Union Calendar No. 145

104TH CONGRESS

1ST SESSION H. R. 2425

[Report No. 104–276, Parts I and II]

A BILL

To amend title XVIII of the Social Security Act to

preserve and reform the medicare program.

OCTOBER 16, 1995

Reported from the Committee on Ways and Means with

an amendment

Reported from the Committee on Commerce with an

amendment

Referral to the Committees on the Judiciary and Rules

16, 1995extended for a period ending not later than October

The Committees on the Judiciary and Rules discharged;

the State of the Union and ordered printedcommitted to the Committee of the Whole House on
IB

Union Calendar No. 145

104TH CONGRESS

1ST SESSION H. R. 2425

[Report No. 104–276, Parts I and II]

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

OCTOBER 16, 1995

Reported from the Committtee on Ways and Means with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

OCTOBER 16, 1995

Reported from the Committtee on Commerce with an amendment

[Strike out all after the enacting clause and insert the part printed in boldface roman]

OCTOBER 16, 1995

Referral to the Committees on the Judiciary and Rules extended for a period

ending not later than October 16, 1995

OCTOBER 16, 1995

The Committees on the Judiciary and Rules discharged; committed to the

Committee of the Whole House on the State of the Union and ordered printed

[For text of introduced bill, see copy of bill as introduced on September 29, 1995]
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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 pro5 gram, in order to preserve and protect the financial stabil6 ity of the program.

7 TITLE XV—MEDICARE

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

9 REFERENCES TO OBRA; TABLE OF CONTENTS

10 OF TITLE.

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

12 ‘‘Medicare Preservation Act of 1995’’.

13 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except

14 as otherwise specifically provided, whenever in this title an

15 amendment is expressed in terms of an amendment to or

16 repeal of a section or other provision, the reference shall

17 be considered to be made to that section or other provision

18 of the Social Security Act.

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

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

21 1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus Budget

22 Reconciliation Act of 1986 (Public Law 99–509), the Omni-
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1 bus Budget Reconciliation Act of 1987 (Public Law 100–

2 203), the Omnibus Budget Reconciliation Act of 1989 (Pub3 lic Law 101–239), the Omnibus Budget Reconciliation Act

4 of 1990 (Public Law 101–508), and the Omnibus Budget

5 Reconciliation Act of 1993 (Public Law 103–66), respec6 tively.

7 (d) TABLE OF CONTENTS OF TITLE.—The table of con8 tents of this title is as follows:

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

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

PART 5—TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDERSPONSORED ORGANIZATIONS

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

Subtitle B—Preventing Fraud and Abuse

Sec. 15101. Increasing awareness of fraud and abuse.

Sec. 15102. Beneficiary incentive programs.

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

Sec. 15104. Voluntary disclosure program.

Sec. 15105. Revisions to current sanctions.

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

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

of durable medical equipment.

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

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

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

Subtitle C—Regulatory Relief

PART 1—PHYSICIAN OWNERSHIP REFERRAL REFORM

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

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

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

Sec. 15204. Exceptions to prohibition.

Sec. 15205. Repeal of reporting requirements.

Sec. 15206. Preemption of State law.

Sec. 15207. Effective date.

PART 2—OTHER MEDICARE REGULATORY RELIEF

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

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

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

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

and new safe harbors.

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

Sec. 15216. Prior notice of changes in billing and claims processing requirements

for physicians’ services.

PART 3—PROMOTING PHYSICIAN SELF-POLICING

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

Subtitle D—Medical Liability Reform

PART 1—GENERAL PROVISIONS

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

Sec. 15302. Definitions.
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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.

‘‘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 hospitalspecific 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.
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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.

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

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

Sec. 15514. Classification of rural referral centers.

Sec. 15515. Floor on area wage index.

PART 2—PAYMENTS TO SKILLED NURSING FACILITIES

Sec. 15521. Payments for routine service costs.

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

Sec. 15523. Payments for routine service costs.

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

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

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

Sec. 15527. Medical review process.

Sec. 15528. Report by Medicare Payment Review Commission.

Sec. 15529. Effective date.

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.
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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.

PART 3—ADMINISTRATIVE SIMPLIFICATION FOR LABORATORY SERVICES

Sec. 15621. Administrative simplification for laboratory services.

PART 4—COVERAGE OF CERTAIN ANTI-NAUSEA DRUGS

Sec. 15631. Coverage of oral anti-nausea drugs under chemotherapeutic regimen.

Sec. 15632. Effective date.

PART 5—COVERAGE OF CERTAIN SERVICES ORDERED OR REFERRED BY

CHIROPRACTORS

Sec. 15641. Coverage of Certain Services Ordered or Referred by Chiropractors.

Subtitle H—Provisions Relating to Medicare Parts A and B

PART 1—PAYMENT FOR HOME HEALTH SERVICES

Sec. 15701. Payment for home health services.

Sec. 15702. Maintaining savings resulting from temporary freeze on payment increases for home health services.

Sec. 15703. Extension of waiver of presumption of lack of knowledge of exclusion

from coverage for home health agencies.

Sec. 15704. Study of coverage of services of Christian Science providers.

PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS

Sec. 15711. Extension and expansion of existing requirements.

Sec. 15712. Improvements in recovery of payments.

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

PART 3—FAILSAFE

Sec. 15721. Failsafe budget mechanism.

PART 4—ADMINISTRATIVE SIMPLIFICATION

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

PART 5—OTHER PROVISIONS RELATING TO PARTS A AND B

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

with certain medical devices approved for investigational use.

Sec. 15742. Additional exclusion from coverage.
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Subtitle I—Clinical Laboratories

Sec. 15801. Exemption of physician office laboratories.

Subtitle J—Lock-Box Provisions for Medicare Part B Savings

from Growth Reductions

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

savings.

1 Subtitle A—MedicarePlus Program

2 PART 1—INCREASING CHOICE UNDER THE

3 MEDICARE PROGRAM

4 SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

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

7 ‘‘PROVIDING FOR CHOICE OF COVERAGE

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

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

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

12 elect to receive benefits under this title through one of

13 the following:

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

16 ‘‘(B) THROUGH A MEDICAREPLUS PROD17 UCT.—Through a MedicarePlus product (as de18 fined in paragraph (2)), which may be—

19 ‘‘(i) a high deductible/medisave product

20 (and a contribution into a MedicarePlus

21 medical savings account (MSA)),
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1 ‘‘(ii) a product offered by a provider2 sponsored organization,

3 ‘‘(iii) a product offered by an organi4 zation that is a Taft-Hartley plan or asso5 ciation, or

6 ‘‘(iv) a product providing for benefits

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

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

9 purposes of this section and part C, the term

10 ‘MedicarePlus product’ means health benefits coverage

11 offered under a policy, contract, or plan by a

12 MedicarePlus organization (as defined in section

13 1851(a)) pursuant to and in accordance with a con14 tract under section 1857.

