Sec16 retary shall request the National Association of In17 surance Commissioners to develop and submit to the

18 Secretary, not later than 12 months after the date

19 of the enactment of the Medicare Preservation Act

20 of 1995, proposed standards consistent with the re21 quirements of this part for MedicarePlus organiza22 tions (other than a union sponsors, Taft-Hartley

23 sponsors, and provider-sponsored organizations) and

24 MedicarePlus products offered by such organiza25 tions.
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1 ‘‘(2) REVIEW.—If the Association submits such

2 standards on a timely basis, the Secretary shall re3 view such standards to determine if the standards

4 meet the requirements of the part. The Secretary

5 shall complete the review of the standards not later

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

7 Secretary shall promulgate such proposed standards

8 to apply to organizations and products described in

9 paragraph (1) except to the extent that the Sec10 retary modifies such proposed standards because

11 they do not meet such requirements.

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

13 does not submit such standards on a timely basis,

14 the Secretary shall promulgate such standards by

15 not later than the date the Secretary would other16 wise have been required to promulgate standards

17 under paragraph (2).

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

19 in which this part is in effect and standards are

20 being developed and established under the preceding

21 provisions of this subsection, the Secretary shall pro22 vide for the application of such interim standards

23 (without regard to any requirements for notice and

24 public comment) as may be appropriate to provide

25 for the expedited implementation of this part. Such
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1 interim standards shall not apply after the date

2 standards are established under the preceding provi3 sions of this subsection.

4 ‘‘(b) UNION AND TAFT-HARTLEY SPONSORS AND

5 PRODUCTS.—

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

7 and promulgate by regulation standards consistent

8 with the requirements of this part for union and

9 Taft-Hartley sponsors and for MedicarePlus prod10 ucts offered by such sponsors.

11 ‘‘(2) CONSULTATION WITH LABOR.—The Sec12 retary shall consult with the Secretary of Labor with

13 respect to such standards for such sponsors and

14 products.

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

16 shall be promulgated at or about the time standards

17 are promulgated under subsection (a).

18 ‘‘(c) ESTABLISHMENT OF STANDARDS FOR PRO19 VIDER-SPONSORED ORGANIZATIONS.—

20 ‘‘(1) IN GENERAL.—The Secretary shall estab21 lish, on an expedited basis and using a negotiated

22 rulemaking process under subchapter 3 of chapter 5

23 of title 5, United States Code, standards that enti24 ties must meet to qualify as provider-sponsored or25 ganizations under this part.
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1 ‘‘(2) PUBLICATION OF NOTICE.—In carrying

2 out the rulemaking process under this subsection,

3 the Secretary, after consultation with the National

4 Association of Insurance Commissioners, the Amer5 ican Academy of Actuaries, organizations represent6 ative of medicare beneficiaries, and other interested

7 parties, shall publish the notice provided for under

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

9 later than 45 days after the date of the enactment

10 of Medicare Preservation Act of 1995.

11 ‘‘(3) TARGET DATE FOR PUBLICATION OF

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

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

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

15 such title) shall be September 1, 1996.

16 ‘‘(4) ABBREVIATED PERIOD FOR SUBMISSION

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

18 title under this subsection, ‘15 days’ shall be sub19 stituted for ‘30 days’.

20 ‘‘(5) APPOINTMENT OF NEGOTIATED RULE21 MAKING COMMITTEE AND FACILITATOR.—The Sec22 retary shall provide for—

23 ‘‘(A) the appointment of a negotiated rule24 making committee under section 565(a) of such

25 title by not later than 30 days after the end of
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1 the comment period provided for under section

2 564(c) of such title (as shortened under para3 graph (4)), and

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

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

6 days after the date of appointment of the com7 mittee.

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

9 negotiated rulemaking committee appointed under

10 paragraph (5) shall report to the Secretary, by not

11 later than June 1, 1996, regarding the committee’s

12 progress on achieving a concensus with regard to the

13 rulemaking proceeding and whether such consensus

14 is likely to occur before one month before the target

15 date for publication of the rule. If the committee re16 ports that the committee has failed to make signifi17 cant progress towards such consensus or is unlikely

18 to reach such consensus by the target date, the Sec19 retary may terminate such process and provide for

20 the publication of a rule under this subsection

21 through such other methods as the Secretary may

22 provide.

23 ‘‘(7) FINAL COMMITTEE REPORT.—If the com24 mittee is not terminated under paragraph (6), the

25 rulemaking committee shall submit a report contain-
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1 ing a proposed rule by not later than one month be2 fore the target publication date.

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

4 shall publish a rule under this subsection in the Fed5 eral Register by not later than the target publication

6 date. Such rule shall be effective and final imme7 diately on an interim basis, but is subject to change

8 and revision after public notice and opportunity for

9 a period (of not less than 60 days) for public com10 ment. In connection with such rule, the Secretary

11 shall specify the process for the timely review and

12 approval of applications of entities to be certified as

13 provider-sponsored organizations pursuant to such

14 rules and consistent with this subsection.

15 ‘‘(9) PUBLICATION OF RULE AFTER PUBLIC

16 COMMENT.—The Secretary shall provide for consid17 eration of such comments and republication of such

18 rule by not later than 1 year after the target publi19 cation date.

20 ‘‘(10) PROCESS FOR APPROVAL OF APPLICA21 TIONS FOR CERTIFICATION.—

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

23 establish a process for the receipt and approval

24 of applications of entities for certification as

25 provider-sponsored organizations under this
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1 part. Under such process, the Secretary shall

2 act upon a complete application submitted with3 in 60 days after the date it is received.

4 ‘‘(B) CIRCULATION OF PROPOSED APPLI5 CATION FORM.—By March 1, 1996, the Sec6 retary, after consultation with the negotiated

7 rulemaking committee, shall circulate a pro8 posed application form that could be used by

9 entities considering becoming certified as a pro10 vider-sponsored organization under this part.

11 ‘‘(d) COORDINATION AMONG FINAL STANDARDS.—In

12 establishing standards (other than on an interim basis)

13 under the previous provisions of this section, the Secretary

14 shall seek to provide for consistency (as appropriate)

15 across the different types of MedicarePlus organizations,

16 in order to promote equitable treatment of different types

17 of organizations and consistent protection for individuals

18 who elect products offered by the different types of

19 MedicarePlus organizations.

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

21 STANDARDS.—To the extent practicable and consistent

22 with the requirements of this part, standards established

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

24 may be based on currently applicable standards, such as

25 the rules established under section 1876 (as in effect as
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1 of the date of the enactment of this section) to carry out

2 analogous provisions of such section or standards estab3 lished or developed for application in the private health

4 insurance market.

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

6 WITH A CONTRACT.—In the case of a MedicarePlus orga7 nization with a contract in effect under this part at the

8 time standards applicable to the organization under this

9 section are changed, the organization may elect not to

10 have such changes apply to the organization until the end

11 of the current contract year (or, if there is less than 6

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

13 the end of the current contract year).

14 ‘‘(g) RELATION TO STATE LAWS.—The standards es15 tablished under this section shall supersede any State law

16 or regulation with respect to MedicarePlus products of17 fered under this part to the extent such law or regulation

18 is inconsistent with such standards.

19 ‘‘MEDICAREPLUS CERTIFICATION

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

21 FOR STATE-REGULATED ORGANIZATIONS.—

22 ‘‘(1) APPROVAL OF STATE PROCESS.—The Sec23 retary shall approve a MedicarePlus certification and

24 enforcement program established by a State for ap25 plying the standards established under section 1856

26 to MedicarePlus organizations (other than union
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1 sponsors, Taft-Hartley sponsors, and provider-spon2 sored organizations) and MedicarePlus products of3 fered by such organizations if the Secretary deter4 mines that the program effectively provides for the

5 application and enforcement of such standards in

6 the State with respect to such organizations and

7 products. Such program shall provide for certifi8 cation of compliance of MedicarePlus organizations

9 and products with the applicable requirements of

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

11 ‘‘(2) EFFECT OF CERTIFICATION UNDER STATE

12 PROCESS.—A MedicarePlus organization and

13 MedicarePlus product offered by such an organiza14 tion that is certified under such program is consid15 ered to have been certified under this subsection

16 with respect to the offering of the product to individ17 uals residing in the State.

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

19 fees on organizations seeking certification under this

20 subsection in such amounts as the State deems suffi21 cient to finance the costs of such certification. Noth22 ing in this paragraph shall be construed as restrict23 ing a State’s authority to impose premium taxes,

24 other taxes, or other levies.
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1 ‘‘(4) REVIEW.—The Secretary periodically shall

2 review State programs approved under paragraph

3 (1) to determine if they continue to provide for cer4 tification and enforcement described in such para5 graph. If the Secretary finds that a State program

6 no longer so provides, before making a final deter7 mination, the Secretary shall provide the State an

8 opportunity to adopt such a plan of correction as

9 would permit the State program to meet the require10 ments of paragraph (1). If the Secretary makes a

11 final determination that the State program, after

12 such an opportunity, fails to meet such require13 ments, the provisions of subsection (b) shall apply to

14 MedicarePlus organizations and products in the

15 State.

16 ‘‘(5) EFFECT OF NO STATE PROGRAM.—Begin17 ning on the date standards are established under

18 section 1856, in the case of organizations and prod19 ucts in States in which a certification program has

20 not been approved and in operation under paragraph

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

22 certification of MedicarePlus organizations (other

23 than union sponsors, Taft-Hartley sponsors, and

24 provider-sponsored organizations) and products of

25 such organizations as meeting such standards.
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1 ‘‘(6) PUBLICATION OF LIST OF APPROVED

2 STATE PROGRAMS.—The Secretary shall publish

3 (and periodically update) a list of those State pro4 grams which are approved for purposes of this sub5 section.

6 ‘‘(b) FEDERAL CERTIFICATION PROCESS FOR UNION

7 AND TAFT-HARTLEY SPONSORS AND PROVIDER-SPON8 SORED ORGANIZATIONS.—

9 ‘‘(1) ESTABLISHMENT.—The Secretary shall es10 tablish a process for the certification of union spon11 sors, Taft-Hartley sponsors, and provider-sponsored

12 organizations and MedicarePlus products offered by

13 such sponsors and organizations as meeting the ap14 plicable standards established under section 1856.

15 ‘‘(2) INVOLVEMENT OF SECRETARY OF

16 LABOR.—Such process shall be established and oper17 ated in cooperation with the Secretary of Labor with

18 respect to union sponsors or Taft-Hartley sponsors.

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

20 ACCREDITATION PROCESSES.—

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

22 this subsection shall, to the maximum extent

23 practicable, provide that MedicarePlus organi24 zations and products that are licensed or cer25 tified through a qualified private accreditation
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1 process that the Secretary finds applies stand2 ards that are no less stringent than the require3 ments of this part are deemed to meet the cor4 responding requirements of this part for such

5 an organization or product.

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

7 of an accreditation under subparagraph (A)

8 shall be valid only for such period as the Sec9 retary specifies.

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

11 user fees on entities seeking certification under this

12 subsection in such amounts as the Secretary deems

13 sufficient to finance the costs of such certification.

14 ‘‘(c) CERTIFICATION OF PROVIDER-SPONSORED OR15 GANIZATIONS BY STATES.—

16 ‘‘(1) IN GENERAL.—The Secretary shall estab17 lish a process under which a State may propose to

18 provide for certification of entities as meeting the re19 quirements of this part to be provider-sponsored or20 ganizations.

21 ‘‘(2) CONDITIONS FOR APPROVAL.—The Sec22 retary may not approve such a process unless the

23 Secretary determines that the certification process

24 applies standards that are consistent with the stand25 ards and requirements provided under this part and
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1 does not impose requirements more restrictive than

2 those that would apply if this subsection were not in

3 effect.

4 ‘‘(d) NOTICE TO ENROLLEES IN CASE OF DECERTI5 FICATION.—If a MedicarePlus organization or product is

6 decertified under this section, the organization shall notify

7 each enrollee with the organization and product under this

8 part of such decertification.

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

10 products offered by a MedicarePlus organization that is

11 a qualified association, nothing in this section shall be con12 strued as limiting the authority of States to regulate such

13 products.

14 ‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS

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

16 not permit the election under section 1805 of a

17 MedicarePlus product offered by a MedicarePlus organiza18 tion under this part, and no payment shall be made under

19 section 1856 to an organization, unless the Secretary has

20 entered into a contract under this section with an organi21 zation with respect to the offering of such product. Such

22 a contract with an organization may cover more than one

23 MedicarePlus product. Such contract shall provide that

24 the organization agrees to comply with the requirements

25 of this part and the terms and conditions of payment as

26 provided for in this part.
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1 ‘‘(b) ENROLLMENT REQUIREMENTS.—

2 ‘‘(1) MINIMUM ENROLLMENT.—

3 ‘‘(A) IN GENERAL.—Subject to subpara4 graphs (B) and (C), the Secretary may not

5 enter into a contract under this section with a

6 MedicarePlus organization (other than a union

7 sponsor or a Taft-Hartley sponsor) unless the

8 organization has at least 5,000 individuals (or

9 1,500 individuals in the case of an organization

10 that is a provider-sponsored organization) who

11 are receiving health benefits through the orga12 nization, except that the standards under sec13 tion 1856 may permit the organization to have

14 a lesser number of beneficiaries (but not less

15 than 500 in the case of an organization that is

16 a provider-sponsored organization) if the orga17 nization primarily serves individuals residing

18 outside of urbanized areas.

19 ‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/

20 MEDISAVE PRODUCT.—Subparagraph (A) shall

21 not apply with respect to a contract that relates

22 only to a high deductible/medisave product.

23 ‘‘(C) ALLOWING TRANSITION.—The Sec24 retary may waive the requirement of subpara-
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1 graph (A) during the first 3 contract years with

2 respect to an organization.

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

4 ‘‘(1) PERIOD.—Each contract under this sec5 tion shall be for a term of at least one year, as de6 termined by the Secretary, and may be made auto7 matically renewable from term to term in the ab8 sence of notice by either party of intention to termi9 nate at the end of the current term.

10 ‘‘(2) TERMINATION AUTHORITY.—In accord11 ance with procedures established under subsection

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

13 such contract or may impose the intermediate sanc14 tions described in an applicable paragraph of sub15 section (g) on the MedicarePlus organization if the

16 Secretary determines that the organization—

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

18 the contract;

19 ‘‘(B) is carrying out the contract in a man20 ner inconsistent with the efficient and effective

21 administration of this part;

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

23 in the best interests of the individuals covered

24 under the contract; or
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1 ‘‘(D) no longer substantially meets the ap2 plicable conditions of this part.

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

4 effective date of any contract executed pursuant to

5 this section shall be specified in the contract, except

6 that in no case shall a contract under this section

7 which provides for coverage under a high deductible/

8 medisave account be effective before January 1997

9 with respect to such coverage.

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

11 may not enter into a contract with a MedicarePlus

12 organization if a previous contract with that organi13 zation under this section was terminated at the re14 quest of the organization within the preceding five15 year period, except in circumstances which warrant

16 special consideration, as determined by the Sec17 retary.

18 ‘‘(5) NO CONTRACTING AUTHORITY.—The au19 thority vested in the Secretary by this part may be

20 performed without regard to such provisions of law

21 or regulations relating to the making, performance,

22 amendment, or modification of contracts of the

23 United States as the Secretary may determine to be

24 inconsistent with the furtherance of the purpose of

25 this title.
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1 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BENE2 FICIARY PROTECTIONS.—

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

4 under this section shall provide that the Secretary,

5 or any person or organization designated by the Sec6 retary—

7 ‘‘(A) shall have the right to inspect or oth8 erwise evaluate (i) the quality, appropriateness,

9 and timeliness of services performed under the

10 contract and (ii) the facilities of the organiza11 tion when there is reasonable evidence of some

12 need for such inspection, and

13 ‘‘(B) shall have the right to audit and in14 spect any books and records of the

15 MedicarePlus organization that pertain (i) to

16 the ability of the organization to bear the risk

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

18 performed or determinations of amounts pay19 able under the contract.

20 ‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI21 NATION.—Each contract under this section shall re22 quire the organization to provide (and pay for) writ23 ten notice in advance of the contract’s termination,

24 as well as a description of alternatives for obtaining
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1 benefits under this title, to each individual enrolled

2 with the organization under this part.

3 ‘‘(3) DISCLOSURE.—

4 ‘‘(A) IN GENERAL.—Each MedicarePlus

5 organization shall, in accordance with regula6 tions of the Secretary, report to the Secretary

7 financial information which shall include the

8 following:

9 ‘‘(i) Such information as the Sec10 retary may require demonstrating that the

11 organization has a fiscally sound operation.

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

13 with the Health Care Financing Adminis14 tration containing the information required

15 to be reported under section 1124 by dis16 closing entities.

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

18 specified by the Secretary, between the or19 ganization and a party in interest. Such

20 transactions shall include—

21 ‘‘(I) any sale or exchange, or

22 leasing of any property between the

23 organization and a party in interest;

24 ‘‘(II) any furnishing for consider25 ation of goods, services (including
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1 management services), or facilities be2 tween the organization and a party in

3 interest, but not including salaries

4 paid to employees for services pro5 vided in the normal course of their

6 employment and health services pro7 vided to members by hospitals and

8 other providers and by staff, medical

9 group (or groups), individual practice

10 association (or associations), or any

11 combination thereof; and

12 ‘‘(III) any lending of money or

13 other extension of credit between an

14 organization and a party in interest.

15 The Secretary may require that information re16 ported respecting an organization which con17 trols, is controlled by, or is under common con18 trol with, another entity be in the form of a

19 consolidated financial statement for the organi20 zation and such entity.

21 ‘‘(B) PARTY IN INTEREST DEFINED.—For

22 the purposes of this paragraph, the term ‘party

23 in interest’ means—

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

25 employee responsible for management or
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1 administration of a MedicarePlus organiza2 tion, any person who is directly or indi3 rectly the beneficial owner of more than 5

4 percent of the equity of the organization,

5 any person who is the beneficial owner of

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

7 interest secured by, and valuing more than

8 5 percent of the organization, and, in the

9 case of a MedicarePlus organization orga10 nized as a nonprofit corporation, an incor11 porator or member of such corporation

12 under applicable State corporation law;

13 ‘‘(ii) any entity in which a person de14 scribed in clause (i)—

15 ‘‘(I) is an officer or director;

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

17 is organized as a partnership);

18 ‘‘(III) has directly or indirectly a

19 beneficial interest of more than 5 per20 cent of the equity; or

21 ‘‘(IV) has a mortgage, deed of

22 trust, note, or other interest valuing

23 more than 5 percent of the assets of

24 such entity;
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1 ‘‘(iii) any person directly or indirectly

2 controlling, controlled by, or under com3 mon control with an organization; and

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

5 an individual described in clause (i).

6 ‘‘(C) ACCESS TO INFORMATION.—Each

7 MedicarePlus organization shall make the infor8 mation reported pursuant to subparagraph (A)

9 available to its enrollees upon reasonable re10 quest.

11 ‘‘(5) LOAN INFORMATION.—The contract shall

12 require the organization to notify the Secretary of

13 loans and other special financial arrangements which

14 are made between the organization and subcontrac15 tors, affiliates, and related parties.

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

17 shall contain such other terms and conditions not incon18 sistent with this part (including requiring the organization

19 to provide the Secretary with such information) as the

20 Secretary may find necessary and appropriate.

21 ‘‘(g) INTERMEDIATE SANCTIONS.—

22 ‘‘(1) IN GENERAL.—If the Secretary determines

23 that a MedicarePlus organization with a contract

24 under this section—
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1 ‘‘(A) fails substantially to provide medi2 cally necessary items and services that are re3 quired (under law or under the contract) to be

4 provided to an individual covered under the con5 tract, if the failure has adversely affected (or

6 has substantial likelihood of adversely affecting)

7 the individual;

8 ‘‘(B) imposes premiums on individuals en9 rolled under this part in excess of the premiums

10 permitted;

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

12 an individual in violation of the provisions of

13 this part;

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

15 reasonably be expected to have the effect of de16 nying or discouraging enrollment (except as

17 permitted by this part) by eligible individuals

18 with the organization whose medical condition

19 or history indicates a need for substantial fu20 ture medical services;

21 ‘‘(E) misrepresents or falsifies information

22 that is furnished—

23 ‘‘(i) to the Secretary under this part,

24 or
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1 ‘‘(ii) to an individual or to any other

2 entity under this part;

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

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

5 ‘‘(G) employs or contracts with any indi6 vidual or entity that is excluded from participa7 tion under this title under section 1128 or

8 1128A for the provision of health care, utiliza9 tion review, medical social work, or administra10 tive services or employs or contracts with any

11 entity for the provision (directly or indirectly)

12 through such an excluded individual or entity of

13 such services;

14 the Secretary may provide, in addition to any other

15 remedies authorized by law, for any of the remedies

16 described in paragraph (2).

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

18 this paragraph are—

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

20 than $25,000 for each determination under

21 paragraph (1) or, with respect to a determina22 tion under subparagraph (D) or (E)(i) of such

23 paragraph, of not more than $100,000 for each

24 such determination, plus, with respect to a de25 termination under paragraph (1)(B), double the
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1 excess amount charged in violation of such

2 paragraph (and the excess amount charged

3 shall be deducted from the penalty and returned

4 to the individual concerned), and plus, with re5 spect to a determination under paragraph

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

7 as a result of the practice involved,

8 ‘‘(B) suspension of enrollment of individ9 uals under this part after the date the Sec10 retary notifies the organization of a determina11 tion under paragraph (1) and until the Sec12 retary is satisfied that the basis for such deter13 mination has been corrected and is not likely to

14 recur, or

15 ‘‘(C) suspension of payment to the organi16 zation under this part for individuals enrolled

17 after the date the Secretary notifies the organi18 zation of a determination under paragraph (1)

19 and until the Secretary is satisfied that the

20 basis for such determination has been corrected

21 and is not likely to recur.

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

23 the case of a MedicarePlus organization for which

24 the Secretary makes a determination under sub25 section (c)(2) the basis of which is not described in
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1 paragraph (1), the Secretary may apply the follow2 ing intermediate sanctions:

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

4 than $25,000 for each determination under

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

6 basis of the determination has directly adversely

7 affected (or has the substantial likelihood of ad8 versely affecting) an individual covered under

9 the organization’s contract;

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

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

12 initiation of procedures by the Secretary under

13 subsection (h) during which the deficiency that

14 is the basis of a determination under subsection

15 (c)(2) exists; and

16 ‘‘(C) suspension of enrollment of individ17 uals under this part after the date the Sec18 retary notifies the organization of a determina19 tion under subsection (c)(2) and until the Sec20 retary is satisfied that the deficiency that is the

21 basis for the determination has been corrected

22 and is not likely to recur.

23 ‘‘(4) PROCEDURES FOR IMPOSING SANC24 TIONS.—The provisions of section 1128A (other

25 than subsections (a) and (b)) shall apply to a civil
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1 money penalty under paragraph (1) or (2) in the

2 same manner as they apply to a civil money penalty

3 or proceeding under section 1128A(a).

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

5 Secretary may terminate a contract with a MedicarePlus

6 organization under this section or may impose the inter7 mediate sanctions described in subsection (g) on the orga8 nization in accordance with formal investigation and com9 pliance procedures established by the Secretary under

10 which—

11 ‘‘(1) the Secretary provides the organization

12 with the opportunity to develop and implement a

13 corrective action plan to correct the deficiencies that

14 were the basis of the Secretary’s determination

15 under subsection (c)(2);

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

17 sanctions on organizations that have a history of de18 ficiencies or that have not taken steps to correct de19 ficiencies the Secretary has brought to their atten20 tion;

21 ‘‘(3) there are no unreasonable or unnecessary

22 delays between the finding of a deficiency and the

23 imposition of sanctions; and

24 ‘‘(4) the Secretary provides the organization

25 with reasonable notice and opportunity for hearing
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1 (including the right to appeal an initial decision) be2 fore imposing any sanction or terminating the con3 tract.’’.

4 (b) CONFORMING REFERENCES TO PREVIOUS PART

5 C.—Any reference in law (in effect before the date of the

6 enactment of this Act) to part C of title XVIII of the So7 cial Security Act is deemed a reference to part D of such

8 title (as in effect after such date).

9 (c) USE OF INTERIM, FINAL REGULATIONS.—In

10 order to carry out the amendment made by subsection (a)

11 in a timely manner, the Secretary of Health and Human

12 Services may promulgate regulations that take effect on

13 an interim basis, after notice and pending opportunity for

14 public comment.

15 (d) ADVANCE DIRECTIVES.—Section 1866(f)(1) (42

16 U.S.C. 1395cc(f)(1)) is amended—

17 (1) in paragraph (1)—

18 (A) by inserting ‘‘1853(g),’’ after

19 ‘‘1833(s),’’, and

20 (B) by inserting ‘‘, MedicarePlus organiza21 tion,’’ after ‘‘provider of services’’, and

22 (2) by adding at the end the following new

23 paragraph:
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1 ‘‘(4) Nothing in this subsection shall be construed to

2 require the provision of information regarding assisted

3 suicide, euthanasia, or mercy killing.’’.

4 SEC. 15003. DUPLICATION AND COORDINATION OF MEDI5 CARE-RELATED PRODUCTS.

6 (a) TREATMENT OF CERTAIN HEALTH INSURANCE

7 POLICIES AS NONDUPLICATIVE.—

8 (1) IN GENERAL.—Effective as if included in

9 the enactment of section 4354 of the Omnibus

10 Budget Reconciliation Act of 1990, section

11 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is

12 amended—

13 (A) by amending clause (i) to read as fol14 lows:

15 ‘‘(i) It is unlawful for a person to sell or issue to an

16 individual entitled to benefits under part A or enrolled

17 under part B of this title or electing a MedicarePlus prod18 uct under section 1805—

19 ‘‘(I) a health insurance policy (other than a

20 medicare supplemental policy) with knowledge that

21 the policy duplicates health benefits to which the in22 dividual is otherwise entitled under this title or title

23 XIX,

24 ‘‘(II) in the case of an individual not electing a

25 MedicarePlus product, a medicare supplemental pol-
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1 icy with knowledge that the individual is entitled to

2 benefits under another medicare supplemental policy,

3 or

4 ‘‘(III) in the case of an individual electing a

5 MedicarePlus product, a medicare supplemental pol6 icy with knowledge that the policy duplicates health

7 benefits to which the individual is otherwise entitled

8 under this title or under another medicare supple9 mental policy.’’;

10 (B) in clause (iii), by striking ‘‘clause (i)’’

11 and inserting ‘‘clause (i)(II)’’; and

12 (C) by adding at the end the following new

13 clauses:

14 ‘‘(iv) For purposes of this subparagraph a health in15 surance policy shall be considered to ‘duplicate’ benefits

16 under this title only when, under its terms, the policy pro17 vides specific reimbursement for identical items and serv18 ices to the extent paid for under this title, and a health

19 insurance policy providing for benefits which are payable

20 to or on behalf of an individual without regard to other

21 health benefit coverage of such individual is not considered

22 to ‘duplicate’ any health benefits under this title.

23 ‘‘(v) For purposes of this subparagraph, a health in24 surance policy (or a rider to an insurance contract which

25 is not a health insurance policy), including a policy (such
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1 as a long-term care insurance contract described in section

2 7702B(b) of the Internal Revenue Code of 1986, as added

3 by the Contract with America Tax Relief Act of 1995

4 (H.R. 1215)) providing benefits for long-term care, nurs5 ing home care, home health care, or community-based

6 care, that coordinates against or excludes items and serv7 ices available or paid for under this title and (for policies

8 sold or issued after January 1, 1996) that discloses such

9 coordination or exclusion in the policy’s outline of cov10 erage, is not considered to ‘duplicate’ health benefits

11 under this title. For purposes of this clause, the terms ‘co12 ordinates’ and ‘coordination’ mean, with respect to a pol13 icy in relation to health benefits under this title, that the

14 policy under its terms is secondary to, or excludes from

15 payment, items and services to the extent available or paid

16 for under this title.

17 ‘‘(vi) Notwithstanding any other provision of law, no

18 criminal or civil penalty may be imposed at any time under

19 this subparagraph and no legal action may be brought or

20 continued at any time in any Federal or State court if

21 the penalty or action is based on an act or omission that

22 occurred after November 5, 1991, and before the date of

23 the enactment of this clause, and relates to the sale, issu24 ance, or renewal of any health insurance policy during
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1 such period, if such policy is not meets the requirements

2 of clause (iv) or (v).

3 ‘‘(vii) A State may not impose, with respect to the

4 sale or issuance of a policy (or rider) that meets the re5 quirements of this title pursuant to clause (iv) or (v) to

6 an individual entitled to benefits under part A or enrolled

7 under part B or enrolled under a MedicarePlus product

8 under part C, any requirement based on the premise that

9 such a policy or rider duplicates health benefits to which

10 the individual is otherwise entitled under this title.’’.

11 (2) CONFORMING AMENDMENTS.—Section

12 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—

13 (A) in subparagraph (B), by inserting

14 ‘‘(including any MedicarePlus product)’’ after

15 ‘‘health insurance policies’’;

16 (B) in subparagraph (C)—

17 (i) by striking ‘‘with respect to (i)’’

18 and inserting ‘‘with respect to’’, and

19 (ii) by striking ‘‘, (ii) the sale’’ and all

20 that follows up to the period at the end;

21 and

22 (C) by striking subparagraph (D).

23 (3) MEDICAREPLUS PRODUCTS NOT TREATED

24 AS MEDICARE SUPPLEMENTARY POLICIES.—Section

25 1882(g) (42 U.S.C. 1395ss(g)) is amended by in-
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1 serting ‘‘a MedicarePlus product or’’ after ‘‘and does

2 not include’’

3 (4) REPORT ON DUPLICATION AND COORDINA4 TION OF HEALTH INSURANCE POLICIES THAT ARE

5 NOT MEDICARE SUPPLEMENTAL POLICIES.—Not

6 later than 3 years after the date of the enactment

7 of this Act, the Secretary of Health and Human

8 Services shall prepare and submit to Congress a re9 port on the advisability and feasibility of restricting

10 the sale to medicare beneficiaries of health insurance

11 policies that duplicate (within the meaning of section

12 1882(d)(3)(A) of the Social Security Act) other

13 health insurance policies that such a beneficiary may

14 have. In preparing such report, the Secretary shall

15 seek the advice of the National Association of Insur16 ance Commissioners and shall take into account the

17 standards established under section 1807 of the So18 cial Security Act for the electronic coordination of

19 benefits.

20 (b) ADDITIONAL RULES RELATING TO INDIVIDUALS

21 ENROLLED IN MEDICAREPLUS PRODUCTS.—Section

22 1882 (42 U.S.C. 1395ss) is further amended by adding

23 at the end the following new subsection:

24 ‘‘(u)(1) Notwithstanding the previous provisions of

25 this section, the following provisions shall not apply to a
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1 health insurance policy (other than a medicare supple2 mental policy) provided to an individual who has elected

3 the MedicarePlus option under section 1805:

4 ‘‘(A) Subsections (o)(1), (o)(2), (p)(1)(A)(i),

5 (p)(2), (p)(3), (p)(8), and (p)(9) (insofar as they re6 late to limitations on benefits or groups of benefits

7 that may be offered).

8 ‘‘(B) Subsection (r) (relating to loss-ratios).

9 ‘‘(2)(A) It is unlawful for a person to sell or issue

10 a policy described in subparagraph (B) to an individual

11 with knowledge that the individual has in effect under sec12 tion 1805 an election of a high deductible/medisave prod13 uct.

14 ‘‘(B) A policy described in this subparagraph is a

15 health insurance policy that provides for coverage of ex16 penses that are otherwise required to be counted toward

17 meeting the annual deductible amount provided under the

18 high deductible/medisave product.’’.

19 SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI20 CARE HMO PROGRAM.

21 (a) TRANSITION FROM CURRENT CONTRACTS.—

22 (1) LIMITATION ON NEW CONTRACTS.—

23 (A) NO NEW RISK-SHARING CONTRACTS

24 AFTER NEW STANDARDS ESTABLISHED.—The

25 Secretary of Health and Human Services (in
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1 this section referred to as the ‘‘Secretary’’)

2 shall not enter into any risk-sharing contract

3 under section 1876 of the Social Security Act

4 with an eligible organization for any contract

5 year beginning on or after the date standards

6 for MedicarePlus organizations and products

7 are first established under section 1856(a) of

8 such Act with respect to MedicarePlus organi9 zations that are insurer or health maintenance

10 organizations unless such a contract had been

11 in effect under section 1876 of such Act for the

12 organization for the previous contract year.

13 (B) NO NEW COST REIMBURSEMENT CON14 TRACTS.—The Secretary shall not enter into

15 any cost reimbursement contract under section

16 1876 of the Social Security Act beginning for

17 any contract year beginning on or after the

18 date of the enactment of this Act.

19 (2) TERMINATION OF CURRENT CONTRACTS.—

20 (A) RISK-SHARING CONTRACTS.—Notwith21 standing any other provision of law, the Sec22 retary shall not extend or continue any risk23 sharing contract with an eligible organization

24 under section 1876 of the Social Security Act

25 (for which a contract was entered into consist-
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1 ent with paragraph (1)(A)) for any contract

2 year beginning on or after 1 year after the date

3 standards described in paragraph (1)(A) are es4 tablished.

5 (B) COST REIMBURSEMENT CONTRACTS.—

6 The Secretary shall not extend or continue any

7 reasonable cost reimbursement contract with an

8 eligible organization under section 1876 of the

9 Social Security Act for any contract year begin10 ning on or after January 1, 1998.

11 (b) CONFORMING PAYMENT RATES.—

12 (1) RISK-SHARING CONTRACTS.—Notwithstand13 ing any other provision of law, the Secretary shall

14 provide that payment amounts under risk-sharing

15 contracts under section 1876(a) of the Social Secu16 rity Act for months in a year (beginning with Janu17 ary 1996) shall be computed—

18 (A) with respect to individuals both enti19 tled to benefits under both parts A and B of

20 title XVIII of such Act, by substituting pay21 ment rates under section 1855(a) of such Act

22 for the payment rates otherwise established

23 under section 1876(a) of such Act, and

24 (B) with respect to individuals only enti25 tled to benefits under part B of such title, by
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1 substituting an appropriate proportion of such

2 rates (reflecting the relative proportion of pay3 ments under such title attributable to such

4 part) for the payment rates otherwise estab5 lished under section 1876(a) of such Act.

6 For purposes of carrying out this paragraph for pay7 ment for months in 1996, the Secretary shall com8 pute, announce, and apply the payment rates under

9 section 1855(a) of such Act (notwithstanding any

10 deadlines specified in such section) in as timely a

11 manner as possible and may (to the extent nec12 essary) provide for retroactive adjustment in pay13 ments made not in accordance with such rates.

14 (2) COST CONTRACTS.—Notwithstanding any

15 other provision of law, the Secretary shall provide

16 that payment amounts under cost reimbursement

17 contracts under section 1876(a) of the Social Secu18 rity Act shall take into account adjustments in pay19 ment amounts made in parts A and B of title XVIII

20 of such Act pursuant to the amendments made by

21 this title.

22 (c) ELIMINATION OF 50:50 RULE.—

23 (1) IN GENERAL.—Section 1876 (42 U.S.C.

24 1395mm) is amended by striking subsection (f).
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1 (2) CONFORMING AMENDMENTS.—Section 1876

2 is further amended—

3 (A) in subsection (c)(3)(A)(i), by striking

4 ‘‘would result in failure to meet the require5 ments of subsection (f)’’, and

6 (B) in subsection (i)(1)(C), by striking

7 ‘‘(e), and (f)’’ and inserting ‘‘and (e)’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this section shall apply to contract years begin10 ning on or after January 1, 1996.

11 PART 2—SPECIAL RULES FOR MEDICAREPLUS

12 MEDICAL SAVINGS ACCOUNTS

SEC. 15011. MEDICAREPLUS MSA’S.

(a) IN GENERAL.—Part III of subchapter B of

chapter 1 of the Internal Revenue Code of 1986 (relating

to amounts specifically excluded from gross income) is

amended by redesignating section 137 as section 138 and

by inserting after section 136 the following new section:

‘‘SEC. 137. MEDICAREPLUS MSA’S.

‘‘(a) EXCLUSION.—Gross income shall not include

any payment to the MedicarePlus MSA of an individual

by the Secretary of Health and Human Services under

section 1855(f)(1)(B) of the Social Security Act.

‘‘(b) MEDICAREPLUS MSA.—For purposes of this

section—
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1 ‘‘(1) MEDICAREPLUS MSA.—The term

2 ‘MedicarePlus MSA’ means a trust created or orga3 nized in the United States exclusively for the pur4 pose of paying the qualified medical expenses of the

5 account holder, but only if the written governing in6 strument creating the trust meets the following re7 quirements:

8 ‘‘(A) Except in the case of a trustee-to9 trustee transfer described in subsection (d)(4),

10 no contribution will be accepted unless it is

11 made by the Secretary of Health and Human

12 Services under section 1855(f)(1)(B) of the So13 cial Security Act.

14 ‘‘(B) The trustee is a bank (as defined in

15 section 408(n)), an insurance company (as de16 fined in section 816), or another person who

17 demonstrates to the satisfaction of the Sec18 retary that the manner in which such person

19 will administer the trust will be consistent with

20 the requirements of this section.

21 ‘‘(C) No part of the trust assets will be in22 vested in life insurance contracts.

23 ‘‘(D) The assets of the trust will not be

24 commingled with other property except in a
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1 common trust fund or common investment

2 fund.

3 ‘‘(E) The interest of an individual in the

4 balance in his account is nonforfeitable.

5 ‘‘(F) Trustee-to-trustee transfers described

6 in subsection (d)(4) may be made to and from

7 the trust.

8 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

9 ‘‘(A) IN GENERAL.—The term ‘qualified

10 medical expenses’ means, with respect to an ac11 count holder, amounts paid by such holder—

12 ‘‘(i) for medical care (as defined in

13 section 213(d)) for the account holder, but

14 only to the extent such amounts are not

15 compensated for by insurance or otherwise,

16 or

17 ‘‘(ii) for long-term care insurance for

18 the account holder.

19 ‘‘(B) HEALTH INSURANCE MAY NOT BE

20 PURCHASED FROM ACCOUNT.—Subparagraph

21 (A)(i) shall not apply to any payment for insur22 ance.

23 ‘‘(3) ACCOUNT HOLDER.—The term ‘account

24 holder’ means the individual on whose behalf the

25 MedicarePlus MSA is maintained.
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1 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

2 to the rules of subsections (g) and (h) of section 408

3 shall apply for purposes of this section.

4 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

5 ‘‘(1) IN GENERAL.—A MedicarePlus MSA is ex6 empt from taxation under this subtitle unless such

7 MSA has ceased to be a MedicarePlus MSA by rea8 son of paragraph (2). Notwithstanding the preceding

9 sentence, any such MSA is subject to the taxes im10 posed by section 511 (relating to imposition of tax

11 on unrelated business income of charitable, etc. or12 ganizations).

13 ‘‘(2) ACCOUNT ASSETS TREATED AS DISTRIB14 UTED IN THE CASE OF PROHIBITED TRANSACTIONS

15 OR ACCOUNT PLEDGED AS SECURITY FOR LOAN.—

16 Rules similar to the rules of paragraphs (2) and (4)

17 of section 408(e) shall apply to MedicarePlus

18 MSA’s, and any amount treated as distributed under

19 such rules shall be treated as not used to pay quali20 fied medical expenses.

21 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

22 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

23 QUALIFIED MEDICAL EXPENSES.—No amount shall

24 be included in the gross income of the account hold25 er by reason of a payment or distribution from a
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1 MedicarePlus MSA which is used exclusively to pay

2 the qualified medical expenses of the account holder.

3 Any amount paid or distributed from a

4 MedicarePlus MSA which is not so used shall be in5 cluded in the gross income of such holder.

6 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

7 FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM

8 BALANCE NOT MAINTAINED.—

9 ‘‘(A) IN GENERAL.—The tax imposed by

10 this chapter for any taxable year in which there

11 is a payment or distribution from a

12 MedicarePlus MSA which is not used exclu13 sively to pay the qualified medical expenses of

14 the account holder shall be increased by 50 per15 cent of the excess (if any) of—

16 ‘‘(i) the amount of such payment or

17 distribution, over

18 ‘‘(ii) the excess (if any) of—

19 ‘‘(I) the fair market value of the

20 assets in the MedicarePlus MSA as of

21 the close of the calendar year preced22 ing the calendar year in which the

23 taxable year begins, over

24 ‘‘(II) an amount equal to 60 per25 cent of the deductible under the cata-
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1 strophic health plan covering the ac2 count holder as of January 1 of the

3 calendar year in which the taxable

4 year begins.

5 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

6 shall not apply if the payment or distribution is

7 made on or after the date the account holder—

8 ‘‘(i) becomes disabled within the

9 meaning of section 72(m)(7), or

10 ‘‘(ii) dies.

11 ‘‘(C) SPECIAL RULES.—For purposes of

12 subparagraph (A)—

13 ‘‘(i) all MedicarePlus MSA’s of the ac14 count holder shall be treated as 1 account,

15 ‘‘(ii) all payments and distributions

16 not used exclusively to pay the qualified

17 medical expenses of the account holder

18 during any taxable year shall be treated as

19 1 distribution, and

20 ‘‘(iii) any distribution of property

21 shall be taken into account at its fair mar22 ket value on the date of the distribution.

23 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU24 TIONS.—Paragraphs (1) and (2) shall not apply to

25 any payment or distribution from a MedicarePlus
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1 MSA to the Secretary of Health and Human Serv2 ices of an erroneous contribution to such MSA and

3 of the net income attributable to such contribution.

4 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—

5 Paragraphs (1) and (2) shall not apply to any trust6 ee-to-trustee transfer from a MedicarePlus MSA of

7 an account holder to another MedicarePlus MSA of

8 such account holder.

9 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

10 DEDUCTION.—For purposes of section 213, any pay11 ment or distribution out of a MedicarePlus MSA for

12 qualified medical expenses shall not be treated as an

13 expense paid for medical care.

14 ‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF

15 ACCOUNT HOLDER.—

16 ‘‘(1) TREATMENT IF DESIGNATED BENEFICIARY

17 IS SPOUSE.—

18 ‘‘(A) IN GENERAL.—In the case of an ac19 count holder’s interest in a MedicarePlus MSA

20 which is payable to (or for the benefit of) such

21 holder’s spouse upon the death of such holder,

22 such MedicarePlus MSA shall be treated as a

23 MedicarePlus MSA of such spouse as of the

24 date of such death.
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1 ‘‘(B) SPECIAL RULES IF SPOUSE NOT MED2 ICARE ELIGIBLE.—If, as of the date of such

3 death, such spouse is not entitled to benefits

4 under title XVIII of the Social Security Act,

5 then after the date of such death—

6 ‘‘(i) the Secretary of Health and

7 Human Services may not make any pay8 ments to such MedicarePlus MSA, other

9 than payments attributable to periods be10 fore such date,

11 ‘‘(ii) in applying subsection (b)(2)

12 with respect to such MedicarePlus MSA,

13 references to the account holder shall be

14 treated as including references to any de15 pendent (as defined in section 152) of such

16 spouse and any subsequent spouse of such

17 spouse, and

18 ‘‘(iii) in lieu of applying subsection

19 (d)(2), the rules of section 220(f)(2) shall

20 apply.

21 ‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY

22 IS NOT SPOUSE.—In the case of an account holder’s

23 interest in a MedicarePlus MSA which is payable to

24 (or for the benefit of) any person other than such

25 holder’s spouse upon the death of such holder—
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1 ‘‘(A) such account shall cease to be a

2 MedicarePlus MSA as of the date of death, and

3 ‘‘(B) an amount equal to the fair market

4 value of the assets in such account on such date

5 shall be includible—

6 ‘‘(i) if such person is not the estate of

7 such holder, in such person’s gross income

8 for the taxable year which includes such

9 date, or

10 ‘‘(ii) if such person is the estate of

11 such holder, in such holder’s gross income

12 for last taxable year of such holder.

13 ‘‘(f) REPORTS.—

14 ‘‘(1) IN GENERAL.—The trustee of a

15 MedicarePlus MSA shall make such reports regard16 ing such account to the Secretary and to the account

17 holder with respect to—

18 ‘‘(A) the fair market value of the assets in

19 such MedicarePlus MSA as of the close of each

20 calendar year, and

21 ‘‘(B) contributions, distributions, and other

22 matters,

23 as the Secretary may require by regulations.

24 ‘‘(2) TIME AND MANNER OF REPORTS.—The re25 ports required by this subsection—
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1 ‘‘(A) shall be filed at such time and in

2 such manner as the Secretary prescribes in

3 such regulations, and

4 ‘‘(B) shall be furnished to the account

5 holder—

6 ‘‘(i) not later than January 31 of the

7 calendar year following the calendar year

8 to which such reports relate, and

9 ‘‘(ii) in such manner as the Secretary

10 prescribes in such regulations.’’

11 (b) EXCLUSION OF MEDICAREPLUS MSA’S FROM

12 ESTATE TAX.—Part IV of subchapter A of chapter 11 of

13 such Code is amended by adding at the end the following

14 new section:

15 ‘‘SEC. 2057. MEDICAREPLUS MSA’S.

16 ‘‘For purposes of the tax imposed by section 2001,

17 the value of the taxable estate shall be determined by de18 ducting from the value of the gross estate an amount

19 equal to the value of any MedicarePlus MSA (as defined

20 in section 137(b)) included in the gross estate.’’

21 (c) TAX ON PROHIBITED TRANSACTIONS.—

22 (1) Section 4975 of such Code (relating to tax

23 on prohibited transactions) is amended by adding at

24 the end of subsection (c) the following new para25 graph:
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1 ‘‘(5) SPECIAL RULE FOR MEDICAREPLUS

2 MSA’S.—An individual for whose benefit a

3 MedicarePlus MSA (within the meaning of section

4 137(b)) is established shall be exempt from the tax

5 imposed by this section with respect to any trans6 action concerning such account (which would other7 wise be taxable under this section) if, with respect

8 to such transaction, the account ceases to be a

9 MedicarePlus MSA by reason of the application of

10 section 137(c)(2) to such account.’’

11 (2) Paragraph (1) of section 4975(e) of such

12 Code is amended to read as follows:

13 ‘‘(1) PLAN.—For purposes of this section, the

14 term ‘plan’ means—

15 ‘‘(A) a trust described in section 401(a)

16 which forms a part of a plan, or a plan de17 scribed in section 403(a), which trust or plan is

18 exempt from tax under section 501(a),

19 ‘‘(B) an individual retirement account de20 scribed in section 408(a),

21 ‘‘(C) an individual retirement annuity de22 scribed in section 408(b),

23 ‘‘(D) a medical savings account described

24 in section 220(d),
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1 ‘‘(E) a MedicarePlus MSA described in

2 section 137(b), or

3 ‘‘(F) a trust, plan, account, or annuity

4 which, at any time, has been determined by the

5 Secretary to be described in any preceding sub6 paragraph of this paragraph.’’

7 (d) FAILURE TO PROVIDE REPORTS ON

8 MEDICAREPLUS MSA’S.—

9 (1) Subsection (a) of section 6693 of such Code

10 (relating to failure to provide reports on individual

11 retirement accounts or annuities) is amended to read

12 as follows:

13 ‘‘(a) REPORTS.—

14 ‘‘(1) IN GENERAL.—If a person required to file

15 a report under a provision referred to in paragraph

16 (2) fails to file such report at the time and in the

17 manner required by such provision, such person

18 shall pay a penalty of $50 for each failure unless it

19 is shown that such failure is due to reasonable

20 cause.

21 ‘‘(2) PROVISIONS.—The provisions referred to

22 in this paragraph are—

23 ‘‘(A) subsections (i) and (l) of section 408

24 (relating to individual retirement plans),
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1 ‘‘(B) section 220(h) (relating to medical

2 savings accounts), and

3 ‘‘(C) section 137(f) (relating to

4 MedicarePlus MSA’s).’’

5 (2) The section heading for section 6693 of

6 such Code is amended to read as follows:

7 ‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE8 TIREMENT PLANS AND CERTAIN OTHER TAX9 FAVORED ACCOUNTS; PENALTIES RELATING

10 TO DESIGNATED NONDEDUCTIBLE CON11 TRIBUTIONS.’’

12 (e) CLERICAL AMENDMENTS.—

13 (1) The table of sections for part III of sub14 chapter B of chapter 1 of such Code is amended by

15 striking the last item and inserting the following:

‘‘Sec. 137. MedicarePlus MSA’s.

‘‘Sec. 138. Cross references to other Acts.’’

16 (2) The table of sections for subchapter B of

17 chapter 68 of such Code is amended by striking the

18 item relating to section 6693 and inserting the fol19 lowing new item:

‘‘Sec. 6693. Failure to file reports on individual retirement plans

and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’’

20 (3) The table of sections for part IV of sub21 chapter A of chapter 11 of such Code is amended by

22 adding at the end the following new item:

‘‘Sec. 2057. MedicarePlus MSA’s.’’
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1996.

4 SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS IN5 COME.

6 (a) IN GENERAL.—Section 105 of the Internal Reve7 nue Code of 1986 (relating to amounts received under ac8 cident and health plans) is amended by adding at the end

9 the following new subsection:

10 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY

11 ACT.—Gross income does not include any rebate received

12 under section 1852(e)(1)(A) of the Social Security Act

13 during the taxable year.’’

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to amounts received after the

16 date of the enactment of this Act.

17 PART 3—SPECIAL ANTITRUST RULE FOR

18 PROVIDER SERVICE NETWORKS

19 SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON

20 TO PROVIDER SERVICE NETWORKS.

21 (a) RULE OF REASON STANDARD.—In any action

22 under the antitrust laws, or under any State law similar

23 to the antitrust laws—

24 (1) the conduct of a provider service network in

25 negotiating, making, or performing a contract (in-
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1 cluding the establishment and modification of a fee

2 schedule and the development of a panel of physi3 cians), to the extent such contract is for the purpose

4 of providing health care services to individuals under

5 the terms of a MedicarePlus PSO product, and

6 (2) the conduct of any member of such network

7 for the purpose of providing such health care serv8 ices under such contract to such extent,

9 shall not be deemed illegal per se. Such conduct shall be

10 judged on the basis of its reasonableness, taking into ac11 count all relevant factors affecting competition, including

12 the effects on competition in properly defined markets.

13 (b) DEFINITIONS.—For purposes of subsection (a):

14 (1) ANTITRUST LAWS.—The term ‘‘antitrust

15 laws’’ has the meaning given it in subsection (a) of

16 the first section of the Clayton Act (15 U.S.C. 12),

17 except that such term includes section 5 of the Fed18 eral Trade Commission Act (15 U.S.C. 45) to the

19 extent that such section 5 applies to unfair methods

20 of competition.

21 (2) HEALTH CARE PROVIDER.—The term

22 ‘‘health care provider’’ means any individual or en23 tity that is engaged in the delivery of health care

24 services in a State and that is required by State law

25 or regulation to be licensed or certified by the State
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1 to engage in the delivery of such services in the

2 State.

3 (3) HEALTH CARE SERVICE.—The term ‘‘health

4 care service’’ means any service for which payment

5 may be made under a MedicarePlus PSO product in6 cluding services related to the delivery or adminis7 tration of such service.

8 (4) MEDICAREPLUS PROGRAM.—The term

9 ‘‘MedicarePlus program’’ means the program under

10 part C of title XVIII of the Social Security Act.

11 (5) MEDICAREPLUS PSO PRODUCT.—The term

12 ‘‘MedicarePlus PSO product’’ means a MedicarePlus

13 product offered by a provider-sponsored organization

14 under part C of title XVIII of the Social Security

15 Act.

16 (6) PROVIDER SERVICE NETWORK.—The term

17 ‘‘provider service network’’ means an organization

18 that—

19 (A) is organized by, operated by, and com20 posed of members who are health care providers

21 and for purposes that include providing health

22 care services,

23 (B) is funded in part by capital contribu24 tions made by the members of such organiza25 tion,
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1 (C) with respect to each contract made by

2 such organization for the purpose of providing

3 a type of health care service to individuals

4 under the terms of a MedicarePlus PSO prod5 uct—

6 (i) requires all members of such orga7 nization who engage in providing such type

8 of health care service to agree to provide

9 health care services of such type under

10 such contract,

11 (ii) receives the compensation paid for

12 the health care services of such type pro13 vided under such contract by such mem14 bers, and

15 (iii) provides for the distribution of

16 such compensation,

17 (D) has established, consistent with the re18 quirements of the MedicarePlus program for

19 provider-sponsored organizations, a program to

20 review, pursuant to written guidelines, the qual21 ity, efficiency, and appropriateness of treatment

22 methods and setting of services for all health

23 care providers and all patients participating in

24 such product, along with internal procedures to
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1 correct identified deficiencies relating to such

2 methods and such services,

3 (E) has established, consistent with the re4 quirements of the MedicarePlus program for

5 provider-sponsored organizations, a program to

6 monitor and control utilization of health care

7 services provided under such product, for the

8 purpose of improving efficient, appropriate care

9 and eliminating the provision of unnecessary

10 health care services,

11 (F) has established a management pro12 gram to coordinate the delivery of health care

13 services for all health care providers and all pa14 tients participating in such product, for the

15 purpose of achieving efficiencies and enhancing

16 the quality of health care services provided, and

17 (G) has established, consistent with the re18 quirements of the MedicarePlus program for

19 provider-sponsored organizations, a grievance

20 and appeal process for such organization de21 signed to review and promptly resolve bene22 ficiary or patient grievances and complaints.

23 Such term may include a provider-sponsored organi24 zation.
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1 (7) PROVIDER-SPONSORED ORGANIZATION.—

2 The term ‘‘provider-sponsored organization’’ means

3 a MedicarePlus organization under the MedicarePlus

4 program that is a provider-sponsored organization

5 (as defined in section ll of the Social Security

6 Act).

7 (8) STATE.—The term ‘‘State’’ has the mean8 ing given it in section 4G(2) of the Clayton Act (15

9 U.S.C. 15g(2)).

10 (c) ISSUANCE OF GUIDELINES.—Not later than 120

11 days after the date of the enactment of this Act, the Attor12 ney General and the Federal Trade Commission shall

13 issue jointly guidelines specifying the enforcement policies

14 and analytical principles that will be applied by the De15 partment of Justice and the Commission with respect to

16 the operation of subsection (a).

17 PART 4—COMMISSIONS

18 SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

19 (a) IN GENERAL.—Title XVIII, as amended by sec20 tion 15001(a), is amended by inserting after section 1805

21 the following new section:

22 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

23 ‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby

24 established the Medicare Payment Review Commission (in

25 this section referred to as the ‘Commission’).

26 ‘‘(b) DUTIES.—
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1 ‘‘(1) GENERAL DUTIES AND REPORTS.—The

2 Commission shall review, and make recommenda3 tions to Congress concerning, payment policies under

4 this title. By not later than June 1 of each year, the

5 Commission shall submit a report to Congress con6 taining an examination of issues affecting the medi7 care program, including the implications of changes

8 in health care delivery in the United States and in

9 the market for health care services on the medicare

10 program. The Commission may submit to Congress

11 from time to time such other reports as the Commis12 sion deems appropriate. The Secretary shall respond

13 to recommendations of the Commission in notices of

14 rulemaking proceedings under this title.

15 ‘‘(2) SPECIFIC DUTIES RELATING TO

16 MEDICAREPLUS PROGRAM.—Specifically, the Com17 mission shall review, with respect to the

18 MedicarePlus program under part C—

19 ‘‘(A) the appropriateness of the methodol20 ogy for making payment to plans under such

21 program, including the making of differential

22 payments and the distribution of differential

23 updates among different payment areas,

24 ‘‘(B) the appropriateness of the mecha25 nisms used to adjust payments for risk and the
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1 need to adjust such mechanisms to take into ac2 count health status of beneficiaries,

3 ‘‘(C) the implications of risk selection both

4 among MedicarePlus organizations and between

5 the MedicarePlus option and the non6 MedicarePlus option,

7 ‘‘(D) in relation to payment under part C,

8 the development and implementation of mecha9 nisms to assure the quality of care for those en10 rolled with MedicarePlus organizations,

11 ‘‘(E) the impact of the MedicarePlus pro12 gram on access to care for medicare bene13 ficiaries, and

14 ‘‘(F) other major issues in implementation

15 and further development of the MedicarePlus

16 program.

17 ‘‘(3) SPECIFIC DUTIES RELATING TO THE

18 FAILSAFE BUDGET MECHANISM.—Specifically, the

19 Commission shall review, with respect to the failsafe

20 budget mechanism described in section 1895—

21 ‘‘(A) the appropriateness of the expendi22 ture projections by the Secretary under section

23 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 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, health facility management, health plans

20 and integrated delivery systems, reimbursement of

21 health facilities, physicians, and other providers of

22 services, and other related fields, who provide a mix

23 of different professionals, broad geographic represen24 tation, and a balance between urban and rural rep25 resentatives, including physicians and other health
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1 professionals, employers, third party payors, individ2 uals skilled in the conduct and interpretation of bio3 medical, health services, and health economics re4 search and expertise in outcomes and effectiveness

5 research and technology assessment. Such member6 ship shall also include representatives of consumers

7 and the elderly.

8 ‘‘(3) CONSIDERATIONS IN INITIAL APPOINT9 MENT.—To the extent possible, in first appointing

10 members to the Commission shall consider appoint11 ing individuals who (as of the date of the enactment

12 of this section) were serving on the Prospective Pay13 ment Assessment Commission or the Physician Pay14 ment Review Commission.

15 ‘‘(4) TERMS.—

16 ‘‘(A) IN GENERAL.—The terms of mem17 bers of the Commission shall be for 3 years ex18 cept that the Comptroller General shall des19 ignate staggered terms for the members first

20 appointed.

21 ‘‘(B) VACANCIES.—Any member appointed

22 to fill a vacancy occurring before the expiration

23 of the term for which the member’s predecessor

24 was appointed shall be appointed only for the

25 remainder of that term. A member may serve
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1 after the expiration of that member’s term until

2 a successor has taken office. A vacancy in the

3 Commission shall be filled in the manner in

4 which the original appointment was made.

5 ‘‘(5) COMPENSATION.—While serving on the

6 business of the Commission (including traveltime), a

7 member of the Commission shall be entitled to com8 pensation at the per diem equivalent of the rate pro9 vided for level IV of the Executive Schedule under

10 section 5315 of title 5, United States Code; and

11 while so serving away from home and member’s reg12 ular place of business, a member may be allowed

13 travel expenses, as authorized by the Chairman of

14 the Commission. Physicians serving as personnel of

15 the Commission may be provided a physician com16 parability allowance by the Commission in the same

17 manner as Government physicians may be provided

18 such an allowance by an agency under section 5948

19 of title 5, United States Code, and for such purpose

20 subsection (i) of such section shall apply to the Com21 mission in the same manner as it applies to the Ten22 nessee Valley Authority. For purposes of pay (other

23 than pay of members of the Commission) and em24 ployment benefits, rights, and privileges, all person-
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1 nel of the Commission shall be treated as if they

2 were employees of the United States Senate.

3 ‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp4 troller General shall designate a member of the

5 Commission, at the time of appointment of the mem6 ber, as Chairman and a member as Vice Chairman

7 for that term of appointment.

8 ‘‘(7) MEETINGS.—The Commission shall meet

9 at the call of the Chairman. Section 10(a)(1) of the

10 Federal Advisory Committee Act shall not apply to

11 any portion of a Commission meeting if the Commis12 sion, by majority vote, determines that such portion

13 of such meeting should be closed.

14 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON15 SULTANTS.—Subject to such review as the Comptroller

16 General deems necessary to assure the efficient adminis17 tration of the Commission, the Commission may—

18 ‘‘(1) employ and fix the compensation of an Ex19 ecutive Director (subject to the approval of the

20 Comptroller General) and such other personnel as

21 may be necessary to carry out its duties (without re22 gard to the provisions of title 5, United States Code,

23 governing appointments in the competitive service);
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1 ‘‘(2) seek such assistance and support as may

2 be required in the performance of its duties from ap3 propriate Federal departments and agencies;

4 ‘‘(3) enter into contracts or make other ar5 rangements, as may be necessary for the conduct of

6 the work of the Commission (without regard to sec7 tion 3709 of the Revised Statutes (41 U.S.C. 5));

8 ‘‘(4) make advance, progress, and other pay9 ments which relate to the work of the Commission;

10 ‘‘(5) provide transportation and subsistence for

11 persons serving without compensation; and

12 ‘‘(6) prescribe such rules and regulations as it

13 deems necessary with respect to the internal organi14 zation and operation of the Commission.

15 ‘‘(e) POWERS.—

16 ‘‘(1) OBTAINING OFFICIAL DATA.—The Com17 mission may secure directly from any department or

18 agency of the United States information necessary

19 to enable it to carry out this section. Upon request

20 of the Chairman, the head of that department or

21 agency shall furnish that information to the Com22 mission on an agreed upon schedule.

23 ‘‘(2) DATA COLLECTION.—In order to carry out

24 its functions, the Commission shall collect and as25 sess information to—
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1 ‘‘(A) utilize existing information, both pub2 lished and unpublished, where possible, collected

3 and assessed either by its own staff or under

4 other arrangements made in accordance with

5 this section,

6 ‘‘(B) carry out, or award grants or con7 tracts for, original research and experimen8 tation, where existing information is inad9 equate, and

10 ‘‘(C) adopt procedures allowing any inter11 ested party to submit information for the Com12 mission’s use in making reports and rec13 ommendations.

14 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

15 Comptroller General shall have unrestricted access

16 to all deliberations, records, and data of the Com17 mission, immediately upon request.

18 ‘‘(4) PERIODIC AUDIT.—The Commission shall

19 be subject to periodic audit by the General Account20 ing Office.

21 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—

22 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

23 Commission shall submit requests for appropriations

24 in the same manner as the Comptroller General sub25 mits requests for appropriations, but amounts ap-
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1 propriated for the Commission shall be separate

2 from amounts appropriated for the Comptroller Gen3 eral.

4 ‘‘(2) AUTHORIZATION.—There are authorized to

5 be appropriated such sums as may be necessary to

6 carry out the provisions of this section. 60 percent

7 of such appropriation shall be payable from the Fed8 eral Hospital Insurance Trust Fund, and 40 percent

9 of such appropriation shall be payable from the Fed10 eral Supplementary Medical Insurance Trust

11 Fund.’’.

12 (b) ABOLITION OF PROPAC AND PPRC.—

13 (1) PROPAC.—

14 (A) IN GENERAL.—Section 1886(e) (42

15 U.S.C. 1395ww(e)) is amended—

16 (i) by striking paragraphs (2) and (6);

17 and

18 (ii) in paragraph (3), by striking ‘‘(A)

19 The Commission’’ and all that follows

20 through ‘‘(B)’’.

21 (B) CONFORMING AMENDMENT.—Section

22 1862 (42 U.S.C. 1395y) is amended by striking

23 ‘‘Prospective Payment Assessment Commis24 sion’’ each place it appears in subsection
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1 (a)(1)(D) and subsection (i) and inserting

2 ‘‘Medicare Payment Review Commission’’.

3 (2) PPRC.—

4 (A) IN GENERAL.—Title XVIII is amended

5 by striking section 1845 (42 U.S.C. 1395w–1).

6 (B) CONFORMING AMENDMENTS.—

7 (i) Section 1834(b)(2) (42 U.S.C.

8 1395m(b)(2)) is amended by striking

9 ‘‘Physician Payment Review Commission’’

10 and inserting ‘‘Medicare Payment Review

11 Commission’’.

12 (ii) Section 1842(b) (42 U.S.C.

13 1395u(b)) is amended by striking ‘‘Physi14 cian Payment Review Commission’’ each

15 place it appears in paragraphs (2)(C),

16 (9)(D), and (14)(C)(i) and inserting ‘‘Med17 icare Payment Review Commission’’.

18 (iii) Section 1848 (42 U.S.C. 1395w–

19 4) is amended by striking ‘‘Physician Pay20 ment Review Commission’’ and inserting

21 ‘‘Medicare Payment Review Commission’’

22 each place it appears in paragraph

23 (2)(A)(ii), (2)(B)(iii), and (5) of subsection

24 (c), subsection (d)(2)(F), paragraphs

25 (1)(B), (3), and (4)(A)of subsection (f),
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1 and paragraphs (6)(C) and (7)(C) of sub2 section (g).

3 (c) EFFECTIVE DATE; TRANSITION.—

4 (1) IN GENERAL.—The Comptroller General

5 shall first provide for appointment of members to

6 the Medicare Payment Review Commission (in this

7 subsection referred to as ‘‘MPRC’’) by not later

8 than March 31, 1996.

9 (2) TRANSITION.—Effective on a date (not later

10 than 30 days after the date a majority of members

11 of the MPRC have first been appointed, the Pro12 spective Payment Assessment Commission (in this

13 subsection referred to as ‘‘ProPAC’’) and the Physi14 cian Payment Review Commission (in this subsection

15 referred to as ‘‘PPRC’’), and amendments made by

16 subsection (b), are terminated. The Comptroller

17 General, to the maximum extent feasible, shall pro18 vide for the transfer to the MPRC of assets and

19 staff of ProPAC and PPRC, without any loss of

20 benefits or seniority by virtue of such transfers.

21 Fund balances available to the ProPAC or PPRC

22 for any period shall be available to the MPRC for

23 such period for like purposes.

24 (3) CONTINUING RESPONSIBILITY FOR RE25 PORTS.—The MPRC shall be responsible for the
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1 preparation and submission of reports required by

2 law to be submitted (and which have not been sub3 mitted by the date of establishment of the MPRC)

4 by the ProPAC and PPRC, and, for this purpose,

5 any reference in law to either such Commission is

6 deemed, after the appointment of the MPRC to refer

7 to the MPRC.

8 SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY

9 BOOM GENERATION ON THE MEDICARE PRO10 GRAM.

11 (a) ESTABLISHMENT.—There is established a com12 mission to be known as the Commission on the Effect of

13 the Baby Boom Generation on the Medicare Program (in

14 this section referred to as the ‘‘Commission’’).

15 (b) DUTIES.—

16 (1) IN GENERAL.—The Commission shall—

17 (A) examine the financial impact on the

18 medicare program of the significant increase in

19 the number of medicare eligible individuals

20 which will occur beginning approximately dur21 ing 2010 and lasting for approximately 25

22 years, and

23 (B) make specific recommendations to the

24 Congress respecting a comprehensive approach

25 to preserve the medicare program for the period
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1 during which such individuals are eligible for

2 medicare.

3 (2) CONSIDERATIONS IN MAKING REC4 OMMENDATIONS.—In making its recommendations,

5 the Commission shall consider the following:

6 (A) The amount and sources of Federal

7 funds to finance the medicare program, includ8 ing the potential use of innovative financing

9 methods.

10 (B) The most efficient and effective man11 ner of administering the program, including the

12 appropriateness of continuing the application of

13 the failsafe budget mechanism under section

14 1895 of the Social Security Act for fiscal years

15 after fiscal year 2002 and the appropriate long16 term growth rates for contributions electing

17 coverage under MedicarePlus under part C of

18 title XVIII of such Act.

19 (C) Methods used by other nations to re20 spond to comparable demographic patterns in

21 eligibility for health care benefits for elderly

22 and disabled individuals.

23 (D) Modifying age-based eligibility to cor24 respond to changes in age-based eligibility

25 under the OASDI program.
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1 (E) Trends in employment-related health

2 care for retirees, including the use of medical

3 savings accounts and similar financing devices.

4 (c) MEMBERSHIP.—

5 (1) APPOINTMENT.—The Commission shall be

6 composed of 15 members appointed as follows:

7 (A) The President shall appoint 3 mem8 bers.

9 (B) The Majority Leader of the Senate

10 shall appoint, after consultation with the minor11 ity leader of the Senate, 6 members, of whom

12 not more than 4 may be of the same political

13 party.

14 (C) The Speaker of the House of Rep15 resentatives shall appoint, after consultation

16 with the minority leader of the House of Rep17 resentatives, 6 members, of whom not more

18 than 4 may be of the same political party.

19 (2) CHAIRMAN AND VICE CHAIRMAN.—The

20 Commission shall elect a Chairman and Vice Chair21 man from among its members.

22 (3) VACANCIES.—Any vacancy in the member23 ship of the Commission shall be filled in the manner

24 in which the original appointment was made and
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1 shall not affect the power of the remaining members

2 to execute the duties of the Commission.

3 (4) QUORUM.—A quorum shall consist of 8

4 members of the Commission, except that 4 members

5 may conduct a hearing under subsection (e).

6 (5) MEETINGS.—The Commission shall meet at

7 the call of its Chairman or a majority of its mem8 bers.

9 (6) COMPENSATION AND REIMBURSEMENT OF

10 EXPENSES.—Members of the Commission are not

11 entitled to receive compensation for service on the

12 Commission. Members may be reimbursed for travel,

13 subsistence, and other necessary expenses incurred

14 in carrying out the duties of the Commission.

15 (d) STAFF AND CONSULTANTS.—

16 (1) STAFF.—The Commission may appoint and

17 determine the compensation of such staff as may be

18 necessary to carry out the duties of the Commission.

19 Such appointments and compensation may be made

20 without regard to the provisions of title 5, United

21 States Code, that govern appointments in the com22 petitive services, and the provisions of chapter 51

23 and subchapter III of chapter 53 of such title that

24 relate to classifications and the General Schedule

25 pay rates.
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1 (2) CONSULTANTS.—The Commission may pro2 cure such temporary and intermittent services of

3 consultants under section 3109(b) of title 5, United

4 States Code, as the Commission determines to be

5 necessary to carry out the duties of the Commission.

6 (e) POWERS.—

7 (1) HEARINGS AND OTHER ACTIVITIES.—For

8 the purpose of carrying out its duties, the Commis9 sion may hold such hearings and undertake such

10 other activities as the Commission determines to be

11 necessary to carry out its duties.

12 (2) STUDIES BY GAO.—Upon the request of the

13 Commission, the Comptroller General shall conduct

14 such studies or investigations as the Commission de15 termines to be necessary to carry out its duties.

16 (3) COST ESTIMATES BY CONGRESSIONAL

17 BUDGET OFFICE.—

18 (A) Upon the request of the Commission,

19 the Director of the Congressional Budget Office

20 shall provide to the Commission such cost esti21 mates as the Commission determines to be nec22 essary to carry out its duties.

23 (B) The Commission shall reimburse the

24 Director of the Congressional Budget Office for

25 expenses relating to the employment in the of-
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1 fice of the Director of such additional staff as

2 may be necessary for the Director to comply

3 with requests by the Commission under sub4 paragraph (A).

5 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon

6 the request of the Commission, the head of any Fed7 eral agency is authorized to detail, without reim8 bursement, any of the personnel of such agency to

9 the Commission to assist the Commission in carry10 ing out its duties. Any such detail shall not interrupt

11 or otherwise affect the civil service status or privi12 leges of the Federal employee.

13 (5) TECHNICAL ASSISTANCE.—Upon the re14 quest of the Commission, the head of a Federal

15 agency shall provide such technical assistance to the

16 Commission as the Commission determines to be

17 necessary to carry out its duties.

18 (6) USE OF MAILS.—The Commission may use

19 the United States mails in the same manner and

20 under the same conditions as Federal agencies and

21 shall, for purposes of the frank, be considered a

22 commission of Congress as described in section 3215

23 of title 39, United States Code.

24 (7) OBTAINING INFORMATION.—The Commis25 sion may secure directly from any Federal agency
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1 information necessary to enable it to carry out its

2 duties, if the information may be disclosed under

3 section 552 of title 5, United States Code. Upon re4 quest of the Chairman of the Commission, the head

5 of such agency shall furnish such information to the

6 Commission.

7 (8) ADMINISTRATIVE SUPPORT SERVICES.—

8 Upon the request of the Commission, the Adminis9 trator of General Services shall provide to the Com10 mission on a reimbursable basis such administrative

11 support services as the Commission may request.

12 (9) ACCEPTANCE OF DONATIONS.—The Com13 mission may accept, use, and dispose of gifts or do14 nations of services or property.

15 (10) PRINTING.—For purposes of costs relating

16 to printing and binding, including the cost of per17 sonnel detailed from the Government Printing Of18 fice, the Commission shall be deemed to be a com19 mittee of the Congress.

20 (f) REPORT.—Not later than May 1, 1997, the Com21 mission shall submit to Congress a report containing its

22 findings and recommendations regarding how to protect

23 and preserve the medicare program in a financially solvent

24 manner until 2030 (or, if later, throughout the period of

25 projected solvency of the Federal Old-Age and Survivors
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1 Insurance Trust Fund). The report shall include detailed

2 recommendations for appropriate legislative initiatives re3 specting how to accomplish this objective.

4 (g) TERMINATION.—The Commission shall terminate

5 60 days after the date of submission of the report required

6 in subsection (f).

7 (h) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated $1,500,000 to carry out

9 this section. Amounts appropriated to carry out this sec10 tion shall remain available until expended.

11 SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR

12 OF HCFA.

13 (a) IN GENERAL.—Section 1117 (42 U.S.C. 1317)

14 is amended by striking ‘‘President by and with the advice

15 and consent of the Senate’’ and inserting ‘‘Secretary of

16 Health and Human Services’’.

17 (b) EFFECTIVE DATE.—The amendment made by

18 subsection (a) shall take effect on the date of the enact19 ment of this Act and shall apply to Administrators ap20 pointed on or after the date of the enactment of this Act.
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1 Subtitle B—Preventing Fraud and

2 Abuse

3 SEC. 15101. INCREASING AWARENESS OF FRAUD AND

4 ABUSE.

5 (a) BENEFICIARY OUTREACH EFFORTS.—The Sec6 retary of Health and Human Services (acting through the

7 Administrator of the Health Care Financing Administra8 tion and the Inspector General of the Department of

9 Health and Human Services) shall make ongoing efforts

10 (through public service announcements, publications, and

11 other appropriate methods) to alert individuals entitled to

12 benefits under the medicare program of the existence of

13 fraud and abuse committed against the program and the

14 costs to the program of such fraud and abuse, and of the

15 existence of the toll-free telephone line operated by the

16 Secretary to receive information on fraud and abuse com17 mitted against the program.

18 (b) CLARIFICATION OF REQUIREMENT TO PROVIDE

19 EXPLANATION OF MEDICARE BENEFITS.—The Secretary

20 shall provide an explanation of benefits under the medi21 care program with respect to each item or service for

22 which payment may be made under the program which

23 is furnished to an individual, without regard to whether

24 or not a deductible or coinsurance may be imposed against

25 the individual with respect to the item or service.
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1 (c) PROVIDER OUTREACH EFFORTS; PUBLICATION

2 OF FRAUD ALERTS.—

3 (1) SPECIAL FRAUD ALERTS.—

4 (A) IN GENERAL.—

5 (i) REQUEST FOR SPECIAL FRAUD

6 ALERTS.—Any person may present, at any

7 time, a request to the Secretary to issue

8 and publish a special fraud alert.

9 (ii) SPECIAL FRAUD ALERT DE10 FINED.—In this section, a ‘‘special fraud

11 alert’’ is a notice which informs the public

12 of practices which the Secretary considers

13 to be suspect or of particular concern

14 under the medicare program or a State

15 health care program (as defined in section

16 1128(h) of the Social Security Act).

17 (B) ISSUANCE AND PUBLICATION OF SPE18 CIAL FRAUD ALERTS.—

19 (i) INVESTIGATION.—Upon receipt of

20 a request for a special fraud alert under

21 subparagraph (A), the Secretary shall in22 vestigate the subject matter of the request

23 to determine whether a special fraud alert

24 should be issued. If appropriate, the Sec25 retary (in consultation with the Attorney
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1 General) shall issue a special fraud alert in

2 response to the request. All special fraud

3 alerts issued pursuant to this subpara4 graph shall be published in the Federal

5 Register.

6 (ii) CRITERIA FOR ISSUANCE.—In de7 termining whether to issue a special fraud

8 alert upon a request under subparagraph

9 (A), the Secretary may consider—

10 (I) whether and to what extent

11 the practices that would be identified

12 in the special fraud alert may result

13 in any of the consequences described

14 in 15214(b); and

15 (II) the extent and frequency of

16 the conduct that would be identified

17 in the special fraud alert.

18 (2) PUBLICATION OF ALL HCFA FRAUD ALERTS

19 IN FEDERAL REGISTER.—Each notice issued by the

20 Health Care Financing Administration which in21 forms the public of practices which the Secretary

22 considers to be suspect or of particular concern

23 under the medicare program or a State health care

24 program (as defined in section 1128(h) of the Social

25 Security Act) shall be published in the Federal Reg-
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1 ister, without regard to whether or not the notice is

2 issued by a regional office of the Health Care Fi3 nancing Administration.

4 SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.

5 (a) PROGRAM TO COLLECT INFORMATION ON FRAUD

6 AND ABUSE.—

7 (1) ESTABLISHMENT OF PROGRAM.—Not later

8 than 3 months after the date of the enactment of

9 this Act, the Secretary shall establish a program

10 under which the Secretary shall encourage individ11 uals to report to the Secretary information on indi12 viduals and entities who are engaging or who have

13 engaged in acts or omissions which constitute

14 grounds for the imposition of a sanction under sec15 tion 1128, section 1128A, or section 1128B of the

16 Social Security Act, or who have otherwise engaged

17 in fraud and abuse against the medicare program.

18 (2) PAYMENT OF PORTION OF AMOUNTS COL19 LECTED.—If an individual reports information to

20 the Secretary under the program established under

21 paragraph (1) which serves as the basis for the col22 lection by the Secretary or the Attorney General of

23 any amount of at least $100 (other than any

24 amount paid as a penalty under section 1128B of

25 the Social Security Act), the Secretary may pay a
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1 portion of the amount collected to the individual

2 (under procedures similar to those applicable under

3 section 7623 of the Internal Revenue Code of 1986

4 to payments to individuals providing information on

5 violations of such Code).

6 (b) PROGRAM TO COLLECT INFORMATION ON PRO7 GRAM EFFICIENCY.—

8 (1) ESTABLISHMENT OF PROGRAM.—Not later

9 than 3 months after the date of the enactment of

10 this Act, the Secretary shall establish a program

11 under which the Secretary shall encourage individ12 uals to submit to the Secretary suggestions on meth13 ods to improve the efficiency of the medicare pro14 gram.

15 (2) PAYMENT OF PORTION OF PROGRAM SAV16 INGS.—If an individual submits a suggestion to the

17 Secretary under the program established under

18 paragraph (1) which is adopted by the Secretary and

19 which results in savings to the program, the Sec20 retary may make a payment to the individual of

21 such amount as the Secretary considers appropriate.

22 SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE

23 HEALTH MAINTENANCE ORGANIZATIONS.

24 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

25 ANY PROGRAM VIOLATIONS.—
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1 (1) IN GENERAL.—Section 1876(i)(1) (42

2 U.S.C. 1395mm(i)(1)) is amended by striking ‘‘the

3 Secretary may terminate’’ and all that follows and

4 inserting the following: ‘‘in accordance with proce5 dures established under paragraph (9), the Secretary

6 may at any time terminate any such contract or may

7 impose the intermediate sanctions described in para8 graph (6)(B) or (6)(C) (whichever is applicable) on

9 the eligible organization if the Secretary determines

10 that the organization—

11 ‘‘(A) has failed substantially to carry out the

12 contract;

13 ‘‘(B) is carrying out the contract in a manner

14 inconsistent with the efficient and effective adminis15 tration of this section;

16 ‘‘(C) is operating in a manner that is not in the

17 best interests of the individuals covered under the

18 contract; or

19 ‘‘(D) no longer substantially meets the applica20 ble conditions of subsections (b), (c), (e), and (f).’’.

21 (2) OTHER INTERMEDIATE SANCTIONS FOR

22 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

23 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

24 adding at the end the following new subparagraph:
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1 ‘‘(C) In the case of an eligible organization for which

2 the Secretary makes a determination under paragraph (1)

3 the basis of which is not described in subparagraph (A),

4 the Secretary may apply the following intermediate sanc5 tions:

6 ‘‘(i) civil money penalties of not more than

7 $25,000 for each determination under paragraph (1)

8 if the deficiency that is the basis of the determina9 tion has directly adversely affected (or has the sub10 stantial likelihood of adversely affecting) an individ11 ual covered under the organization’s contract;

12 ‘‘(ii) civil money penalties of not more than

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

14 of procedures by the Secretary under paragraph (9)

15 during which the deficiency that is the basis of a de16 termination under paragraph (1) exists; and

17 ‘‘(iii) suspension of enrollment of individuals

18 under this section after the date the Secretary noti19 fies the organization of a determination under para20 graph (1) and until the Secretary is satisfied that

21 the deficiency that is the basis for the determination

22 has been corrected and is not likely to recur.’’.