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

16 purposes of this section and part C—

17 ‘‘(A) NON-MEDICARE-PLUS OPTION.—An in18 dividual who has made the election described in

19 paragraph (1)(A) is considered to have elected

20 the ‘Non-MedicarePlus option’.

21 ‘‘(B) MEDICAREPLUS OPTION.—An individ22 ual who has made the election described in para23 graph (1)(B) to obtain coverage through a

24 MedicarePlus product is considered to have elect25 ed the ‘MedicarePlus option’ for that product.
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1 ‘‘(b) SPECIAL RULES.—

2 ‘‘(1) RESIDENCE REQUIREMENT.—Except as the

3 Secretary may otherwise provide, an individual is el4 igible to elect a MedicarePlus product offered by a

5 MedicarePlus organization only if the organization in

6 relation to the product serves the geographic area in

7 which the individual resides.

8 ‘‘(2) AFFILIATION REQUIREMENTS FOR CERTAIN

9 PRODUCTS.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (B), an individual is eligible to elect a

12 MedicarePlus product offered by a limited enroll13 ment MedicarePlus organization (as defined in

14 section 1852(c)(4)(D)) only if—

15 ‘‘(i) the individual is eligible under

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

17 and

18 ‘‘(ii) in the case of a MedicarePlus or19 ganization that is a Taft-Hartley sponsor

20 (as defined in section 1852(c)(4)), the indi21 vidual elected under this section a

22 MedicarePlus product offered by the sponsor

23 during the first enrollment period in which

24 the individual was eligible to make such

25 election with respect to such sponsor.
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1 ‘‘(B) NO REELECTION AFTER

2 DISENROLLMENT FOR CERTAIN PRODUCTS.—An

3 individual is not eligible to elect a MedicarePlus

4 product offered by a MedicarePlus organization

5 that is a Taft-Hartley sponsor if the individual

6 previously had elected a MedicarePlus product

7 offered by the organization and had subsequently

8 discontinued to elect such a product offered by

9 the organization.

10 ‘‘(3) SPECIAL RULE FOR CERTAIN ANNU11 ITANTS.—An individual is not eligible to elect a high

12 deductible/medisave product if the individual is enti13 tled to benefits under chapter 89 of title 5, United

14 States Code, as an annuitant or spouse of an annu15 itant.

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

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

18 a process through which elections described in sub19 section (a) are made and changed, including the form

20 and manner in which such elections are made and

21 changed. Such elections shall be made or changed only

22 during coverage election periods specified under sub23 section (e) and shall become effective as provided in

24 subsection (f).
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Subtitle A, Part 1

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1 ‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec2 retary shall establish the process of electing coverage

3 under this section during the transition period (as de4 fined in subsection (e)(1)(B)) in such an expedited

5 manner as will permit such an election for

6 MedicarePlus products in an area as soon as such

7 products become available in that area.

8 ‘‘(3) COORDINATION THROUGH MEDICARE-PLUS

9 ORGANIZATIONS.—

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

11 permit an individual who wishes to elect a

12 MedicarePlus product offered by a MedicarePlus

13 organization to make such election through the

14 filing of an appropriate election form with the

15 organization.

16 ‘‘(B) DISENROLLMENT.—Such process shall

17 permit an individual, who has elected a

18 MedicarePlus product offered by a MedicarePlus

19 organization and who wishes to terminate such

20 election, to terminate such election through the

21 filing of an appropriate election form with the

22 organization.

23 ‘‘(4) DEFAULT.—

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

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

3 election during an initial election period

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

5 chosen the Non-MedicarePlus option.

6 ‘‘(ii) SEAMLESS CONTINUATION OF

7 COVERAGE.—The Secretary shall establish

8 procedures under which individuals who are

9 enrolled with a MedicarePlus organization

10 at the time of the initial election period and

11 who fail to elect to receive coverage other

12 than through the organization are deemed

13 to have elected an appropriate MedicarePlus

14 product offered by the organization.

15 ‘‘(B) CONTINUING PERIODS.—An individual

16 who has made (or deemed to have made) an elec17 tion under this section is considered to have con18 tinued to make such election until such time

19 as—

20 ‘‘(i) the individual changes the election

21 under this section, or

22 ‘‘(ii) a MedicarePlus product is discon23 tinued, if the individual had elected such

24 product at the time of the discontinuation.
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1 ‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO2 CIAL SECURITY TO PROMOTE EFFICIENT ADMINISTRA3 TION.—In order to promote the efficient administra4 tion of this section and the MedicarePlus program

5 under part C, the Secretary may enter into an agree6 ment with the Commissioner of Social Security under

7 which the Commissioner performs administrative re8 sponsibilities relating to enrollment and disenrollment

9 in MedicarePlus products under this section.

10 ‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO

11 PROMOTE INFORMED CHOICE.—

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

13 for activities under this subsection to disseminate

14 broadly information to medicare beneficiaries (and

15 prospective medicare beneficiaries) on the coverage

16 options provided under this section in order to pro17 mote an active, informed selection among such op18 tions. Such information shall be made available on

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

20 an individual would first attain eligibility for medi21 care on the basis of age) as to permit individuals to

22 elect the MedicarePlus option during the initial elec23 tion period described in subsection (e)(1).

24 ‘‘(2) USE OF NONFEDERAL ENTITIES.—The Sec25 retary shall, to the maximum extent feasible, enter
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1 into contracts with appropriate non-Federal entities

2 to carry out activities under this subsection.

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

4 subsection, the Secretary shall provide for at least the

5 following activities in all areas in which

6 MedicarePlus products are offered:

7 ‘‘(A) INFORMATION BOOKLET.—

8 ‘‘(i) IN GENERAL.—The Secretary shall

9 publish an information booklet and dissemi10 nate the booklet to all individuals eligible to

11 elect the MedicarePlus option under this

12 section during coverage election periods.

13 ‘‘(ii) INFORMATION INCLUDED.—The

14 booklet shall include information presented

15 in plain English and in a standardized for16 mat regarding—

17 ‘‘(I) the benefits (including cost18 sharing) and premiums for the various

19 MedicarePlus products in the areas in20 volved;

21 ‘‘(II) the quality of such products,

22 including consumer satisfaction infor23 mation; and
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1 ‘‘(III) rights and responsibilities

2 of medicare beneficiaries under such

3 products.