23 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

24 Section 1876(i) (42 U.S.C. 1395mm(i)) is amended

25 by adding at the end the following new paragraph:
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1 ‘‘(9) The Secretary may terminate a contract with an

2 eligible organization under this section or may impose the

3 intermediate sanctions described in paragraph (6) on the

4 organization in accordance with formal investigation and

5 compliance procedures established by the Secretary under

6 which—

7 ‘‘(A) the Secretary provides the organization

8 with the opportunity to develop and implement a

9 corrective action plan to correct the deficiencies that

10 were the basis of the Secretary’s determination

11 under paragraph (1);

12 ‘‘(B) the Secretary shall impose more severe

13 sanctions on organizations that have a history of de14 ficiencies or that have not taken steps to correct de15 ficiencies the Secretary has brought to their atten16 tion;

17 ‘‘(C) there are no unreasonable or unnecessary

18 delays between the finding of a deficiency and the

19 imposition of sanctions; and

20 ‘‘(D) the Secretary provides the organization

21 with reasonable notice and opportunity for hearing

22 (including the right to appeal an initial decision) be23 fore imposing any sanction or terminating the con24 tract.’’.
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1 (4) CONFORMING AMENDMENTS.—(A) Section

2 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

3 amended by striking the second sentence.

4 (B) Section 1876(i)(6) (42 U.S.C.

5 1395mm(i)(6)) is further amended by adding at the

6 end the following new subparagraph:

7 ‘‘(D) The provisions of section 1128A (other than

8 subsections (a) and (b)) shall apply to a civil money pen9 alty under subparagraph (A) or (B) in the same manner

10 as they apply to a civil money penalty or proceeding under

11 section 1128A(a).’’.

12 (b) EFFECTIVE DATE.—The amendments made by

13 this section shall apply with respect to contract years be14 ginning on or after January 1, 1996.

15 SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.

16 Title XI (42 U.S.C. 1301 et seq.) is amended by in17 serting after section 1128B the following new section:

18 ‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS

19 ‘‘SEC. 1129. (a) ESTABLISHMENT OF VOLUNTARY

20 DISCLOSURE PROGRAM.—Not later than 3 months after

21 the date of the enactment of this section, the Secretary

22 shall establish a program to encourage individuals and en23 tities to voluntarily disclose to the Secretary information

24 on acts or omissions of the individual or entity which con25 stitute grounds for the imposition of a sanction described

26 in section 1128, 1128A, or 1128B.
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1 ‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If an

2 individual or entity voluntarily discloses information with

3 respect to an act or omission to the Secretary under sub4 section (a), the following rules shall apply:

5 ‘‘(1) The Secretary may waive, reduce, or other6 wise mitigate any sanction which would otherwise be

7 applicable to the individual or entity under section

8 1128, 1128A, or 1128B as a result of the act or

9 omission involved.

10 ‘‘(2) No qui tam action may be brought pursu11 ant to chapter 37 of title 31, United States Code,

12 against the individual or entity with respect to the

13 act or omission involved.’’.

14 SEC. 15105. REVISIONS TO CURRENT SANCTIONS.

15 (a) DOUBLING THE AMOUNT OF CIVIL MONETARY

16 PENALTIES.—The maximum amount of civil monetary

17 penalties specified in section 1128A of the Social Security

18 Act or under title XVIII of such Act (as in effect on the

19 day before the date of the enactment of this Act) shall,

20 effective for violations occurring after the date of the en21 actment of this Act, be double the amount otherwise pro22 vided as of such date.

23 (b) ESTABLISHMENT OF MINIMUM PERIOD OF EX24 CLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUB25 JECT TO PERMISSIVE EXCLUSION.—Section 1128(c)(3)
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1 (42 U.S.C. 1320a–7(c)(3)) is amended by adding at the

2 end the following new subparagraphs:

3 ‘‘(D) In the case of an exclusion of an individual or

4 entity under paragraph (1), (2), or (3) of subsection (b),

5 the period of the exclusion shall be 3 years, unless the

6 Secretary determines in accordance with published regula7 tions that a shorter period is appropriate because of miti8 gating circumstances or that a longer period is appro9 priate because of aggravating circumstances.

10 ‘‘(E) In the case of an exclusion of an individual or

11 entity under subsection (b)(4) or (b)(5), the period of the

12 exclusion shall not be less than the period during which

13 the individual’s or entity’s license to provide health care

14 is revoked, suspended, or surrendered, or the individual

15 or the entity is excluded or suspended from a Federal or

16 State health care program.

17 ‘‘(F) In the case of an exclusion of an individual or

18 entity under subsection (b)(6)(B), the period of the exclu19 sion shall be not less than 1 year.’’.

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply with respect to acts or omissions

22 occurring on or after January 1, 1996.
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1 SEC. 15106. CONSOLIDATED FUNDING FOR ANTI-FRAUD

2 AND ABUSE ACTIVITIES UNDER MEDICARE

3 INTEGRITY PROGRAM.

4 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO5 GRAM.—Title XVIII is amended by adding at the end the

6 following new section:

7 ‘‘MEDICARE INTEGRITY PROGRAM

8 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—

9 There is hereby established the Medicare Integrity Pro10 gram (hereafter in this section referred to as the ‘Pro11 gram’) under which the Secretary shall promote the integ12 rity of the medicare program by entering into contracts

13 in accordance with this section with eligible private entities

14 to carry out the activities described in subsection (b).

15 ‘‘(b) ACTIVITIES DESCRIBED.—The activities de16 scribed in this subsection are as follows:

17 ‘‘(1) Review of activities of providers of services

18 or other individuals and entities furnishing items

19 and services for which payment may be made under

20 this title (including skilled nursing facilities and

21 home health agencies), including medical and utiliza22 tion review and fraud review (employing similar

23 standards, processes, and technologies used by pri24 vate health plans, including equipment and software

25 technologies which surpass the capability of the

26 equipment and technologies used in the review of
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1 claims under this title as of the date of the enact2 ment of this section).

3 ‘‘(2) Audit of cost reports.

4 ‘‘(3) Determinations as to whether payment

5 should not be, or should not have been, made under

6 this title by reason of section 1862(b), and recovery

7 of payments that should not have been made.

8 ‘‘(4) Education of providers of services, bene9 ficiaries, and other persons with respect to payment

10 integrity and benefit quality assurance issues.

11 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

12 to enter into a contract under the Program to carry out

13 any of the activities described in subsection (b) if—

14 ‘‘(1) the entity has demonstrated capability to

15 carry out such activities;

16 ‘‘(2) in carrying out such activities, the entity

17 agrees to cooperate with the Inspector General of

18 the Department of Health and Human Services, the

19 Attorney General of the United States, and other

20 law enforcement agencies, as appropriate, in the in21 vestigation and deterrence of fraud and abuse in re22 lation to this title and in other cases arising out of

23 such activities;

24 ‘‘(3) the entity’s financial holdings, interests, or

25 relationships will not interfere with its ability to per-
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1 form the functions to be required by the contract in

2 an effective and impartial manner; and

3 ‘‘(4) the entity meets such other requirements

4 as the Secretary may impose.

5 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—

6 The Secretary shall enter into contracts under the Pro7 gram in accordance with such procedures as the Secretary

8 may by regulation establish, except that such procedures

9 shall include the following:

10 ‘‘(1) The Secretary shall determine the appro11 priate number of separate contracts which are nec12 essary to carry out the Program and the appropriate

13 times at which the Secretary shall enter into such

14 contracts.

15 ‘‘(2) The provisions of section 1153(e)(1) shall

16 apply to contracts and contracting authority under

17 this section, except that competitive procedures must

18 be used when entering into new contracts under this

19 section, or at any other time considered appropriate

20 by the Secretary.

21 ‘‘(3) A contract under this section may be re22 newed without regard to any provision of law requir23 ing competition if the contractor has met or ex24 ceeded the performance requirements established in

25 the current contract.
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1 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

2 Secretary shall by regulation provide for the limitation of

3 a contractor’s liability for actions taken to carry out a con4 tract under the Program, and such regulation shall, to the

5 extent the Secretary finds appropriate, employ the same

6 or comparable standards and other substantive and proce7 dural provisions as are contained in section 1157.

8 ‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI9 FRAUD AND ABUSE TRUST FUND.—For each fiscal year,

10 the Secretary shall transfer from the Federal Hospital In11 surance Trust Fund and the Federal Supplementary Med12 ical Insurance Trust Fund to the Medicare Anti-Fraud

13 and Abuse Trust Fund under subsection (g) such amounts

14 as are necessary to carry out the activities described in

15 subsection (b). Such transfer shall be in an allocation as

16 reasonably reflects the proportion of such expenditures as17 sociated with part A and part B.

18 ‘‘(g) MEDICARE ANTI-FRAUD AND ABUSE TRUST

19 FUND.—

20 ‘‘(1) ESTABLISHMENT.—

21 ‘‘(A) IN GENERAL.—There is hereby estab22 lished in the Treasury of the United States the

23 Anti-Fraud and Abuse Trust Fund (hereafter

24 in this subsection referred to as the ‘Trust

25 Fund’). The Trust Fund shall consist of such
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1 gifts and bequests as may be made as provided

2 in subparagraph (B) and such amounts as may

3 be deposited in the Trust Fund as provided in

4 subsection (f), paragraph (3), and title XI.

5 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS

6 AND BEQUESTS.—The Trust Fund is author7 ized to accept on behalf of the United States

8 money gifts and bequests made unconditionally

9 to the Trust Fund, for the benefit of the Trust

10 Fund or any activity financed through the

11 Trust Fund.

12 ‘‘(2) INVESTMENT.—

13 ‘‘(A) IN GENERAL.—The Secretary of the

14 Treasury shall invest such amounts of the Fund

15 as such Secretary determines are not required

16 to meet current withdrawals from the Fund in

17 government account serial securities.

18 ‘‘(B) USE OF INCOME.—Any interest de19 rived from investments under subparagraph (A)

20 shall be credited to the Fund.

21 ‘‘(3) AMOUNTS DEPOSITED INTO TRUST

22 FUND.—In addition to amounts transferred under

23 subsection (f), there shall be deposited in the Trust

24 Fund—
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1 ‘‘(A) that portion of amounts recovered in

2 relation to section 1128A arising out of a claim

3 under title XVIII as remains after application

4 of subsection (f)(2) (relating to repayment of

5 the Federal Hospital Insurance Trust Fund or

6 the Federal Supplementary Medical Insurance

7 Trust Fund) of that section, as may be applica8 ble,

9 ‘‘(B) fines imposed under section 1128B

10 arising out of a claim under this title, and

11 ‘‘(C) penalties and damages imposed (other

12 than funds awarded to a relator or for restitu13 tion) under sections 3729 through 3732 of title

14 31, United States Code (pertaining to false

15 claims) in cases involving claims relating to pro16 grams under title XVIII or XIX.

17 ‘‘(4) DIRECT APPROPRIATION OF FUNDS TO

18 CARRY OUT PROGRAM.—

19 ‘‘(A) IN GENERAL.—There are appro20 priated from the Trust Fund for each fiscal

21 year such amounts as are necessary to carry

22 out the Medicare Integrity Program under this

23 section, subject to subparagraph (B).
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1 ‘‘(B) AMOUNTS SPECIFIED.—The amount

2 appropriated under subparagraph (A) for a fis3 cal year is as follows:

4 ‘‘(i) For fiscal year 1996, such

5 amount shall be not less than

6 $430,000,000 and not more than

7 $440,000,000.

8 ‘‘(ii) For fiscal year 1997, such

9 amount shall be not less than

10 $490,000,000 and not more than

11 $500,000,000.

12 ‘‘(iii) For fiscal year 1998, such

13 amount shall be not less than

14 $550,000,000 and not more than

15 $560,000,000.

16 ‘‘(iv) For fiscal year 1999, such

17 amount shall be not less than

18 $620,000,000 and not more than

19 $630,000,000.

20 ‘‘(v) For fiscal year 2000, such

21 amount shall be not less than

22 $670,000,000 and not more than

23 $680,000,000.

24 ‘‘(vi) For fiscal year 2001, such

25 amount shall be not less than
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1 $690,000,000 and not more than

2 $700,000,000.

3 ‘‘(vii) For fiscal year 2002, such

4 amount shall be not less than

5 $710,000,000 and not more than

6 $720,000,000.

7 ‘‘(5) ANNUAL REPORT.—The Secretary shall

8 submit an annual report to Congress on the amount

9 of revenue which is generated and disbursed by the

10 Trust Fund in each fiscal year.’’.

11 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL12 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO13 GRAM.—

14 (1) RESPONSIBILITIES OF FISCAL

15 INTERMEDIARIES UNDER PART A.—Section 1816

16 (42 U.S.C. 1395h) is amended by adding at the end

17 the following new subsection:

18 ‘‘(l) No agency or organization may carry out (or re19 ceive payment for carrying out) any activity pursuant to

20 an agreement under this section to the extent that the ac21 tivity is carried out pursuant to a contract under the Med22 icare Integrity Program under section 1893.’’.

23 (2) RESPONSIBILITIES OF CARRIERS UNDER

24 PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is
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1 amended by adding at the end the following new

2 paragraph:

3 ‘‘(6) No carrier may carry out (or receive payment

4 for carrying out) any activity pursuant to a contract under

5 this subsection to the extent that the activity is carried

6 out pursuant to a contract under the Medicare Integrity

7 Program under section 1893.’’.

8 (c) CONFORMING AMENDMENT.—Section

9 1128A(f)(3) (42 U.S.C. 1320a–7a(f)(3)) is amended by

10 striking ‘‘as miscellaneous receipts of the Treasury of the

11 United States’’ and inserting ‘‘in the Anti-Fraud and

12 Abuse Trust Fund established under section 1145’’.

13 SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR

14 AUTHORIZATION FOR CERTAIN ITEMS OF DU15 RABLE MEDICAL EQUIPMENT.

16 (a) IN GENERAL.—Section 1834(a)(15) (42 U.S.C.

17 1395m(a)(15)), as amended by section 135(b) of the So18 cial Security Act Amendments of 1994, is amended by

19 adding at the end the following new subparagraphs:

20 ‘‘(D) APPLICATION BY CARRIERS.—A car21 rier may develop (and periodically update) a list

22 of items under subparagraph (A) and a list of

23 suppliers under subparagraph (B) in the same

24 manner as the Secretary may develop (and peri25 odically update) such lists.
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1 ‘‘(E) WAIVER OF PUBLICATION REQUIRE2 MENT.—A carrier may make an advance deter3 mination under subparagraph (C) with respect

4 to an item or supplier on a list developed by the

5 Secretary or the carrier without regard to

6 whether or not the Secretary has promulgated

7 a regulation with respect to the list, except that

8 the carrier may not make such an advance de9 termination with respect to an item or supplier

10 on a list until the expiration of the 30-day pe11 riod beginning on the date the Secretary or the

12 carrier places the item or supplier on the list.’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 subsection (a) shall take effect as if included in the enact15 ment of the Social Security Act Amendments of 1994.

16 SEC. 15108. ESTABLISHMENT OF HEALTH CARE ANTI17 FRAUD TASK FORCE.

18 (a) IN GENERAL.—Not later than 120 days after the

19 date of the enactment of this Act, the Attorney General

20 shall establish (in consultation with the Advisory Group

21 described in subsection (c)) within the Department of Jus22 tice a task force (similar to the Organized Crime Drug

23 Enforcement Task Force) to be known as the ‘‘Health

24 Care Anti-Fraud Task Force’’ (hereafter in this section

25 referred to as the ‘‘Task Force’’) to prosecute health care
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1 fraud offenses. Nothing in this section may be construed

2 as affecting the powers of the Attorney General or any

3 other individual.

4 (b) OPERATIONS OF TASK FORCE.—The Attorney

5 General shall establish and operate the Task Force in a

6 manner such that—

7 (1) at least one fully staffed operational seg8 ment of the Task Force (including at least one Fed9 eral representative engaged in Task Force activities

10 on a full-time basis) shall operate in each judicial

11 district of the United States; and

12 (2) the Task Force maintains separate account13 ing of its finances, personnel, case load, and resolu14 tion of claims and actions.

15 (c) ADVISORY GROUP DESCRIBED.—The Advisory

16 Group described in this subsection is a group consisting

17 of the following individuals (or their designees):

18 (1) The Secretary of Health and Human Serv19 ices.

20 (2) The Secretary of the Treasury.

21 (3) The Secretary of Veterans’ Affairs.

22 (4) The Chair of the Board of Governors of the

23 United States Postal Service.
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1 SEC. 15109. STUDY OF ADEQUACY OF PRIVATE QUALITY AS2 SURANCE PROGRAMS.

3 (a) IN GENERAL.—The Administrator of the Health

4 Care Financing Administration (acting through the Direc5 tor of the Office of Research and Development) shall enter

6 into an agreement with a private entity to conduct a study

7 during the 5-year period beginning on the date of the en8 actment of this Act of the adequacy of the quality assur9 ance programs and consumer protections used by plans

10 enrolling medicare beneficiaries under part C of title

11 XVIII of the Social Security Act (as inserted by section

12 15002(a)), and shall include in the study an analysis of

13 the effectiveness of such programs in protecting plan en14 rollees against the risk of insufficient provision of benefits

15 which may result from utilization controls.

16 (b) REPORT.—Not later than 6 months after the con17 clusion of the 5-year period described in subsection (a),

18 the Administrator shall submit a report to Congress on

19 the study conducted under subsection (a).

20 Subtitle C—Regulatory Relief

21 PART 1—PHYSICIAN OWNERSHIP REFERRAL

22 REFORM

23 SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM24 PENSATION ARRANGEMENTS.

25 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

26 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 PROVISIONS’’ and inserting ‘‘WHERE FI10 NANCIAL 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), as amended by section

7 152(a) of the Social Security Act Amendments of

8 1994—

9 (A) in the matter preceding paragraph (1),

10 by striking ‘‘ownership, investment, and com11 pensation’’ and inserting ‘‘ownership and in12 vestment’’;

13 (B) in paragraph (2), by striking ‘‘sub14 section (a)(2)(A)’’ and all that follows through

15 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub16 section (a)(2),’’; and

17 (C) in paragraph (2), by striking ‘‘or who

18 have such a compensation relationship with the

19 entity’’.

20 (6) In subsection (h)—

21 (A) by striking paragraphs (1), (2), and

22 (3);

23 (B) in paragraph (4)(A), by striking

24 clauses (iv) and (vi);
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1 (C) in paragraph (4)(B), by striking

2 ‘‘RULES.—’’ and all that follows through ‘‘(ii)

3 FACULTY’’ and inserting ‘‘RULES FOR FAC4 ULTY; and

5 (D) by adding at the end of paragraph (4)

6 the following new subparagraph:

7 ‘‘(C) MEMBER OF A GROUP.—A physician

8 is a ‘member’ of a group if the physician is an

9 owner or a bona fide employee, or both, of the

10 group.’’.

11 SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES

12 SUBJECT TO PROHIBITION.

13 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

14 1395nn(h)(6)) is amended by striking subparagraphs (B)

15 through (K) and inserting the following:

16 ‘‘(B) Items and services furnished by a

17 community pharmacy (as defined in paragraph

18 (1)).

19 ‘‘(C) Magnetic resonance imaging and

20 computerized tomography services.

21 ‘‘(D) Outpatient physical therapy serv22 ices.’’.

23 (b) COMMUNITY PHARMACY DEFINED.—Section

24 1877(h) (42 U.S.C. 1395nn(h)), as amended by section
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1 15201(b)(6), is amended by inserting before paragraph

2 (4) the following new paragraph:

3 ‘‘(1) COMMUNITY PHARMACY.—The term ‘com4 munity pharmacy’ means any entity licensed or cer5 tified to dispense prescription drugs by the State in

6 which the entity is located (including an entity which

7 dispenses such drugs by mail order).’’.

8 (c) CONFORMING AMENDMENTS.—

9 (1) Section 1877(b)(2) (42 U.S.C.

10 1395nn(b)(2)) is amended in the matter preceding

11 subparagraph (A) by striking ‘‘services’’ and all that

12 follows through ‘‘supplies)—’’ and inserting ‘‘serv13 ices—’’.

14 (2) Section 1877(h)(5)(C) (42 U.S.C.

15 1395nn(h)(5)(C)) is amended—

16 (A) by striking ‘‘, a request by a radiolo17 gist for diagnostic radiology services, and a re18 quest by a radiation oncologist for radiation

19 therapy,’’ and inserting ‘‘and a request by a ra20 diologist for magnetic resonance imaging or for

21 computerized tomography’’, and

22 (B) by striking ‘‘radiologist, or radiation

23 oncologist’’ and inserting ‘‘or radiologist’’.
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1 SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMUL2 GATION OF REGULATIONS.

3 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

4 (42 U.S.C. 1395nn note) is amended—

5 (1) in paragraph (1), by striking ‘‘paragraph

6 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

7 (2) by adding at the end the following new

8 paragraph:

9 ‘‘(3) PROMULGATION OF REGULATIONS.—Not10 withstanding paragraphs (1) and (2), the amend11 ments made by this section shall not apply to any

12 referrals made before the effective date of final regu13 lations promulgated by the Secretary of Health and

14 Human Services to carry out such amendments.’’.

15 (b) EFFECTIVE DATE.—The amendments made by

16 subsection (a) shall take effect as if included in the enact17 ment of OBRA–1993.

18 SEC. 15204. EXCEPTIONS TO PROHIBITION.

19 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN20 CILLARY SERVICES.—

21 (1) REPEAL OF SITE-OF-SERVICE REQUIRE22 MENT.—Section 1877 (42 U.S.C. 1395nn) is amend23 ed—

24 (A) by amending subparagraph (A) of sub25 section (b)(2) to read as follows:
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1 ‘‘(A) that are furnished personally by the

2 referring physician, personally by a physician

3 who is a member of the same group practice as

4 the referring physician, or personally by individ5 uals who are under the general supervision of

6 the physician or of another physician in the

7 group practice, and’’, and

8 (B) by adding at the end of subsection (h)

9 the following new paragraph:

10 ‘‘(7) GENERAL SUPERVISION.—An individual is

11 considered to be under the ‘general supervision’ of a

12 physician if the physician (or group practice of

13 which the physician is a member) is legally respon14 sible for the services performed by the individual and

15 for ensuring that the individual meets licensure and

16 certification requirements, if any, applicable under

17 other provisions of law, regardless of whether or not

18 the physician is physically present when the individ19 ual furnishes an item or service.’’.

20 (2) CLARIFICATION OF TREATMENT OF PHYSI21 CIAN OWNERS OF GROUP PRACTICE.—Section

22 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is

23 amended by striking ‘‘physician or such group prac24 tice’’ and inserting ‘‘physician, such group practice,

25 or the physician owners of such group practice’’.
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1 (3) CONFORMING AMENDMENT.—Section

2 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

3 amending the heading to read as follows: ‘‘ANCIL4 LARY SERVICES FURNISHED PERSONALLY OR

5 THROUGH GROUP PRACTICE.—’’.

6 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

7 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

8 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

9 15201(b)(3)(C), is amended by striking ‘‘substantially all’’

10 and inserting ‘‘not less than 75 percent’’.

11 (c) REVISION OF EXCEPTION FOR CERTAIN MAN12 AGED CARE ARRANGEMENTS.—Section 1877(b)(3) (42

13 U.S.C. 1395nn(b)(3)) is amended—

14 (1) in the heading by inserting ‘‘MANAGED

15 CARE ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;

16 (2) in the matter preceding subparagraph (A),

17 by striking ‘‘organization—’’ and inserting ‘‘organi18 zation, directly or through contractual arrangements

19 with other entities, to individuals enrolled with the

20 organization—’’;

21 (3) in subparagraph (A), by inserting ‘‘or part

22 C’’ after ‘‘section 1876’’;

23 (4) by striking ‘‘or’’ at the end of subparagraph

24 (C);
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1 (5) by striking the period at the end of sub2 paragraph (D) and inserting a comma; and

3 (6) by adding at the end the following new sub4 paragraphs:

5 ‘‘(E) with a contract with a State to pro6 vide services under the State plan under title

7 XIX (in accordance with section 1903(m)) or a

8 State MediGrant plan under title XXI; or

9 ‘‘(F) which—

10 ‘‘(i) provides health care items or

11 services directly or through one or more

12 subsidiary entities or arranges for the pro13 vision of health care items or services sub14 stantially through the services of health

15 care providers under contract with the or16 ganization, and

17 ‘‘(ii)(I) assumes financial risk for the

18 provision of health services through mecha19 nisms (such as capitation, risk pools, with20 holds, and per diem payments) or offers its

21 network of contract health providers to an

22 entity (including self-insured employers

23 and indemnity plans) which assumes finan24 cial risk for the provision of such health

25 services, or
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1 ‘‘(II) has in effect a written agree2 ment with the provider of services under

3 which the provider is at significant finan4 cial risk (whether through a withhold, capi5 tation, incentive pool, per diem payments,

6 or similar risk sharing arrangement) for

7 the cost or utilization of services that the

8 provider is obligated to provide.’’.

9 (d) NEW EXCEPTION FOR SHARED FACILITY SERV10 ICES.—

11 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

12 1395nn(b)), as amended by section 15201(b)(3)(C),

13 is amended—

14 (A) by redesignating paragraphs (4)

15 through (7) as paragraphs (5) through (8); and

16 (B) by inserting after paragraph (3) the

17 following new paragraph:

18 ‘‘(4) SHARED FACILITY SERVICES.—In the case

19 of a designated health service consisting of a shared

20 facility service of a shared facility—

21 ‘‘(A) that is furnished—

22 ‘‘(i) personally by the referring physi23 cian who is a shared facility physician or

24 personally by an individual directly em-
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1 ployed or under the general supervision of

2 such a physician,

3 ‘‘(ii) by a shared facility in a building

4 in which the referring physician furnishes

5 substantially all of the services of the phy6 sician that are unrelated to the furnishing

7 of shared facility services, and

8 ‘‘(iii) to a patient of a shared facility

9 physician; and

10 ‘‘(B) that is billed by the referring physi11 cian or a group practice of which the physician

12 is a member.’’.

13 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

14 1395nn(h)), as amended by section 15201(b)(6) and

15 section 15202(b), is amended by inserting after

16 paragraph (1) the following new paragraph:

17 ‘‘(2) SHARED FACILITY RELATED DEFINI18 TIONS.—

19 ‘‘(A) SHARED FACILITY SERVICE.—The

20 term ‘shared facility service’ means, with re21 spect to a shared facility, a designated health

22 service furnished by the facility to patients of

23 shared facility physicians.

24 ‘‘(B) SHARED FACILITY.—The term

25 ‘shared facility’ means an entity that furnishes
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1 shared facility services under a shared facility

2 arrangement.

3 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

4 term ‘shared facility physician’ means, with re5 spect to a shared facility, a physician (or a

6 group practice of which the physician is a mem7 ber) who has a financial relationship under a

8 shared facility arrangement with the facility.

9 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

10 The term ‘shared facility arrangement’ means,

11 with respect to the provision of shared facility

12 services in a building, a financial arrange13 ment—

14 ‘‘(i) which is only between physicians

15 who are providing services (unrelated to

16 shared facility services) in the same build17 ing,

18 ‘‘(ii) in which the overhead expenses

19 of the facility are shared, in accordance

20 with methods previously determined by the

21 physicians in the arrangement, among the

22 physicians in the arrangement, and

23 ‘‘(iii) which, in the case of a corpora24 tion, is wholly owned and controlled by

25 shared facility physicians.’’.
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1 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

2 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—

3 Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by

4 section 15201(b)(3)(C) and subsection (d)(1), is amend5 ed—

6 (1) by redesignating paragraphs (5) through

7 (8) as paragraphs (6) through (9); and

8 (2) by inserting after paragraph (4) the follow9 ing new paragraph:

10 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—

11 In the case of a designated health service furnished

12 in any area with respect to which the Secretary de13 termines that individuals residing in the area do not

14 have reasonable access to such a designated health

15 service for which subsection (a)(1) does not apply.’’.

16 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

17 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

18 U.S.C. 1395nn(b)), as amended by section

19 15201(b)(3)(C), subsection (d)(1), and subsection (e)(1),

20 is amended—

21 (1) by redesignating paragraphs (6) through

22 (9) as paragraphs (7) through (10); and

23 (2) by inserting after paragraph (5) the follow24 ing new paragraph:
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1 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

2 SURGICAL CENTERS.—In the case of a designated

3 health service furnished in an ambulatory surgical

4 center described in section 1832(a)(2)(F)(i).’’.

5 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

6 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42

7 U.S.C. 1395nn(b)), as amended by section

8 15201(b)(3)(C), subsection (d)(1), subsection (e)(1), and

9 subsection (f), is amended—

10 (1) by redesignating paragraphs (7) through

11 (10) as paragraphs (8) through (11); and

12 (2) by inserting after paragraph (6) the follow13 ing new paragraph:

14 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

15 FACILITIES.—In the case of a designated health

16 service furnished in a renal dialysis facility under

17 section 1881.’’.

18 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN

19 A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

20 amended by section 15201(b)(3)(C), subsection (d)(1),

21 subsection (e)(1), subsection (f), and subsection (g), is

22 amended—

23 (1) by redesignating paragraphs (8) through

24 (11) as paragraphs (9) through (12); and
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1 (2) by inserting after paragraph (7) the follow2 ing new paragraph:

3 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO4 GRAM.—In the case of a designated health service

5 furnished by a hospice program under section

6 1861(dd)(2).’’.

7 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN

8 A COMPREHENSIVE OUTPATIENT REHABILITATION FA9 CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

10 amended by section 15201(b)(3)(C), subsection (d)(1),

11 subsection (e)(1), subsection (f), subsection (g), and sub12 section (h), is amended—

13 (1) by redesignating paragraphs (9) through

14 (12) as paragraphs (10) through (13); and

15 (2) by inserting after paragraph (8) the follow16 ing new paragraph:

17 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN18 SIVE OUTPATIENT REHABILITATION FACILITY.—In

19 the case of a designated health service furnished in

20 a comprehensive outpatient rehabilitation facility (as

21 defined in section 1861(cc)(2)).’’.

22 (i) DEFINITION OF REFERRAL.—Section

23 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amend24 ed—
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1 (1) by striking ‘‘an item or service’’ and insert2 ing ‘‘a designated health service’’, and

3 (2) by striking ‘‘the item or service’’ and insert4 ing ‘‘the designated health service’’.

5 SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.

6 Section 1877 (42 U.S.C. 1395nn) is amended—

7 (1) by striking subsection (f); and

8 (2) by striking subsection (g)(5).

9 SEC. 15206. PREEMPTION OF STATE LAW.

10 Section 1877 (42 U.S.C. 1395nn) is amended by add11 ing at the end the following new subsection:

12 ‘‘(i) PREEMPTION OF STATE LAW.—This section pre13 empts State law to the extent State law is inconsistent

14 with this section.’’.

15 SEC. 15207. EFFECTIVE DATE.

16 Except as provided in section 15203(b), the amend17 ments made by this part shall apply to referrals made on

18 or after August 14, 1995, regardless of whether or not

19 regulations are promulgated to carry out such amend20 ments.
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1 PART 2—OTHER MEDICARE REGULATORY

2 RELIEF

3 SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV4 ERAGE DATA BANK.

5 (a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–

6 14), as added by section 13581(a) of OBRA–93, is re7 pealed.

8 (b) CONFORMING AMENDMENTS.—

9 (1) MEDICARE.—Section 1862(b)(5) of such

10 Act (42 U.S.C. 1395y(b)(5)), as amended by section

11 13581(b)(1) of OBRA–93, is amended—

12 (A) in subparagraph (B), by striking the

13 dash and all that follows through the end and

14 inserting ‘‘subparagraph (A) for purposes of

15 carrying out this subsection.’’, and

16 (B) in subparagraph (C)(i), by striking

17 ‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara18 graph (B)’’.

19 (2) MEDICAID.—Section 1902(a)(25)(A)(i) of

20 such Act (42 U.S.C. 1396a(a)(25)(A)(i)), as amend21 ed by section 13581(b)(2) of OBRA–93, is amended

22 by striking ‘‘including the use of’’ and all that fol23 lows through ‘‘any additional measures’’.

24 (3) ERISA.—Section 101(f) of the Employee

25 Retirement Income Security Act of 1974 (29 U.S.C.

26 1021(f)) is repealed.
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1 (4) INTERNAL REVENUE CODE PROVISION.—

2 Section 6103(l) of the Internal Revenue Code of

3 1986 is amended by striking paragraph (12).

4 (5) DATA MATCHES.—Section 552a(a)(8)(B) of

5 title 5, United States Code, as amended by section

6 13581(c) of OBRA–93, is amended—

7 (A) by adding ‘‘or’’ at the end of clause

8 (v),

9 (B) by striking ‘‘or’’ at the end of clause

10 (vi), and

11 (C) by striking clause (vii).

12 SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE13 QUIRED FOR IMPOSITION OF SANCTIONS.

14 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE15 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN16 ALTIES.—

17 (1) IN GENERAL.—Section 1128A(a) (42

18 U.S.C. 1320a–7a(a)) is amended—

19 (A) in paragraphs (1) and (2), by inserting

20 ‘‘knowingly’’ before ‘‘presents’’ each place it ap21 pears; and

22 (B) in paragraph (3), by striking ‘‘gives’’

23 and inserting ‘‘knowingly gives or causes to be

24 given’’.
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1 (2) DEFINITION OF STANDARD.—Section

2 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

3 adding at the end the following new paragraph:

4 ‘‘(6) The term ‘should know’ means that a per5 son, with respect to information—

6 ‘‘(A) acts in deliberate ignorance of the

7 truth or falsity of the information; or

8 ‘‘(B) acts in reckless disregard of the truth

9 or falsity of the information,

10 and no proof of specific intent to defraud is re11 quired.’’.

12 (b) CLARIFICATION OF EFFECT AND APPLICATION

13 OF SAFE HARBOR EXCEPTIONS.—For purposes of section

14 1128B(b)(3) of the Social Security Act, the specification

15 of any payment practice in regulations promulgated pur16 suant to section 14(a) of the Medicare and Medicaid Pro17 gram Patient Protection Act of 1987 is—

18 (1) solely for the purpose of adding additional

19 exceptions to the types of conduct which are not

20 subject to an anti-kickback penalty under such sec21 tion and not for the purpose of limiting the scope of

22 such exceptions; and

23 (2) for the purpose of prescribing criteria for

24 qualifying for such an exception notwithstanding the

25 intent of the party involved.
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1 (c) LIMITING IMPOSITION OF ANTI-KICKBACK PEN2 ALTIES TO ACTIONS WITH SIGNIFICANT PURPOSE TO IN3 DUCE REFERRALS.—Section 1128B(b)(2) (42 U.S.C.

4 1320a–7b(b)(2)) is amended in the matter preceding sub5 paragraph (A) by striking ‘‘to induce’’ and inserting ‘‘for

6 the significant purpose of inducing’’.

7 (d) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to acts or omissions occurring on

9 or after January 1, 1996.

10 SEC. 15213. CLARIFICATION OF AND ADDITIONS TO EXCEP11 TIONS TO ANTI-KICKBACK PENALTIES.

12 (a) DISCOUNTS, RISK-SHARING AND OTHER MAN13 AGED CARE ARRANGEMENTS.—Section 1128B(b)(3) (42

14 U.S.C. 1320a–7b(b)(3)) is amended—

15 (1) by amending subparagraph (A) to read as

16 follows:

17 ‘‘(A) any discount or other reduction in price

18 (including a reduction in price applied to a combina19 tion of items and services and a reduction made

20 available as part of capitation, risk sharing, disease

21 management, or a similar program) obtained by a

22 provider of service or other entity under title XVIII

23 or a State health care program if—

24 ‘‘(i) the reduction in price is properly dis25 closed and appropriately reflected in the costs
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1 claimed or charges made by the provider or en2 tity under such title or program, or

3 ‘‘(ii) in the case of an entity which does

4 not report its costs on a cost report, the entity

5 separately claims an item or service for pay6 ment, payment under such title or program is

7 not based on actual acquisition costs, and the

8 price reduction on the item or service is prop9 erly disclosed and appropriately reflected by

10 providing full and accurate information con11 cerning the price reduction at the time the

12 value of the reduction is known, at the request

13 of the Secretary or a State agency;’’;

14 (2) by striking ‘‘and’’ at the end of subpara15 graph (D);

16 (3) by striking the period at the end of sub17 paragraph (E) and inserting ‘‘; and’’; and

18 (4) by adding at the end the following new sub19 paragraph:

20 ‘‘(F) any reduction in cost sharing or increased

21 benefits given to an individual, any amounts paid by

22 or on behalf of an organization described in clause

23 (i) or (ii) to a provider in connection with an item

24 or service furnished to an individual, any discount or

25 reduction in price given by the provider for such an
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1 item or service, or any other remuneration if the

2 item or service is provided through an organization

3 which—

4 ‘‘(i) provides health care items or services

5 directly or through one or more subsidiary enti6 ties or arranges for the provision of health care

7 items or services substantially through the serv8 ices of health care providers under contract

9 with the organization, and

10 ‘‘(ii)(I) assumes financial risk for the pro11 vision of health services through mechanisms

12 (such as capitation, risk pools, withholds, and

13 per diem payments) or offers its network of

14 contract health providers to an entity (including

15 self-insured employers and indemnity plans)

16 which assumes financial risk for the provision

17 of such health services, or

18 ‘‘(II) has in effect a written agreement

19 with the provider of services under which the

20 provider is at significant financial risk (whether

21 through a withhold, capitation, incentive pool,

22 per diem payments, or similar risk sharing ar23 rangement) for the cost or utilization of services

24 that the provider is obligated to provide.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to acts or omissions occurring on

3 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 within the meaning

2 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 made; 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.—Subject to paragraph (2),

2 any activity of a medical self-regulatory entity relat3 ing to standard setting or standard enforcement ac4 tivities that are designed to promote the quality of

5 health care services provided to patients.

6 (2) EXCEPTION.—No activity of a medical self7 regulatory entity may be deemed to fall under the

8 safe harbor established under paragraph (1) if the

9 activity—

10 (A) is conducted for purposes of financial

11 gain, or

12 (B) interferes with the provision of health

13 care services by any health care provider who is

14 not a member of the specific profession which

15 is subject to the authority of the medical self16 regulatory entity.

17 (c) DEFINITIONS.—For purposes of this section:

18 (1) ANTITRUST LAWS.—The term ‘‘antitrust

19 laws’’ has the meaning given it in subsection (a) of

20 the first section of the Clayton Act (15 U.S.C.

21 12(a)), except that such term includes section 5 of

22 the Federal Trade Commission Act (15 U.S.C. 45)

23 to the extent such section applies to unfair methods

24 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 an action for damages arising from a vaccine12 related injury or death to the extent that title XXI of the

13 Public Health Service Act applies to the action.

14 (b) PREEMPTION.—This subtitle shall preempt any

15 State law to the extent such law is inconsistent with the

16 limitations contained in this subtitle. This subtitle shall

17 not preempt any State law that provides for defenses or

18 places limitations on a person’s liability in addition to

19 those contained in this subtitle or otherwise imposes great20 er restrictions than those provided in this subtitle.

21 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

22 OF LAW OR VENUE.—Nothing in subsection (b) shall be

23 construed to—
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1 (1) waive or affect any defense of sovereign im2 munity asserted by any State under any provision of

3 law;

4 (2) waive or affect any defense of sovereign im5 munity asserted by the United States;

6 (3) affect the applicability of any provision of

7 the Foreign Sovereign Immunities Act of 1976;

8 (4) preempt State choice-of-law rules with re9 spect to claims brought by a foreign nation or a citi10 zen of a foreign nation; or

11 (5) affect the right of any court to transfer

12 venue or to apply the law of a foreign nation or to

13 dismiss a claim of a foreign nation or of a citizen

14 of a foreign nation on the ground of inconvenient

15 forum.

16 (d) AMOUNT IN CONTROVERSY.—In an action to

17 which this subtitle applies and which is brought under sec18 tion 1332 of title 28, United States Code, the amount of

19 noneconomic damages or punitive damages, and attorneys’

20 fees or costs, shall not be included in determining whether

21 the matter in controversy exceeds the sum or value of

22 $50,000.

23 (e) FEDERAL COURT JURISDICTION NOT ESTAB24 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

25 this subtitle shall be construed to establish any jurisdiction
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1 in the district courts of the United States over health care

2 liability actions on the basis of section 1331 or 1337 of

3 title 28, United States Code.

4 SEC. 15302. DEFINITIONS.

5 As used in this subtitle:

6 (1) ACTUAL DAMAGES.—The term ‘‘actual dam7 ages’’ means damages awarded to pay for economic

8 loss.

9 (2) ALTERNATIVE DISPUTE RESOLUTION SYS10 TEM; ADR.—The term ‘‘alternative dispute resolution

11 system’’ or ‘‘ADR’’ means a system established

12 under Federal or State law that provides for the res13 olution of health care liability claims in a manner

14 other than through health care liability actions.

15 (3) CLAIMANT.—The term ‘‘claimant’’ means

16 any person who brings a health care liability action

17 and any person on whose behalf such an action is

18 brought. If such action is brought through or on be19 half of an estate, the term includes the claimant’s

20 decedent. If such action is brought through or on be21 half of a minor or incompetent, the term includes

22 the claimant’s legal guardian.

23 (4) CLEAR AND CONVINCING EVIDENCE.—The

24 term ‘‘clear and convincing evidence’’ is that meas25 ure or degree of proof that will produce in the mind
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1 of the trier of fact a firm belief or conviction as to

2 the truth of the allegations sought to be established,

3 except that such measure or degree of proof is more

4 than that required under preponderance of the evi5 dence but less than that required for proof beyond

6 a reasonable doubt.

7 (5) COLLATERAL SOURCE PAYMENTS.—The

8 term ‘‘collateral source payments’’ means any

9 amount paid or reasonably likely to be paid in the

10 future to or on behalf of a claimant, or any service,

11 product, or other benefit provided or reasonably like12 ly to be provided in the future to or on behalf of a

13 claimant, as a result of an injury or wrongful death,

14 pursuant to—

15 (A) any State or Federal health, sickness,

16 income-disability, accident or workers’ com17 pensation Act;

18 (B) any health, sickness, income-disability,

19 or accident insurance that provides health bene20 fits or income-disability coverage;

21 (C) any contract or agreement of any

22 group, organization, partnership, or corporation

23 to provide, pay for, or reimburse the cost of

24 medical, hospital, dental, or income disability

25 benefits; and
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1 (D) any other publicly or privately funded

2 program.

3 (6) ECONOMIC LOSS.—The term ‘‘economic

4 loss’’ means any pecuniary loss resulting from harm

5 (including the loss of earnings, medical expense loss,

6 replacement services loss, loss due to death, and bur7 ial costs), to the extent recovery for such loss is al8 lowed under applicable State law.

9 (7) HARM.—The term ‘‘harm’’ means any le10 gally cognizable wrong or injury for which punitive

11 damages may be imposed.

12 (8) HEALTH CARE LIABILITY ACTION.—The

13 term ‘‘health care liability action’’ means a civil ac14 tion brought in a State or Federal court against a

15 health care provider, an entity which is obligated to

16 provide or pay for health benefits under any health

17 plan (including any person or entity acting under a

18 contract or arrangement to provide or administer

19 any health benefit), or the manufacturer, distributor,

20 supplier, marketer, promoter, or seller of a medical

21 product, in which the claimant alleges a claim (in22 cluding third party claims, cross claims, counter

23 claims, or distribution claims) based upon the provi24 sion of (or the failure to provide or pay for) health

25 care services or the use of a medical product, re-
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1 gardless of the theory of liability on which the claim

2 is based or the number of plaintiffs, or defendants

3 or causes of action.

4 (9) HEALTH CARE LIABILITY CLAIM.—The

5 term ‘‘health care liability claim’’ means a claim in

6 which the claimant alleges that injury was caused by

7 the provision of (or the failure to provide) health

8 care services.

9 (10) HEALTH CARE PROVIDER.—The term

10 ‘‘health care provider’’ means any individual, organi11 zation, or institution that is engaged in the delivery

12 of health care services in a State and that is re13 quired by the laws or regulations of the State to be

14 licensed or certified by the State to engage in the

15 delivery of such services in the State.

16 (11) NONECONOMIC DAMAGES.—The term

17 ‘‘noneconomic damages’’ means damages paid to an

18 individual for pain and suffering, inconvenience,

19 emotional distress, mental anguish, loss of consor20 tium, injury to reputation, humiliation, and other

21 nonpecuniary losses.

22 (12) PERSON.—The term ‘‘person’’ means any

23 individual, corporation, company, association, firm,

24 partnership, society, joint stock company, or any

25 other entity, including any governmental entity.
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1 (13) PUNITIVE DAMAGES.—The term ‘‘punitive

2 damages’’ means damages awarded against any per3 son not to compensate for actual injury suffered, but

4 to punish or deter such person or others from en5 gaging in similar behavior in the future.

6 (14) STATE.—The term ‘‘State’’ means each of

7 the several States, the District of Columbia, the

8 Commonwealth of Puerto Rico, the Virgin Islands,

9 Guam, American Samoa, the Northern Mariana Is10 lands, the Trust Territories of the Pacific Islands,

11 and any other territory or possession of the United

12 States.

13 SEC. 15303. EFFECTIVE DATE.

14 This subtitle will apply to any health care liability ac15 tion brought in a Federal or State court and to any health

16 care liability claim subject to an alternative dispute resolu17 tion system, that is initiated on or after the date of enact18 ment of this subtitle, except that any health care liability

19 claim or action arising from an injury occurring prior to

20 the date of enactment of this subtitle shall be governed

21 by the applicable statute of limitations provisions in effect

22 at the time the injury occurred.
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1 PART 2—UNIFORM STANDARDS FOR HEALTH

2 CARE LIABILITY ACTIONS

3 SEC. 15311. STATUTE OF LIMITATIONS.

4 A health care liability action may not be brought

5 after the expiration of the 2-year period that begins on

6 the date on which the alleged injury that is the subject

7 of the action was discovered or should reasonably have

8 been discovered, but in no case after the expiration of the

9 5-year period that begins on the date the alleged injury

10 occurred.

11 SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.

12 (a) TREATMENT OF NONECONOMIC DAMAGES.—

13 (1) LIMITATION ON NONECONOMIC DAMAGES.—

14 The total amount of noneconomic damages that may

15 be awarded to a claimant for losses resulting from

16 the injury which is the subject of a health care liabil17 ity action may not exceed $250,000, regardless of

18 the number of parties against whom the action is

19 brought or the number of actions brought with re20 spect to the injury.

21 (2) JOINT AND SEVERAL LIABILITY.—In any

22 health care liability action brought in State or Fed23 eral court, a defendant shall be liable only for the

24 amount of noneconomic damages attributable to

25 such defendant in direct proportion to such defend26 ant’s share of fault or responsibility for the claim-
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1 ant’s actual damages, as determined by the trier of

2 fact. In all such cases, the liability of a defendant

3 for noneconomic damages shall be several and not

4 joint.

5 (b) TREATMENT OF PUNITIVE DAMAGES.—

6 (1) GENERAL RULE.—Punitive damages may,

7 to the extent permitted by applicable State law, be

8 awarded in any health care liability action for harm

9 in any Federal or State court against a defendant if

10 the claimant establishes by clear and convincing evi11 dence that the harm suffered was result of con12 duct—

13 (A) specifically intended to cause harm, or

14 (B) conduct manifesting a conscious, fla15 grant indifference to the rights or safety of oth16 ers.

17 (2) PROPORTIONAL AWARDS.—The amount of

18 punitive damages that may be awarded in any health

19 care liability action subject to this subtitle shall not

20 exceed 3 times the amount of damages awarded to

21 the claimant for economic loss, or $250,000, which22 ever is greater. This section shall be applied by the

23 court and shall not be disclosed to the jury.

24 (c) APPLICABILITY.—This section shall apply to any

25 health care liability action brought in any Federal or State
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1 court on any theory where punitive damages are sought.

2 This section does not create a cause of action for punitive

3 damages. This section does not preempt or supersede any

4 State or Federal law to the extent that such law would

5 further limit the award of punitive damages.

6 (d) BIFURCATION.—At the request of any party, the

7 trier of fact shall consider in a separate proceeding wheth8 er punitive damages are to be awarded and the amount

9 of such award. If a separate proceeding is requested, evi10 dence relevant only to the claim of punitive damages, as

11 determined by applicable State law, shall be inadmissible

12 in any proceeding to determine whether actual damages

13 are to be awarded.

14 (e) DRUGS AND DEVICES.—

15 (1)(A) Punitive damages shall not be awarded

16 against a manufacturer or product seller of a drug

17 (as defined in section 201(g)(1) of the Federal

18 Food, Drug, and Cosmetic Act (21 U.S.C.

19 321(g)(1)) or medical device (as defined in section

20 201(h) of the Federal Food, Drug, and Cosmetic

21 Act (21 U.S.C. 321(h)) which caused the claimant’s

22 harm where—

23 (i) such drug or device was subject to pre24 market approval by the Food and Drug Admin25 istration with respect to the safety of the for-
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1 mulation or performance of the aspect of such

2 drug or device which caused the claimant’s

3 harm or the adequacy of the packaging or label4 ing of such drug or device, and such drug was

5 approved by the Food and Drug Administra6 tion; or

7 (ii) the drug is generally recognized as safe

8 and effective pursuant to conditions established

9 by the Food and Drug Administration and ap10 plicable regulations, including packaging and la11 beling regulations.

12 (B) Subparagraph (A) shall not apply in any

13 case in which the defendant, before or after pre14 market approval of a drug or device—

15 (i) intentionally and wrongfully withheld

16 from or misrepresented to the Food and Drug

17 Administration information concerning such

18 drug or device required to be submitted under

19 the Federal Food, Drug, and Cosmetic Act (21

20 U.S.C. 301 et seq.) or section 351 of the Public

21 Health Service Act (42 U.S.C. 262) that is ma22 terial and relevant to the harm suffered by the

23 claimant, or

24 (ii) made an illegal payment to an official

25 or employee of the Food and Drug Administra-
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1 tion for the purpose of securing or maintaining

2 approval of such drug or device.

3 (2) PACKAGING.—In a health care liability ac4 tion for harm which is alleged to relate to the ade5 quacy of the packaging (or labeling relating to such

6 packaging) of a drug which is required to have tam7 per-resistant packaging under regulations of the

8 Secretary of Health and Human Services (including

9 labeling regulations related to such packaging), the

10 manufacturer of the drug shall not be held liable for

11 punitive damages unless the drug is found by the

12 court by clear and convincing evidence to be sub13 stantially out of compliance with such regulations.

14 (f) PERIODIC PAYMENTS FOR FUTURE LOSSES.—

15 (1) GENERAL RULE.—In any health care liabil16 ity action in which the damages awarded for future

17 economic and noneconomic loss exceeds $50,000, a

18 person shall not be required to pay such damages in

19 a single, lump-sum payment, but shall be permitted

20 to make such payments periodically based on when

21 the damages are found likely to occur, as such pay22 ments are determined by the court.

23 (2) FINALITY OF JUDGMENT.—The judgment

24 of the court awarding periodic payments under this

25 subsection may not, in the absence of fraud, be re-
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1 opened at any time to contest, amend, or modify the

2 schedule or amount of the payments.

3 (3) LUMP-SUM SETTLEMENTS.—This sub4 section shall not be construed to preclude a settle5 ment providing for a single, lump-sum payment.

6 (g) TREATMENT OF COLLATERAL SOURCE PAY7 MENTS.—

8 (1) INTRODUCTION INTO EVIDENCE.—In any

9 health care liability action, any defendant may intro10 duce evidence of collateral source payments. If any

11 defendant elects to introduce such evidence, the

12 claimant may introduce evidence of any amount paid

13 or contributed or reasonably likely to be paid or con14 tributed in the future by or on behalf of the claim15 ant to secure the right to such collateral source pay16 ments.

17 (2) NO SUBROGATION.—No provider of collat18 eral source payments shall recover any amount

19 against the claimant or receive any lien or credit

20 against the claimant’s recovery or be equitably or le21 gally subrogated the right of the claimant in a

22 health care liability action. This subsection shall

23 apply to an action that is settled as well as an action

24 that is resolved by a fact finder.
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1 SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.

2 Any ADR used to resolve a health care liability action

3 or claim shall contain provisions relating to statute of limi4 tations, non-economic damages, joint and several liability,

5 punitive damages, collateral source rule, and periodic pay6 ments which are identical to the provisions relating to

7 such matters in this subtitle.

8 Subtitle E—Teaching Hospitals and

9 Graduate Medical Education

10 PART 1—TEACHING HOSPITAL AND GRADUATE

11 MEDICAL EDUCATION TRUST FUND

12 SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO

13 TEACHING HOSPITALS.

14 The Social Security Act (42 U.S.C. 300 et seq.) is

15 amended by adding after title XXI the following title:

16 ‘‘TITLE XXII—TEACHING HOSPITAL AND

17 GRADUATE MEDICAL EDUCATION TRUST FUND

18 ‘‘PART A—ESTABLISHMENT OF FUND

19 ‘‘SEC. 2201. ESTABLISHMENT OF FUND.

20 ‘‘(a) IN GENERAL.—There is established in the

21 Treasury of the United States a fund to be known as the

22 Teaching Hospital and Graduate Medical Education Trust

23 Fund (in this title referred to as the ‘Fund’), consisting

24 of amounts appropriated to the Fund in subsection (d)

25 and subsection (e)(3), amounts transferred to the Fund

26 under section 1886(j), and such gifts and bequests as may
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1 be deposited in the Fund pursuant to subsection (f).

2 Amounts in the Fund are available until expended.

3 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

4 Fund are available to the Secretary for making payments

5 under section 2211.

6 ‘‘(c) ACCOUNTS IN FUND.—There is established with7 in the Fund the following accounts:

8 ‘‘(1) The Indirect-Costs Medical Education Ac9 count.

10 ‘‘(2) The Medicare Direct-Costs Medical Edu11 cation Account.

12 ‘‘(3) The General Direct-Costs Medical Edu13 cation Account.

14 ‘‘(d) GENERAL TRANSFERS TO FUND.—

15 ‘‘(1) IN GENERAL.—For fiscal year 1997 and

16 each subsequent fiscal year, there are appropriated

17 to the Fund (effective on the applicable date under

18 paragraph (2)), out of any money in the Treasury

19 not otherwise appropriated, the following amounts

20 (as applicable to the fiscal year involved):

21 ‘‘(A) For fiscal year 1997, $400,000,000.

22 ‘‘(B) For fiscal year 1998, $600,000,000.

23 ‘‘(C) For fiscal year 1999, $2,000,000,000.

24 ‘‘(D) For fiscal year 2000,

25 $3,000,000,000.
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1 ‘‘(E) For fiscal year 2001,

2 $4,000,000,000.

3 ‘‘(F) For fiscal year 2002,

4 $5,800,000,000.

5 ‘‘(G) For fiscal year 2003 and each subse6 quent fiscal year, the greater of the amount ap7 propriated for the preceding fiscal year or an

8 amount equal to the product of—

9 ‘‘(i) the amount appropriated for the

10 preceding fiscal year; and

11 ‘‘(ii) 1 plus the percentage increase in

12 the nominal gross domestic product for the

13 one-year period ending upon July 1 of such

14 preceding fiscal year.

15 ‘‘(2) EFFECTIVE DATE FOR ANNUAL APPRO16 PRIATION.—For purposes of paragraph (1) (and for

17 purposes of section 2221(a)(1), and subsections

18 (b)(1)(A) and (c)(1)(A) of section 2231)), the appli19 cable date for a fiscal year is the first day of the fis20 cal year, exclusive of Saturdays, Sundays, and Fed21 eral holidays.

22 ‘‘(3) ALLOCATION AMONG CERTAIN AC23 COUNTS.—Of the amount appropriated in paragraph

24 (1) for a fiscal year—
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1 ‘‘(A) there shall be allocated to the Indi2 rect-Costs Medical Education Account the per3 centage determined under paragraph (4)(B);

4 and

5 ‘‘(B) there shall be allocated to the Gen6 eral Direct-Costs Medical Education Account

7 the percentage determined under paragraph

8 (4)(C).

9 ‘‘(4) DETERMINATION OF PERCENTAGES.—The

10 Secretary of Health and Human Services, acting

11 through the Administrator of the Health Care Fi12 nancing Administration, shall determine the follow13 ing:

14 ‘‘(A) The total amount of payments that

15 were made under subsections (d)(5)(B) and (h)

16 of section 1886 for fiscal year 1994.

17 ‘‘(B) The percentage of such total that was

18 constituted by payments under subsection

19 (d)(5)(B) of such section.

20 ‘‘(C) The percentage of such total that was

21 constituted by payments under subsection (h) of

22 such section.

23 ‘‘(e) INVESTMENT.—

24 ‘‘(1) IN GENERAL.—The Secretary of the

25 Treasury shall invest such amounts of the Fund as
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1 such Secretary determines are not required to meet

2 current withdrawals from the Fund. Such invest3 ments may be made only in interest-bearing obliga4 tions of the United States. For such purpose, such

5 obligations may be acquired on original issue at the

6 issue price, or by purchase of outstanding obliga7 tions at the market price.

8 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation

9 acquired by the Fund may be sold by the Secretary

10 of the Treasury at the market price.

11 ‘‘(3) AVAILABILITY OF INCOME.—Any interest

12 derived from obligations acquired by the Fund, and

13 proceeds from any sale or redemption of such obliga14 tions, are hereby appropriated to the Fund.

15 ‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—The

16 Fund may accept on behalf of the United States money

17 gifts and bequests made unconditionally to the Fund for

18 the benefit of the Fund or any activity financed through

19 the Fund.

20 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

21 ‘‘Subpart 1—Requirement of Payments

22 ‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOS23 PITALS.

24 ‘‘(a) IN GENERAL.—Subject to subsection (d), in the

25 case of each teaching hospital that in accordance with sub-
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1 section (b) submits to the Secretary a payment document

2 for fiscal year 1997 or any subsequent fiscal year, the Sec3 retary shall make payments for the year to the teaching

4 hospital for the costs of operating approved medical resi5 dency training programs. Such payments shall be made

6 from the Fund, and the total of the payments to the hos7 pital for the fiscal year shall equal the sum of the follow8 ing:

9 ‘‘(1) An amount determined under section 2221

10 (relating to the indirect costs of graduate medical

11 education).

12 ‘‘(2) An amount determined under section 2231

13 (relating to the direct costs of graduate medical edu14 cation).

15 ‘‘(b) PAYMENT DOCUMENT.—For purposes of sub16 section (a), a payment document is a document containing

17 such information as may be necessary for the Secretary

18 to make payments under such subsection to a teaching

19 hospital for a fiscal year. The document is submitted in

20 accordance with this subsection if the document is submit21 ted not later than the date specified by the Secretary, and

22 the document is in such form and is made in such manner

23 as the Secretary may require. The Secretary may require

24 that information under this subsection be submitted to the

25 Secretary in periodic reports.
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1 ‘‘(c) ADMINISTRATOR OF PROGRAMS.—This part,

2 and the subsequent parts of this title, shall be carried out

3 by the Secretary acting through the Administrator of the

4 Health Care Financing Administration.

5 ‘‘(d) SPECIAL RULES.—

6 ‘‘(1) AUTHORITY REGARDING PAYMENTS TO

7 CONSORTIA OF PROVIDERS.—In the case of pay8 ments under subsection (a) that are determined

9 under section 2231:

10 ‘‘(A) The requirement under such sub11 section to make the payments to teaching hos12 pitals is subject to the authority of the Sec13 retary under section 2233(a) to make payments

14 to qualifying consortia.

15 ‘‘(B) If the Secretary authorizes such a

16 consortium for purposes of section 2233(a),

17 subsections (a) and (b) of this section apply to

18 the consortium to the same extent and in the

19 same manner as the subsections apply to teach20 ing hospitals.

21 ‘‘(2) CERTAIN HOSPITALS.—Paragraph (1) of

22 subsection (a) is subject to sections 2222 and 2223

23 of subpart 2. Paragraph (2) of subsection (a) is sub24 ject to sections 2232 through 2234 of subpart 3.
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1 ‘‘(e) APPROVED MEDICAL RESIDENCY TRAINING

2 PROGRAM.—For purposes of this title, the term ‘approved

3 medical residency training program’ has the meaning

4 given such term in section 1886(h)(5)(A).

5 ‘‘Subpart 2—Amount Relating to Indirect Costs of

6 Graduate Medical Education

7 ‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN8 DIRECT COSTS.

9 ‘‘(a) IN GENERAL.—For purposes of section

10 2211(a)(1), the amount determined under this section for

11 a teaching hospital for a fiscal year is the product of—

12 ‘‘(1) the amount in the Indirect-Costs Medical

13 Education Account on the applicable date under sec14 tion 2201(d) (once the appropriation under such sec15 tion is made); and

16 ‘‘(2) the percentage determined for the hospital

17 under subsection (b).

18 ‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—

19 ‘‘(1) IN GENERAL.—For purposes of subsection

20 (a)(2), the percentage determined under this sub21 section for a teaching hospital is the mean average

22 of the respective percentages determined under para23 graph (3) for each fiscal year of the applicable pe24 riod (as defined in paragraph (2)), adjusted by the

25 Secretary (upward or downward, as the case may
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1 be) on a pro rata basis to the extent necessary to

2 ensure that the sum of the percentages determined

3 under this paragraph for all teaching hospitals is

4 equal to 100 percent. The preceding sentence is sub5 ject to sections 2222 and 2223.

6 ‘‘(2) APPLICABLE PERIOD REGARDING REL7 EVANT DATA; FISCAL YEARS 1992 THROUGH 1994.—

8 For purposes of this part, the term ‘applicable pe9 riod’ means the period beginning on the first day of

10 fiscal year 1992 and continuing through the end of

11 fiscal year 1994.

12 ‘‘(3) RESPECTIVE DETERMINATIONS FOR FIS13 CAL YEARS OF APPLICABLE PERIOD.—For purposes

14 of paragraph (1), the percentage determined under

15 this paragraph for a teaching hospital for a fiscal

16 year of the applicable period is the percentage con17 stituted by the ratio of—

18 ‘‘(A) the total amount of payments re19 ceived by the hospital under section

20 1886(d)(5)(B) for discharges occurring during

21 the fiscal year involved; to

22 ‘‘(B) the sum of the respective amounts

23 determined under subparagraph (A) for the fis24 cal year for all teaching hospitals.
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1 ‘‘(c) AVAILABILITY OF DATA.—If a teaching hospital

2 received the payments specified in subsection (b)(3)(A)

3 during the applicable period but a complete set of the rel4 evant data is not available to the Secretary for purposes

5 of determining an amount under such subsection for the

6 fiscal year involved, the Secretary shall for purposes of

7 such subsection make an estimate on the basis of such

8 data as is available to the Secretary for the applicable pe9 riod.

10 ‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING

11 DETERMINATION OF HOSPITAL-SPECIFIC

12 PERCENTAGE.

13 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS

14 1995 AND 1996.—

15 ‘‘(1) IN GENERAL.—In the case of a teaching

16 hospital whose first payments under 1886(d)(5)(B)

17 were for discharges occurring in fiscal year 1995 or

18 in fiscal year 1996 (referred to in this subsection in19 dividually as a ‘first payment year’), the percentage

20 determined under paragraph (2) for the hospital is

21 deemed to be the percentage applicable under section

22 2221(b) to the hospital, except that the percentage

23 under paragraph (2) shall be adjusted in accordance

24 with section 2221(b)(1) to the extent determined by
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1 the Secretary to be necessary with respect to a sum

2 that equals 100 percent.

3 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

4 purposes of paragraph (1), the percentage deter5 mined under this paragraph for a teaching hospital

6 is the percentage constituted by the ratio of the

7 amount determined under subparagraph (A) to the

8 amount determined under subparagraph (B), as fol9 lows:

10 ‘‘(A)(i) If the first payment year for the

11 hospital is fiscal year 1995, the amount deter12 mined under this subparagraph is the total

13 amount of payments received by the hospital

14 under section 1886(d)(5)(B) for discharges oc15 curring during fiscal year 1995.

16 ‘‘(ii) If the first payment year for the hos17 pital is fiscal year 1996, the amount determined

18 under this subparagraph is an amount equal to

19 an estimate by the Secretary of the total

20 amount of payments that would have been paid

21 to the hospital under section 1886(d)(5)(B) for

22 discharges occurring during fiscal year 1995 if

23 such section, as in effect for fiscal year 1996,

24 had applied to the hospital for discharges occur25 ring during fiscal year 1995.
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1 ‘‘(B)(i) If the first payment year for the

2 hospital is fiscal year 1995, the amount deter3 mined under this subparagraph is the aggregate

4 total of the payments received by teaching hos5 pitals under section 1886(d)(5)(B) for dis6 charges occurring during fiscal year 1995.

7 ‘‘(ii) If the first payment year for the hos8 pital is fiscal year 1996—

9 ‘‘(I) the Secretary shall make an esti10 mate in accordance with subparagraph

11 (A)(ii) for all teaching hospitals; and

12 ‘‘(II) the amount determined under

13 this subparagraph is the sum of the esti14 mates made by the Secretary under

15 subclause (I).

16 ‘‘(b) NEW TEACHING HOSPITALS.—

17 ‘‘(1) IN GENERAL.—In the case of a teaching

18 hospital that did not receive payments under section

19 1886(d)(5)(B) for any of the fiscal years 1992

20 through 1996, the percentage determined under

21 paragraph (3) for the hospital is deemed to be the

22 percentage applicable under section 2221(b) to the

23 hospital, except that the percentage under paragraph

24 (3) shall be adjusted in accordance with section

25 2221(b)(1) to the extent determined by the Sec-
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1 retary to be necessary with respect to a sum that

2 equals 100 percent.

3 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

4 DATA.—The determination under paragraph (3) of a

5 percentage for a teaching hospital described in para6 graph (1) shall be made for the most recent fiscal

7 year for which the Secretary has sufficient data to

8 make the determination (referred to in this sub9 section as the ‘designated fiscal year’).

10 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

11 purposes of paragraph (1), the percentage deter12 mined under this paragraph for the teaching hos13 pital involved is the percentage constituted by the

14 ratio of the amount determined under subparagraph

15 (A) to the amount determined under subparagraph

16 (B), as follows:

17 ‘‘(A) The amount determined under this

18 subparagraph is an amount equal to an esti19 mate by the Secretary of the total amount of

20 payments that would have been paid to the hos21 pital under section 1886(d)(5)(B) for the des22 ignated fiscal year if such section, as in effect

23 for the first fiscal year for which payments pur24 suant to this subsection are to be made to the
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1 hospital, had applied to the hospital for the des2 ignated fiscal year.

3 ‘‘(B) The Secretary shall make an estimate

4 in accordance with subparagraph (A) for all

5 teaching hospitals. The amount determined

6 under this subparagraph is the sum of the esti7 mates made by the Secretary under the preced8 ing sentence.

9 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case

10 of two or more teaching hospitals that have each received

11 payments pursuant to section 2221 for one or more fiscal

12 years and that undergo a consolidation or merger, the per13 centage applicable to the resulting teaching hospital for

14 purposes of section 2221(b) is the sum of the respective

15 percentages that would have applied pursuant to such sec16 tion if the hospitals had not undergone the consolidation

17 or merger.

18 ‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE19 GARDING TEACHING HOSPITALS IN CERTAIN

20 STATES.

21 ‘‘(a) IN GENERAL.—In the case of a teaching hospital

22 in a State for which a demonstration project under section

23 1814(b)(3) is in effect, this section applies in lieu of sec24 tion 2221. For purposes of section 2211(a)(1), the amount
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1 determined for a teaching hospital for a fiscal year is the

2 product of—

3 ‘‘(1) the amount in the Indirect-Costs Medical

4 Education Account for the fiscal year pursuant to

5 the allocation under section 2201(d)(3)(A) for the

6 year; and

7 ‘‘(2) the percentage determined under sub8 section (b) for the hospital.

9 ‘‘(b) DETERMINATION OF PERCENTAGE.—For pur10 poses of subsection (a)(2):

11 ‘‘(1) The Secretary shall make an estimate of

12 the total amount of payments that would have been

13 received under section 1886(d)(5)(B) by the hospital

14 involved with respect to each of the fiscal years of

15 the applicable period if such section (as in effect for

16 such fiscal years) had applied to the hospital for

17 such years.

18 ‘‘(2) The percentage determined under this sub19 section for the hospital for a fiscal year is a mean

20 average percentage determined for the hospital in

21 accordance with the methodology of section

22 2221(b)(1), except that the estimate made by the

23 Secretary under paragraph (1) of this subsection for

24 a fiscal year of the applicable period is deemed to be
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1 the amount that applies for purposes of section

2 2221(b)(3)(A) for such year.

3 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

4 AMOUNTS.—In the case of a teaching hospital in a State

5 for which a demonstration project under section

6 1814(b)(3) is in effect, this section does not provide any

7 payment 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 whose sum is equal

2 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).

7 ‘‘Subpart 3—Amount Relating to Direct Costs of

8 Graduate Medical Education

9 ‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI10 RECT COSTS.

11 ‘‘(a) IN GENERAL.—For purposes of section

12 2211(a)(2), the amount determined under this section for

13 a teaching hospital for a fiscal year is the sum of—

14 ‘‘(1) the amount determined under subsection

15 (b) (relating to the General Direct-Costs Medical

16 Education Account); and

17 ‘‘(2) the amount determined under subsection

18 (c) (relating to the Medicare Direct-Costs Medical

19 Education Account).

20 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—

21 ‘‘(1) IN GENERAL.—For purposes of subsection

22 (a)(1), the amount determined under this subsection

23 for a teaching hospital for a fiscal year is the prod24 uct of—
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1 ‘‘(A) the amount in the General Direct2 Costs Medical Education Account on the appli3 cable date under section 2201(d) (once the ap4 propriation under such section is made); and

5 ‘‘(B) the percentage determined for the

6 hospital under paragraph (2).

7 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (1)(B), the percentage determined under

10 this paragraph for a teaching hospital is the

11 mean average of the respective percentages de12 termined under subparagraph (B) for each fis13 cal year of the applicable period (as defined in

14 section 2221(b)(2)), adjusted by the Secretary

15 (upward or downward, as the case may be) on

16 a pro rata basis to the extent necessary to en17 sure that the sum of the percentages deter18 mined under this subparagraph for all teaching

19 hospitals is equal to 100 percent. The preceding

20 sentence is subject to sections 2232 through

21 2234.

22 ‘‘(B) RESPECTIVE DETERMINATIONS FOR

23 FISCAL YEARS OF APPLICABLE PERIOD.—For

24 purposes of subparagraph (A), the percentage

25 determined under this subparagraph for a
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1 teaching hospital for a fiscal year of the appli2 cable period is the percentage constituted by

3 the ratio of—

4 ‘‘(i) the total amount of payments re5 ceived by the hospital under section

6 1886(h) for cost reporting periods begin7 ning during the fiscal year involved; to

8 ‘‘(ii) the sum of the respective

9 amounts determined under clause (i) for

10 the fiscal year for all teaching hospitals.

11 ‘‘(3) AVAILABILITY OF DATA.—If a teaching

12 hospital received the payments specified in para13 graph (2)(B)(i) during the applicable period but a

14 complete set of the relevant data is not available to

15 the Secretary for purposes of determining an

16 amount under such paragraph for the fiscal year in17 volved, the Secretary shall for purposes of such

18 paragraph make an estimate on the basis of such

19 data as is available to the Secretary for the applica20 ble period.

21 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—

22 ‘‘(1) IN GENERAL.—For purposes of subsection

23 (a)(2), the amount determined under this subsection

24 for a teaching hospital for a fiscal year is the prod25 uct of—
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1 ‘‘(A) the amount in the Medicare Direct2 Costs Medical Education Account on the appli3 cable date under section 2201(d) (once the ap4 propriation under such section is made); and

5 ‘‘(B) the percentage determined for the

6 hospital under paragraph (2).

7 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—For

8 purposes of paragraph (1)(B), the percentage deter9 mined under this subsection for a teaching hospital

10 for a fiscal year is the percentage constituted by the

11 ratio of—

12 ‘‘(A) the estimate made by the Secretary

13 for the hospital for the fiscal year under section

14 1886(j)(2)(B); to

15 ‘‘(B) the sum of the respective estimates

16 referred to in subparagraph (A) for all teaching

17 hospitals.

18 ‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING

19 DETERMINATION OF HOSPITAL-SPECIFIC

20 PERCENTAGE.

21 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS

22 1995 AND 1996.—

23 ‘‘(1) IN GENERAL.—In the case of a teaching

24 hospital whose first payments under 1886(h) were

25 for cost reporting period beginning in fiscal year
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1 1995 or in fiscal year 1996 (referred to in this sub2 section individually as a ‘first payment year’), the

3 percentage determined under paragraph (2) for the

4 hospital is deemed to be the percentage applicable

5 under section 2231(b)(2) to the hospital, except that

6 the percentage under paragraph (2) shall be ad7 justed in accordance with section 2231(b)(2)(A) to

8 the extent determined by the Secretary to be nec9 essary with respect to a sum that equals 100 per10 cent.

11 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

12 purposes of paragraph (1), the percentage deter13 mined under this paragraph for a teaching hospital

14 is the percentage constituted by the ratio of the

15 amount determined under subparagraph (A) to the

16 amount determined under subparagraph (B), as fol17 lows:

18 ‘‘(A)(i) If the first payment year for the

19 hospital is fiscal year 1995, the amount deter20 mined under this subparagraph is the total

21 amount of payments received by the hospital

22 under section 1886(h) for cost reporting periods

23 beginning in fiscal year 1995.

24 ‘‘(ii) If the first payment year for the hos25 pital is fiscal year 1996, the amount determined
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1 under this subparagraph is an amount equal to

2 an estimate by the Secretary of the total

3 amount of payments that would have been paid

4 to the hospital under section 1886(h) for cost

5 reporting periods beginning in fiscal year 1995

6 if such section, as in effect for fiscal year 1996,

7 had applied to the hospital for fiscal year 1995.

8 ‘‘(B)(i) If the first payment year for the

9 hospital is fiscal year 1995, the amount deter10 mined under this subparagraph is the aggregate

11 total of the payments received by teaching hos12 pitals under section 1886(h) for cost reporting

13 periods beginning in fiscal year 1995.

14 ‘‘(ii) If the first payment year for the hos15 pital is fiscal year 1996—

16 ‘‘(I) the Secretary shall make an esti17 mate in accordance with subparagraph

18 (A)(ii) for all teaching hospitals; and

19 ‘‘(II) the amount determined under

20 this subparagraph is the sum of the esti21 mates made by the Secretary under

22 subclause (I).

23 ‘‘(b) NEW TEACHING HOSPITALS.—

24 ‘‘(1) IN GENERAL.—In the case of a teaching

25 hospital that did not receive payments under section
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1 1886(h) for any of the fiscal years 1992 through

2 1996, the percentage determined under paragraph

3 (3) for the hospital is deemed to be the percentage

4 applicable under section 2231(b)(2) to the hospital,

5 except that the percentage under paragraph (3) shall

6 be adjusted in accordance with section

7 2231(b)(2)(A) to the extent determined by the Sec8 retary to be necessary with respect to a sum that

9 equals 100 percent.

10 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

11 DATA.—The determination under paragraph (3) of a

12 percentage for a teaching hospital described in para13 graph (1) shall be made for the most recent fiscal

14 year for which the Secretary has sufficient data to

15 make the determination (referred to in this sub16 section as the ‘designated fiscal year’).

17 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

18 purposes of paragraph (1), the percentage deter19 mined under this paragraph for the teaching hos20 pital involved is the percentage constituted by the

21 ratio of the amount determined under subparagraph

22 (A) to the amount determined under subparagraph

23 (B), as follows:

24 ‘‘(A) The amount determined under this

25 subparagraph is an amount equal to an esti-
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1 mate by the Secretary of the total amount of

2 payments that would have been paid to the hos3 pital under section 1886(h) for the designated

4 fiscal year if such section, as in effect for the

5 first fiscal year for which payments pursuant to

6 this subsection are to be made to the hospital,

7 had applied to the hospital for cost reporting

8 periods beginning in the designated fiscal year.

9 ‘‘(B) The Secretary shall make an estimate

10 in accordance with subparagraph (A) for all

11 teaching hospitals. The amount determined

12 under this subparagraph is the sum of the esti13 mates made by the Secretary under the preced14 ing sentence.

15 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case

16 of two or more teaching hospitals that have each received

17 payments pursuant to section 2231 for one or more fiscal

18 years and that undergo a consolidation or merger, the per19 centage applicable to the resulting teaching hospital for

20 purposes of section 2231(b) is the sum of the respective

21 percentages that would have applied pursuant to such sec22 tion if the hospitals had not undergone the consolidation

23 or merger.
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1 ‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO

2 CONSORTIA OF PROVIDERS.

3 ‘‘(a) IN GENERAL.—In lieu of making payments to

4 teaching hospitals pursuant to section 2231, the Secretary

5 may make payments under this section to consortia that

6 meet the requirements of subsection (b).

7 ‘‘(b) QUALIFYING CONSORTIUM.—For purposes of

8 subsection (a), a consortium meets the requirements of

9 this subsection if the consortium is in compliance with the

10 following:

11 ‘‘(1) The consortium consists of an approved

12 medical residency training program of a teaching

13 hospital and one or more of the following entities:

14 ‘‘(A) Schools of medicine or osteopathic

15 medicine.

16 ‘‘(B) Other teaching hospitals (or the ap17 proved medical residency training programs of

18 the hospitals).

19 ‘‘(C) Community health centers (under sec20 tion 330 of the Public Health Service Act).

21 ‘‘(D) Medical group practices.

22 ‘‘(E) Managed care entities.

23 ‘‘(F) Entities furnishing outpatient serv24 ices.

25 ‘‘(G) Such other entities as the Secretary

26 determines to be appropriate.
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1 ‘‘(2) The members of the consortium have

2 agreed to participate in the programs of graduate

3 medical education that are operated by the teaching

4 hospitals of the consortium.

5 ‘‘(3) With respect to the receipt by the consor6 tium of payments made pursuant to this section, the

7 members of the consortium have agreed on a method

8 for allocating the payments among the members.

9 ‘‘(4) The consortium meets such additional re10 quirements as the Secretary may establish.

11 ‘‘(c) PAYMENTS FROM ACCOUNTS.—

12 ‘‘(1) IN GENERAL.—Subject to subsection (d),

13 the total of payments to a qualifying consortium for

14 a fiscal year pursuant to subsection (a) shall be the

15 sum of—

16 ‘‘(1) the aggregate amount determined for the

17 teaching hospitals of the consortium pursuant to

18 paragraph (1) of section 2231(a); and

19 ‘‘(2) an amount determined in accordance with

20 the methodology that applies pursuant to paragraph

21 (2) of such section, except that the estimate used for

22 purposes of subsection (c)(2)(A) of such section shall

23 be the estimate made for the consortium under sec24 tion 1886(j)(2)(C)(ii).
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1 ‘‘(d) LIMITATION ON AGGREGATE TOTAL OF PAY2 MENTS TO CONSORTIA.—The aggregate total of the

3 amounts paid under subsection (c)(2) to qualifying consor4 tia for a fiscal year may not exceed the sum of—

5 ‘‘(1) the aggregate total of the amounts that

6 would have been paid under section 2231(c) for the

7 fiscal year to the teaching hospitals of the consortia

8 if the hospitals had not been participants in the con9 sortia; and

10 ‘‘(2) an amount equal to 1 percent of the

11 amount that applies under paragraph (1)(A) of such

12 section for the fiscal year (relating to the Medicare

13 Direct-Costs Medical Education Account).

14 ‘‘(e) DEFINITION.—For purposes of this title, the

15 term ‘qualifying consortium’ means a consortium that

16 meets the requirements of subsection (b).

17 ‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE18 GARDING TEACHING HOSPITALS IN CERTAIN

19 STATES.

20 ‘‘(a) IN GENERAL.—In the case of a teaching hospital

21 in a State for which a demonstration project under section

22 1814(b)(3) is in effect, this section applies in lieu of sec23 tion 2231. For purposes of section 2211(a)(2), the amount

24 determined for a teaching hospital for a fiscal year is the

25 product of—
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1 ‘‘(1) the amount in the General Direct-Costs

2 Medical Education Account on the applicable date

3 under section 2201(d) (once the appropriation under

4 such section is made); and

5 ‘‘(2) the percentage determined under sub6 section (b) for the hospital.

7 ‘‘(b) DETERMINATION OF PERCENTAGE.—For pur8 poses of subsection (a)(2):

9 ‘‘(1) The Secretary shall make an estimate of

10 the total amount of payments that would have been

11 received under section 1886(h) by the hospital in12 volved with respect to each of the fiscal years of the

13 applicable period if such section (as in effect for

14 such fiscal years) had applied to the hospital for

15 such years.