4 ‘‘(iii) PERIODIC UPDATING.—The book5 let shall be updated on a regular basis (not

6 less often than once every 12 months) to re7 flect changes in the availability of

8 MedicarePlus products and the benefits and

9 premiums for such products.

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

11 shall maintain a toll-free number for inquiries

12 regarding MedicarePlus options and the oper13 ation of part C.

14 ‘‘(C) GENERAL INFORMATION IN MEDICARE

15 HANDBOOK.—The Secretary shall include infor16 mation about the MedicarePlus option provided

17 under this section in the annual notice of medi18 care benefits under section 1804.

19 ‘‘(e) COVERAGE ELECTION PERIODS.—

20 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE

21 ELECTION.—

22 ‘‘(A) IN GENERAL.—In the case of an indi23 vidual who first becomes entitled to benefits

24 under part A and enrolled under part B after

25 the beginning of the transition period (as defined
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1 in subparagraph (B)), the individual shall make

2 the election under this section during a period

3 (of a duration and beginning at a time specified

4 by the Secretary) at the first time the individual

5 both is entitled to benefits under part A and en6 rolled under part B. Such period shall be speci7 fied in a manner so that, in the case of an indi8 vidual who elects a MedicarePlus product during

9 the period, coverage under the product becomes

10 effective as of the first date on which the individ11 ual may receive such coverage.

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

13 this subsection, the term ‘transition period’

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

15 the period beginning on the first day of the first

16 month in which a MedicarePlus product is first

17 made available to individuals in the area and

18 ending with the month preceding the beginning

19 of the first annual, coordinated election period

20 under paragraph (3).

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

22 paragraph (6)—

23 ‘‘(A) CONTINUOUS OPEN ENROLLMENT INTO

24 A MEDICARE-PLUS OPTION.—During the transi25 tion period, an individual who is eligible to
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Subtitle A, Part 1

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1 make an election under this section and who has

2 elected the non-MedicarePlus option may change

3 such election to a MedicarePlus option at any

4 time.

5 ‘‘(B) OPEN DISENROLLMENT BEFORE END

6 OF TRANSITION PERIOD.—

7 ‘‘(i) IN GENERAL.—During the transi8 tion period, an individual who has elected

9 a MedicarePlus option for a MedicarePlus

10 product may change such election to an11 other MedicarePlus product or to the non12 MedicarePlus option.

13 ‘‘(ii) SPECIAL RULE.—During the

14 transition period, an individual who has

15 elected a high deductible/medisave product

16 may not change such election to a

17 MedicarePlus product that is not a high de18 ductible/medisave product unless the indi19 vidual has had such election in effect for 12

20 months.

21 ‘‘(3) ANNUAL, COORDINATED ELECTION PE22 RIOD.—

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

24 (5), each individual who is eligible to make an
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Subtitle A, Part 1

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1 election under this section may change such elec2 tion during annual, coordinated election periods.

3 ‘‘(B) ANNUAL, COORDINATED ELECTION PE4 RIOD.—For purposes of this section, the term

5 ‘annual, coordinated election period’ means, with

6 respect to a calendar year (beginning with

7 1998), the month of October before such year.

8 ‘‘(C) MEDICAREPLUS HEALTH FAIR DURING

9 OCTOBER, 1996.—In the month of October, 1996,

10 the Secretary shall provide for a nationally co11 ordinated educational and publicity campaign to

12 inform individuals, who are eligible to elect

13 MedicarePlus products, about such products and

14 the election process provided under this section

15 (including the annual, coordinated election peri16 ods that occur in subsequent years).

17 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OPTION.—

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

19 time an individual elects a MedicarePlus option

20 (other than a high deductible/medisave product)

21 under this section, the individual may dis22 continue such election through the filing of an

23 appropriate notice during the 90-day period be24 ginning on the first day on which the individ-
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1 ual’s coverage under the MedicarePlus product

2 under such option becomes effective.

3 ‘‘(B) EFFECT OF DISCONTINUATION OF

4 ELECTION.—An individual who discontinues an

5 election under this paragraph shall be deemed at

6 the time of such discontinuation to have elected

7 the Non-MedicarePlus option.

8 ‘‘(5) SPECIAL ELECTION PERIODS.—An individ9 ual may discontinue an election of a MedicarePlus

10 product offered by a MedicarePlus organization other

11 than during an annual, coordinated election period

12 and make a new election under this section if—

13 ‘‘(A) the organization’s or product’s certifi14 cation under part C has been terminated or the

15 organization has terminated or otherwise discon16 tinued providing the product;

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

18 elected a MedicarePlus product offered by a

19 MedicarePlus organization, the individual is no

20 longer eligible to elect the product because of a

21 change in the individual’s place of residence or

22 other change in circumstances (specified by the

23 Secretary, but not including termination of

24 membership in a qualified association in the

25 case of a product offered by a qualified associa-
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1 tion or termination of the individual’s enroll2 ment on the basis described in clause (i) or (ii)

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

4 ‘‘(C) the individual demonstrates (in ac5 cordance with guidelines established by the Sec6 retary) that—

7 ‘‘(i) the organization offering the prod8 uct substantially violated a material provi9 sion of the organization’s contract under

10 part C in relation to the individual and the

11 product; or

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

13 other entity acting on the organization’s be14 half) materially misrepresented the prod15 uct’s provisions in marketing the product to

16 the individual; or

17 ‘‘(D) the individual meets such other condi18 tions as the Secretary may provide.

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

20 MEDISAVE PRODUCTS.—Notwithstanding the previous

21 provisions of this subsection, an individual may elect

22 a high deductible/medisave product only during an

23 annual, coordinated election period described in para24 graph (3)(B) or during the month of October, 1996.

25 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—
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1 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE2 RIOD.—An election of coverage made during the ini3 tial coverage election period under subsection

4 (e)(1)(A) shall take effect upon the date the individual

5 becomes entitled to benefits under part A and enrolled

6 under part B, except as the Secretary may provide

7 (consistent with section 1838) in order to prevent ret8 roactive coverage.

9 ‘‘(2) DURING TRANSITION; 90-DAY

10 DISENROLLMENT OPTION.—An election of coverage

11 made under subsection (e)(2) and an election to dis12 continue a MedicarePlus option under subsection

13 (e)(4) at any time shall take effect with the first cal14 endar month following the date on which the election

15 is made.