16 ‘‘(2) The percentage determined under this sub17 section for the hospital for a fiscal year is a mean

18 average percentage determined for the hospital in

19 accordance with the methodology of section

20 2231(b)(2)(A), except that the estimate made by the

21 Secretary under paragraph (1) of this subsection for

22 a fiscal year of the applicable period is deemed to be

23 the amount that applies for purposes of section

24 2231(b)(2)(B)(i) for such year.
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1 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

2 AMOUNTS.—In the case of a teaching hospital in a State

3 for which a demonstration project under section

4 1814(b)(3) is in effect, this section does not provide any

5 payment to the hospital from amounts transferred to the

6 Fund under section 1886(j).

7 ‘‘Subpart 4—General Provisions

8 ‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.

9 ‘‘(a) COLLECTION OF DATA ON ACCURACY OF ESTI10 MATES.—The Secretary shall collect data on whether the

11 estimates made by the Secretary under section 1886(j) for

12 a fiscal year were substantially accurate.

13 ‘‘(b) ADJUSTMENTS.—If the Secretary determines

14 under subsection (a) that an estimate for a fiscal year was

15 not substantially accurate, the Secretary shall, for the first

16 fiscal year beginning after the Secretary makes the deter17 mination—

18 ‘‘(1) make adjustments accordingly in transfers

19 to the Fund under section 1886(j); and

20 ‘‘(2) make adjustments accordingly in the

21 amount of payments to teaching hospitals pursuant

22 to 2231(c) (or, as applicable, to qualifying consortia

23 pursuant to section 2232(c)(2)).’’.
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1 PART 2—AMENDMENTS TO MEDICARE PROGRAM

2 SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND

3 GRADUATE MEDICAL EDUCATION TRUST

4 FUND.

5 Section 1886 (42 U.S.C. 1395ww) is amended—

6 (1) in subsection (d)(5)(B), in the matter pre7 ceding clause (i), by striking ‘‘The Secretary shall

8 provide’’ and inserting the following: ‘‘For dis9 charges occurring on or before September 30, 1996,

10 the Secretary shall provide’’;

11 (2) in subsection (h)—

12 (A) in paragraph (1), in the first sentence,

13 by striking ‘‘the Secretary shall provide’’ and

14 inserting ‘‘the Secretary shall, subject to para15 graph (6), provide’’; and

16 (B) by adding at the end the following

17 paragraph:

18 ‘‘(6) LIMITATION.—

19 ‘‘(A) IN GENERAL.—The authority to

20 make payments under this subsection applies

21 only with respect to cost reporting periods end22 ing on or before September 30, 1996, except as

23 provided in subparagraph (B).

24 ‘‘(B) RULE REGARDING PORTION OF LAST

25 COST REPORTING PERIOD.—In the case of a

26 cost reporting period that extends beyond Sep-
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1 tember 30, 1996, payments under this sub2 section shall be made with respect to such por3 tion of the period as has lapsed as of such date.

4 ‘‘(C) RULE OF CONSTRUCTION.—This

5 paragraph may not be construed as authorizing

6 any payment under section 1861(v) with re7 spect to graduate medical education.’’; and

8 (3) by adding at the end the following sub9 section:

10 ‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND

11 GRADUATE MEDICAL EDUCATION TRUST FUND.—

12 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU13 CATION.—

14 ‘‘(A) IN GENERAL.—From the Federal

15 Hospital Insurance Trust Fund, the Secretary

16 shall, for fiscal year 1997 and each subsequent

17 fiscal year, transfer to the Indirect-Costs Medi18 cal Education Account (under section 2201) an

19 amount determined by the Secretary in accord20 ance with subparagraph (B).

21 ‘‘(B) DETERMINATION OF AMOUNTS.—The

22 Secretary shall make an estimate for the fiscal

23 year involved of the nationwide total of the

24 amounts that would have been paid under sub25 section (d)(5)(B) to hospitals during the fiscal
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1 year if such payments had not been terminated

2 for discharges occurring after September 30,

3 1996. For purposes of subparagraph (A), the

4 amount determined under this subparagraph

5 for the fiscal year is the estimate made by the

6 Secretary under the preceding sentence.

7 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

8 ‘‘(A) IN GENERAL.—From the Federal

9 Hospital Insurance Trust Fund and the Fed10 eral Supplementary Medical Insurance Trust

11 Fund, the Secretary shall, for fiscal year 1997

12 and each subsequent fiscal year, transfer to the

13 Medicare Direct-Costs Medical Education Ac14 count (under section 2201) the sum of—

15 ‘‘(i) an amount determined by the

16 Secretary in accordance with subparagraph

17 (B); and

18 ‘‘(ii) as applicable, an amount deter19 mined by the Secretary in accordance with

20 subparagraph (C)(ii).

21 ‘‘(B) DETERMINATION OF AMOUNTS.—For

22 each hospital (other than a hospital that is a

23 member of a qualifying consortium referred to

24 in subparagraph (C)), the Secretary shall make

25 an estimate for the fiscal year involved of the
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1 amount that would have been paid under sub2 section (h) to the hospital during the fiscal year

3 if such payments had not been terminated for

4 cost reporting periods ending on or before Sep5 tember 30, 1996. For purposes of subparagraph

6 (A)(i), the amount determined under this sub7 paragraph for the fiscal year is the sum of all

8 estimates made by the Secretary under the pre9 ceding sentence.

10 ‘‘(C) ESTIMATES REGARDING QUALIFYING

11 CONSORTIA.—If the Secretary elects to author12 ize one or more qualifying consortia for pur13 poses of section 2233(a), the Secretary shall

14 carry out the following:

15 ‘‘(i) The Secretary shall establish a

16 methodology for making payments to quali17 fying consortia with respect to the reason18 able direct costs of such consortia in carry19 ing out programs of graduate medical edu20 cation. The methodology shall be the meth21 odology established in subsection (h),

22 modified to the extent necessary to take

23 into account the participation in such pro24 grams of entities other than hospitals.
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1 ‘‘(ii) For each qualifying consortium,

2 the Secretary shall make an estimate for

3 the fiscal year involved of the amount that

4 would have been paid to the consortium

5 during the fiscal year if, using the meth6 odology under clause (i), payments had

7 been made to the consortium for the fiscal

8 year as reimbursements with respect to

9 cost reporting periods. For purposes of

10 subparagraph (A)(ii), the amount deter11 mined under this clause for the fiscal year

12 is the sum of all estimates made by the

13 Secretary under the preceding sentence.

14 ‘‘(D) ALLOCATION BETWEEN FUNDS.—In

15 providing for a transfer under subparagraph

16 (A) for a fiscal year, the Secretary shall provide

17 for an allocation of the amounts involved be18 tween part A and part B (and the trust funds

19 established under the respective parts) as rea20 sonably reflects the proportion of direct grad21 uate medical education costs of hospitals associ22 ated with the provision of services under each

23 respective part.

24 ‘‘(3) APPLICABILITY OF CERTAIN AMEND25 MENTS.—Amendments made to subsection (d)(5)(B)
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1 and subsection (h) that are effective on or after Oc2 tober 1, 1996, apply only for purposes of estimates

3 under paragraphs (1) and (2) and for purposes of

4 determining the amount of payments under 2211.

5 Such amendments do not require any adjustment to

6 amounts paid under subsection (d)(5)(B) or (h) with

7 respect to fiscal year 1996 or any prior fiscal year.

8 ‘‘(4) RELATIONSHIP TO CERTAIN DEMONSTRA9 TION PROJECTS.—In the case of a State for which

10 a demonstration project under section 1814(b)(3) is

11 in effect, the Secretary, in making determinations of

12 the rates of increase under such section, shall in13 clude all amounts transferred under this subsection.

14 Such amounts shall be so included to the same ex15 tent and in the same manner as amounts determined

16 under subsections (d)(5)(B) and (h) were included in

17 such determination under the provisions of this title

18 in effect on September 30, 1996.’’.

19 SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD20 ING GRADUATE MEDICAL EDUCATION.

21 (a) INDIRECT COSTS OF MEDICAL EDUCATION; AP22 PLICABLE PERCENTAGE.—

23 (1) MODIFICATION REGARDING 5.6 PERCENT.—

24 Section 1886(d)(5)(B)(ii) (42 U.S.C.

25 1395ww(d)(5)(B)(ii)) is amended—
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1 (A) by striking ‘‘on or after October 1,

2 1988,’’ and inserting ‘‘on or after October 1,

3 1999,’’; and

4 (B) by striking ‘‘1.89’’ and inserting

5 ‘‘1.38’’.

6 (2) SPECIAL RULE REGARDING FISCAL YEARS

7 1996 THROUGH 1998; MODIFICATION REGARDING 6

8 PERCENT.—Section 1886(d)(5)(B)(ii), as amended

9 by paragraph (1), is amended by adding at the end

10 the following: ‘‘In the case of discharges occurring

11 on or after October 1, 1995, and before October 1,

12 1999, the preceding sentence applies to the same ex13 tent and in the same manner as the sentence applies

14 to discharges occurring on or after October 1, 1999,

15 except that the term ‘1.38’ is deemed to be ‘1.48’.’’.

16 (b) DIRECT COSTS OF MEDICAL EDUCATION.—

17 (1) LIMITATION ON NUMBER OF FULL-TIME18 EQUIVALENT RESIDENTS.—Section 1886(h)(4) (42

19 U.S.C. 1395ww(h)(4)) is amended by adding at the

20 end the following new subparagraph:

21 ‘‘(F) LIMITATION ON NUMBER OF RESI22 DENTS FOR CERTAIN FISCAL YEARS.—Such

23 rules shall provide that for purposes of a cost

24 reporting period beginning on or after October

25 1, 1995, and on or before September 30, 2002,
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1 the number of full-time-equivalent residents de2 termined under this paragraph with respect to

3 an approved medical residency training program

4 may not exceed the number of full-time-equiva5 lent residents with respect to the program as of

6 August 1, 1995 (except that this subparagraph

7 does not apply to any nonphysician post8 graduate training program that, under para9 graph (5)(A), is an approved medical residency

10 training program).’’.

11 (2) EXCLUSION OF RESIDENTS AFTER INITIAL

12 RESIDENCY PERIOD.—Section 1886(h)(4)(C) (42

13 U.S.C. 1395ww(h)(4)(C)) is amended to read as fol14 lows:

15 ‘‘(C) WEIGHTING FACTORS FOR RESI16 DENTS.—Effective for cost reporting periods

17 beginning on or after October 1, 1997, such

18 rules shall provide that, in the calculation of the

19 number of full-time-equivalent residents in an

20 approved residency program, the weighting fac21 tor for a resident who is in the initial residency

22 period (as defined in paragraph (5)(F)) is 1.0

23 and the weighting factor for a resident who has

24 completed such period is 0.0. (In the case of

25 cost reporting periods beginning before October
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1 1, 1997, the weighting factors that apply in

2 such calculation are the weighting factors that

3 were applicable under this subparagraph on the

4 day before the date of the enactment of the

5 Medicare Preservation Act of 1995.)’’.

6 (3) REDUCTIONS IN PAYMENTS FOR ALIEN

7 RESIDENTS.—Section 1886(h)(4) (42 U.S.C.

8 1395ww(h)(4)), as amended by paragraph (1), is

9 amended by adding at the end the following new

10 subparagraph:

11 ‘‘(G) SPECIAL RULES FOR ALIEN RESI12 DENTS.—In the case of individuals who are not

13 citizens or nationals of the United States, in

14 the calculation of the number of full-time-equiv15 alent residents in an approved medical resi16 dency program, the following rules shall apply

17 with respect to such individuals who are resi18 dents in the program:

19 ‘‘(i) For a cost reporting period begin20 ning during fiscal year 1996, for each such

21 individual the Secretary shall apply a

22 weighting factor of .75.

23 ‘‘(ii) For a cost reporting period be24 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, for each

5 such individual the Secretary shall apply a

6 weighting factor of .25.

7 ‘‘(iv) For a cost reporting period be8 ginning during fiscal year 1999 or any

9 subsequent fiscal year, such individuals

10 shall be excluded from the calculation of

11 the number of full-time-equivalent resi12 dents in an approved medical residency

13 program under this paragraph.’’.

14 (c) EFFECTIVE DATE.—Except as provided otherwise

15 in this section (or in the amendments made by this sec16 tion), the amendments made by this section apply to hos17 pital cost reporting periods beginning on or after October

18 1, 1995.
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1 PART 3—REFORM OF FEDERAL POLICIES RE2 GARDING TEACHING HOSPITALS AND GRAD3 UATE MEDICAL EDUCATION

4 SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR

5 RECOMMENDING POLICIES.

6 Title XXII of the Social Security Act, as added by

7 section 15401, is amended by adding at the end the follow8 ing part:

9 ‘‘PART C—OTHER MATTERS

10 ‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING

11 OF TEACHING HOSPITALS AND GRADUATE

12 MEDICAL EDUCATION.

13 ‘‘(a) ESTABLISHMENT.—The Chair of the Medicare

14 Payment Review Commission under section 1806 shall es15 tablish a temporary advisory panel to be known as the Ad16 visory Panel on Financing for Teaching Hospitals and

17 Graduate Medical Education (in this section referred to

18 as the ‘Panel’).

19 ‘‘(b) DUTIES.—The Panel shall develop recommenda20 tions on whether and to what extent Federal policies re21 garding teaching hospitals and graduate medical edu22 cation should be reformed, including recommendations re23 garding the following:

24 ‘‘(1) The financing of graduate medical edu25 cation, including consideration of alternative broad26 based sources of funding for such education.
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1 ‘‘(2) The financing of teaching hospitals, in2 cluding consideration of the difficulties encountered

3 by such hospitals as competition among health care

4 entities increases. Matters considered under this

5 paragraph shall include consideration of the effects

6 on teaching hospitals of the method of financing

7 used for the program under part C of title XVIII

8 (relating to MedicarePlus).

9 ‘‘(3) The methodology for making payments for

10 graduate medical education, and the selection of en11 tities to receive the payments. Matters considered

12 under this paragraph shall include the following:

13 ‘‘(A) The methodology under part B for

14 making payments from the Fund, including the

15 use of data from the fiscal years 1992 through

16 1994, and including the methodology that ap17 plies with respect to consolidations and mergers

18 of participants in the program under such part

19 and with respect to the inclusion of additional

20 participants in the program.

21 ‘‘(B) Issues regarding children’s hospitals,

22 and approved medical residency training pro23 grams in pediatrics.

24 ‘‘(C) Whether and to what extent pay25 ments are being made (or should be made) for
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1 graduate training in the various nonphysician

2 health professions.

3 ‘‘(4) Federal policies regarding international

4 medical graduates.

5 ‘‘(5) The dependence of schools of medicine on

6 service-generated income.

7 ‘‘(6) The effects of the amendments made by

8 section 15412 of the Medicare Preservation Act of

9 1995, including adverse effects on teaching hospitals

10 that result from modifications in policies regarding

11 international medical graduates.

12 ‘‘(7) The feasibility and desirability of reducing

13 payments for graduate medical education for high14 cost residency programs under section

15 1886(h)(2)(D)(iii).

16 ‘‘(c) COMPOSITION.—Not later than three months

17 after being designated as the initial chairman of the Medi18 care Payment Review Commission, the chairman of the

19 Commission shall appoint to the Panel 19 individuals who

20 are not members of the Commission, who are not officers

21 or employees of the United States, and who possess exper22 tise on matters on which the Panel is to make rec23 ommendations under subsection (b). Such individuals shall

24 include the following:
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1 ‘‘(1) Deans from allopathic and osteopathic

2 schools of medicine.

3 ‘‘(2) Chief executive officers (or equivalent ad4 ministrative heads) from academic health centers,

5 integrated health care systems, and approved medi6 cal residency training 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 Review Pay24 ment 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 section 3. The Panel may not procure services

19 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 section 3.

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 2000.

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 Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F))

10 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 17 percent.

23 ‘‘(II) For discharges occurring on or after Octo24 ber 1, 1996, and on or before September 30, 1997,

25 by 15 percent.
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1 ‘‘(III) For discharges occurring on or after Oc2 tober 1, 1997, and on or before September 30, 1998,

3 by 20 percent.

4 ‘‘(IV) For discharges occurring on or after Oc5 tober 1, 1998, and on or before September 30, 1999,

6 by 20 percent.

7 ‘‘(V) For discharges occurring on or after Octo8 ber 1, 1999, and on or before September 30, 2000,

9 by 25 percent.

10 ‘‘(VI) For discharges occurring on or after Oc11 tober 1, 2000, and on or before September 30, 2001,

12 by 30 percent.

13 ‘‘(VII) For discharges occurring on or after Oc14 tober 1, 2001, by 30 percent.’’.

15 SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR

16 INPATIENT HOSPITAL SERVICES.

17 (a) REDUCTION IN PAYMENTS FOR PPS HOS18 PITALS.—

19 (1) CONTINUATION OF CURRENT REDUC20 TIONS.—Section 1886(g)(1)(A) (42 U.S.C.

21 1395ww(g)(1)(A)) is amended in the second sen22 tence—

23 (A) by striking ‘‘through 1995’’ and insert24 ing ‘‘through 2002’’; and
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1 (B) by inserting after ‘‘reduction’’ the fol2 lowing: ‘‘(or a 15 percent reduction in the case

3 of payments during fiscal years 1996 through

4 2002)’’.

5 (2) REDUCTION IN BASE PAYMENT RATES.—

6 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

7 is amended by adding at the end the following new

8 sentence: ‘‘In addition to the reduction described in

9 the preceding sentence, for discharges occurring

10 after September 30, 1995, the Secretary shall reduce

11 by 7.47 percent the unadjusted standard Federal

12 capital payment rate (as described in 42 CFR

13 412.308(c), as in effect on the date of the enactment

14 of the Medicare Preservation Act of 1995) and shall

15 reduce by 8.27 percent the unadjusted hospital-spe16 cific rate (as described in 42 CFR 412.328(e)(1), as

17 in effect on such date of enactment).’’.

18 (b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT

19 HOSPITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is

20 amended by adding at the end the following new para21 graph:

22 ‘‘(4)(A) Except as provided in subparagraph (B), in

23 determining the amount of the payments that may be

24 made under this title with respect to all the capital-related

25 costs of inpatient hospital services furnished during fiscal
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1 years 1996 through 2002 of a hospital which is not a sub2 section (d) hospital or a subsection (d) Puerto Rico hos3 pital, the Secretary shall reduce the amounts of such pay4 ments otherwise determined under this title by 15 percent.

5 ‘‘(B) Subparagraph (A) shall not apply to payments

6 with respect to the capital-related costs of any hospital

7 that is a sole community hospital (as defined in subsection

8 (d)(5)(D)(iii)) or a rural primary care hospital (as defined

9 in section 1861(mm)(1)).’’.

10 (c) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL11 RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.

12 1395ww(g)(1)) is amended—

13 (1) by redesignating subparagraph (C) as sub14 paragraph (D), and

15 (2) by inserting after subparagraph (B) the fol16 lowing:

17 ‘‘(C)(i) For discharges occurring after Sep18 tember 30, 1995, such system shall provide for

19 an adjustment in an amount equal to the

20 amount determined under clause (iv) for cap21 ital-related tax costs for each hospital that is el22 igible for such adjustment.

23 ‘‘(ii) Subject to clause (iii), a hospital is el24 igible for an adjustment under this subpara-
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1 graph, with respect to discharges occurring in a

2 fiscal year, if the hospital—

3 ‘‘(I) is a hospital that may otherwise

4 receive payments under this subsection,

5 ‘‘(II) is not a public hospital, and

6 ‘‘(III) incurs capital-related tax costs

7 for the fiscal year.

8 ‘‘(iii)(I) In the case of a hospital that first

9 incurs capital-related tax costs in a fiscal year

10 after fiscal year 1992 because of a change from

11 nonproprietary to proprietary status or because

12 the hospital commenced operation after such

13 fiscal year, the first fiscal year for which the

14 hospital shall be eligible for such adjustment is

15 the second full fiscal year following the fiscal

16 year in which the hospital first incurs such

17 costs.

18 ‘‘(II) In the case of a hospital that first in19 curs capital-related tax costs in a fiscal year

20 after fiscal year 1992 because of a change in

21 State or local tax laws, the first fiscal year for

22 which the hospital shall be eligible for such ad23 justment is the fourth full fiscal year following

24 the fiscal year in which the hospital first incurs

25 such costs.
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1 ‘‘(iv) The per discharge adjustment under

2 this clause shall be equal to the hospital-specific

3 capital-related tax costs per discharge of a hos4 pital for fiscal year 1992 (or, in the case of a

5 hospital that first incurs capital-related tax

6 costs for a fiscal year after fiscal year 1992, for

7 the first full fiscal year for which such costs are

8 incurred), updated to the fiscal year to which

9 the adjustment applies. Such per discharge ad10 justment shall be added to the Federal capital

11 rate, after such rate has been adjusted as de12 scribed in 42 CFR 412.312 (as in effect on the

13 date of the enactment of the Medicare Preser14 vation Act of 1995), and before such rate is

15 multiplied by the applicable Federal rate per16 centage.

17 ‘‘(v) For purposes of this subparagraph,

18 capital-related tax costs include—

19 ‘‘(I) the costs of taxes on land and de20 preciable assets owned by a hospital (or re21 lated organization) and used for patient

22 care,

23 ‘‘(II) payments in lieu of such taxes

24 (made by hospitals that are exempt from

25 taxation), and
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1 ‘‘(III) the costs of taxes paid by a

2 hospital (or related organization) as lessee

3 of land, buildings, or fixed equipment from

4 a lessor that is unrelated to the hospital

5 (or related organization) under the terms

6 of a lease that requires the lessee to pay

7 all expenses (including mortgage, interest,

8 and amortization) and leaves the lessor

9 with an amount free of all claims (some10 times referred to as a ‘net net net’ or ‘tri11 ple net’ lease).

12 In determining the adjustment required under

13 clause (i), the Secretary shall not take into ac14 count any capital-related tax costs of a hospital

15 to the extent that such costs are based on tax

16 rates and assessments that exceed those for

17 similar commercial properties.

18 ‘‘(vi) The system shall provide that the

19 Federal capital rate for any fiscal year after

20 September 30, 1995, shall be reduced by a per21 centage sufficient to ensure that the adjust22 ments required to be paid under clause (i) for

23 a fiscal year neither increase nor decrease the

24 total amount that would have been paid under
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1 this system but for the payment of such adjust2 ments for such fiscal year.’’.

3 (d) REVISION OF EXCEPTIONS PROCESS UNDER

4 PROSPECTIVE PAYMENT SYSTEM FOR CERTAIN

5 PROJECTS.—

6 (1) IN GENERAL.—Section 1886(g)(1) (42

7 U.S.C. 1395ww(g)(1)), as amended by subsection

8 (c), is amended—

9 (A) by redesignating subparagraph (D) as

10 subparagraph (E), and

11 (B) by inserting after subparagraph (C)

12 the following:

13 ‘‘(D) The exceptions under the system provided by

14 the Secretary under subparagraph (B)(iii) shall include

15 the provision of exception payments under the special ex16 ceptions process provided under 42 CFR 412.348(g) (as

17 in effect on September 1, 1995), except that the Secretary

18 shall revise such process as follows:

19 ‘‘(i) A hospital with at least 100 beds which is

20 located in an urban area shall be eligible under such

21 process without regard to its disproportionate pa22 tient percentage under subsection (d)(5)(F) or

23 whether it qualifies for additional payment amounts

24 under such subsection.
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1 ‘‘(ii) The minimum payment level for qualifying

2 hospitals shall be 85 percent.

3 ‘‘(iii) A hospital shall be considered to meet the

4 requirement that it completes the project involved no

5 later than the end of the hospital’s last cost report6 ing period beginning after October 1, 2001, if—

7 ‘‘(I) the hospital has obtained a certificate

8 of need for the project approved by the State or

9 a local planning authority, and

10 ‘‘(II) by September 1, 1995, the hospital

11 has expended on the project at least $750,000

12 or 10 percent of the estimated cost of the

13 project.

14 ‘‘(iv) The amount of the exception payment

15 made shall not be reduced by any offsetting

16 amounts.’’.

17 (2) CONFORMING AMENDMENT.—Section

18 1886(g)(1)(B) (42 U.S.C. 1395ww(g)(1)(B)) is

19 amended by striking ‘‘may provide’’ and inserting

20 ‘‘shall provide (in accordance with subparagraph

21 (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 UNITS LOCATED

10 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 long-term care unit of

15 the hospital if such unit was not treated as a sub16 section (d) hospital with respect to discharges occur17 ring on or before September 30, 1995.’’.

18 (2) STUDY BY REVIEW COMMISSION.—Not later

19 than 12 months after the date a majority of the

20 members of the Medicare Payment Review Commis21 sion are first appointed, the Commission shall sub22 mit a report to Congress containing recommenda23 tions for appropriate revisions in the treatment of

24 distinct units of hospitals for purposes of section

25 1886 of the Social Security Act.
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1 SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR

2 ENROLLEES’ BAD DEBTS.

3 (a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.

4 1395x(v)(1)) is amended by adding at the end the follow5 ing new subparagraph:

6 ‘‘(T) In determining such reasonable costs for hos7 pitals, the amount of bad debts otherwise treated as allow8 able costs which are attributable to the deductibles and

9 coinsurance amounts under this title shall be reduced by—

10 ‘‘(i) 75 percent for cost reporting periods begin11 ning during fiscal year 1996,

12 ‘‘(ii) 60 percent for cost reporting periods be13 ginning during fiscal year 1997, and

14 ‘‘(iii) 50 percent for subsequent cost reporting

15 periods.’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall apply to hospital cost reporting peri18 ods beginning on or after October 1, 1995.

19 SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS20 THROUGH.

21 Effective as if included in the enactment of OBRA–

22 1989, section 6011(d) of such Act (as amended by section

23 13505 of OBRA–1993) is amended by striking ‘‘and shall

24 expire September 30, 1994’’.
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1 SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION

2 OF CHRISTIAN SCIENCE PROVIDERS.

3 (a) HOSPITALS.—Section 1861(e) (42 U.S.C.

4 1395x(e)) is amended in the sixth sentence by inserting

5 after ‘‘Massachusetts,’’ the following: ‘‘or by the Commis6 sion for Accreditation of Christian Science Nursing Orga7 nizations/Facilities, Inc.,’’.

8 (b) SKILLED NURSING FACILITIES.—Section

9 1861(y)(1) is amended by inserting after ‘‘Massachu10 setts,’’ the following: ‘‘or by the Commission for Accredita11 tion of Christian Science Nursing Organizations/Facilities,

12 Inc.,’’.

13 Subpart B—Provisions Relating to Rural Hospitals

14 SEC. 15511. SOLE COMMUNITY HOSPITALS.

15 (a) UPDATE.—Section 1886(b)(3)(B)(iv) (42 U.S.C.

16 1395ww(b)(3)(B)(iv)) is amended—

17 (A) in subclause (III), by striking ‘‘and’’ at

18 the end; and

19 (B) by striking subclause (IV) and insert20 ing the following:

21 ‘‘(IV) for each of the fiscal years 1996 through

22 2000, the market basket percentage increase minus

23 1 percentage points, and

24 ‘‘(V) for fiscal year 2001 and each subsequent

25 fiscal year, the applicable percentage increase under

26 clause (i).’’.
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1 (b) STUDY OF IMPACT OF SOLE COMMUNITY HOS2 PITAL DESIGNATIONS.—

3 (1) STUDY.—The Medicare Payment Review

4 Commission shall conduct a study of the impact of

5 the designation of hospitals as sole community hos6 pitals under the medicare program on the delivery of

7 health care services to individuals in rural areas, and

8 shall include in the study an analysis of the charac9 teristics of the hospitals designated as such sole

10 community hospitals under the program.

11 (2) REPORT.—Not later than 12 months after

12 the date a majority of the members of the Commis13 sion are first appointed, the Commission shall sub14 mit to Congress a report on the study conducted

15 under paragraph (1).

16 SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND

17 RPC HOSPITALS.

18 Paragraphs (1)(A) and (2)(A) of section 1820(i) (42

19 U.S.C. 1395i–4(i)) are each amended by striking the semi20 colon at the end and inserting the following: ‘‘, or in a

21 State which the Secretary finds would receive a grant

22 under such subsection during a fiscal year if funds were

23 appropriated for grants under such subsection for the fis24 cal year;’’.
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1 SEC. 15513. RURAL EMERGENCY ACCESS CARE HOSPITALS.

2 (a) ESTABLISHMENT OF PROGRAM.—

3 (1) IN GENERAL.—Section 1861 (42 U.S.C.

4 1395x) is amended by adding at the end the follow5 ing new subsection:

6 ‘‘Rural Emergency Access Care Hospital; Rural

7 Emergency Access Care Hospital Services

8 ‘‘(oo)(1) The term ‘rural emergency access care hos9 pital’ means, for a fiscal year, a facility with respect to

10 which the Secretary finds the following:

11 ‘‘(A) The facility is located in a rural area (as

12 defined in section 1886(d)(2)(D)).

13 ‘‘(B) The facility was a hospital under this title

14 at any time during the 5-year period that ends on

15 the date of the enactment of this subsection.

16 ‘‘(C) The facility is in danger of closing due to

17 low inpatient utilization rates and negative operating

18 losses, and the closure of the facility would limit the

19 access of individuals residing in the facility’s service

20 area to emergency services.

21 ‘‘(D) The facility has entered into (or plans to

22 enter into) an agreement with a hospital with a par23 ticipation agreement in effect under section 1866(a),

24 and under such agreement the hospital shall accept

25 patients transferred to the hospital from the facility
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1 and receive data from and transmit data to the facil2 ity.

3 ‘‘(E) There is a practitioner who is qualified to

4 provide advanced cardiac life support services (as de5 termined by the State in which the facility is lo6 cated) on-site at the facility on a 24-hour basis.

7 ‘‘(F) A physician is available on-call to provide

8 emergency medical services on a 24-hour basis.

9 ‘‘(G) The facility is a member of a community

10 rural health network under section 104 of the Rural

11 Health Development Act.

12 ‘‘(H) The facility meets such staffing require13 ments as would apply under section 1861(e) to a

14 hospital located in a rural area, except that—

15 ‘‘(i) the facility need not meet hospital

16 standards relating to the number of hours dur17 ing a day, or days during a week, in which the

18 facility must be open, except insofar as the fa19 cility is required to provide emergency care on

20 a 24-hour basis under subparagraphs (E) and

21 (F); and

22 ‘‘(ii) the facility may provide any services

23 otherwise required to be provided by a full-time,

24 on-site dietician, pharmacist, laboratory techni-
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1 cian, medical technologist, or radiological tech2 nologist on a part-time, off-site basis.

3 ‘‘(I) The facility meets the requirements appli4 cable to clinics and facilities under subparagraphs

5 (C) through (J) of paragraph (2) of section

6 1861(aa) and of clauses (ii) and (iv) of the second

7 sentence of such paragraph (or, in the case of the

8 requirements of subparagraph (E), (F), or (J) of

9 such paragraph, would meet the requirements if any

10 reference in such subparagraph to a ‘nurse practi11 tioner’ or to ‘nurse practitioners’ was deemed to be

12 a reference to a ‘nurse practitioner or nurse’ or to

13 ‘nurse practitioners or nurses’); except that in deter14 mining whether a facility meets the requirements of

15 this subparagraph, subparagraphs (E) and (F) of

16 that paragraph shall be applied as if any reference

17 to a ‘physician’ is a reference to a physician as de18 fined in section 1861(r)(1).

19 ‘‘(2) The term ‘rural emergency access care hospital

20 services’ means the following services provided by a rural

21 emergency access care hospital:

22 ‘‘(A) An appropriate medical screening exam23 ination (as described in section 1867(a)).
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1 ‘‘(B) Necessary stabilizing examination and

2 treatment services for an emergency medical condi3 tion and labor (as described in section 1867(b)).

4 ‘‘(3) The term ‘inpatient rural emergency access care

5 hospital services’ means services described in paragraph

6 (2), furnished to an individual over a continuous period

7 not to exceed 24 hours (except that such services may be

8 furnished over a longer period in the case of an individual

9 who is unable to leave the hospital because of inclement

10 weather) that would be inpatient hospital services if fur11 nished to an inpatient of a hospital by a hospital.’’.

12 (2) REQUIRING RURAL EMERGENCY ACCESS

13 CARE HOSPITALS TO MEET HOSPITAL ANTI-DUMPING

14 REQUIREMENTS.—Section 1867(e)(5) (42 U.S.C.

15 1395dd(e)(5)) is amended by striking

16 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) and

17 a rural emergency access care hospital (as defined in

18 section 1861(oo)(1))’’.

19 (b) COVERAGE OF AND PAYMENT FOR SERVICES

20 UNDER PART A.—

21 (1) COVERAGE.—Section 1812(a)(1) (42 U.S.C.

22 1395d(a)(1)) is amended by striking ‘‘or inpatient

23 rural primary care hospital services’’ and inserting

24 ‘‘inpatient rural primary care hospital services, or
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1 inpatient rural emergency access care hospital serv2 ices’’.

3 (2) APPLICATION OF DEDUCTIBLE AND COIN4 SURANCE.—(A) Sections 1813(a) and 1813(b)(3)(A)

5 (42 U.S.C. 1395e(a), 1395e(b)(3)(A)) are each

6 amended by striking ‘‘services or inpatient rural pri7 mary care hospital services’’ each place it appears

8 and inserting ‘‘services, inpatient rural primary care

9 hospital services, or inpatient rural emergency access

10 care hospital services’’.

11 (B) Section 1813(b)(3)(B) (42 U.S.C.

12 1395e(b)(3)(B)) is amended by inserting ‘‘, inpatient

13 rural emergency access care hospital services,’’ after

14 ‘‘inpatient rural primary care hospital services’’.

15 (3) PAYMENT BASED ON REASONABLE COSTS.—

16 Section 1814 (42 U.S.C. 1395f) is amended by add17 ing at the end the following new subsection:

18 ‘‘Payment for Inpatient Rural Emergency Access Care

19 Hospital Services

20 ‘‘(m) The amount of payment under this part for in21 patient rural primary care hospital services shall be equal

22 to the reasonable cost of such services (as determined

23 under section 1861(v)), less the amount the hospital may

24 charge as described in clause (ii) of section 1866(a)(2)(A),
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1 but in no case may the payment for such services exceed

2 80 percent of such reasonable cost.’’.

3 (4) APPLICATION OF SPELL OF ILLNESS.—Sec4 tion 1861(a) (42 U.S.C. 1395x(a)) is amended—

5 (A) in paragraph (1), by inserting ‘‘, inpa6 tient rural emergency access care hospital serv7 ices,’’ after ‘‘inpatient rural primary care hos8 pital services’’; and

9 (B) in paragraph (2), by striking ‘‘hospital

10 or rural primary care hospital’’ and inserting

11 ‘‘hospital, rural primary care hospital, or rural

12 emergency access care hospital’’.

13 (c) REFERENCE TO PAYMENT PROVISIONS UNDER

14 PART B.—For provisions relating to payment for inpa15 tient rural emergency access care hospital services under

16 part B, see section 15607.

17 (d) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to fiscal years beginning on or

19 after October 1, 1995.

20 SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN21 TERS.

22 (a) PROHIBITING DENIAL OF REQUEST FOR RECLAS23 SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—

24 (1) IN GENERAL.—Section 1886(d)(10)(D) (42

25 U.S.C. 1395ww(d)(10)(D)) is amended—
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1 (A) by redesignating clause (iii) as clause

2 (iv); and

3 (B) by inserting after clause (ii) the follow4 ing new clause:

5 ‘‘(iii) Under the guidelines published by the Secretary

6 under clause (i), in the case of a hospital which is classi7 fied by the Secretary as a rural referral center under para8 graph (5)(C), the Board may not reject the application

9 of the hospital under this paragraph on the basis of any

10 comparison between the average hourly wage of the hos11 pital and the average hourly wage of hospitals in the area

12 in which it is located.’’.

13 (2) EFFECTIVE DATE.—Notwithstanding sec14 tion 1886(d)(10)(C)(ii) of the Social Security Act, a

15 hospital may submit an application to the Medicare

16 Geographic Classification Review Board during the

17 30-day period beginning on the date of the enact18 ment of this Act requesting a change in its classi19 fication for purposes of determining the area wage

20 index applicable to the hospital under section

21 1886(d)(3)(D) of such Act for fiscal year 1997, if

22 the hospital would be eligible for such a change in

23 its classification under the standards described in

24 section 1886(d)(10)(D) (as amended by paragraph
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1 (1)) but for its failure to meet the deadline for appli2 cations under section 1886(d)(10)(C)(ii).

3 (b) CONTINUING TREATMENT OF PREVIOUSLY DES4 IGNATED CENTERS.—Any hospital classified as a rural re5 ferral center by the Secretary of Health and Human Serv6 ices under section 1886(d)(5)(C) of the Social Security

7 Act for fiscal year 1994 shall be classified as such a rural

8 referral center for fiscal year 1996 and each subsequent

9 fiscal year.

10 SEC. 15515. FLOOR ON AREA WAGE INDEX.

11 (a) IN GENERAL.—For purposes of section

12 1886(d)(3)(E) of the Social Security Act for discharges

13 occurring on or after October 1, 1995, the area wage index

14 applicable under such section to any hospital which is not

15 located in a rural area (as defined in section

16 1886(d)(2)(D) of such Act) may not be less than the aver17 age of the area wage indices applicable under such section

18 to hospitals located in rural areas in the State in which

19 the hospital is located.

20 (b) BUDGET-NEUTRALITY IN IMPLEMENTATION.—

21 The Secretary of Health and Human Services shall make

22 any adjustments required under subsection (a) in a man23 ner which assures that the aggregate payments made

24 under section 1886(d) of the Social Security Act in a fiscal

25 year for the operating costs of inpatient hospital services
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1 are not greater or less than those which would have been

2 made in the year without such adjustments.

3 PART 2—PAYMENTS TO SKILLED NURSING

4 FACILITIES

5 SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.

6 (a) CLARIFICATION OF DEFINITION OF ROUTINE

7 SERVICE COSTS.—Section 1888 (42 U.S.C. 1395yy) is

8 amended by adding at the end the following new sub9 section:

10 ‘‘(e) For purposes of this section, the ‘routine service

11 costs’ of a skilled nursing facility are all costs which are

12 attributable to nursing services, room and board, adminis13 trative costs, other overhead costs, and all other ancillary

14 services (including supplies and equipment), excluding

15 costs attributable to covered non-routine services subject

16 to payment limits under section 1888A.’’.

17 (b) CONFORMING AMENDMENT.—Section 1888 (42

18 U.S.C. 1395yy) is amended in the heading by inserting

19 ‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERVICE’’.

20 SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE21 MENT OF COVERED NON-ROUTINE SERVICES.

22 (a) IN GENERAL.—Title XVIII is amended by insert23 ing after section 1888 the following new section:
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1 ‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT OF

2 COVERED NON-ROUTINE SERVICES OF SKILLED

3 NURSING FACILITIES

4 ‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of

5 this section:

6 ‘‘(1) COVERED NON-ROUTINE SERVICES.—The

7 term ‘covered non-routine services’ means post-hos8 pital extended care services consisting of any of the

9 following:

10 ‘‘(A) Physical or occupational therapy or

11 speech-language pathology services, or res12 piratory therapy.

13 ‘‘(B) Prescription drugs.

14 ‘‘(C) Complex medical equipment.

15 ‘‘(D) Intravenous therapy and solutions

16 (including enteral and parenteral nutrients,

17 supplies, and equipment).

18 ‘‘(E) Radiation therapy.

19 ‘‘(F) Diagnostic services, including labora20 tory, radiology (including computerized tomog21 raphy services and imaging services), and pul22 monary services.

23 ‘‘(2) SNF MARKET BASKET PERCENTAGE IN24 CREASE.—The term ‘SNF market basket percentage

25 increase’ for a fiscal year means a percentage equal
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1 to the percentage increase in routine service cost

2 limits for the year under section 1888(a).

3 ‘‘(3) STAY.—The term ‘stay’ means, with re4 spect to an individual who is a resident of a skilled

5 nursing facility, a period of continuous days during

6 which the facility provides extended care services for

7 which payment may be made under this title to the

8 individual during the individual’s spell of illness.

9 ‘‘(b) NEW PAYMENT METHOD FOR COVERED NON10 ROUTINE SERVICES.—

11 ‘‘(1) IN GENERAL.—Subject to subsection (c), a

12 skilled nursing facility shall receive interim pay13 ments under this title for covered non-routine serv14 ices furnished to an individual during a cost report15 ing period beginning during a fiscal year (after fiscal

16 year 1996) in an amount equal to the reasonable

17 cost of providing such services in accordance with

18 section 1861(v). The Secretary may adjust such pay19 ments if the Secretary determines (on the basis of

20 such estimated information as the Secretary consid21 ers appropriate) that payments to the facility under

22 this paragraph for a cost reporting period would

23 substantially exceed the cost reporting period limit

24 determined under subsection (c)(1)(B).
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1 ‘‘(2) RESPONSIBILITY OF SKILLED NURSING

2 FACILITY TO MANAGE BILLINGS.—

3 ‘‘(A) CLARIFICATION RELATING TO PART A

4 BILLING.—In the case of a covered non-routine

5 service furnished to an individual who (at the

6 time the service is furnished) is a resident of a

7 skilled nursing facility who is entitled to cov8 erage under section 1812(a)(2) for such service,

9 the skilled nursing facility shall submit a claim

10 for payment under this title for such service

11 under part A (without regard to whether or not

12 the item or service was furnished by the facility,

13 by others under arrangement with them made

14 by the facility, under any other contracting or

15 consulting arrangement, or otherwise).

16 ‘‘(B) PART B BILLING.—In the case of a

17 covered non-routine service furnished to an in18 dividual who (at the time the service is fur19 nished) is a resident of a skilled nursing facility

20 who is not entitled to coverage under section

21 1812(a)(2) for such service but is entitled to

22 coverage under part B for such service, the

23 skilled nursing facility shall submit a claim for

24 payment under this title for such service under

25 part B (without regard to whether or not the
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1 item or service was furnished by the facility, by

2 others under arrangement with them made by

3 the facility, under any other contracting or con4 sulting arrangement, or otherwise).

5 ‘‘(C) MAINTAINING RECORDS ON SERVICES

6 FURNISHED TO RESIDENTS.—Each skilled nurs7 ing facility receiving payments for extended

8 care services under this title shall document on

9 the facility’s cost report all covered non-routine

10 services furnished to all residents of the facility

11 to whom the facility provided extended care

12 services for which payment was made under

13 part A during a fiscal year (beginning with fis14 cal year 1996) (without regard to whether or

15 not the services were furnished by the facility,

16 by others under arrangement with them made

17 by the facility, under any other contracting or

18 consulting arrangement, or otherwise).

19 ‘‘(c) RECONCILIATION OF AMOUNTS.—

20 ‘‘(1) LIMIT BASED ON PER STAY LIMIT AND

21 NUMBER OF STAYS.—

22 ‘‘(A) IN GENERAL.—If a skilled nursing fa23 cility has received aggregate payments under

24 subsection (b) for covered non-routine services

25 during a cost reporting period beginning during
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1 a fiscal year in excess of an amount equal to

2 the cost reporting period limit determined

3 under subparagraph (B), the Secretary shall re4 duce the payments made to the facility with re5 spect to such services for cost reporting periods

6 beginning during the following fiscal year in an

7 amount equal to such excess. The Secretary

8 shall reduce payments under this subparagraph

9 at such times and in such manner during a fis10 cal year as the Secretary finds necessary to

11 meet the requirement of this subparagraph.

12 ‘‘(B) COST REPORTING PERIOD LIMIT.—

13 The cost reporting period limit determined

14 under this subparagraph is an amount equal to

15 the product of—

16 ‘‘(i) the per stay limit applicable to

17 the facility under subsection (d) for the pe18 riod; and

19 ‘‘(ii) the number of stays beginning

20 during the period for which payment was

21 made to the facility for such services.

22 ‘‘(C) PROSPECTIVE REDUCTION IN PAY23 MENTS.—In addition to the process for reduc24 ing payments described in subparagraph (A),

25 the Secretary may reduce payments made to a
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1 facility under this section during a cost report2 ing period if the Secretary determines (on the

3 basis of such estimated information as the Sec4 retary considers appropriate) that payments to

5 the facility under this section for the period will

6 substantially exceed the cost reporting period

7 limit for the period determined under this para8 graph.

9 ‘‘(2) INCENTIVE PAYMENTS.—

10 ‘‘(A) IN GENERAL.—If a skilled nursing fa11 cility has received aggregate payments under

12 subsection (b) for covered non-routine services

13 during a cost reporting period beginning during

14 a fiscal year in an amount that is less than the

15 amount determined under paragraph (1)(B),

16 the Secretary shall pay the skilled nursing facil17 ity in the following fiscal year an incentive pay18 ment equal to 50 percent of the difference be19 tween such amounts, except that the incentive

20 payment may not exceed 5 percent of the aggre21 gate payments made to the facility under sub22 section (b) for the previous fiscal year (without

23 regard to subparagraph (B)).

24 ‘‘(B) INSTALLMENT INCENTIVE PAY25 MENTS.—The Secretary may make installment
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1 payments during a fiscal year to a skilled nurs2 ing facility based on the estimated incentive

3 payment that the facility would be eligible to

4 receive with respect to such fiscal year.

5 ‘‘(d) DETERMINATION OF FACILITY PER STAY

6 LIMIT.—

7 ‘‘(1) LIMIT FOR FISCAL YEAR 1997.—

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

9 subparagraph (B), the Secretary shall establish

10 separate per stay limits for hospital-based and

11 freestanding skilled nursing facilities for the 12-

12 month cost reporting period beginning during

13 fiscal year 1997 that are equal to the sum of—

14 ‘‘(i) 50 percent of the facility-specific

15 stay amount for the facility (as determined

16 under subsection (e)) for the last 12-month

17 cost reporting period ending on or before

18 September 30, 1994, increased (in a

19 compounded manner) by the SNF market

20 basket percentage increase for fiscal years

21 1995 through 1997; and

22 ‘‘(ii) 50 percent of the average of all

23 facility-specific stay amounts for all hos24 pital-based facilities or all freestanding fa25 cilities (whichever is applicable) during the
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1 cost reporting period described in clause

2 (i), increased (in a compounded manner)

3 by the SNF market basket percentage in4 crease for fiscal years 1995 through 1997.

5 ‘‘(B) FACILITIES NOT HAVING 1994 COST

6 REPORTING PERIOD.—In the case of a skilled

7 nursing facility for which payments were not

8 made under this title for covered non-routine

9 services for the last 12-month cost reporting pe10 riod ending on or before September 30, 1994,

11 the per stay limit for the 12-month cost report12 ing period beginning during fiscal year 1997

13 shall be twice the amount determined under

14 subparagraph (A)(ii).

15 ‘‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS.—

16 The per stay limit for a skilled nursing facility for

17 a 12-month cost reporting period beginning during

18 a fiscal year after fiscal year 1997 is equal to the

19 per stay limit established under this subsection for

20 the 12-month cost reporting period beginning during

21 the previous fiscal year, increased by the SNF mar22 ket basket percentage increase for such subsequent

23 fiscal year minus 2 percentage points.

24 ‘‘(3) REBASING OF AMOUNTS.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall

2 provide for an update to the facility-specific

3 amounts used to determine the per stay limits

4 under this subsection for cost reporting periods

5 beginning on or after October 1, 1999, and

6 every 2 years thereafter.

7 ‘‘(B) TREATMENT OF FACILITIES NOT

8 HAVING REBASED COST REPORTING PERIODS.—

9 Paragraph (1)(B) shall apply with respect to a

10 skilled nursing facility for which payments were

11 not made under this title for covered non-rou12 tine services for the 12-month cost reporting

13 period used by the Secretary to update facility14 specific amounts under subparagraph (A) in the

15 same manner as such paragraph applies with

16 respect to a facility for which payments were

17 not made under this title for covered non-rou18 tine services for the last 12-month cost report19 ing period ending on or before September 30,

20 1994.

21 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY

22 AMOUNTS.—The ‘facility-specific stay amount’ for a

23 skilled nursing facility for a cost reporting period is the

24 sum of—
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1 ‘‘(1) the average amount of payments made to

2 the facility under part A during the period which are

3 attributable to covered non-routine services fur4 nished during a stay (as determined on a per diem

5 basis); and

6 ‘‘(2) the Secretary’s best estimate of the aver7 age amount of payments made under part B during

8 the period for covered non-routine services furnished

9 to all residents of the facility to whom the facility

10 provided extended care services for which payment

11 was made under part A during the period (without

12 regard to whether or not the services were furnished

13 by the facility, by others under arrangement with

14 them made by the facility, under any other contract15 ing or consulting arrangement, or otherwise), as es16 timated by the Secretary.

17 ‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—

18 ‘‘(1) IN GENERAL.—In applying subsection (b)

19 to covered non-routine services furnished during a

20 stay beginning during a cost reporting period begin21 ning during a fiscal year (beginning with fiscal years

22 after fiscal year 1997) to a resident of a skilled

23 nursing facility who requires intensive nursing or

24 therapy services, the per stay limit for such resident

25 shall be the per stay limit developed under para-
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1 graph (2) instead of the per stay limit determined

2 under subsection (d)(1)(A).

3 ‘‘(2) PER STAY LIMIT FOR INTENSIVE NEED

4 RESIDENTS.—Not later than June 30, 1997, the

5 Secretary, after consultation with the Medicare Pay6 ment Review Commission and skilled nursing facility

7 experts, shall develop and publish a per stay limit

8 for residents of a skilled nursing facility who require

9 intensive nursing or therapy services.

10 ‘‘(3) BUDGET NEUTRALITY.—The Secretary

11 shall adjust payments under subsection (b) in a

12 manner that ensures that total payments for covered

13 non-routine services under this section are not great14 er or less than total payments for such services

15 would have been but for the application of para16 graph (1).

17 ‘‘(g) SPECIAL TREATMENT FOR SMALL SKILLED

18 NURSING FACILITIES.—This section shall not apply with

19 respect to a skilled nursing facility for which payment is

20 made for routine service costs during a cost reporting pe21 riod on the basis of prospective payments under section

22 1888(d).

23 ‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS.—

24 ‘‘(1) IN GENERAL.—The Secretary may make

25 exceptions and adjustments to the cost reporting
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1 limits applicable to a skilled nursing facility under

2 subsection (c)(1)(B) for a cost reporting period, ex3 cept that the total amount of any additional pay4 ments made under this section for covered non-rou5 tine services during the cost reporting period as a

6 result of such exceptions and adjustments may not

7 exceed 5 percent of the aggregate payments made

8 to all skilled nursing facilities for covered non-rou9 tine services during the cost reporting period (deter10 mined without regard to this paragraph).

11 ‘‘(2) BUDGET NEUTRALITY.—The Secretary

12 shall adjust payments under subsection (b) in a

13 manner that ensures that total payments for covered

14 non-routine services under this section are not great15 er or less than total payments for such services

16 would have been but for the application of para17 graph (1).

18 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before

19 furnishing a covered non-routine service consisting of an

20 X-ray service for which payment may be made under part

21 A or part B to a resident, a skilled nursing facility shall

22 consider whether furnishing the service through a provider

23 of portable X-ray service services would be appropriate,

24 taking into account the cost effectiveness of the service

25 and the convenience to the resident.’’.
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1 (b) CONFORMING AMENDMENT.—Section 1814(b)

2 (42 U.S.C. 1395f(b)) is amended in the matter preceding

3 paragraph (1) by striking ‘‘1813 and 1886’’ and inserting

4 ‘‘1813, 1886, 1888, and 1888A’’.

5 SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.

6 (a) MAINTAINING SAVINGS RESULTING FROM TEM7 PORARY FREEZE ON PAYMENT INCREASES.—

8 (1) BASING UPDATES TO PER DIEM COST LIM9 ITS ON LIMITS FOR FISCAL YEAR 1993.—

10 (A) IN GENERAL.—The last sentence of

11 section 1888(a) (42 U.S.C. 1395yy(a)) is

12 amended by adding at the end the following:

13 ‘‘(except that such updates may not take into

14 account any changes in the routine service costs

15 of skilled nursing facilities occurring during

16 cost reporting periods which began during fiscal

17 year 1994 or fiscal year 1995).’’.

18 (B) NO EXCEPTIONS PERMITTED BASED

19 ON AMENDMENT.—The Secretary of Health and

20 Human Services shall not consider the amend21 ment made by subparagraph (A) in making any

22 adjustments pursuant to section 1888(c) of the

23 Social Security Act.

24 (2) PAYMENTS DETERMINED ON PROSPECTIVE

25 BASIS.—Any change made by the Secretary of
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1 Health and Human Services in the amount of any

2 prospective payment paid to a skilled nursing facility

3 under section 1888(d) of the Social Security Act for

4 cost reporting periods beginning on or after October

5 1, 1995, may not take into account any changes in

6 the costs of services occurring during cost reporting

7 periods which began during fiscal year 1994 or fiscal

8 year 1995.

9 (b) ESTABLISHMENT OF SCHEDULE FOR MAKING

10 ADJUSTMENTS TO LIMITS.—Section 1888(c) (42 U.S.C.

11 1395yy(c)) is amended by striking the period at the end

12 of the second sentence and inserting ‘‘, and may only make

13 adjustments under this subsection with respect to a facil14 ity which applies for an adjustment during an annual ap15 plication period established by the Secretary.’’.

16 (c) LIMITATION ON AGGREGATE INCREASE IN PAY17 MENTS RESULTING FROM ADJUSTMENTS TO LIMITS.—

18 Section 1888(c) (42 U.S.C. 1395yy(c)) is amended—

19 (1) by striking ‘‘(c) The Secretary’’ and insert20 ing ‘‘(c)(1) Subject to paragraph (2), the Sec21 retary’’; and

22 (2) by adding at the end the following new

23 paragraph:

24 ‘‘(2) The Secretary may not make any adjustments

25 under this subsection in the limits set forth in subsection
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1 (a) for a cost reporting period beginning during a fiscal

2 year to the extent that the total amount of the additional

3 payments made under this title as a result of such adjust4 ments is greater than an amount equal to—

5 ‘‘(A) for cost reporting periods beginning dur6 ing fiscal year 1997, the total amount of the addi7 tional payments made under this title as a result of

8 adjustments under this subsection for cost reporting

9 periods beginning during fiscal year 1996 increased

10 by the SNF market basket percentage increase (as

11 defined in section 1888A(e)(3)) for fiscal year 1997;

12 and

13 ‘‘(B) for cost reporting periods beginning dur14 ing a subsequent fiscal year, the amount determined

15 under this paragraph for the previous fiscal year in16 creased by the SNF market basket percentage in17 crease for such subsequent fiscal year.’’.

18 (d) IMPOSITION OF LIMITS FOR ALL COST REPORT19 ING PERIODS.—Section 1888(a) (42 U.S.C. 1395yy(a)) is

20 amended in the matter preceding paragraph (1) by insert21 ing after ‘‘extended care services’’ the following: ‘‘(for any

22 cost reporting period for which payment is made under

23 this title to the skilled nursing facility for such services)’’.
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1 SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RE2 LATED COSTS.

3 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

4 amended by section 15506, is amended by adding at the

5 end the following new subparagraph:

6 ‘‘(U) Such regulations shall provide that, in deter7 mining the amount of the payments that may be made

8 under this title with respect to all the capital-related costs

9 of skilled nursing facilities, the Secretary shall reduce the

10 amounts of such payments otherwise established under

11 this title by 15 percent for payments attributable to por12 tions of cost reporting periods occurring during fiscal

13 years 1996 through 2002.’’.

14 SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID

15 FOR UNDER PART B.

16 (a) REQUIRING PAYMENT FOR ALL ITEMS AND

17 SERVICES TO BE MADE TO FACILITY.—

18 (1) IN GENERAL.—The first sentence of section

19 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended—

20 (A) by striking ‘‘and (D)’’ and inserting

21 ‘‘(D)’’; and

22 (B) by striking the period at the end and

23 inserting the following: ‘‘, and (E) in the case

24 of an item or service furnished to an individual

25 who (at the time the item or service is fur26 nished) is a resident of a skilled nursing facil-
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1 ity, payment shall be made to the facility (with2 out regard to whether or not the item or service

3 was furnished by the facility, by others under

4 arrangement with them made by the facility, or

5 otherwise).’’.

6 (2) EXCLUSION FOR ITEMS AND SERVICES NOT

7 BILLED BY FACILITY.—Section 1862(a) (42 U.S.C.

8 1395y(a)) is amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (14);

11 (B) by striking the period at the end of

12 paragraph (15) and inserting ‘‘; or’’; and

13 (C) by inserting after paragraph (15) the

14 following new paragraph:

15 ‘‘(16) where such expenses are for covered non16 routine services (as defined in section 1888A(a)(1))

17 furnished to an individual who is a resident of a

18 skilled nursing facility and for which the claim for

19 payment under this title is not submitted by the fa20 cility.’’.

21 (3) CONFORMING AMENDMENT.—Section

22 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended by

23 striking ‘‘(2);’’ and inserting ‘‘(2) and section

24 1842(b)(6)(E);’’.
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1 (b) REDUCTION IN PAYMENTS FOR ITEMS AND SERV2 ICES FURNISHED BY OR UNDER ARRANGEMENTS WITH

3 FACILITIES.—Section 1861(v)(1) (42 U.S.C.

4 1395x(v)(1)), as amended by sections 15506 and 15524,

5 is amended by adding at the end the following new sub6 paragraph:

7 ‘‘(V) In the case of an item or service furnished by

8 a skilled nursing facility (or by others under arrangement

9 with them made by a skilled nursing facility) for which

10 payment is made under part B in an amount determined

11 in accordance with section 1833(a)(2)(B), the Secretary

12 shall reduce the reasonable cost for such item or service

13 otherwise determined under clause (i)(I) of such section

14 by 5.8 percent for payments attributable to portions of

15 cost reporting periods occurring during fiscal years 1996

16 through 2002.’’.

17 SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE18 VISED NURSING HOME REFORM STANDARDS.

19 (a) IN GENERAL.—Section 1819(a)(3) (42 U.S.C.

20 1395i–3(a)(3)) is amended to read as follows:

21 ‘‘(3)(A) is certified by the Secretary as meeting

22 the standards established under subsection (b), or

23 (B) is a State-certified facility (as defined in sub24 section (c)).’’.
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1 (b) REQUIREMENTS DESCRIBED.—Section 1819 (42

2 U.S.C. 1395i–3) is amended by striking subsections (b)

3 through (i) and inserting the following:

4 ‘‘(b) STANDARDS FOR AND CERTIFICATION OF FA5 CILITIES.—

6 ‘‘(1) STANDARDS FOR FACILITIES.—

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

8 provide for the establishment and maintenance

9 of standards consistent with the contents de10 scribed in subparagraph (B) for skilled nursing

11 facilities which furnish services for which pay12 ment may be made under this title.

13 ‘‘(B) CONTENTS OF STANDARDS.—The

14 standards established for facilities under this

15 paragraph shall contain provisions relating to

16 the following items:

17 ‘‘(i) The treatment of resident medical

18 records.

19 ‘‘(ii) Policies, procedures, and bylaws

20 for operation.

21 ‘‘(iii) Quality assurance systems.

22 ‘‘(iv) Resident assessment procedures,

23 including care planning and outcome eval24 uation.
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1 ‘‘(vi) The assurance of a safe and ade2 quate physical plant for the facility.

3 ‘‘(vii) Qualifications for staff suffi4 cient to provide adequate care.

5 ‘‘(viii) Utilization review.

6 ‘‘(ix) The protection and enforcement

7 of resident rights described in subpara8 graph (C).

9 ‘‘(C) RESIDENT RIGHTS DESCRIBED.—The

10 resident rights described in this subparagraph

11 are the rights of residents to the following:

12 ‘‘(i) To exercise the individual’s rights

13 as a resident of the facility and as a citizen

14 or resident of the United States.

15 ‘‘(ii) To receive notice of rights and

16 services.

17 ‘‘(iii) To be protected against the mis18 use of resident funds.

19 ‘‘(iv) To be provided privacy and con20 fidentiality.

21 ‘‘(v) To voice grievances.

22 ‘‘(vi) To examine the results of inspec23 tions under the certification program.

24 ‘‘(vii) To refuse to perform services

25 for the facility.
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1 ‘‘(viii) To be provided privacy in com2 munications and to receive mail.

3 ‘‘(ix) To have the facility provide im4 mediate access to any resident by any rep5 resentative of the certification program,

6 the resident’s individual physician, the

7 State long term care ombudsman, and any

8 person the resident has designated as a

9 visitor.

10 ‘‘(x) To retain and use personal prop11 erty.

12 ‘‘(xi) To be free from abuse, including

13 verbal, sexual, physical and mental abuse,

14 corporal punishment, and involuntary se15 clusion.

16 ‘‘(xii) To be provided with prior writ17 ten notice of a pending transfer or dis18 charge.

19 ‘‘(D) REQUIRING NOTICE AND COM20 MENT.—The standards established for facilities

21 under this paragraph may only take effect after

22 the Secretary has provided the public with no23 tice and an opportunity for comment.

24 ‘‘(2) CERTIFICATION PROGRAM.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall

2 provide for the establishment and operation of

3 a program consistent with the requirements of

4 subparagraph (B) for the certification of skilled

5 nursing facilities which meet the standards es6 tablished under paragraph (1) and the decerti7 fication of facilities which fail to meet such

8 standards.

9 ‘‘(B) REQUIREMENTS FOR PROGRAM.—In

10 addition to any other requirements the Sec11 retary may impose, in establishing and operat12 ing the certification program under subpara13 graph (A), the Secretary shall ensure the fol14 lowing:

15 ‘‘(i) The Secretary shall ensure public

16 access (as defined by the Secretary) to the

17 certification program’s evaluations of par18 ticipating facilities, including compliance

19 records and enforcement actions and other

20 reports by the Secretary regarding the

21 ownership, compliance histories, and serv22 ices provided by certified facilities.

23 ‘‘(ii) Not less often than every 4

24 years, the Secretary shall audit its expendi25 tures under the program, through an en-
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1 tity designated by the Secretary which is

2 not affiliated with the program, as des3 ignated by the Secretary.

4 ‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—

5 ‘‘(1) AUTHORITY.—In addition to any other au6 thority, where the Secretary determines that a nurs7 ing facility which is certified for participation under

8 this title plan no longer substantially meets the re9 quirements for such a facility under this title and

10 further determines that the facility’s deficiencies—

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 substantially

3 meets the requirements for such a facility under the

4 plan, to correct its deficiencies, and, following this

5 period, has been given reasonable notice and oppor6 tunity 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 ‘‘(c) 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 subchapter, the

17 amendments made by this subchapter shall apply to serv18 ices furnished during cost reporting periods (or portions

19 of cost reporting periods) beginning on or after October

20 1, 1996.
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1 Subtitle G—Provisions Relating to

2 Medicare Part B

3 PART 1—PAYMENT REFORMS

4 SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.

5 (a) REPLACEMENT OF VOLUME PERFORMANCE

6 STANDARD WITH SUSTAINABLE GROWTH RATE.—Section

7 1848(f)(2) (42 U.S.C. 1395w–4(f)(2)) is amended to read

8 as follows:

9 ‘‘(f) SUSTAINABLE GROWTH RATE.—

10 ‘‘(1) SPECIFICATION OF GROWTH RATE.—

11 ‘‘(A) FISCAL YEAR 1996.—The sustainable

12 growth rate for all physicians’ services for fiscal

13 year 1996 shall be equal to the product of—

14 ‘‘(i) 1 plus the Secretary’s estimate of

15 the percentage change in the medicare eco16 nomic index for 1996 (described in the

17 fourth sentence of section 1842(b)(3)) (di18 vided by 100),

19 ‘‘(ii) 1 plus the Secretary’s estimate of

20 the percentage change (divided by 100) in

21 the average number of individuals enrolled

22 under this part (other than private plan

23 enrollees) from fiscal year 1995 to fiscal

24 year 1996,
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1 ‘‘(iii) 1 plus the Secretary’s estimate

2 of the projected percentage growth in real

3 gross domestic product per capita (divided

4 by 100) from fiscal year 1995 to fiscal

5 year 1996, plus 2 percentage points, and

6 ‘‘(iv) 1 plus the Secretary’s estimate

7 of the percentage change (divided by 100)

8 in expenditures for all physicians’ services

9 in fiscal year 1996 (compared with fiscal

10 year 1995) which will result from changes

11 in law, determined without taking into ac12 count estimated changes in expenditures

13 due to changes in the volume and intensity

14 of physicians’ services or changes in ex15 penditures resulting from changes in the

16 update to the conversion factor under sub17 section (d),

18 minus 1 and multiplied by 100.

19 ‘‘(B) SUBSEQUENT FISCAL YEARS.—The

20 sustainable growth rate for all physicians’ serv21 ices for fiscal year 1997 and each subsequent

22 fiscal year shall be equal to the sustainable

23 growth rate determined under this paragraph

24 for the previous fiscal year, increased by the

25 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 the fiscal year involved

4 (described in the fourth sentence of section

5 1842(b)(3)) (divided 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 the previous fiscal year to

11 the fiscal year involved,

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 the previous fiscal year to

16 the fiscal year involved, plus 2 percentage

17 points, and

18 ‘‘(iv) 1 plus the Secretary’s estimate

19 of the percentage change (divided by 100)

20 in expenditures for all physicians’ services

21 in the fiscal year (compared with the pre22 vious fiscal year) which will result from

23 changes in law, determined without taking

24 into account estimated changes in expendi25 tures due to changes in the volume and in-
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1 tensity of physicians’ services or changes in

2 expenditures resulting from changes in the

3 update to the conversion factor under sub4 section (d)(3),

5 minus 1 and multiplied by 100.’’.

6 ‘‘(2) EXCLUSION OF SERVICES FURNISHED TO

7 PRIVATE PLAN ENROLLEES.—In this subsection, the

8 term ‘physicians’ services’ with respect to a fiscal

9 year does not include services furnished to an indi10 vidual enrolled under this part who has elected to re11 ceive benefits under this title for the fiscal year

12 through a MedicarePlus product offered under part

13 C or through enrollment with an eligible organiza14 tion with a risk-sharing contract under section

15 1876.’’.

16 (b) ESTABLISHING UPDATE TO CONVERSION FAC17 TOR TO MATCH SPENDING UNDER SUSTAINABLE

18 GROWTH RATE.—

19 (1) IN GENERAL.—Section 1848(d) (42 U.S.C.

20 1395w–4(d)(3)) is amended—

21 (A) by striking paragraph (2);

22 (B) by amending paragraph (3) to read as

23 follows:

24 ‘‘(3) UPDATE.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (E), for purposes of this section the up3 date for a year (beginning with 1997) is equal

4 to the product of—

5 ‘‘(i) 1 plus the Secretary’s estimate of

6 the percentage increase in the medicare

7 economic index (described in the fourth

8 sentence of section 1842(b)(3)) for the

9 year (divided by 100), and

10 ‘‘(ii) 1 plus the Secretary’s estimate of

11 the update adjustment factor for the year

12 (divided by 100),

13 minus 1 and multiplied by 100.

14 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

15 ‘update adjustment factor’ for a year is equal to

16 the quotient of—

17 ‘‘(i) the difference between (I) the

18 sum of the allowed expenditures for physi19 cians’ services furnished during each of the

20 years 1995 through the year involved and

21 (II) the sum of the amount of actual ex22 penditures for physicians’ services fur23 nished during each of the years 1995

24 through the previous year; divided by
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1 ‘‘(ii) the Secretary’s estimate of al2 lowed expenditures for physicians’ services

3 furnished during the year.

4 ‘‘(C) DETERMINATION OF ALLOWED EX5 PENDITURES.—For purposes of subparagraph

6 (B), allowed expenditures for physicians’ serv7 ices shall be determined as follows (as esti8 mated by the Secretary):

9 ‘‘(i) In the case of allowed expendi10 tures for 1995, such expenditures shall be

11 equal to actual expenditures for services

12 furnished during the 12-month period end13 ing with June of 1995.

14 ‘‘(ii) In the case of allowed expendi15 tures for 1996 and each subsequent year,

16 such expenditures shall be equal to allowed

17 expenditures for the previous year, in18 creased by the sustainable growth rate

19 under subsection (f) for the fiscal year

20 which begins during the year.

21 ‘‘(D) DETERMINATION OF ACTUAL EX22 PENDITURES.—For purposes of subparagraph

23 (B), the amount of actual expenditures for phy24 sicians’ services furnished during a year shall

25 be equal to the amount of expenditures for such
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1 services during the 12-month period ending

2 with June of the previous year.

3 ‘‘(E) RESTRICTION ON VARIATION FROM

4 MEDICARE ECONOMIC INDEX.—Notwithstanding

5 the amount of the update adjustment factor de6 termined under subparagraph (B) for a year,

7 the update in the conversion factor under this

8 paragraph for the year may not be—

9 ‘‘(i) greater than 103 percent of the

10 Secretary’s estimate of the percentage in11 crease in the medicare economic index (de12 scribed in the fourth sentence of section

13 1842(b)(3)) for the year; or

14 ‘‘(ii) less than 93 percent of the Sec15 retary’s estimate of the percentage in16 crease in the medicare economic index (de17 scribed in the fourth sentence of section

18 1842(b)(3)) for the year.’’; and

19 (C) by adding at the end the following new

20 paragraph:

21 ‘‘(4) REPORTING REQUIREMENTS.—

22 ‘‘(A) IN GENERAL.—Not later than No23 vember 1 of each year (beginning with 1996),

24 the Secretary shall transmit to the Congress a

25 report that describes the update in the conver-
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1 sion factor for physicians’ services (as defined

2 in subsection (f)(3)(A)) in the following year.

3 ‘‘(B) COMMISSION REVIEW.—The Medicare

4 Payment Review Commission shall review the

5 report submitted under subparagraph (A) for a

6 year and shall submit to the Congress, by not

7 later than December 1 of the year, a report

8 containing its analysis of the conversion factor

9 for the following year.’’.

10 (2) EFFECTIVE DATE.—The amendments made

11 by this subsection shall apply to physicians’ services

12 furnished on or after January 1, 1997.

13 (c) ESTABLISHMENT OF SINGLE CONVERSION FAC14 TOR FOR 1996.—

15 (1) IN GENERAL.—Section 1848(d)(1) (42

16 U.S.C. 1395w–4(d)(1)) is amended—

17 (A) by redesignating subparagraph (C) as

18 subparagraph (D); and

19 (B) by inserting after subparagraph (B)

20 the following new subparagraph:

21 ‘‘(C) SPECIAL RULE FOR 1996.—For 1996,

22 the conversion factor under this subsection shall

23 be $34.60 for all physicians’ services.’’.
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1 (2) CONFORMING AMENDMENTS.—Section 1848

2 (42 U.S.C. 1395w–4) is amended—

3 (A) by striking ‘‘(or factors)’’ each place it

4 appears in subsection (d)(1)(A) and

5 (d)(1)(C)(ii);

6 (B) in subsection (d)(1)(A), by striking ‘‘or

7 updates’’;

8 (C) in subsection (d)(1)(C)(ii), by striking

9 ‘‘(or updates)’’; and

10 (D) in subsection (i)(1)(C), by striking

11 ‘‘conversion factors’’ and inserting ‘‘the conver12 sion factor’’.

13 SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY14 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

15 SERVICES.

16 (a) AMBULATORY SURGICAL CENTER PROCE17 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

18 1395l(i)(3)(B)(i)(II)) is amended—

19 (1) by striking ‘‘of 80 percent’’; and

20 (2) by striking the period at the end and insert21 ing the following: ‘‘, less the amount a provider may

22 charge as described in clause (ii) of section

23 1866(a)(2)(A).’’.
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1 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE2 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

3 1395l(n)(1)(B)(i)(II)) is amended—

4 (1) by striking ‘‘of 80 percent’’; and

5 (2) by striking the period at the end and insert6 ing the following: ‘‘, less the amount a provider may

7 charge as described in clause (ii) of section

8 1866(a)(2)(A).’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to services furnished during por11 tions of cost reporting periods occurring on or after Octo12 ber 1, 1995.

13 SEC. 15603. REDUCTION IN UPDATES TO PAYMENT

14 AMOUNTS FOR DURABLE MEDICAL EQUIP15 MENT.

16 (a) IN GENERAL.—

17 (1) FREEZE IN UPDATE FOR COVERED

18 ITEMS.—Section 1834(a)(14) (42 U.S.C.

19 1395m(a)(14)) is amended—

20 (A) by striking ‘‘and’’ at the end of sub21 paragraph (A);

22 (B) in subparagraph (B)—

23 (i) by striking ‘‘a subsequent year’’

24 and inserting ‘‘1993, 1994, and 1995’’,

25 and
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1 (ii) by striking the period at the end

2 and inserting ‘‘; and’’; and

3 (C) by adding at the end the following:

4 ‘‘(C) for each of the years 1996 through

5 2002, 0 percentage points; and

6 ‘‘(D) for a subsequent year, the percentage

7 increase in the consumer price index for all

8 urban consumers (U.S. urban average) for the

9 12-month period ending with June of the pre10 vious year.’’.

11 (2) UPDATE FOR ORTHOTICS AND PROSTHET12 ICS.—Section 1834(h)(4)(A) (42 U.S.C.

13 1395m(h)(4)(A)) is amended—

14 (A) by striking ‘‘and’’ at the end of clause

15 (iii);

16 (B) by redesignating clause (iv) as clause

17 (v); and

18 (C) by inserting after clause (iii) the fol19 lowing new clause:

20 ‘‘(iv) for each of the years 1996

21 through 2002, 1 percent, and’’.

22 (b) OXYGEN AND OXYGEN EQUIPMENT.—Section

23 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—

24 (1) by striking ‘‘and’’ at the end of clause (iii);

25 (2) in clause (iv)—
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1 (A) by striking ‘‘a subsequent year’’ and

2 inserting ‘‘1993, 1994, and 1995’’, and

3 (B) by striking the period at the end and

4 inserting a semicolon; and

5 (3) by adding at the end the following new

6 clauses:

7 ‘‘(v) in 1996, is 80 percent of the na8 tional limited monthly payment rate com9 puted under subparagraph (B) for the item

10 for the year; and

11 ‘‘(vi) in a subsequent year, is the na12 tional limited monthly payment rate com13 puted under subparagraph (B) for the item

14 for the year.’’.

15 SEC. 15604. REDUCTION IN UPDATES TO PAYMENT

16 AMOUNTS FOR CLINICAL DIAGNOSTIC LAB17 ORATORY TESTS.

18 (a) CHANGE IN UPDATE.—Section

19 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))

20 is amended striking ‘‘1994 and 1995’’ and inserting

21 ‘‘1994 through 2002’’.

22 (b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec23 tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend24 ed—

25 (1) in clause (vi), by striking ‘‘and’’ at the end;
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1 (2) in clause (vii)—

2 (A) by inserting ‘‘and before January 1,

3 1997,’’ after ‘‘1995,’’, and

4 (B) by striking the period at the end and

5 inserting ‘‘, and’’; and

6 (3) by adding at the end the following new

7 clause:

8 ‘‘(viii) after December 31, 1996, is equal to 65

9 percent of such median.’’.

10 SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

11 COSTS OF HOSPITAL OUTPATIENT SERVICES.

12 (a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT13 ED COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

14 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through

15 1998’’ and inserting ‘‘through 2002’’.

16 (b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—

17 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

18 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through

19 1998’’ and inserting ‘‘through 2002’’.

20 SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR21 GICAL CENTER SERVICES.

22 The Secretary of Health and Human Services shall

23 not provide for any inflation update in the payment

24 amounts under subparagraphs (A) and (B) of section
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1 1833(i)(2) of the Social Security Act for any of the fiscal

2 years 1996 through 2002.

3 SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.

4 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

5 (42 U.S.C. 1395k(a)(2)) is amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (I);

8 (2) by striking the period at the end of sub9 paragraph (J) and inserting ‘‘; and’’; and

10 (3) by adding at the end the following new sub11 paragraph:

12 ‘‘(K) rural emergency access care hospital

13 services (as defined in section 1861(oo)(2)).’’.

14 (b) PAYMENT BASED ON REASONABLE COSTS.—Sec15 tion 1833(a)(2) (42 U.S.C. 1395l(a)(2)), as amended by

16 section 15607(c), is amended—

17 (1) by striking ‘‘and’’ at the end of subpara18 graph (F);

19 (2) by adding ‘‘and’’ at the end of subpara20 graph (G); and

21 (3) by adding at the end the following new sub22 paragraph:

23 ‘‘(H) with respect to rural emergency ac24 cess care hospital services, the reasonable cost

25 of such services (as determined under section
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1 1861(v)), less the amount the hospital may

2 charge as described in clause (ii) of section

3 1866(a)(2)(A), but in no case may the payment

4 for such services exceed 80 percent of such rea5 sonable cost;’’.

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to services furnished on or after

8 October 1, 1995.

9 PART 2—PART B PREMIUM

10 SEC. 15611. EXTENSION OF PART B PREMIUM.

11 (a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.

12 1395r(e)(1)) is amended—

13 (1) in subparagraph (A)—

14 (A) by striking ‘‘and prior to January

15 1999’’, and

16 (B) by inserting ‘‘(or, if higher, the per17 cent described in subparagraph (C))’’ after ‘‘50

18 percent’’; and

19 (2) by adding at the end the following new sub20 paragraph:

21 ‘‘(C) For purposes of subparagraph (A), the percent

22 described in this subparagraph is the ratio (expressed as

23 a percentage) of the monthly premium established under

24 this section for months in 1995 to the monthly actuarial

25 rate for enrollees age 65 and over applicable to such
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1 months (as specified in the most recent report of the

2 Board of Trustees of the Federal Supplementary Medical

3 Insurance Trust Fund published prior to the date of the

4 enactment of the Medicare Preservation Act of 1995).’’.

5 (b) EFFECTIVE DATE.—The amendments made by

6 subsection (a) apply to premiums for months beginning

7 with January 1996.

8 SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE

9 SUBSIDY.

10 (a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r)

11 is amended by adding at the end the following:

12 ‘‘(h)(1) Notwithstanding the previous subsections of

13 this section, in the case of an individual whose modified

14 adjusted gross income for a taxable year ending with or

15 within a calendar year (as initially determined by the Sec16 retary in accordance with paragraph (3)) exceeds the

17 threshold amount described in paragraph (4), the Sec18 retary shall increase the amount of the monthly premium

19 for months in the calendar year by an amount equal to

20 the difference between—

21 ‘‘(A) 200 percent of the monthly actuarial rate

22 for enrollees age 65 and over as determined under

23 subsection (a)(1) for that calendar year; and
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1 ‘‘(B) the total of the monthly premiums paid by

2 the individual under this section (determined without

3 regard to subsection (b)) during such calendar year.

4 ‘‘(2) In the case of an individual described in para5 graph (1) whose modified adjusted gross exceeds the

6 threshold amount by less than $25,000, the amount of the

7 increase in the monthly premium applicable under para8 graph (1) shall be an amount which bears the same ratio

9 to the amount of the increase described in paragraph (1)

10 (determined without regard to this paragraph) as such ex11 cess bears to $25,000. In the case of a joint return filed

12 under section 6013 of the Internal Revenue Code of 1986

13 by spouses both of whom are enrolled under this part, the

14 previous sentence shall be applied by substituting

15 ‘$50,000’ for ‘$25,000’. The preceding provisions of this

16 paragraph shall not apply to any individual whose thresh17 old amount is zero.

18 ‘‘(3) The Secretary shall make an initial determina19 tion of the amount of an individual’s adjusted gross in20 come for a taxable year ending with or within a calendar

21 year for purposes of this subsection as follows:

22 ‘‘(A) Not later than October 1 of the year pre23 ceding the year, the Secretary shall provide notice to

24 each individual whom the Secretary finds (on the

25 basis of the individual’s actual adjusted gross in-
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1 come for the most recent taxable year for which such

2 information is available or other information pro3 vided to the Secretary by the Secretary of the Treas4 ury) will be subject to an increase under this sub5 section that the individual will be subject to such an

6 increase, and shall include in such notice the Sec7 retary’s estimate of the individual’s adjusted gross

8 income for the year.

9 ‘‘(B) If, during the 30-day period beginning on

10 the date notice is provided to an individual under

11 subparagraph (A), the individual provides the Sec12 retary with information on the individual’s antici13 pated adjusted gross income for the year, the

14 amount initially determined by the Secretary under

15 this paragraph with respect to the individual shall be

16 based on the information provided by the individual.

17 ‘‘(C) If an individual does not provide the Sec18 retary with information under subparagraph (B), the

19 amount initially determined by the Secretary under

20 this paragraph with respect to the individual shall be

21 the amount included in the notice provided to the in22 dividual under subparagraph (A).