16 ‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD

17 AND MEDISAVE ELECTION.—An election of coverage

18 made during an annual, coordinated election period

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

20 a high deductible/medisave product shall take effect as

21 of the first day of the following year.

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

23 made during any other period under subsection (e)(5)

24 shall take effect in such manner as the Secretary pro25 vides in a manner consistent (to the extent prac-
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1 ticable) with protecting continuity of health benefit

2 coverage.

3 ‘‘(g) EFFECT OF ELECTION OF MEDICAREPLUS OP4 TION.—Subject to the provisions of section 1855(f), pay5 ments under a contract with a MedicarePlus organization

6 under section 1857(a) with respect to an individual electing

7 a MedicarePlus product offered by the organization shall

8 be instead of the amounts which (in the absence of the con9 tract) would otherwise be payable under parts A and B for

10 items and services furnished to the individual.

11 ‘‘(h) ADMINISTRATION.—

12 ‘‘(1) IN GENERAL.—This part and sections 1805

13 and 1876 shall be administered through an operating

14 division (A) that is established or identified by the

15 Secretary in the Department of Health and Human

16 Services, (B) that is separate from the Health Care

17 Financing Administration, and (C) the primary

18 function of which is the administration of this part

19 and such sections. The director of such division shall

20 be of equal pay and rank to that of the individual re21 sponsible for overall administration of parts A and B.

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

23 shall transfer such personnel, administrative support

24 systems, assets, records, funds, and other resources in

25 the Health Care Financing Administration to the op-
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1 erating division referred to in paragraph (1) as are

2 used in the administration of section 1876 and as

3 may be required to implement the provisions referred

4 to in such paragraph promptly and efficiently.’’.

5 SEC. 15002. MEDICAREPLUS PROGRAM.

6 (a) IN GENERAL.—Title XVIII is amended by redesig7 nating part C as part D and by inserting after part B

8 the following new part:

9 ‘‘PART C—PROVISIONS RELATING TO MEDICAREPLUS

10 ‘‘REQUIREMENTS FOR MEDICAREPLUS ORGANIZATIONS;

11 HIGH DEDUCTIBLE/MEDISAVE PRODUCTS

12 ‘‘SEC. 1851. (a) MEDICAREPLUS ORGANIZATION DE13 FINED.—In this part, subject to the succeeding provisions

14 of this section, the term ‘MedicarePlus organization’ means

15 a public or private entity that is certified under section

16 1857 as meeting the requirements and standards of this

17 part for such an organization.

18 ‘‘(b) ORGANIZED AND LICENSED UNDER STATE

19 LAW.—

20 ‘‘(1) IN GENERAL.—A MedicarePlus organization

21 shall be organized and licensed under State law to

22 offer health insurance or health benefits coverage in

23 each State in which it offers a MedicarePlus product.

24 ‘‘(2) EXCEPTION FOR TAFT-HARTLEY SPON25 SORS.—Paragraph (1) shall not apply to an
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1 MedicarePlus organization that is a Taft-Hartley

2 sponsor (as defined in section 1852(c)(4)).

3 ‘‘(3) EXCEPTION FOR PROVIDER-SPONSORED OR4 GANIZATIONS.—Paragraph (1) shall not apply to a

5 MedicarePlus organization that is a provider-spon6 sored organization (as defined in section 1854(a)) ex7 cept to the extent provided under section 1857(c).

8 ‘‘(4) EXCEPTION FOR QUALIFIED ASSOCIA9 TIONS.—Paragraph (1) shall not apply to a

10 MedicarePlus organization that is a qualified associa11 tion (as defined in section 1852(c)(4)(B)).

12 ‘‘(c) PREPAID PAYMENT.—A MedicarePlus organiza13 tion shall be compensated (except for deductibles, coinsur14 ance, and copayments) for the provision of health care serv15 ices to enrolled members by a payment which is paid on

16 a periodic basis without regard to the date the health care

17 services are provided and which is fixed without regard to

18 the frequency, extent, or kind of health care service actually

19 provided to a member.

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

21 MedicarePlus organization shall assume full financial risk

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

23 services (other than hospice care) for which benefits are re24 quired to be provided under section 1852(a)(1), except that

25 the organization—
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1 ‘‘(1) may obtain insurance or make other ar2 rangements for the cost of providing to any enrolled

3 member such services the aggregate value of which ex4 ceeds $5,000 in any year,

5 ‘‘(2) may obtain insurance or make other ar6 rangements for the cost of such services provided to its

7 enrolled members other than through the organization

8 because medical necessity required their provision be9 fore they could be secured through the organization,

10 ‘‘(3) may obtain insurance or make other ar11 rangements for not more than 90 percent of the

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

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

14 and

15 ‘‘(4) may make arrangements with physicians or

16 other health professionals, health care institutions, or

17 any combination of such individuals or institutions

18 to assume all or part of the financial risk on a pro19 spective basis for the provision of basic health services

20 by the physicians or other health professionals or

21 through the institutions.

22 In the case of a MedicarePlus organization that is a Taft23 Hartley sponsor (as defined in section 1852(c)(4)(A)) or a

24 qualified association (as defined in section 1852(c)(4)(B)),

25 this subsection shall not apply with respect to MedicarePlus
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1 products offered by such organization and issued by an or2 ganization to which subsection (b)(1) applies or by a pro3 vider-sponsored organization (as defined in section

4 1854(a)).

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

6 ‘‘(1) IN GENERAL.—Each MedicarePlus organi7 zation shall meet standards under section 1856 relat8 ing to the financial solvency and capital adequacy of

9 the organization. Such standards shall take into ac10 count the nature and type of MedicarePlus products

11 offered by the organization.

12 ‘‘(2) TREATMENT OF TAFT-HARTLEY SPON13 SORS.—An entity that is a Taft-Hartley sponsor is

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

15 ‘‘(3) TREATMENT OF CERTAIN QUALIFIED ASSO16 CIATIONS.—An entity that is a qualified association

17 is deemed to meet the requirement of paragraph (1)

18 with respect to MedicarePlus products offered by such

19 association and issued by an organization to which

20 subsection (b)(1) applies or by a provider-sponsored

21 organization.