23 ‘‘(4)(A) If the Secretary determines (on the basis of

24 final information provided by the Secretary of the Treas25 ury) that the amount of an individual’s actual adjusted
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1 gross income for a taxable year ending with or within a

2 calendar year is less than or greater than the amount ini3 tially determined by the Secretary under paragraph (3),

4 the Secretary shall increase or decrease the amount of the

5 individual’s monthly premium under this section (as the

6 case may be) for months during the following calendar

year by an amount equal to 1 7 ⁄12 of the difference be8 tween—

9 ‘‘(i) the total amount of all monthly premiums

10 paid by the individual under this section during the

11 previous calendar year; and

12 ‘‘(ii) the total amount of all such premiums

13 which would have been paid by the individual during

14 the previous calendar year if the amount of the indi15 vidual’s adjusted gross income initially determined

16 under paragraph (3) were equal to the actual

17 amount of the individual’s adjusted gross income de18 termined under this paragraph.

19 ‘‘(B) In the case of an individual who is not enrolled

20 under this part for any calendar year for which the indi21 vidual’s monthly premium under this section for months

22 during the year would be increased pursuant to subpara23 graph (A) if the individual were enrolled under this part

24 for the year, the Secretary may take such steps as the

25 Secretary considers appropriate to recover from the indi-
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1 vidual the total amount by which the individual’s monthly

2 premium for months during the year would have been in3 creased under subparagraph (A) if the individual were en4 rolled under this part for the year.

5 ‘‘(5) In this subsection, the following definitions

6 apply:

7 ‘‘(A) The term ‘modified adjusted gross income’

8 means, with respect to an individual for a taxable

9 year, the individual’s adjusted gross income under

10 the Internal Revenue Code of 1986—

11 ‘‘(i) determined without regard to sections

12 135, 911, 931, and 933 of such Code, and

13 ‘‘(ii) increased by the amount of interest

14 received or accrued by the individual during the

15 taxable year which is exempt from tax under

16 such Code.

17 ‘‘(B) The term ‘threshold amount’ means—

18 ‘‘(i) except as otherwise provided in this

19 paragraph, $75,000,

20 ‘‘(ii) $125,000, in the case of a joint re21 turn, and

22 ‘‘(iii) zero in the case of a taxpayer who—

23 ‘‘(I) is married at the close of the tax24 able year but does not file a joint return

25 for such year, and
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1 ‘‘(II) does not live apart from his

2 spouse at all times during the taxable

3 year.’’.

4 (b) CONFORMING AMENDMENT.—Section 1839(f)

5 (42 U.S.C. 1395r(f)) is amended by striking ‘‘if an indi6 vidual’’ and inserting the following: ‘‘if an individual

7 (other than an individual subject to an increase in the

8 monthly premium under this section pursuant to sub9 section (h))’’.

10 (c) REPORTING REQUIREMENTS FOR SECRETARY OF

11 THE TREASURY.—Notwithstanding section 6103 of the

12 Internal Revenue Code of 1986, the Secretary of the

13 Treasury shall provide, at the request of the Secretary of

14 Health and Human Services, such information (at such

15 times and in such form as the Secretary of Health and

16 Human Services may require) as is necessary for the Sec17 retary of Health and Human Services to carry out section

18 1839(h) of the Social Security Act (as added by subsection

19 (a)).

20 (d) EFFECTIVE DATE.—The amendments made by

21 subsections (a) and (b) shall apply to the monthly pre22 mium under section 1839 of the Social Security Act for

23 months beginning with January 1997.
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1 Subtitle H—Provisions Relating to

2 Medicare Parts A and B

3 PART 1—PAYMENTS FOR HOME HEALTH

4 SERVICES

5 SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.

6 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

7 seq.), as amended by section 15106, is amended by adding

8 at the end the following new section:

9 ‘‘PAYMENT FOR HOME HEALTH SERVICES

10 ‘‘SEC. 1894. (a) IN GENERAL.—

11 ‘‘(1) PER VISIT PAYMENTS.—Subject to sub12 section (c), the Secretary shall make per visit pay13 ments beginning with fiscal year 1997 to a home

14 health agency in accordance with this section for

15 each type of home health service described in para16 graph (2) furnished to an individual who at the time

17 the service is furnished is under a plan of care by

18 the home health agency under this title (without re19 gard to whether or not the item or service was fur20 nished by the agency or by others under arrange21 ment with them made by the agency, or otherwise).

22 ‘‘(2) TYPES OF SERVICES.—The types of home

23 health services described in this paragraph are the

24 following:
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1 ‘‘(A) Part-time or intermittent nursing

2 care provided by or under the supervision of a

3 registered professional nurse.

4 ‘‘(B) Physical therapy.

5 ‘‘(C) Occupational therapy.

6 ‘‘(D) Speech-language pathology services.

7 ‘‘(E) Medical social services under the di8 rection of a physician.

9 ‘‘(F) To the extent permitted in regula10 tions, part-time or intermittent services of a

11 home health aide who has successfully com12 pleted a training program approved by the Sec13 retary.

14 ‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR

15 EACH TYPE OF SERVICES.—

16 ‘‘(1) IN GENERAL.—The Secretary shall, sub17 ject to paragraph (3), establish a per visit payment

18 rate for a home health agency in an area for each

19 type of home health service described in subsection

20 (a)(2). Such rate shall be equal to the national per

21 visit payment rate determined under paragraph (2)

22 for each such type, except that the labor-related por23 tion of such rate shall be adjusted by the area wage

24 index applicable under section 1886(d)(3)(E) for the

25 area in which the agency is located (as determined
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1 without regard to any reclassification of the area

2 under section 1886(d)(8)(B) or a decision of the

3 Medicare Geographic Classification Review Board or

4 the Secretary under section 1886(d)(10) for cost re5 porting periods beginning after October 1, 1995).

6 ‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—

7 The national per visit payment rate for each type of

8 service described in subsection (a)(2)—

9 ‘‘(A) for fiscal year 1997, is an amount

10 equal to the national average amount paid per

11 visit under this title to home health agencies for

12 such type of service during the most recent 12-

13 month cost reporting period ending on or before

14 June 30, 1994, increased (in a compounded

15 manner) by the home health market basket per16 centage increase for fiscal years 1995, 1996,

17 and 1997; and

18 ‘‘(B) for each subsequent fiscal year, is an

19 amount equal to the national per visit payment

20 rate in effect for the preceding fiscal year, in21 creased by the home health market basket per22 centage increase for such subsequent fiscal year

23 minus 2 percentage points.

24 ‘‘(3) REBASING OF RATES.—The Secretary

25 shall provide for an update to the national per visit
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1 payment rates under this subsection for cost report2 ing periods beginning not later than the first day of

3 the fifth fiscal year which begins after fiscal year

4 1997, and not later than every 5 years thereafter, to

5 reflect the most recent available data.

6 ‘‘(4) HOME HEALTH MARKET BASKET PER7 CENTAGE INCREASE.—For purposes of this sub8 section, the term ‘home health market basket per9 centage increase’ means, with respect to a fiscal

10 year, a percentage (estimated by the Secretary be11 fore the beginning of the fiscal year) determined and

12 applied with respect to the types of home health

13 services described in subsection (a)(2) in the same

14 manner as the market basket percentage increase

15 under section 1886(b)(3)(B)(iii) is determined and

16 applied to inpatient hospital services for the fiscal

17 year.

18 ‘‘(c) PER EPISODE LIMIT.—

19 ‘‘(1) AGGREGATE LIMIT.—

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

21 paragraph (2), a home health agency may not

22 receive aggregate per visit payments under sub23 section (a) for a fiscal year in excess of an

24 amount equal to the sum of the following prod-
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1 ucts determined for each case-mix category for

2 which the agency receives payments:

3 ‘‘(i) The number of episodes of each

4 case-mix category during the fiscal year;

5 multiplied by

6 ‘‘(ii) the per episode limit determined

7 for such case-mix category for such fiscal

8 year.

9 ‘‘(B) ESTABLISHMENT OF PER EPISODE

10 LIMITS.—

11 ‘‘(i) IN GENERAL.—The per episode

12 limit for a fiscal year for any case-mix cat13 egory for the area in which a home health

14 agency is located is equal to—

15 ‘‘(I) the mean number of visits

16 for each type of home health service

17 described in subsection (a)(2) fur18 nished during an episode of such case19 mix category in such area during fis20 cal year 1994, adjusted by the case21 mix adjustment factor determined in

22 clause (ii) for the fiscal year involved;

23 multiplied by

24 ‘‘(II) the per visit payment rate

25 established under subsection (b) for
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1 such type of home health service for

2 the fiscal year for which the deter3 mination is being made.

4 ‘‘(ii) CASE MIX ADJUSTMENT FAC5 TOR.—For purposes of clause (i), the case6 mix adjustment factor for a year is the

7 factor determined by the Secretary to as8 sure that aggregate payments for home

9 health services under this section during

10 the year will not exceed the payment for

11 such services during the previous year as a

12 result of changes in the number and type

13 of home health visits within case-mix cat14 egories over the previous year.

15 ‘‘(iii) REBASING OF PER EPISODE

16 AMOUNTS.—Beginning with fiscal year

17 1999 and every 2 years thereafter, the Sec18 retary shall revise the mean number of

19 home health visits determined under clause

20 (i)(I) for each type of home health service

21 visit described in subsection (a)(2) fur22 nished during an episode in a case-mix cat23 egory to reflect the most recently available

24 data on the number of visits.
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1 ‘‘(iv) DETERMINATION OF APPLICA2 BLE AREA.—For purposes of determining

3 per episode limits under this subpara4 graph, the area in which a home health

5 agency is considered to be located shall be

6 such area as the Secretary finds appro7 priate for purposes of this subparagraph.

8 ‘‘(C) CASE-MIX CATEGORY.—For purposes

9 of this paragraph, the term ‘case-mix category’

10 means each of the 18 case-mix categories estab11 lished under the Phase II Home Health Agency

12 Prospective Payment Demonstration Project

13 conducted by the Health Care Financing Ad14 ministration. The Secretary may develop an al15 ternate methodology for determining case-mix

16 categories.

17 ‘‘(D) EPISODE.—

18 ‘‘(i) IN GENERAL.—For purposes of

19 this paragraph, the term ‘episode’ means

20 the continuous 120-day period that—

21 ‘‘(I) begins on the date of an in22 dividual’s first visit for a type of home

23 health service described in subsection

24 (a)(2) for a case-mix category, and
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1 ‘‘(II) is immediately preceded by

2 a 60-day period in which the individ3 ual did not receive visits for a type of

4 home health service described in sub5 section (a)(2).

6 ‘‘(ii) TREATMENT OF EPISODES SPAN7 NING COST REPORTING PERIODS.—The

8 Secretary shall provide for such rules as

9 the Secretary considers appropriate regard10 ing the treatment of episodes under this

11 paragraph which begin during a cost re12 porting period and end in a subsequent

13 cost reporting period.

14 ‘‘(E) EXEMPTIONS AND EXCEPTIONS.—

15 The Secretary may provide for exemptions and

16 exceptions to the limits established under this

17 paragraph for a fiscal year as the Secretary

18 deems appropriate, to the extent such exemp19 tions and exceptions do not result in greater

20 payments under this section than the exemp21 tions and exceptions provided under section

22 1861(v)(1)(L)(ii) in fiscal year 1994, increased

23 by the home health market basket percentage

24 increase for the fiscal year involved (as defined

25 in subsection (b)(4)).
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1 ‘‘(2) RECONCILIATION OF AMOUNTS.—

2 ‘‘(A) OVERPAYMENTS TO HOME HEALTH

3 AGENCIES.—Subject to subparagraph (B), if a

4 home health agency has received aggregate per

5 visit payments under subsection (a) for a fiscal

6 year in excess of the amount determined under

7 paragraph (1) with respect to such home health

8 agency for such fiscal year, the Secretary shall

9 reduce payments under this section to the home

10 health agency in the following fiscal year in

11 such manner as the Secretary considers appro12 priate (including on an installment basis) to re13 capture the amount of such excess.

14 ‘‘(B) EXCEPTION FOR HOME HEALTH

15 SERVICES FURNISHED OVER A PERIOD GREAT16 ER THAN 165 DAYS.—

17 ‘‘(i) IN GENERAL.—For purposes of

18 subparagraph (A), the amount of aggre19 gate per visit payments determined under

20 subsection (a) shall not include payments

21 for home health visits furnished to an indi22 vidual on or after a continuous period of

23 more than 165 days after an individual be24 gins an episode described in subsection
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1 (c)(1)(D) (if such period is not interrupted

2 by the beginning of a new episode).

3 ‘‘(ii) REQUIREMENT OF CERTIFI4 CATION.—Clause (i) shall not apply if the

5 agency has not obtained a physician’s cer6 tification with respect to the individual re7 quiring such visits that includes a state8 ment that the individual requires such con9 tinued visits, the reason for the need for

10 such visits, and a description of such serv11 ices furnished during such visits.

12 ‘‘(C) SHARE OF SAVINGS.—

13 ‘‘(i) BONUS PAYMENTS.—If a home

14 health agency has received aggregate per

15 visit payments under subsection (a) for a

16 fiscal year in an amount less than the

17 amount determined under paragraph (1)

18 with respect to such home health agency

19 for such fiscal year, the Secretary shall pay

20 such home health agency a bonus payment

21 equal to 50 percent of the difference be22 tween such amounts in the following fiscal

23 year, except that the bonus payment may

24 not exceed 5 percent of the aggregate per
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1 visit payments made to the agency for the

2 year.

3 ‘‘(ii) INSTALLMENT BONUS PAY4 MENTS.—The Secretary may make install5 ment payments during a fiscal year to a

6 home health agency based on the estimated

7 bonus payment that the agency would be

8 eligible to receive with respect to such fis9 cal year.

10 ‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary

11 shall implement a medical review process (with a particu12 lar emphasis on fiscal years 1997 and 1998) for the sys13 tem of payments described in this section that shall pro14 vide an assessment of the pattern of care furnished to in15 dividuals receiving home health services for which pay16 ments are made under this section to ensure that such

17 individuals receive appropriate home health services. Such

18 review process shall focus on low-cost cases described in

19 subsection (e)(3) and cases described in subsection

20 (c)(2)(B) and shall require recertification by

21 intermediaries at 30, 60, 90, 120, and 165 days into an

22 episode described in subsection (c)(1)(D).

23 ‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR24 CUMVENTION OF LIMITS.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall provide

2 for appropriate adjustments to payments to home

3 health agencies under this section to ensure that

4 agencies do not circumvent the purpose of this sec5 tion by—

6 ‘‘(A) discharging patients to another home

7 health agency or similar provider;

8 ‘‘(B) altering corporate structure or name

9 to avoid being subject to this section or for the

10 purpose of increasing payments under this title;

11 or

12 ‘‘(C) undertaking other actions considered

13 unnecessary for effective patient care and in14 tended to achieve maximum payments under

15 this title.

16 ‘‘(2) TRACKING OF PATIENTS THAT SWITCH

17 HOME HEALTH AGENCIES DURING EPISODE.—

18 ‘‘(A) DEVELOPMENT OF SYSTEM.—The

19 Secretary shall develop a system that tracks

20 home health patients that receive home health

21 services described in subsection (a)(2) from

22 more than 1 home health agency during an epi23 sode described in subsection (c)(1)(D).

24 ‘‘(B) ADJUSTMENT OF PAYMENTS.—The

25 Secretary shall adjust payments under this sec-
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1 tion to each home health agency that furnishes

2 an individual with a type of home health service

3 described in subsection (a)(2) to ensure that

4 aggregate payments on behalf of such individual

5 during such episode do not exceed the amount

6 that would be paid under this section if the in7 dividual received such services from a single

8 home health agency.

9 ‘‘(3) LOW-COST CASES.—The Secretary shall

10 develop a system designed to adjust payments to a

11 home health agency for a fiscal year to eliminate any

12 increase in growth of the percentage of low-cost epi13 sodes for which home health services are furnished

14 by the agency over such percentage determined for

15 the agency for the 12-month cost reporting period

16 ending on June 30, 1994. The Secretary shall define

17 a low-cost episode in a manner that provides that a

18 home health agency has an incentive to be cost effi19 cient in delivering home health services and that the

20 volume of such services does not increase as a result

21 of factors other than patient needs.

22 ‘‘(f) REPORT BY MEDICARE PAYMENT REVIEW COM23 MISSION.—During the first 3 years in which payments are

24 made under this section, the Medicare Payment Review

25 Commission shall annually submit a report to Congress
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1 on the effectiveness of the payment methodology estab2 lished under this section that shall include recommenda3 tions regarding the following:

4 ‘‘(1) Case-mix and volume increases.

5 ‘‘(2) Quality monitoring of home health agency

6 practices.

7 ‘‘(3) Whether a capitated payment for home

8 care patients receiving care during a continuous pe9 riod exceeding 165 days is warranted.

10 ‘‘(4) Whether public providers of service are

11 adequately reimbursed.

12 ‘‘(5) The adequacy of the exemptions and ex13 ceptions to the limits provided under subsection

14 (c)(1)(E).

15 ‘‘(6) The appropriateness of the methods pro16 vided under this section to adjust the per episode

17 limits and annual payment updates to reflect

18 changes in the mix of services, number of visits, and

19 assignment to case categories to reflect changing

20 patterns of home health care.

21 ‘‘(7) The geographic areas used to determine

22 the per episode limits.’’.

23 (b) PAYMENT FOR PROSTHETICS AND ORTHOTICS

24 UNDER PART A.—Section 1814(k) (42 U.S.C. 1395f(k))

25 is amended—
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1 (1) by inserting ‘‘and prosthetics and orthotics’’

2 after ‘‘durable medical equipment’’; and

3 (2) by inserting ‘‘and 1834(h), respectively’’

4 after ‘‘1834(a)(1)’’.

5 (c) CONFORMING AMENDMENTS.—

6 (1) PAYMENTS UNDER PART A.—Section

7 1814(b) (42 U.S.C. 1395f(b)), as amended by sec8 tion 15522(b), is amended in the matter preceding

9 paragraph (1) by striking ‘‘1888 and 1888A’’ and

10 inserting ‘‘1888, 1888A, and 1894’’.

11 (2) TREATMENT OF ITEMS AND SERVICES PAID

12 UNDER PART B.—

13 (A) PAYMENTS UNDER PART B.—Section

14 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amend15 ed—

16 (i) by amending subparagraph (A) to

17 read as follows:

18 ‘‘(A) with respect to home health serv19 ices—

20 ‘‘(i) that are a type of home health

21 service described in section 1894(a)(2),

22 and which are furnished to an individual

23 who (at the time the item or service is fur24 nished) is under a plan of care of a home
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1 health agency, the amount determined

2 under section 1894;

3 ‘‘(ii) that are not described in clause

4 (i) (other than a covered osteoporosis

5 drug) (as defined in section 1861(kk)), the

6 lesser of—

7 ‘‘(I) the reasonable cost of such

8 services, as determined under section

9 1861(v), or

10 ‘‘(II) the customary charges with

11 respect to such services;’’.

12 (ii) by striking ‘‘and’’ at the end of

13 subparagraph (E);

14 (iii) by adding ‘‘and’’ at the end of

15 subparagraph (F); and

16 (iv) by adding at the end the following

17 new subparagraph:

18 ‘‘(G) with respect to items and services de19 scribed in section 1861(s)(10)(A), the lesser

20 of—

21 ‘‘(i) the reasonable cost of such serv22 ices, as determined under section 1861(v),

23 or

24 ‘‘(ii) the customary charges with re25 spect to such services,
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1 or, if such services are furnished by a public

2 provider of services, or by another provider

3 which demonstrates to the satisfaction of the

4 Secretary that a significant portion of its pa5 tients are low-income (and requests that pay6 ment be made under this provision), free of

7 charge or at nominal charges to the public, the

8 amount determined in accordance with section

9 1814(b)(2);’’.

10 (B) REQUIRING PAYMENT FOR ALL ITEMS

11 AND SERVICES TO BE MADE TO AGENCY.—

12 (i) IN GENERAL.—The first sentence

13 of section 1842(b)(6) (42 U.S.C.

14 1395u(b)(6)) is amended—

15 (I) by striking ‘‘and (D)’’ and in16 serting ‘‘(D)’’; and

17 (II) by striking the period at the

18 end and inserting the following: ‘‘,

19 and (E) in the case of types of home

20 health services described in section

21 1894(a)(2) furnished to an individual

22 who (at the time the item or service is

23 furnished) is under a plan of care of

24 a home health agency, payment shall

25 be made to the agency (without re-
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1 gard to whether or not the item or

2 service was furnished by the agency,

3 by others under arrangement with

4 them made by the agency, or other5 wise).’’.

6 (ii) CONFORMING AMENDMENT.—Sec7 tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is

8 amended by striking ‘‘(2);’’ and inserting

9 ‘‘(2) and section 1842(b)(6)(E);’’.

10 (C) EXCLUSIONS FROM COVERAGE.—Sec11 tion 1862(a) (42 U.S.C. 1395y(a)), as amended

12 by section 15525(a)(2), is amended—

13 (i) by striking ‘‘or’’ at the end of

14 paragraph (15);

15 (ii) by striking the period at the end

16 of paragraph (16) and inserting ‘‘or’’; and

17 (iii) by adding at the end the follow18 ing new paragraph:

19 ‘‘(17) where such expenses are for home health

20 services furnished to an individual who is under a

21 plan of care of the home health agency if the claim

22 for payment for such services is not submitted by

23 the agency.’’.

24 (3) SUNSET OF REASONABLE COST LIMITA25 TIONS.—Section 1861(v)(1)(L) (42 U.S.C.
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1 1395x(v)(1)(L)) is amended by adding at the end

2 the following new clause:

3 ‘‘(iv) This subparagraph shall apply only to services

4 furnished by home health agencies during cost reporting

5 periods ending on or before September 30, 1996.’’.

6 (c) EFFECTIVE DATE.—The amendments made by

7 subsections (a) and (b) shall apply to cost reporting peri8 ods beginning on or after October 1, 1996.

9 SEC. 15702. MAINTAINING SAVINGS RESULTING FROM TEM10 PORARY FREEZE ON PAYMENT INCREASES

11 FOR HOME HEALTH SERVICES.

12 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

13 LIMITS FOR FISCAL YEAR 1993.—Section

14 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

15 amended by adding at the end the following sentence: ‘‘In

16 establishing limits under this subparagraph, the Secretary

17 may not take into account any changes in the costs of

18 the provision of services furnished by home health agencies

19 with respect to cost reporting periods which began on or

20 after July 1, 1994, and before July 1, 1996.’’.

21 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND22 MENT.—The Secretary of Health and Human Services

23 shall not consider the amendment made by subsection (a)

24 in making any exemptions and exceptions pursuant to sec25 tion 1861(v)(1)(L)(ii) of the Social Security Act.
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1 SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF

2 LACK OF KNOWLEDGE OF EXCLUSION FROM

3 COVERAGE FOR HOME HEALTH AGENCIES.

4 Section 9305(g)(3) of OBRA–1986, as amended by

5 section 426(d) of the Medicare Catastrophic Coverage Act

6 of 1988 and section 4207(b)(3) of OBRA–1990 (as re7 numbered by section 160(d)(4) of the Social Security Act

8 Amendments of 1994), is amended by striking ‘‘December

9 31, 1995’’ and inserting ‘‘September 30, 1996’’.

10 PART 2—MEDICARE SECONDARY PAYER

11 IMPROVEMENTS

12 SEC. 15711. EXTENSION AND EXPANSION OF EXISTING RE13 QUIREMENTS.

14 (a) DATA MATCH.—

15 (1) Section 1862(b)(5)(C) (42 U.S.C.

16 1395y(b)(5)(C)) is amended by striking clause (iii).

17 (2) Section 6103(l)(12) of the Internal Revenue

18 Code of 1986 is amended by striking subparagraph

19 (F).

20 (b) APPLICATION TO DISABLED INDIVIDUALS IN

21 LARGE GROUP HEALTH PLANS.—

22 (1) IN GENERAL.—Section 1862(b)(1)(B) (42

23 U.S.C. 1395y(b)(1)(B)) is amended—

24 (A) in clause (i), by striking ‘‘clause (iv)’’

25 and inserting ‘‘clause (iii)’’,

26 (B) by striking clause (iii), and
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1 (C) by redesignating clause (iv) as clause

2 (iii).

3 (2) CONFORMING AMENDMENTS.—Paragraphs

4 (1) through (3) of section 1837(i) (42 U.S.C.

5 1395p(i)) and the second sentence of section

6 1839(b) (42 U.S.C. 1395r(b)) are each amended by

7 striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears

8 and inserting ‘‘1862(b)(1)(B)(iii)’’.

9 (c) EXPANSION OF PERIOD OF APPLICATION TO IN10 DIVIDUALS WITH END STAGE RENAL DISEASE.—Section

11 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—

12 (1) in the first sentence, by striking ‘‘12-

13 month’’ each place it appears and inserting ‘‘24-

14 month’’, and

15 (2) by striking the second sentence.

16 SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

17 (a) PERMITTING RECOVERY AGAINST THIRD PARTY

18 ADMINISTRATORS OF PRIMARY PLANS.—Section

19 1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is

20 amended—

21 (1) by striking ‘‘under this subsection to pay’’

22 and inserting ‘‘(directly, as a third-party adminis23 trator, or otherwise) to make payment’’, and

24 (2) by adding at the end the following: ‘‘The

25 United States may not recover from a third-party
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1 administrator under this clause in cases where the

2 third-party administrator would not be able to re3 cover the amount at issue from the employer or

4 group health plan for whom it provides administra5 tive services due to the insolvency or bankruptcy of

6 the employer or plan.’’.

7 (b) EXTENSION OF CLAIMS FILING PERIOD.—Sec8 tion 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amend9 ed by adding at the end the following new clause:

10 ‘‘(vi) CLAIMS-FILING PERIOD.—Not11 withstanding any other time limits that

12 may exist for filing a claim under an em13 ployer group health plan, the United

14 States may seek to recover conditional pay15 ments in accordance with this subpara16 graph where the request for payment is

17 submitted to the entity required or respon18 sible under this subsection to pay with re19 spect to the item or service (or any portion

20 thereof) under a primary plan within the

21 3-year period beginning on the date on

22 which the item or service was furnished.’’.

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to items and services furnished on

25 or after the date of the enactment of this Act.
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1 SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF

2 POLICY REGARDING ESRD BENEFICIARIES

3 ENROLLED IN PRIMARY PLANS.

4 For purposes of carrying out section 1862(b)(1)(C)

5 of the Social Security Act, the Secretary of Health and

6 Human Services shall apply the policy directive issued by

7 the Administrator of the Health Care Financing Adminis8 tration on April 24, 1995, only with respect to items and

9 services furnished on or after such date.

10 PART 3—FAILSAFE

11 SEC. 15721. FAILSAFE BUDGET MECHANISM.

12 (a) IN GENERAL.—Title XVIII, as amended by sec13 tions 15106(a) and 15701(a), is amended by adding at

14 the end the following new section:

15 ‘‘FAILSAFE BUDGET MECHANISM

16 ‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT AD17 JUSTMENTS TO ACHIEVE MEDICARE BUDGET TAR18 GETS.—

19 ‘‘(1) IN GENERAL.—If the Secretary determines

20 under subsection (e)(3)(C) before a fiscal year (be21 ginning with fiscal year 1998) that—

22 ‘‘(A) the fee-for-service expenditures (as

23 defined in subsection (f)) for a sector of medi24 care services (as defined in subsection (b)) for

25 the fiscal year, will exceed
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1 ‘‘(B) the allotment specified under sub2 section (c)(2) for such fiscal year (taking into

3 account any adjustment in the allotment under

4 subsection (h) for that fiscal year),

5 then, notwithstanding any other provision of this

6 title, there shall be an adjustment (consistent with

7 subsection (d)) in applicable payment rates or pay8 ments for items and services included in the sector

9 in the fiscal year so that such expenditures for the

sector for the year will be reduced by 1331 10 ⁄3 percent

11 of the amount of such excess.

12 ‘‘(b) SECTORS OF MEDICARE SERVICES DE13 SCRIBED.—

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, items and services included under each of the

16 following subparagraphs shall be considered to be a

17 separate ‘sector’ of medicare services:

18 ‘‘(A) Inpatient hospital services.

19 ‘‘(B) Home health services.

20 ‘‘(C) Extended care services (for inpatients

21 of skilled nursing facilities).

22 ‘‘(D) Hospice care.

23 ‘‘(E) Physicians’ services (including serv24 ices and supplies described in section

25 1861(s)(2)(A)) and services of other health care
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1 professionals (including certified registered

2 nurse anesthetists, nurse practitioners, physi3 cian assistants, and clinical psychologists) for

4 which separate payment is made under this

5 title.

6 ‘‘(F) Outpatient hospital services and am7 bulatory facility services.

8 ‘‘(G) Durable medical equipment and sup9 plies, including prosthetic devices and orthotics.

10 ‘‘(H) Diagnostic tests (including clinical

11 laboratory services and x-ray services).

12 ‘‘(I) Other items and services.

13 ‘‘(2) CLASSIFICATION OF ITEMS AND SERV14 ICES.—The Secretary shall classify each type of

15 items and services covered and paid for separately

16 under this title into one of the sectors specified in

17 paragraph (1). After publication of such classifica18 tion under subsection (e)(1), the Secretary is not au19 thorized to make substantive changes in such classi20 fication.

21 ‘‘(c) ALLOTMENT.—

22 ‘‘(1) ALLOTMENTS FOR EACH SECTOR.—For

23 purposes of this section, subject to subsection (h)(1),

24 the allotment for a sector of medicare services for a

25 fiscal year is equal to the product of—
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1 ‘‘(A) the total allotment for the fiscal year

2 established under paragraph (2), and

3 ‘‘(B) the allotment proportion (specified

4 under paragraph (3)) for the sector and fiscal

5 year involved.

6 ‘‘(2) TOTAL ALLOTMENT.—

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

8 section, the total allotment for a fiscal year is

9 equal to—

10 ‘‘(i) the medicare benefit budget for

11 the fiscal year (as specified under subpara12 graph (B)), reduced by

13 ‘‘(ii) the amount of payments the Sec14 retary estimates will be made in the fiscal

15 year under the MedicarePlus program

16 under part C.

17 In making the estimate under clause (ii), the

18 Secretary shall take into account estimated en19 rollment and demographic profile of individuals

20 electing MedicarePlus products.

21 ‘‘(B) MEDICARE BENEFIT BUDGET.—For

22 purposes of this subsection, subject to subpara23 graph (C), the ‘medicare benefit budget’—

24 ‘‘(i) for fiscal year 1997 is $203.1 bil25 lion;
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1 ‘‘(ii) for fiscal year 1998 is $214.3

2 billion;

3 ‘‘(iii) for fiscal year 1999 is $227.2

4 billion;

5 ‘‘(iv) for fiscal year 2000 is $241.0

6 billion;

7 ‘‘(v) for fiscal year 2001 is $259.1 bil8 lion;

9 ‘‘(vi) for fiscal year 2002 is $280.0

10 billion; and

11 ‘‘(vi) for a subsequent fiscal year is

12 equal to the medicare benefit budget under

13 this subparagraph for the preceding fiscal

14 year increased by the sum of (I) 5 percent15 age points, and (II) the annual percentage

16 increase in the average number of medi17 care beneficiaries from the previous fiscal

18 year to the fiscal year involved.

19 ‘‘(3) MEDICARE ALLOTMENT PROPORTION DE20 FINED.—

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

22 section and with respect to a sector of medicare

23 services for a fiscal year, the term ‘medicare al24 lotment proportion’ means the ratio of—
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1 ‘‘(i) the baseline-projected medicare

2 expenditures (as determined under sub3 paragraph (B)) for the sector for the fiscal

4 year, to

5 ‘‘(ii) the sum of such baseline expendi6 tures for all such sectors for the fiscal

7 year.

8 ‘‘(B) BASELINE-PROJECTED MEDICARE

9 EXPENDITURES.—In this paragraph, the ‘base10 line, projected medicare expenditures’ for a sec11 tor of medicare services—

12 ‘‘(i) for fiscal year 1996 is equal to

13 fee-for-service expenditures for such sector

14 during fiscal year 1995, increased by the

15 baseline annual growth rate for such sector

16 of medicare services for fiscal year 1996

17 (as specified in table in subparagraph (C));

18 and

19 ‘‘(ii) for a subsequent fiscal year is

20 equal to the baseline-projected medicare

21 expenditures under this subparagraph for

22 the sector for the previous fiscal year in23 creased by the baseline annual growth rate

24 for such sector for the fiscal year involved

25 (as specified in such table).
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1 ‘‘(C) BASELINE ANNUAL GROWTH

2 RATES.—The following table specifies the base3 line annual growth rates for each of the sectors

4 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%

5 ‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—

6 ‘‘(1) IN GENERAL.—Subject to the succeeding

7 provisions of this subsection, the Secretary shall

8 apply a payment reduction for a sector for a fiscal

9 year in such a manner as to—

10 ‘‘(A) make a change in payment rates (to

11 the maximum extent practicable) at the time

12 payment rates are otherwise changed or subject

13 to change for that fiscal year; and

14 ‘‘(B) provide for the full appropriate ad15 justment so that the fee-for-service expenditures

16 for the sector for the fiscal year will approxi17 mate (and not exceed) the allotment for the sec18 tor for the fiscal year.
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1 ‘‘(2) TAKING INTO ACCOUNT VOLUME AND

2 CASH FLOW.—In providing for an adjustment in

3 payments under this subsection for a sector for a

4 fiscal year, the Secretary shall take into account (in

5 a manner consistent with actuarial projections)—

6 ‘‘(A) the impact of such an adjustment on

7 the volume or type of services provided in such

8 sector (and other sectors), and

9 ‘‘(B) the fact that an adjustment may

10 apply to items and services furnished in a fiscal

11 year (payment for which may occur in a subse12 quent fiscal year),

13 in a manner that is consistent with assuring that

14 total fee-for-services expenditures for each sector for

15 the fiscal year will not exceed the allotment under

16 subsection (c)(1) for such sector for such year.

17 ‘‘(3) PROPORTIONALITY OF REDUCTIONS WITH18 IN A SECTOR.—In making adjustments under this

19 subsection in payment for items and services in20 cluded within a sector of medicare services for a fis21 cal year, the Secretary shall provide for such an ad22 justment that results (to the maximum extent fea23 sible) in the same percentage reductions in aggre24 gate Federal payments under parts A and B for the
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1 different classes of items and services included with2 in the sector for the fiscal year.

3 ‘‘(4) APPLICATION TO PAYMENTS MADE BASED

4 ON PROSPECTIVE PAYMENT RATES DETERMINED ON

5 A FISCAL YEAR BASIS.—

6 ‘‘(A) IN GENERAL.—In applying subsection

7 (a) with respect to items and services for which

8 payment is made under part A or B on the

9 basis of rates that are established on a prospec10 tive basis for (and in advance of) a fiscal year,

11 the Secretary shall provide for the payment ad12 justment under such subsection through an ap13 propriate reduction in such rates established for

14 items and services furnished (or, in the case of

15 payment for operating costs of inpatient hos16 pital services of subsection (d) hospitals and

17 subsection (d) Puerto Rico hospitals (as defined

18 in paragraphs (1)(B) and (9)(A) of section

19 1886(d)), discharges occurring) during such

20 year.

21 ‘‘(B) DESCRIPTION OF APPLICATION TO

22 SPECIFIC SERVICES.—The payment adjustment

23 described in subparagraph (A) applies for a fis24 cal year to at least the following:
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1 ‘‘(i) UPDATE FACTOR FOR PAYMENT

2 FOR OPERATING COSTS OF INPATIENT

3 HOSPITAL SERVICES OF PPS HOSPITALS.—

4 To the computation of the applicable per5 centage increase specified in section

6 1886(d)(3)(B)(i) for discharges occurring

7 in the fiscal year.

8 ‘‘(ii) HOME HEALTH SERVICES.—To

9 the extent payment amounts for home

10 health services are based on per visit pay11 ment rates under section 1894, to the com12 putation of the increase in the national per

13 visit payment rates established for the year

14 under section 1894(b)(2)(B).

15 ‘‘(iii) HOSPICE CARE.—To the update

16 of payment rates for hospice care under

17 section 1814(i) for services furnished dur18 ing the fiscal year.

19 ‘‘(iv) UPDATE FACTOR FOR PAYMENT

20 OF OPERATING COSTS OF INPATIENT HOS21 PITAL SERVICES OF PPS-EXEMPT HOS22 PITALS.—To the computation of the target

23 amount under section 1886(b)(3) for dis24 charges occurring during the fiscal year.
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1 ‘‘(v) COVERED NON-ROUTINE SERV2 ICES OF SKILLED NURSING FACILITIES.—

3 To the computation of the facility per stay

4 limits for the year under section 1888A(d)

5 for covered non-routine services of a skilled

6 nursing facility (as described in such sec7 tion).

8 ‘‘(5) APPLICATION TO PAYMENTS MADE BASED

9 ON PROSPECTIVE PAYMENT RATES DETERMINED ON

10 A CALENDAR YEAR BASIS.—

11 ‘‘(A) IN GENERAL.—In applying subsection

12 (a) for a fiscal year with respect to items and

13 services for which payment is made under part

14 A or B on the basis of rates that are estab15 lished on a prospective basis for (and in ad16 vance of) a calendar year, the Secretary shall

17 provide for the payment adjustment under such

18 subsection through an appropriate reduction in

19 such rates established for items and services

20 furnished at any time during such calendar

21 year as follows:

22 ‘‘(i) For fiscal year 1997, the reduc23 tion shall be made for payment rates dur24 ing calendar year 1997 in a manner so as

25 to achieve the necessary payment reduc-
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1 tions for such fiscal year for items and

2 services furnished during the first 3 quar3 ters of calendar year 1997.

4 ‘‘(ii) For a subsequent fiscal year, the

5 reduction shall be made for payment rates

6 during the calendar year in which the fis7 cal year ends in a manner so as to achieve

8 the necessary payment reductions for such

9 fiscal year for items and services furnished

10 during the first 3 quarters of the calendar

11 year, but also taking into account the pay12 ment reductions made in the first quarter

13 of the fiscal year resulting from payment

14 reductions made under this paragraph for

15 the previous calendar year.

16 ‘‘(iii) Payment rate reductions ef17 fected under this subparagraph for a cal18 endar year and applicable to the last 3

19 quarters of the fiscal year in which the cal20 endar year ends shall continue to apply

21 during the first quarter of the succeeding

22 fiscal year.

23 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

24 The payment adjustment described in subpara-
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1 graph (A) applies for a fiscal year to at least

2 the following:

3 ‘‘(i) UPDATE IN CONVERSION FACTOR

4 FOR PHYSICIANS’ SERVICES.—To the com5 putation of the conversion factor under

6 subsection (d) of section 1848 used in the

7 fee schedule established under subsection

8 (b) of such section, for items and services

9 furnished during the calendar year in

10 which the fiscal year ends.

11 ‘‘(ii) PAYMENT RATES FOR OTHER

12 HEALTH CARE PROFESSIONALS.—To the

13 computation of payments for professional

14 services of certified registered nurse anes15 thetists under section 1833(l), nurse mid16 wives, physician assistants, nurse practi17 tioners and clinical nurse specialists under

18 section 1833(r), clinical psychologists, clin19 ical social workers, physical or occupational

20 therapists, and any other health profes21 sionals for which payment rates are based

22 (in whole or in part) on payments for phy23 sicians’ services, for services furnished dur24 ing the calendar year in which the fiscal

25 year ends.
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1 ‘‘(iii) UPDATE IN LAB FEE SCHED2 ULE.—To the computation of the fee

3 schedule amount under section 1833(h)(2)

4 for clinical diagnostic laboratory services

5 furnished during the calendar year in

6 which the fiscal year ends.

7 ‘‘(iv) UPDATE IN REASONABLE

8 CHARGES FOR VACCINES.—To the com9 putation of the reasonable charge for vac10 cines described in section 1861(s)(10) for

11 vaccines furnished during the calendar

12 year in which the fiscal year ends.

13 ‘‘(v) DURABLE MEDICAL EQUIPMENT14 RELATED ITEMS.—To the computation of

15 the payment basis under section

16 1834(a)(1)(B) for covered items described

17 in section 1834(a)(13), for items furnished

18 during the calendar year in which the fis19 cal year ends.

20 ‘‘(vi) RADIOLOGIST SERVICES.—To

21 the computation of conversion factors for

22 radiologist services under section 1834(b),

23 for services furnished during the calendar

24 year in which the fiscal year ends.
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1 ‘‘(vii) SCREENING MAMMOGRAPHY.—

2 To the computation of payment rates for

3 screening mammography under section

4 1834(c)(1)(C)(ii), for screening mammog5 raphy performed during the calendar year

6 in which the fiscal year ends.