22 ‘‘(f) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DE23 FINED.—
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1 ‘‘(1) IN GENERAL.—In this part, the term ‘high

2 deductible/medisave product’ means a MedicarePlus

3 product that—

4 ‘‘(A) provides reimbursement for at least the

5 items and services described in section

6 1852(a)(1) in a year but only after the enrollee

7 incurs countable expenses (as specified under the

8 product) equal to the amount of a deductible (de9 scribed in paragraph (2));

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

11 of such deductible) at least all amounts that

12 would have been payable under parts A and B

13 or by the enrollee if the enrollee had elected to re14 ceive benefits through the provisions of such

15 parts; and

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

17 for a year and for all subsequent expenses for

18 benefits referred to in subparagraph (A) in the

19 year, for a level of reimbursement that is not less

20 than—

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

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

23 would have been paid (without regard to

24 any deductibles or coinsurance) under parts

25 A and B with respect to such expenses,
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1 whichever is less. Such term does not include the

2 MedicarePlus MSA itself or any contribution

3 into such account.

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

5 under a high deductible/medisave product—

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

7 more than $10,000; and

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

9 not more than the maximum amount of such de10 ductible for the previous contract year under this

11 paragraph increased by the national average per

12 capita growth rate under section 1855(c)(3) for

13 the year.

14 If the amount of the deductible under subparagraph

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

16 rounded to the nearest multiple of $50.

17 ‘‘(g) ORGANIZATIONS TREATED AS MEDICAREPLUS

18 ORGANIZATIONS DURING TRANSITION.—Any of the follow19 ing organizations shall be considered to qualify as a

20 MedicarePlus organization for contract years beginning be21 fore January 1, 1998:

22 ‘‘(1) HEALTH MAINTENANCE ORGANIZATIONS.—

23 An organization that is organized under the laws of

24 any State and that is a qualified health maintenance

25 organization (as defined in section 1310(d) of the
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1 Public Health Service Act), an organization recog2 nized under State law as a health maintenance orga3 nization, or a similar organization regulated under

4 State law for solvency in the same manner and to the

5 same extent as such a health maintenance organiza6 tion.

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

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

9 ‘‘(A) is licensed by a State agency as an in10 surer for the offering of health benefit coverage,

11 or

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

13 service benefit plan,

14 but only for individuals residing in an area in which

15 the organization is licensed to offer health insurance

16 coverage.

17 ‘‘(3) CURRENT RISK-CONTRACTORS.—An organi18 zation that is an eligible organization (as defined in

19 section 1876(b)) and that has a risk-sharing contract

20 in effect under section 1876 as of the date of the en21 actment of this section.

22 ‘‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF

23 SERVICES, ENROLLMENT, AND PREMIUMS

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

25 ‘‘(1) IN GENERAL.—Except as provided in sec26 tion 1851(f)(1) with respect to high deductible/
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1 medisave products, each MedicarePlus product offered

2 under this part shall provide benefits for at least the

3 items and services for which benefits are available

4 under parts A and B consistent with the standards

5 for coverage of such items and services applicable

6 under this title.

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

8 Notwithstanding any other provision of law, a

9 MedicarePlus organization may (in the case of the

10 provision of items and services to an individual

11 under this part under circumstances in which pay12 ment under this title is made secondary pursuant to

13 section 1862(b)(2)) charge or authorize the provider of

14 such services to charge, in accordance with the charges

15 allowed under such law or policy—

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

17 other entity which under such law, plan, or pol18 icy is to pay for the provision of such services,

19 or

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

21 individual has been paid under such law, plan,

22 or policy for such services.

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

24 MedicarePlus product (other than a high deductible/

25 medisave product) offered by a MedicarePlus organi-
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1 zation satisfies paragraph (1) with respect to benefits

2 for items and services if the following requirements

3 are met:

4 ‘‘(A) FEE FOR SERVICE PROVIDERS.—In the

5 case of benefits furnished through a provider that

6 does not have a contract with the organization,

7 the product provides for at least the dollar

8 amount of payment for such items and services

9 as would otherwise be provided under parts A

10 and B.

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

12 case of benefits furnished through a provider that

13 has such a contract, the individual’s liability for

14 payment for such items and services does not ex15 ceed (after taking into account any deductible,

16 which does not exceed any deductible under parts

17 A and B) the lesser of the following:

18 ‘‘(i) NON-MEDICAREPLUS LIABILITY.—

19 The amount of the liability that the indi20 vidual would have had (based on the pro21 vider being a participating provider) if the

22 individual had elected the non-MedicarePlus

23 option.

24 ‘‘(ii) MEDICARE COINSURANCE AP25 PLIED TO PRODUCT PAYMENT RATES.—The
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1 applicable coinsurance or copayment rate

2 (that would have applied under the non3 MedicarePlus option) of the payment rate

4 provided under the contract.

5 ‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi6 zation may not deny, limit, or condition the coverage or

7 provision of benefits under this part based on the health

8 status, claims experience, receipt of health care, medical his9 tory, or lack of evidence of insurability, of an individual.

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

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

12 subsection, a MedicarePlus organization shall provide

13 that at any time during which elections are accepted

14 under section 1805 with respect to a MedicarePlus

15 product offered by the organization, the organization

16 will accept without restrictions individuals who are

17 eligible to make such election.

18 ‘‘(2) PRIORITY.—If the Secretary determines that

19 a MedicarePlus organization, in relation to a

20 MedicarePlus product it offers, has a capacity limit

21 and the number of eligible individuals who elect the

22 product under section 1805 exceeds the capacity limit,

23 the organization may limit the election of individuals

24 of the product under such section but only if priority

25 in election is provided—
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1 ‘‘(A) first to such individuals as have elect2 ed the product at the time of the determination,

3 and

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

5 a manner that does not discriminate among the

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

7 basis described in paragraph (1).

8 ‘‘(3) LIMITATION ON TERMINATION OF ELEC9 TION.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (B), a MedicarePlus organization may not

12 for any reason terminate the election of any in13 dividual under section 1805 for a MedicarePlus

14 product it offers.

15 ‘‘(B) BASIS FOR TERMINATION OF ELEC16 TION.—A MedicarePlus organization may termi17 nate an individual’s election under section 1805

18 with respect to a MedicarePlus product it offers

19 if—

20 ‘‘(i) any premiums required with re21 spect to such product are not paid on a

22 timely basis (consistent with standards

23 under section 1856 that provide for a grace

24 period for late payment of premiums),
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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 is

7 deemed to have elected the Non-MedicarePlus op8 tion (as defined in section 1805(a)(3)(A)).

9 ‘‘(C) ORGANIZATION OBLIGATION WITH RE10 SPECT TO ELECTION FORMS.—Pursuant to a

11 contract under section 1858, each MedicarePlus

12 organization receiving an election form under

13 section 1805(c)(2) shall transmit to the Secretary

14 (at such time and in such manner as the Sec15 retary may specify) a copy of such form or such

16 other information respecting the election as the

17 Secretary may specify.

18 ‘‘(4) SPECIAL RULES FOR LIMITED ENROLLMENT

19 MEDICAREPLUS ORGANIZATIONS.—

20 ‘‘(A) TAFT-HARTLEY SPONSORS.—

21 ‘‘(i) IN GENERAL.—Subject to subpara22 graph (C), a MedicarePlus organization

23 that is a Taft-Hartley sponsor (as defined

24 in clause (ii)) shall limit eligibility of en25 rollees under this part for MedicarePlus
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1 products it offers to individuals who are en2 titled to obtain benefits through such prod3 ucts under the terms of an applicable collec4 tive bargaining agreement.

5 ‘‘(ii) TAFT-HARTLEY SPONSOR.—In

6 this part and section 1805, the term ‘Taft7 Hartley sponsor’ means, in relation to a

8 group health plan that is established or

9 maintained by two or more employers or

10 jointly by one or more employers and one or

11 more employee organizations, the associa12 tion, committee, joint board of trustees, or

13 other similar group of representatives of

14 parties who establish or maintain the plan.

15 ‘‘(B) QUALIFIED ASSOCIATIONS.—

16 ‘‘(i) IN GENERAL.—Subject to subpara17 graph (C), a MedicarePlus organization

18 that is a qualified association (as defined in

19 clause (iii)) shall limit eligibility of indi20 viduals under this part for products it offers

21 to individuals who are members of the asso22 ciation (or who are spouses of such individ23 uals).

24 ‘‘(ii) LIMITATION ON TERMINATION OF

25 COVERAGE.—Such a qualifying association
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1 offering a MedicarePlus product to an indi2 vidual may not terminate coverage of the

3 individual on the basis that the individual

4 is no longer a member of the association ex5 cept pursuant to a change of election during

6 an open election period occurring on or

7 after the date of the termination of member8 ship.

9 ‘‘(iii) QUALIFIED ASSOCIATION.—In

10 this part and section 1805, the term ‘quali11 fied association’ means an association, reli12 gious fraternal organization, or other orga13 nization (which may be a trade, industry,

14 or professional association, a chamber of

15 commerce, or a public entity association)

16 that the Secretary finds—

17 ‘‘(I) has been formed for purposes

18 other than the sale of any health insur19 ance and does not restrict membership

20 based on the health status, claims expe21 rience, receipt of health care, medical

22 history, or lack of evidence of insur23 ability, of an individual,
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1 ‘‘(II) does not exist solely or prin2 cipally for the purpose of selling insur3 ance, and

4 ‘‘(III) has at least 1,000 individ5 ual members or 200 employer members.

6 Such term includes a subsidiary or corpora7 tion that is wholly owned by one or more

8 qualified organizations.

9 ‘‘(C) LIMITATION.—Rules of eligibility to

10 carry out the previous subparagraphs of this

11 paragraph shall not have the effect of denying

12 eligibility to individuals on the basis of health

13 status, claims experience, receipt of health care,

14 medical history, or lack of evidence of insurabil15 ity.

16 ‘‘(D) LIMITED ENROLLMENT MEDICAREPLUS

17 ORGANIZATION.—In this part and section 1805,

18 the term ‘limited enrollment MedicarePlus orga19 nization’ means a MedicarePlus organization

20 that is a Taft-Hartley sponsor or a qualified as21 sociation.

22 ‘‘(E) EMPLOYER, ETC.—In this paragraph,

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

24 and ‘group health plan’ have the meanings given

25 such terms for purposes of part 6 of subtitle B
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1 of title I of the Employee Retirement Income Se2 curity Act of 1974.

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

4 ‘‘(1) IN GENERAL.—Each MedicarePlus organi5 zation shall file with the Secretary each year, in a

6 form and manner and at a time specified by the Sec7 retary—

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

9 for coverage under each MedicarePlus product it

10 offers under this part in each payment area (as

11 determined for purposes of section 1855) in

12 which the product is being offered; and

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

14 the product in each such area.

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

16 amount of the monthly premium charged by a

17 MedicarePlus organization for a MedicarePlus prod18 uct offered in a payment area to an individual under

19 this part shall be equal to the amount (if any) by

20 which—

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

22 for the product for the period involved, as estab23 lished under paragraph (3) and submitted under

24 paragraph (1), exceeds
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‘‘(B)(i) 1 1 ⁄12 of the annual MedicarePlus

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

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

4 case of a high deductible/medisave product, the

5 monthly adjusted MedicarePlus capitation rate

6 specified in section 1855(b)(1) for the individual

7 and period involved.

8 ‘‘(3) UNIFORM PREMIUM.—

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

10 subparagraph (B), the premiums charged by a

11 MedicarePlus organization under this part may

12 not vary among individuals who reside in the

13 same payment area.

14 ‘‘(B) EXCEPTION FOR HIGH DEDUCTIBLE/

15 MEDISAVE PRODUCTS.—A MedicarePlus organi16 zation shall establish premiums for any high de17 ductible/medisave product it offers in a payment

18 area based on each of the risk adjustment cat19 egories established for purposes of determining

20 the amount of the payment to MedicarePlus or21 ganizations under section 1855(b)(1) and using

22 the identical demographic and other adjustments

23 among such categories as are used for such pur24 poses.
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1 ‘‘(4) TERMS AND CONDITIONS OF IMPOSING PRE2 MIUMS.—Each MedicarePlus organization shall per3 mit the payment of monthly premiums on a monthly

4 basis and may terminate election of individuals for a

5 MedicarePlus product for failure to make premium

6 payments only in accordance with subsection

7 (c)(3)(B).

8 ‘‘(5) RELATION OF PREMIUMS AND COST-SHAR9 ING TO BENEFITS.—In no case may the portion of a

10 MedicarePlus organization’s premium rate and the

11 actuarial value of its deductibles, coinsurance, and

12 copayments charged (to the extent attributable to the

13 minimum benefits described in subsection (a)(1) and

14 not count any amount attributable to balance billing)

15 to individuals who are enrolled under this part with

16 the organization exceed the actuarial value of the co17 insurance and deductibles that would be applicable on

18 the average to individuals enrolled under this part

19 with the organization (or, if the Secretary finds that

20 adequate data are not available to determine that ac21 tuarial value, the actuarial value of the coinsurance

22 and deductibles applicable on the average to individ23 uals in the area, in the State, or in the United States,

24 eligible to enroll under this part with the organiza25 tion, or other appropriate data) and entitled to bene-
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1 fits under part A and enrolled under part B if they

2 were not members of a MedicarePlus organization.