7 ‘‘(viii) PROSTHETICS AND

8 ORTHOTICS.—To the computation of the

9 amount to be recognized under section

10 1834(h) for payment for prosthetic devices

11 and orthotics and prosthetics, for items

12 furnished during the calendar year in

13 which the fiscal year ends.

14 ‘‘(ix) SURGICAL DRESSINGS.—To the

15 computation of the payment amount re16 ferred to in section 1834(i)(1)(B) for sur17 gical dressings, for items furnished during

18 the calendar year in which the fiscal year

19 ends.

20 ‘‘(x) PARENTERAL AND ENTERAL NU21 TRITION.—To the computation of reason22 able charge screens for payment for paren23 teral and enteral nutrition under section

24 1834(h), for nutrients furnished during the

25 calendar year in which the fiscal year ends.
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1 ‘‘(xi) AMBULANCE SERVICES.—To the

2 computation of limits on reasonable

3 charges for ambulance services, for services

4 furnished during the calendar year in

5 which the fiscal year ends.

6 ‘‘(6) APPLICATION TO PAYMENTS MADE BASED

7 ON COSTS DURING A COST REPORTING PERIOD.—

8 ‘‘(A) IN GENERAL.—In applying subsection

9 (a) for a fiscal year with respect to items and

10 services for which payment is made under part

11 A or B on the basis of costs incurred for items

12 and services in a cost reporting period, the Sec13 retary shall provide for the payment adjustment

14 under such subsection for a fiscal year through

15 a appropriate proportional reduction in the pay16 ment for costs for such items and services in17 curred at any time during each cost reporting

18 period any part of which occurs during the fis19 cal year involved, but only (for each such cost

20 reporting period) in the same proportion as the

21 fraction of the cost reporting period that occurs

22 during the fiscal year involved.

23 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

24 The payment adjustment described in subpara-
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1 graph (A) applies for a fiscal year to at least

2 the following:

3 ‘‘(i) CAPITAL-RELATED COSTS OF

4 HOSPITAL SERVICES.—To the computation

5 of payment amounts for inpatient and out6 patient hospital services under sections

7 1886(g) and 1861(v) for portions of cost

8 reporting periods occurring during the fis9 cal year.

10 ‘‘(ii) OPERATING COSTS FOR PPS-EX11 EMPT HOSPITALS.—To the computation of

12 payment amounts under section 1886(b)

13 for operating costs of inpatient hospital

14 services of pps-exempt hospitals for por15 tions of cost reporting periods occurring

16 during the fiscal year.

17 ‘‘(iii) DIRECT GRADUATE MEDICAL

18 EDUCATION.—To the computation of pay19 ment amounts under section 1886(h) for

20 reasonable costs of direct graduate medical

21 education costs for portions of cost report22 ing periods occurring during the fiscal

23 year.

24 ‘‘(iv) INPATIENT RURAL PRIMARY

25 CARE HOSPITAL SERVICES.—To the com-
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1 putation of payment amounts under sec2 tion 1814(j) for inpatient rural primary

3 care hospital services for portions of cost

4 reporting periods occurring during the fis5 cal year.

6 ‘‘(v) EXTENDED CARE SERVICES OF A

7 SKILLED NURSING FACILITY.—To the com8 putation of payment amounts under sec9 tion 1861(v) for post-hospital extended

10 care services of a skilled nursing facility

11 (other than covered non-routine services

12 subject to section 1888A) for portions of

13 cost reporting periods occurring during the

14 fiscal year.

15 ‘‘(vi) REASONABLE COST CON16 TRACTS.—To the computation of payment

17 amounts under section 1833(a)(1)(A) for

18 organizations for portions of cost reporting

19 periods occurring during the fiscal year.

20 ‘‘(vii) HOME HEALTH SERVICES.—

21 Subject to paragraph (4)(B)(ii), for pay22 ment amounts for home health services, for

23 portions of cost reporting periods occurring

24 during such fiscal year.
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1 ‘‘(7) OTHER.—In applying subsection (a) for a

2 fiscal year with respect to items and services for

3 which payment is made under part A or B on a

4 basis not described in a previous paragraph of this

5 subsection, the Secretary shall provide for the pay6 ment adjustment under such subsection through a

7 appropriate proportional reduction in the payments

8 (or payment bases for items and services furnished)

9 during the fiscal year.

10 ‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—The

11 Secretary shall provide for such proportional adjust12 ment in any limits on payment established under

13 part A or B for payment for items and services with14 in a sector as may be appropriate based on (and in

15 order to properly carry out) the adjustment on the

16 amount of payment under this subsection in the sec17 tor.

18 ‘‘(9) REFERENCES TO PAYMENT RATES.—Ex19 cept as the Secretary may provide, any reference in

20 this title (other than this section) to a payment rate

21 is deemed a reference to such a rate as adjusted

22 under this subsection.

23 ‘‘(e) PUBLICATION OF DETERMINATIONS; JUDICIAL

24 REVIEW.—
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1 ‘‘(1) ONE-TIME PUBLICATION OF SECTORS AND

2 GENERAL PAYMENT ADJUSTMENT METHODOLOGY.—

3 Not later than October 1, 1996, the Secretary shall

4 publish in the Federal Register the classification of

5 medicare items and services into the sectors of medi6 care services under subsection (b) and the general

7 methodology to be used in applying payment adjust8 ments to the different classes of items and services

9 within the sectors.

10 ‘‘(2) INCLUSION OF INFORMATION IN PRESI11 DENT’S BUDGET.—

12 ‘‘(A) IN GENERAL.—With respect to fiscal

13 years beginning with fiscal year 1999, the

14 President shall include in the budget submitted

15 under section 1105 of title 31, United States

16 Code, information on—

17 ‘‘(i) the fee-for-service expenditures,

18 within each sector, for the second previous

19 fiscal year, and how such expenditures

20 compare to the adjusted sector allotment

21 for that sector for that fiscal year; and

22 ‘‘(ii) actual annual growth rates for

23 fee-for-service expenditures in the different

24 sectors in the second previous fiscal year.
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1 ‘‘(B) RECOMMENDATIONS REGARDING

2 GROWTH FACTORS.—The President may include

3 in such budget for a fiscal year (beginning with

4 fiscal year 1998) recommendations regarding

5 percentages that should be applied (for one or

6 more fiscal years beginning with that fiscal

7 year) instead of the baseline annual growth

8 rates under subsection (c)(3)(C). Such rec9 ommendations shall take into account medically

10 appropriate practice patterns.

11 ‘‘(3) DETERMINATIONS CONCERNING PAYMENT

12 ADJUSTMENTS.—

13 ‘‘(A) RECOMMENDATIONS OF COMMIS14 SION.—By not later than March 1 of each year

15 (beginning with 1997), the Medicare Payment

16 Review Commission shall submit to the Sec17 retary and the Congress a report that analyzes

18 the previous operation (if any) of this section

19 and that includes recommendations concerning

20 the manner in which this section should be ap21 plied for the following fiscal year.

22 ‘‘(B) PRELIMINARY NOTICE BY SEC23 RETARY.—Not later than May 15 preceding the

24 beginning of each fiscal year (beginning with

25 fiscal year 1998), the Secretary shall publish in
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1 the Federal Register a notice containing the

2 Secretary’s preliminary determination, for each

3 sector of medicare services, concerning the fol4 lowing:

5 ‘‘(i) The projected allotment under

6 subsection (c) for such sector for the fiscal

7 year.

8 ‘‘(ii) Whether there will be a payment

9 adjustment for items and services included

10 in such sector for the fiscal year under

11 subsection (a).

12 ‘‘(iii) If there will be such an adjust13 ment, the size of such adjustment and the

14 methodology to be used in making such a

15 payment adjustment for classes of items

16 and services included in such sector.

17 ‘‘(iv) Beginning with fiscal year 1999,

18 the fee-for-service expenditures for such

19 sector for the second preceding fiscal year.

20 Such notice shall include an explanation of the

21 basis for such determination. Determinations

22 under this subparagraph and subparagraph (C)

23 shall be based on the best data available at the

24 time of such determinations.
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1 ‘‘(C) FINAL DETERMINATION.—Not later

2 than September 1 preceding the beginning of

3 each fiscal year (beginning with fiscal year

4 1998), the Secretary shall publish in the Fed5 eral Register a final determination, for each

6 sector of medicare services, concerning the mat7 ters described in subparagraph (B) and an ex8 planation of the reasons for any differences be9 tween such determination and the preliminary

10 determination for such fiscal year published

11 under subparagraph (B).

12 ‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI13 CIAL REVIEW.—There shall be no administrative or

14 judicial review under section 1878 or otherwise of—

15 ‘‘(A) the classification of items and serv16 ices among the sectors of medicare services

17 under subsection (b),

18 ‘‘(B) the determination of the amounts of

19 allotments for the different sectors of medicare

20 services under subsection (c),

21 ‘‘(C) the determination of the amount (or

22 method of application) of any payment adjust23 ment under subsection (d), or

24 ‘‘(D) any adjustment in an allotment ef25 fected under subsection (h).
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1 ‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—

2 In this section, the term ‘fee-for-service expenditures’, for

3 items and services within a sector of medicare services in

4 a fiscal year, means amounts payable for such items and

5 services which are furnished during the fiscal year, and—

6 ‘‘(1) includes types of expenses otherwise reim7 bursable under parts A and B (including administra8 tive costs incurred by organizations described in sec9 tions 1816 and 1842) with respect to such items and

10 services, and

11 ‘‘(2) does not include amounts paid under part

12 C.

13 ‘‘(g) EXPEDITED PROCESS FOR ADJUSTMENT OF

14 SECTOR GROWTH RATES.—

15 ‘‘(1) OPTIONAL INCLUSION OF LEGISLATIVE

16 PROPOSAL.—The President may include in rec17 ommendations under subsection (e)(2)(B) submitted

18 with respect to a fiscal year a specific legislative pro19 posal that provides only for the substitution of per20 centages specified in the proposal for one or more of

21 the baseline annual growth rates (specified in the

22 table in subsection (c)(3)(C) or in a previous legisla23 tive proposal under this subsection) for that fiscal

24 year or any subsequent fiscal year.

25 ‘‘(2) CONGRESSIONAL CONSIDERATION.—
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1 ‘‘(A) IN GENERAL.—The percentages con2 tained in a legislative proposal submitted under

3 paragraph (1) shall apply under this section if

4 a joint resolution (described in subparagraph

5 (B)) approving such proposal is enacted, in ac6 cordance with the provisions of subparagraph

7 (C), before the end of the 60-day period begin8 ning on the date on which such proposal was

9 submitted. For purposes of applying the preced10 ing sentence and subparagraphs (B) and (C),

11 the days on which either House of Congress is

12 not in session because of an adjournment of

13 more than three days to a day certain shall be

14 excluded in the computation of a period.

15 ‘‘(B) JOINT RESOLUTION OF APPROVAL.—

16 A joint resolution described in this subpara17 graph means only a joint resolution which is in18 troduced within the 10-day period beginning on

19 the date on which the President submits a pro20 posal under paragraph (1) and—

21 ‘‘(i) which does not have a preamble;

22 ‘‘(ii) the matter after the resolving

23 clause of which is as follows: ‘That Con24 gress approves the proposal of the Presi25 dent providing for substitution of percent-
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1 ages for certain baseline annual growth

2 rates under section 1895 of the Social Se3 curity Act, as submitted by the President

4 on lllllll.’, the blank space

5 being filled in with the appropriate date;

6 and

7 ‘‘(iii) the title of which is as follows:

8 ‘Joint resolution approving Presidential

9 proposal to substitute certain specified per10 centages for baseline annual growth rates

11 under section 1895 of the Social Security

12 Act, as submitted by the President on

13 lllllll.’, the blank space being

14 filled in with the appropriate date.

15 ‘‘(C) PROCEDURES FOR CONSIDERATION

16 OF RESOLUTION OF APPROVAL.—Subject to

17 subparagraph (D), the provisions of section

18 2908 (other than subsection (a)) of the Defense

19 Base Closure and Realignment Act of 1990

20 shall apply to the consideration of a joint reso21 lution described in subparagraph (B) in the

22 same manner as such provisions apply to a joint

23 resolution described in section 2908(a) of such

24 Act.
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1 ‘‘(D) SPECIAL RULES.—For purposes of

2 applying subparagraph (C) with respect to such

3 provisions—

4 ‘‘(i) any reference to the Committee

5 on Armed Services of the House of Rep6 resentatives shall be deemed a reference to

7 an appropriate Committee of the House of

8 Representatives (specified by the Speaker

9 of the House of Representatives at the

10 time of submission of a legislative proposal

11 under paragraph (1)) and any reference to

12 the Committee on Armed Services of the

13 Senate shall be deemed a reference to the

14 Committee on Finance of the Senate; and

15 ‘‘(ii) any reference to the date on

16 which the President transmits a report

17 shall be deemed a reference to the date on

18 which the President submits the legislative

19 proposal under paragraph (1).

20 ‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO

21 REFLECT ACTUAL EXPENDITURES.—

22 ‘‘(1) IN GENERAL.—If the Secretary determines

23 under subsection (e)(3)(B) with respect to a particu24 lar fiscal year (beginning with fiscal year 1999) that
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1 the fee-for-service expenditures for a sector of medi2 care services for the second preceding fiscal year—

3 ‘‘(A) exceeded the adjusted allotment for

4 such sector for such year (as defined in para5 graph (2)), then the allotment for the sector for

6 the particular fiscal year shall be reduced by

1331 7 ⁄3 percent of the amount of such excess, or

8 ‘‘(B) was less than the adjusted allotment

9 for such sector for such year, then the allot10 ment for the sector for the particular fiscal year

11 shall be increased by the amount of such defi12 cit.

13 ‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al14 lotment under this paragraph for a sector for a fis15 cal year is—

16 ‘‘(A) the amount that would be computed

17 as the allotment under subsection (c) for the

18 sector for the fiscal year if the actual amount

19 of payments made in the fiscal year under the

20 MedicarePlus program under part C in the fis21 cal year were substituted for the amount de22 scribed in subsection (c)(2)(A)(ii) for that fiscal

23 year,

24 ‘‘(B) adjusted to take into account the

25 amount of any adjustment under paragraph (1)
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1 for that fiscal year (based on expenditures in

2 the second previous fiscal year).

3 ‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN NA4 TIONAL COVERAGE DETERMINATIONS.—In the case of a

5 national coverage determination that the Secretary

6 projects will result in significant additional expenditures

7 under this title (taking into account any substitution for

8 existing procedures or technologies), such determination

9 shall not become effective before the beginning of the fiscal

10 year that begins after the date of such determination and

11 shall apply to contracts under part C entered into (or re12 newed) after the date of such determination.’’.

13 (b) REPORT OF TRUSTEES ON GROWTH RATE IN

14 PART A EXPENDITURES.—Section 1817 (42 U.S.C.

15 1395i) is amended by adding at the end the following new

16 subsection:

17 ‘‘(k) Each annual report provided in subsection (b)(2)

18 shall include information regarding the annual rate of

19 growth in program expenditures that would be required

20 to maintain the financial solvency of the Trust Fund and

21 the extent to which the provisions of section 1895 restrain

22 the rate of growth of expenditures under this part in order

23 to achieve such solvency.’’.
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1 PART 4—ADMINISTRATIVE SIMPLIFICATION

2 SEC. 15731. STANDARDS FOR MEDICARE INFORMATION

3 TRANSACTIONS AND DATA ELEMENTS.

4 Title XVIII, as amended by section 15031, is amend5 ed by inserting after section 1806 the following new sec6 tion:

7 ‘‘STANDARDS FOR MEDICARE INFORMATION

8 TRANSACTIONS AND DATA ELEMENTS

9 ‘‘SEC. 1807. (a) ADOPTION OF STANDARDS FOR

10 DATA ELEMENTS.—

11 ‘‘(1) IN GENERAL.—Pursuant to subsection (b),

12 the Secretary shall adopt standards for information

13 transactions and data elements of medicare informa14 tion and modifications to the standards under this

15 section that are—

16 ‘‘(A) consistent with the objective of reduc17 ing the administrative costs of providing and

18 paying for health care; and

19 ‘‘(B) developed or modified by a standard

20 setting organization (as defined in subsection

21 (h)(8)).

22 ‘‘(2) SPECIAL RULE RELATING TO DATA ELE23 MENTS.—The Secretary may adopt or modify a

24 standard relating to data elements that is different

25 from the standard developed by a standard setting

26 organization, if—
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1 ‘‘(A) the different standard or modification

2 will substantially reduce administrative costs to

3 health care providers and health plans com4 pared to the alternative; and

5 ‘‘(B) the standard or modification is pro6 mulgated in accordance with the rulemaking

7 procedures of subchapter III of chapter 5 of

8 title 5, United States Code.

9 ‘‘(3) SECURITY STANDARDS FOR HEALTH IN10 FORMATION NETWORK.—

11 ‘‘(A) IN GENERAL.—Each person, who

12 maintains or transmits medicare information or

13 data elements of medicare information and is

14 subject to this section, shall maintain reason15 able and appropriate administrative, technical,

16 and physical safeguards—

17 ‘‘(i) to ensure the integrity and con18 fidentiality of the information;

19 ‘‘(ii) to protect against any reasonably

20 anticipated—

21 ‘‘(I) threats or hazards to the se22 curity or integrity of the information;

23 and

24 ‘‘(II) unauthorized uses or disclo25 sures of the information; and
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1 ‘‘(iii) to otherwise ensure compliance

2 with this section by the officers and em3 ployees of such person.

4 ‘‘(B) SECURITY STANDARDS.—The Sec5 retary shall establish security standards and

6 modifications to such standards with respect to

7 medicare information network services, health

8 plans, and health care providers that—

9 ‘‘(i) take into account—

10 ‘‘(I) the technical capabilities of

11 record systems used to maintain medi12 care information;

13 ‘‘(II) the costs of security meas14 ures;

15 ‘‘(III) the need for training per16 sons who have access to medicare in17 formation; and

18 ‘‘(IV) the value of audit trails in

19 computerized record systems; and

20 ‘‘(ii) ensure that a medicare informa21 tion network service, if it is part of a larg22 er organization, has policies and security

23 procedures which isolate the activities of

24 such service with respect to processing in25 formation in a manner that prevents unau-
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1 thorized access to such information by

2 such larger organization.

3 The security standards established by the Sec4 retary shall be based on the standards devel5 oped or modified by standard setting organiza6 tions. If such standards do not exist, the Sec7 retary shall rely on the recommendations of the

8 Health Information Advisory Committee (estab9 lished under subsection (g)) and shall consult

10 with appropriate government agencies and pri11 vate organizations in accordance with para12 graph (5).

13 ‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The

14 Secretary shall establish specifications for imple15 menting each of the standards and the modifications

16 to the standards adopted pursuant to paragraph (1).

17 ‘‘(5) ASSISTANCE TO THE SECRETARY.—In

18 complying with the requirements of this section, the

19 Secretary shall rely on recommendations of the Med20 icare Information Advisory Committee established

21 under subsection (g) and shall consult with appro22 priate Federal and State agencies and private orga23 nizations. The Secretary shall publish in the Federal

24 Register the recommendations of the Medicare Infor-
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1 mation Advisory Committee regarding the adoption

2 of a standard under this section.

3 ‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS

4 AND DATA ELEMENTS.—

5 ‘‘(1) IN GENERAL.—The Secretary shall adopt

6 standards for transactions and data elements to

7 make medicare information uniformly available to be

8 exchanged electronically, that is—

9 ‘‘(A) appropriate for the following financial

10 and administrative transactions: claims (includ11 ing coordination of benefits) or equivalent en12 counter information, enrollment and

13 disenrollment, eligibility, premium payments,

14 and referral certification and authorization; and

15 ‘‘(B) related to other financial and admin16 istrative transactions determined appropriate by

17 the Secretary consistent with the goals of im18 proving the operation of the health care system

19 and reducing administrative costs.

20 ‘‘(2) UNIQUE HEALTH IDENTIFIERS.—

21 ‘‘(A) ADOPTION OF STANDARDS.—The

22 Secretary shall adopt standards providing for a

23 standard unique health identifier for each indi24 vidual, employer, health plan, and health care

25 provider for use in the medicare information
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1 system. In developing unique health identifiers

2 for each health plan and health care provider,

3 the Secretary shall take into account multiple

4 uses for identifiers and multiple locations and

5 specialty classifications for health care provid6 ers.

7 ‘‘(B) PENALTY FOR IMPROPER DISCLO8 SURE.—A person who knowingly uses or causes

9 to be used a unique health identifier under sub10 paragraph (A) for a purpose that is not author11 ized by the Secretary shall—

12 ‘‘(i) be fined not more than $50,000,

13 imprisoned not more than 1 year, or both;

14 or

15 ‘‘(ii) if the offense is committed under

16 false pretenses, be fined not more than

17 $100,000, imprisoned not more than 5

18 years, or both.

19 ‘‘(3) CODE SETS.—

20 ‘‘(A) IN GENERAL.—The Secretary, in con21 sultation with the Medicare Information Advi22 sory Committee, experts from the private sec23 tor, and Federal and State agencies, shall—

24 ‘‘(i) select code sets for appropriate

25 data elements from among the code sets
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1 that have been developed by private and

2 public entities; or

3 ‘‘(ii) establish code sets for such data

4 elements if no code sets for the data ele5 ments have been developed.

6 ‘‘(B) DISTRIBUTION.—The Secretary shall

7 establish efficient and low-cost procedures for

8 distribution (including electronic distribution) of

9 code sets and modifications made to such code

10 sets under subsection (c)(2).

11 ‘‘(4) ELECTRONIC SIGNATURE.—

12 ‘‘(A) IN GENERAL.—The Secretary, after

13 consultation with the Medicare Information Ad14 visory Committee, shall promulgate regulations

15 specifying procedures for the electronic trans16 mission and authentication of signatures, com17 pliance with which will be deemed to satisfy

18 Federal and State statutory requirements for

19 written signatures with respect to information

20 transactions required by this section and writ21 ten signatures on enrollment and disenrollment

22 forms.

23 ‘‘(B) PAYMENTS FOR SERVICES AND PRE24 MIUMS.—Nothing in this section shall be con25 strued to prohibit the payment of health care
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1 services or health plan premiums by debit, cred2 it, payment card or numbers, or other electronic

3 means.

4 ‘‘(5) TRANSFER OF INFORMATION BETWEEN

5 HEALTH PLANS.—The Secretary shall develop rules

6 and procedures—

7 ‘‘(A) for determining the financial liability

8 of health plans when health care benefits are

9 payable under two or more health plans; and

10 ‘‘(B) for transferring among health plans

11 appropriate standard data elements needed for

12 the coordination of benefits, the sequential

13 processing of claims, and other data elements

14 for individuals who have more than one health

15 plan.

16 ‘‘(6) COORDINATION OF BENEFITS.—If, at the

17 end of the 5-year period beginning on the date of the

18 enactment of this section, the Secretary determines

19 that additional transaction standards for coordinat20 ing benefits are necessary to reduce administrative

21 costs or duplicative (or inappropriate) payment of

22 claims, the Secretary shall establish further trans23 action standards for the coordination of benefits be24 tween health plans.
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1 ‘‘(7) PROTECTION OF TRADE SECRETS.—Ex2 cept as otherwise required by law, the standards

3 adopted under this section shall not require disclo4 sure of trade secrets or confidential commercial in5 formation by an entity operating a medicare infor6 mation network.

7 ‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—

8 ‘‘(1) INITIAL STANDARDS.—Not later than 18

9 months after the date of the enactment of this sec10 tion, the Secretary shall adopt standards relating to

11 the information transactions, data elements of medi12 care information and security described in sub13 sections (a) and (b).

14 ‘‘(2) ADDITIONS AND MODIFICATIONS TO

15 STANDARDS.—

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

17 review the standards adopted under this section

18 and shall adopt additional or modified stand19 ards, that have been developed or modified by

20 a standard setting organization, as determined

21 appropriate, but not more frequently than once

22 every 12 months. Any addition or modification

23 to such standards shall be completed in a man24 ner which minimizes the disruption and cost of

25 compliance.
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1 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

2 CODE SETS.—

3 ‘‘(i) IN GENERAL.—The Secretary

4 shall ensure that procedures exist for the

5 routine maintenance, testing, enhancement,

6 and expansion of code sets.

7 ‘‘(ii) ADDITIONAL RULES.—If a code

8 set is modified under this paragraph, the

9 modified code set shall include instructions

10 on how data elements of medicare informa11 tion that were encoded prior to the modi12 fication may be converted or translated so

13 as to preserve the informational value of

14 the data elements that existed before the

15 modification. Any modification to a code

16 set under this paragraph shall be imple17 mented in a manner that minimizes the

18 disruption and cost of complying with such

19 modification.

20 ‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—

21 ‘‘(1) IN GENERAL.—If a person desires to con22 duct any of the information transactions described

23 in subsection (b)(1) with a health plan as a standard

24 transaction, the health plan shall conduct such

25 standard transaction in a timely manner and the in-
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1 formation transmitted or received in connection with

2 such transaction shall be in the form of standard

3 data elements of medicare information.

4 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

5 health plan may satisfy the requirement imposed on

6 such plan under paragraph (1) by directly transmit7 ting standard data elements of medicare information

8 or submitting nonstandard data elements to a medi9 care information network service for processing into

10 standard data elements and transmission.

11 ‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE12 QUIREMENTS.—Not later than 24 months after the

13 date on which standards are adopted under sub14 sections (a) and (b) with respect to any type of in15 formation transaction or data element of medicare

16 information or with respect to security, a health plan

17 shall comply with the requirements of this section

18 with respect to such transaction or data element.

19 ‘‘(4) COMPLIANCE WITH MODIFIED STAND20 ARDS.—If the Secretary adopts a modified standard

21 under subsection (a) or (b), a health plan shall be

22 required to comply with the modified standard at

23 such time as the Secretary determines appropriate

24 taking into account the time needed to comply due

25 to the nature and extent of the modification. How-
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1 ever, the time determined appropriate under the pre2 ceding sentence shall be not earlier than the last day

3 of the 180-day period beginning on the date such

4 modified standard is adopted. The Secretary may ex5 tend the time for compliance for small health plans,

6 if the Secretary determines such extension is appro7 priate.

8 ‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY

9 WITH REQUIREMENTS AND STANDARDS.—

10 ‘‘(1) GENERAL PENALTY.—

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

12 paragraph (2), the Secretary shall impose on

13 any person that violates a requirement or

14 standard—

15 ‘‘(i) with respect to medicare informa16 tion transactions, data elements of medi17 care information, or security imposed

18 under subsection (a) or (b); or

19 ‘‘(ii) with respect to health plans im20 posed under subsection (d);

21 a penalty of not more than $100 for each such

22 violation of a specific standard or requirement,

23 but the total amount imposed for all such viola24 tions of a specific standard or requirement dur25 ing the calendar year shall not exceed $25,000.
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1 ‘‘(B) PROCEDURES.—The provisions of

2 section 1128A (other than subsections (a) and

3 (b) and the second sentence of subsection (f))

4 shall apply to the imposition of a civil money

5 penalty under this paragraph in the same man6 ner as such provisions apply to the imposition

7 of a penalty under such section 1128A.

8 ‘‘(C) DENIAL OF PAYMENT.—Except as

9 provided in paragraph (2), the Secretary may

10 deny payment under this title for an item or

11 service furnished by a person if the person fails

12 to comply with an applicable requirement or

13 standard for medicare information relating to

14 that item or service.

15 ‘‘(2) LIMITATIONS.—

16 ‘‘(A) NONCOMPLIANCE NOT DISCOV17 ERED.—A penalty may not be imposed under

18 paragraph (1) if it is established to the satisfac19 tion of the Secretary that the person liable for

20 the penalty did not know, and by exercising rea21 sonable diligence would not have known, that

22 such person failed to comply with the require23 ment or standard described in paragraph (1).

24 ‘‘(B) FAILURES DUE TO REASONABLE

25 CAUSE.—
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1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clause (ii), a penalty may not be

3 imposed under paragraph (1) if—

4 ‘‘(I) the failure to comply was

5 due to reasonable cause and not to

6 willful neglect; and

7 ‘‘(II) the failure to comply is cor8 rected during the 30-day period begin9 ning on the first date the person liable

10 for the penalty knew, or by exercising

11 reasonable diligence would have

12 known, that the failure to comply oc13 curred.

14 ‘‘(ii) EXTENSION OF PERIOD.—

15 ‘‘(I) NO PENALTY.—The period

16 referred to in clause (i)(II) may be ex17 tended as determined appropriate by

18 the Secretary based on the nature and

19 extent of the failure to comply.

20 ‘‘(II) ASSISTANCE.—If the Sec21 retary determines that a health plan

22 failed to comply because such plan

23 was unable to comply, the Secretary

24 may provide technical assistance to

25 such plan during the period described
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1 in clause (i)(II). Such assistance shall

2 be provided in any manner determined

3 appropriate by the Secretary.

4 ‘‘(C) REDUCTION.—In the case of a failure

5 to comply which is due to reasonable cause and

6 not to willful neglect, any penalty under para7 graph (1) that is not entirely waived under sub8 paragraph (B) may be waived to the extent that

9 the payment of such penalty would be excessive

10 relative to the compliance failure involved.

11 ‘‘(f) EFFECT ON STATE LAW.—

12 ‘‘(1) GENERAL EFFECT.—

13 ‘‘(A) GENERAL RULE.—Except as provided

14 in subparagraph (B), a provision, requirement,

15 or standard under this section shall supersede

16 any contrary provision of State law, including a

17 provision of State law that requires medical or

18 health plan records (including billing informa19 tion) to be maintained or transmitted in written

20 rather than electronic form.

21 ‘‘(B) EXCEPTIONS.—A provision, require22 ment, or standard under this section shall not

23 supersede a contrary provision of State law, if

24 the provision of State law—
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1 ‘‘(i) provides requirements or stand2 ards that are more stringent than the re3 quirements or standards under this section

4 with respect to the privacy of individually

5 identifiable medicare information; or

6 ‘‘(ii) is a provision the Secretary de7 termines is necessary to prevent fraud and

8 abuse with respect to controlled sub9 stances, or for other purposes.

10 ‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in

11 this section shall be construed to invalidate or limit

12 the authority, power, or procedures established

13 under any law providing for the reporting of disease

14 or injury, child abuse, birth, or death, public health

15 surveillance, or public health investigation or inter16 vention.

17 ‘‘(g) MEDICARE INFORMATION ADVISORY COMMIT18 TEE.—

19 ‘‘(1) ESTABLISHMENT.—There is established a

20 committee to be known as the Medicare Information

21 Advisory Committee (in this subsection referred to

22 as the ‘committee’).

23 ‘‘(2) DUTIES.—The committee shall—

24 ‘‘(A) advise the Secretary in the develop25 ment of standards under this section; and
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1 ‘‘(B) be generally responsible for advising

2 the Secretary and the Congress on the status

3 and the future of the medicare information net4 work.

5 ‘‘(3) MEMBERSHIP.—

6 ‘‘(A) IN GENERAL.—The committee shall

7 consist of 9 members of whom—

8 ‘‘(i) 3 shall be appointed by the Presi9 dent;

10 ‘‘(ii) 3 shall be appointed by the

11 Speaker of the House of Representatives

12 after consultation with the minority leader

13 of the House of Representatives; and

14 ‘‘(iii) 3 shall be appointed by the

15 President pro tempore of the Senate after

16 consultation with the minority leader of

17 the Senate.

18 The appointments of the members shall be

19 made not later than 60 days after the date of

20 the enactment of this section. The President

21 shall designate 1 member as the Chair.

22 ‘‘(B) EXPERTISE.—The membership of the

23 committee shall consist of individuals who are

24 of recognized standing and distinction in the

25 areas of information systems, information
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1 networking and integration, consumer health,

2 or health care financial management, and who

3 possess the demonstrated capacity to discharge

4 the duties imposed on the committee.

5 ‘‘(C) TERMS.—Each member of the com6 mittee shall be appointed for a term of 5 years,

7 except that the members first appointed shall

8 serve staggered terms such that the terms of

9 not more than 3 members expire at one time.

10 ‘‘(D) INITIAL MEETING.—Not later than

11 30 days after the date on which a majority of

12 the members have been appointed, the commit13 tee shall hold its first meeting.

14 ‘‘(4) REPORTS.—Not later than 1 year after the

15 date of the enactment of this section, and annually

16 thereafter, the committee shall submit to Congress

17 and the Secretary a report regarding—

18 ‘‘(A) the extent to which entities using the

19 medicare information network are meeting the

20 standards adopted under this section and work21 ing together to form an integrated network that

22 meets the needs of its users;

23 ‘‘(B) the extent to which such entities are

24 meeting the security standards established pur25 suant to this section and the types of penalties
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1 assessed for noncompliance with such stand2 ards;

3 ‘‘(C) any problems that exist with respect

4 to implementation of the medicare information

5 network; and

6 ‘‘(D) the extent to which timetables under

7 this section are being met.

8 Reports made under this subsection shall be made

9 available to health care providers, health plans, and

10 other entities that use the medicare information net11 work to exchange medicare information.

12 ‘‘(h) DEFINITIONS.—For purposes of this section:

13 ‘‘(1) CODE SET.—The term ‘code set’ means

14 any set of codes used for encoding data elements,

15 such as tables of terms, enrollment information, and

16 encounter data.

17 ‘‘(2) COORDINATION OF BENEFITS.—The term

18 ‘coordination of benefits’ means determining and co19 ordinating the financial obligations of health plans

20 when health care benefits are payable under such a

21 plan and under this title (including under a

22 MedicarePlus product).

23 ‘‘(3) MEDICARE INFORMATION.—The term

24 ‘medicare information’ means any information that

25 relates to the enrollment of individuals under this
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1 title (including information relating to elections of

2 MedicarePlus products under section 1805) and the

3 provision of health benefits (including benefits pro4 vided under such products) under this title.

5 ‘‘(4) MEDICARE INFORMATION NETWORK.—The

6 term ‘medicare information network’ means the

7 medicare information system that is formed through

8 the application of the requirements and standards

9 established under this section.

10 ‘‘(5) MEDICARE INFORMATION NETWORK SERV11 ICE.—The term ‘medicare information network serv12 ice’ means a public or private entity that—

13 ‘‘(A) processes or facilitates the processing

14 of nonstandard data elements of medicare infor15 mation into standard data elements;

16 ‘‘(B) provides the means by which persons

17 may meet the requirements of this section; or

18 ‘‘(C) provides specific information process19 ing services.

20 ‘‘(6) HEALTH PLAN.—The term ‘health plan’

21 means a plan which provides, or pays the cost of,

22 health benefits. Such term includes the following, or

23 any combination thereof:

24 ‘‘(A) Part A or part B of this title, and in25 cludes a MedicarePlus product.
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1 ‘‘(B) The medicaid program under title

2 XIX and the MediGrant program under title

3 XXI.

4 ‘‘(C) A medicare supplemental policy (as

5 defined in section 1882(g)(1)).

6 ‘‘(D) Worker’s compensation or similar in7 surance.

8 ‘‘(E) Automobile or automobile medical9 payment insurance.

10 ‘‘(F) A long-term care policy, other than a

11 fixed indemnity policy.

12 ‘‘(G) The Federal Employees Health Bene13 fit Plan under chapter 89 of title 5, United

14 States Code.

15 ‘‘(H) An employee welfare benefit plan, as

16 defined in section 3(1) of the Employee Retire17 ment Income Security Act of 1974 (29 U.S.C.

18 1002(1)), but only to the extent the plan is es19 tablished or maintained for the purpose of pro20 viding health benefits.

21 ‘‘(7) INDIVIDUALLY IDENTIFIABLE MEDICARE

22 INFORMATION.—The term ‘individually identifiable

23 medicare information’ means medicare enrollment

24 information, including demographic information col25 lected from an individual, that—
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1 ‘‘(A) is created or received by a health care

2 provider, health plan, employer, or medicare in3 formation network service, and

4 ‘‘(B) identifies an individual.

5 ‘‘(8) STANDARD SETTING ORGANIZATION.—The

6 term ‘standard setting organization’ means a stand7 ard setting organization accredited by the American

8 National Standards Institute.

9 ‘‘(9) STANDARD TRANSACTION.—The term

10 ‘standard transaction’ means, when referring to an

11 information transaction or to data elements of medi12 care information, any transaction that meets the re13 quirements and implementation specifications adopt14 ed by the Secretary under subsections (a) and (b).’’.

15 PART 5—OTHER PROVISIONS RELATING TO

16 PARTS A AND B

17 SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF

18 ITEMS AND SERVICES ASSOCIATED WITH

19 CERTAIN MEDICAL DEVICES APPROVED FOR

20 INVESTIGATIONAL USE.

21 (a) COVERAGE.—Nothing in title XVIII of the Social

22 Security Act may be construed to prohibit coverage under

23 part A or part B of the medicare program of items and

24 services associated with the use of a medical device in the

25 furnishing of inpatient or outpatient hospital services (in-
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1 cluding outpatient diagnostic imaging services) for which

2 payment may be made under the program solely on the

3 grounds that the device is not an approved device, if—

4 (1) the device is an investigational device; and

5 (2) the device is used instead of either an ap6 proved device or a covered procedure.

7 (b) CLARIFICATION OF PAYMENT AMOUNT.—Not8 withstanding any other provision of title XVIII of the So9 cial Security Act, the amount of payment made under the

10 medicare program for any item or service associated with

11 the use of an investigational device in the furnishing of

12 inpatient or outpatient hospital services (including out13 patient diagnostic imaging services) for which payment

14 may be made under the program may not exceed the

15 amount of the payment which would have been made

16 under the program for the item or service if the item or

17 service were associated with the use of an approved device

18 or a covered procedure.

19 (c) DEFINITIONS.—In this section—

20 (1) the term ‘‘approved device’’ means a medi21 cal device (or devices) which has been approved for

22 marketing under pre-market approval under the

23 Federal Food, Drug, and Cosmetic Act or cleared

24 for marketing under a 510(k) notice under such Act;

25 and
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1 (2) the term ‘‘investigational device’’ means—

2 (A) a medical device or devices (other than

3 a device described in paragraph (1)) approved

4 for investigational use under section 520(g) of

5 the Federal Food, Drug, and Cosmetic Act, or

6 (B) an investigational combination product

7 under section 503(g) of the Federal Food,

8 Drug, and Cosmetic Act which includes a device

9 (or devices) authorized for use under section

10 505(i) of such Act.

11 SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.

12 (a) IN GENERAL.—Section 1862(a) (42 U.S.C.

13 1395y(a)), as amended by section 15525(a)(2) and section

14 15701(c)(2)(C), is amended—

15 (1) by striking ‘‘or’’ at the end of paragraph

16 (16),

17 (2) by striking the period at the end of para18 graph (17) and inserting ‘‘; or’’, and

19 (3) by inserting after paragraph (17) the fol20 lowing new paragraph:

21 ‘‘(18) where such expenses are for items or

22 services, or to assist in the purchase, in whole or in

23 part, of health benefit coverage that includes items

24 or services, for the purpose of causing, or assisting
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1 in causing, the death, suicide, euthanasia, or mercy

2 killing of a person.’’.

3 (b) EFFECTIVE DATE.—The amendments made by

4 subsection (a) shall apply to payment for items and serv5 ices furnished on or after the date of the enactment of

6 this Act.

7 Subtitle I—Clinical Laboratories

8 SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA9 TORIES.

10 Section 353(d) of the Public Health Service Act (42

11 U.S.C. 263a(d)) is amended—

12 (1) by redesignating paragraphs (2), (3), and

13 (4) as paragraphs (3), (4), and (5) and by adding

14 after paragraph (1) the following:

15 ‘‘(4) EXEMPTION OF PHYSICIAN OFFICE LAB16 ORATORIES.—

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

18 subparagraph (B), a clinical laboratory in a

19 physician’s office (including an office of a group

20 of physicians) which is directed by a physician

21 and in which examinations and procedures are

22 either performed by a physician or by individ23 uals supervised by a physician solely as an ad24 junct to other services provided by the physi25 cian’s office is exempt from this section.
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1 ‘‘(B) EXCEPTION.—A clinical laboratory

2 described in subparagraph (A) is not exempt

3 from this section when it performs a pap smear

4 (Papanicolaou Smear) analysis.

5 ‘‘(C) DEFINITION.—For purposes of sub6 paragraph (A), the term ‘physician’ has the

7 same meaning as is prescribed for such term by

8 section 1861(r) of the Social Security Act (42

9 U.S.C. 1395x(r)).’’;

10 (2) in paragraph (3) (as so redesignated) by

11 striking ‘‘(3)’’ and inserting ‘‘(4)’’; and

12 (3) in paragraphs (4) and (5) (as so redesig13 nated) by striking ‘‘(2)’’ and inserting ‘‘(3)’’.

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