3 ‘‘(e) REQUIREMENT FOR ADDITIONAL BENEFITS, PART

4 B PREMIUM DISCOUNT REBATES, OR BOTH.—

5 ‘‘(1) REQUIREMENT.—

6 ‘‘(A) IN GENERAL.—Each MedicarePlus or7 ganization (in relation to a MedicarePlus prod8 uct it offers) shall provide that if there is an ex9 cess amount (as defined in subparagraph (B))

10 for the product for a contract year, subject to the

11 succeeding provisions of this subsection, the orga12 nization shall provide to individuals such addi13 tional benefits (as the organization may specify),

14 a monetary rebate (paid on a monthly basis) of

15 the part B monthly premium, or a combination

16 thereof, in a total value which is at least equal

17 to the adjusted excess amount (as defined in sub18 paragraph (C)).

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

20 this paragraph, the ‘excess amount’, for an orga21 nization for a product, is the amount (if any) by

22 which—

23 ‘‘(i) the average of the capitation pay24 ments made to the organization under this
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1 part for the product at the beginning of con2 tract year, exceeds

3 ‘‘(ii) the actuarial value of the mini4 mum benefits described in subsection (a)(1)

5 under the product for individuals under

6 this part, as determined based upon an ad7 justed community rate described in para8 graph (5).

9 ‘‘(C) ADJUSTED EXCESS AMOUNT.—For

10 purposes of this paragraph, the ‘adjusted excess

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

12 the excess amount reduced to reflect any amount

13 withheld and reserved for the organization for

14 the year under paragraph (3).

15 ‘‘(D) NO APPLICATION TO HIGH DEDUCT16 IBLE/MEDISAVE PRODUCT.—Subparagraph (A)

17 shall not apply to a high deductible/medisave

18 product.

19 ‘‘(E) UNIFORM APPLICATION.—This para20 graph shall be applied uniformly for all enrollees

21 for a product in a service area.

22 ‘‘(F) CONSTRUCTION.—Nothing in this sub23 section shall be construed as preventing a

24 MedicarePlus organization from providing health

25 care benefits that are in addition to the benefits
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1 otherwise required to be provided under this

2 paragraph and from imposing a premium for

3 such additional benefits.

4 ‘‘(2) LIMITATION ON AMOUNT OF PART B PRE5 MIUM DISCOUNT REBATE.—In no case shall the

6 amount of a part B premium discount rebate under

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

8 amount of premiums imposed under part B (not tak9 ing into account section 1839(b) (relating to penalty

10 for late enrollment) or 1839(h) (relating to affluence

11 testing)), for the individual for the month. Except as

12 provided in the previous sentence, a MedicarePlus or13 ganization is not authorized to provide for cash or

14 other monetary rebates as an inducement for enroll15 ment or otherwise.

16 ‘‘(3) STABILIZATION FUND.—A MedicarePlus or17 ganization may provide that a part of the value of an

18 excess actuarial amount described in paragraph (1)

19 be withheld and reserved in the Federal Hospital In20 surance Trust Fund and in the Federal Supple21 mentary Medical Insurance Trust Fund (in such pro22 portions as the Secretary determines to be appro23 priate) by the Secretary for subsequent annual con24 tract periods, to the extent required to stabilize and

25 prevent undue fluctuations in the additional benefits
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1 and rebates offered in those subsequent periods by the

2 organization in accordance with such paragraph. Any

3 of such value of amount reserved which is not pro4 vided as additional benefits described in paragraph

5 (1)(A) to individuals electing the MedicarePlus prod6 uct in accordance with such paragraph prior to the

7 end of such periods, shall revert for the use of such

8 trust funds.

9 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

10 DATA.—For purposes of this subsection, if the Sec11 retary finds that there is insufficient enrollment expe12 rience (including no enrollment experience in the case

13 of a provider-sponsored organization) to determine an

14 average of the capitation payments to be made under

15 this part at the beginning of a contract period, the

16 Secretary may determine such an average based on

17 the enrollment experience of other contracts entered

18 into under this part.

19 ‘‘(5) ADJUSTED COMMUNITY RATE.—

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

21 subsection, subject to subparagraph (B), the term

22 ‘adjusted community rate’ for a service or serv23 ices means, at the election of a MedicarePlus or24 ganization, either—
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1 ‘‘(i) the rate of payment for that serv2 ice or services which the Secretary annually

3 determines would apply to an individual

4 electing a MedicarePlus product under this

5 part if the rate of payment were determined

6 under a ‘community rating system’ (as de7 fined in section 1302(8) of the Public

8 Health Service Act, other than subpara9 graph (C)), or

10 ‘‘(ii) such portion of the weighted ag11 gregate premium, which the Secretary an12 nually estimates would apply to such an in13 dividual, as the Secretary annually esti14 mates is attributable to that service or serv15 ices,

16 but adjusted for differences between the utiliza17 tion characteristics of the individuals electing

18 coverage under this part and the utilization

19 characteristics of the other enrollees with the or20 ganization (or, if the Secretary finds that ade21 quate data are not available to adjust for those

22 differences, the differences between the utilization

23 characteristics of individuals selecting other

24 MedicarePlus coverage, or individuals in the

25 area, in the State, or in the United States, eligi-
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1 ble to elect MedicarePlus coverage under this

2 part and the utilization characteristics of the

3 rest of the population in the area, in the State,

4 or in the United States, respectively).

5 ‘‘(B) SPECIAL RULE FOR PROVIDER-SPON6 SORED ORGANIZATIONS.—In the case of a

7 MedicarePlus organization that is a provider8 sponsored organization, the adjusted community

9 rate under subparagraph (A) for a MedicarePlus

10 product may be computed (in a manner specified

11 by the Secretary) using data in the general com12 mercial marketplace or (during a transition pe13 riod) based on the costs incurred by the organi14 zation in providing such a product.

15 ‘‘(f) RULES REGARDING PHYSICIAN PARTICIPATION.—

16 ‘‘(1) PROCEDURES.—Each MedicarePlus organi17 zation shall establish reasonable procedures relating to

18 the participation (under an agreement between a

19 physician and the organization) of physicians under

20 MedicarePlus products offered by the organization

21 under this part. Such procedures shall include—

22 ‘‘(A) providing notice of the rules regarding

23 participation,
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1 ‘‘(B) providing written notice of participa2 tion decisions that are adverse to physicians,

3 and

4 ‘‘(C) providing a process within the organi5 zation for appealing adverse decisions, including

6 the presentation of information and views of the

7 physician regarding such decision.

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

9 MedicarePlus organization shall consult with physi10 cians who have entered into participation agreements

11 with the organization regarding the organization’s

12 medical policy, quality, and medical management

13 procedures.

14 ‘‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE

15 PLANS.—

16 ‘‘(A) IN GENERAL.—Each MedicarePlus or17 ganization may not operate any physician in18 centive plan (as defined in subparagraph (B))

19 unless the following requirements are met:

20 ‘‘(i) No specific payment is made di21 rectly or indirectly under the plan to a phy22 sician or physician group as an inducement

23 to reduce or limit medically necessary serv24 ices provided with respect to a specific indi25 vidual enrolled with the organization.
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1 ‘‘(ii) If the plan places a physician or

2 physician group at substantial financial

3 risk (as determined by the Secretary) for

4 services not provided by the physician or

5 physician group, the organization—

6 ‘‘(I) provides stop-loss protection

7 for the physician or group that is ade8 quate and appropriate, based on stand9 ards developed by the Secretary that

10 take into account the number of physi11 cians placed at such substantial finan12 cial risk in the group or under the

13 plan and the number of individuals

14 enrolled with the organization who re15 ceive services from the physician or the

16 physician group, and

17 ‘‘(II) conducts periodic surveys of

18 both individuals enrolled and individ19 uals previously enrolled with the orga20 nization to determine the degree of ac21 cess of such individuals to services pro22 vided by the organization and satisfac23 tion with the quality of such services.

24 ‘‘(iii) The organization provides the

25 Secretary with descriptive information re-
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1 garding the plan, sufficient to permit the

2 Secretary to determine whether the plan is

3 in compliance with the requirements of this

4 subparagraph.

5 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE6 FINED.—In this paragraph, the term ‘physician

7 incentive plan’ means any compensation ar8 rangement between a MedicarePlus organization

9 and a physician or physician group that may

10 directly or indirectly have the effect of reducing

11 or limiting services provided with respect to in12 dividuals enrolled with the organization under

13 this part.

14 ‘‘(4) EXCEPTION FOR CERTAIN FEE-FOR-SERVICE

15 PLANS.—The previous provisions of this subsection

16 shall not apply in the case of a MedicarePlus organi17 zation in relation to a MedicarePlus product if the

18 organization does not have agreements between physi19 cians and the organization for the provision of bene20 fits under the product.

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

22 organization shall provide the Secretary with such informa23 tion on the organization and each MedicarePlus product it

24 offers as may be required for the preparation of the infor25 mation booklet described in section 1805(d)(3)(A).
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1 ‘‘(h) COORDINATED ACUTE AND LONG-TERM CARE

2 BENEFITS UNDER A MEDICAREPLUS PRODUCT.—Nothing

3 in this part shall be construed as preventing a State from

4 coordinating benefits under its MediGrant program under

5 title XXI with those provided under a MedicarePlus product

6 in a manner that assures continuity of a full-range of acute

7 care and long-term care services to poor elderly or disabled

8 individuals eligible for benefits under this title and under

9 such program.

10 ‘‘(i) TRANSITIONAL FILE AND USE FOR CERTAIN RE11 QUIREMENTS.—

12 ‘‘(1) IN GENERAL.—In the case of a

13 MedicarePlus product proposed to be offered before the

14 end of the transition period (as defined in

15 section1805(e)(1)(B)), by a MedicarePlus organiza16 tion described in section 1851(g)(3) or by a

17 MedicarePlus organization with a contract in effect

18 under section 1858, if the organization submits com19 plete information to the Secretary regarding the prod20 uct demonstrating that the product meets the require21 ments and standards under subsections (a), (d), and

22 (e) (relating to benefits and premiums), the product

23 shall be deemed as meeting such requirements and

24 standards under such subsections unless the Secretary
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1 disapproves the product within 60 days after the date

2 of submission of the complete information.

3 ‘‘(2) CONSTRUCTION.—Nothing in paragraph (1)

4 shall be construed as waiving the requirement of a

5 contract under section 1858 or waiving requirements

6 and standards not referred to in paragraph (1).

7 ‘‘PATIENT PROTECTION STANDARDS

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

9 MedicarePlus organization shall disclose in clear, accurate,

10 and standardized form, information regarding all of the fol11 lowing for each MedicarePlus product it offers:

12 ‘‘(1) Benefits under the MedicarePlus product of13 fered, including exclusions from coverage and, if it is

14 a high deductible/medisave product, a comparison of

15 benefits under such a product with benefits under

16 other MedicarePlus products.

17 ‘‘(2) Rules regarding prior authorization or

18 other review requirements that could result in

19 nonpayment.

20 ‘‘(3) Potential liability for cost-sharing for out21 of-network services.

22 ‘‘(4) The number, mix, and distribution of par23 ticipating providers.

24 ‘‘(5) The financial obligations of the enrollee, in25 cluding premiums, deductibles, co-payments, and
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1 maximum limits on out-of-pocket losses for items and

2 services (both in and out of network).

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

4 product and organization, including rates of

5 reenrollment.

6 ‘‘(7) Enrollee rights and responsibilities, includ7 ing the grievance process provided under subsection

8 (f).

9 ‘‘(8) A statement that the use of the 911 emer10 gency telephone number is appropriate in emergency

11 situations and an explanation of what constitutes an

12 emergency situation.

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

14 assurance program under subsection (d).

15 Such information shall be disclosed to each enrollee under

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

17 thereafter.

18 ‘‘(b) ACCESS TO SERVICES.—

19 ‘‘(1) IN GENERAL.—A MedicarePlus organization

20 offering a MedicarePlus product may restrict the pro21 viders from whom the benefits under the product are

22 provided so long as—

23 ‘‘(A) the organization makes such benefits

24 available and accessible to each individual elect25 ing the product within the product service area
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1 with reasonable promptness and in a manner

2 which assures continuity in the provision of ben3 efits;

4 ‘‘(B) when medically necessary the organi5 zation makes such benefits available and acces6 sible 24 hours a day and 7 days a week;

7 ‘‘(C) the product provides for reimburse8 ment with respect to services which are covered

9 under subparagraphs (A) and (B) and which are

10 provided to such an individual other than

11 through the organization, if—

12 ‘‘(i) the services were medically nec13 essary and immediately required because of

14 an unforeseen illness, injury, or condition,

15 and

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

17 circumstances to obtain the services through

18 the organization; and

19 ‘‘(D) coverage is provided for emergency

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

21 regard to prior authorization or the emergency

22 care provider’s contractual relationship with the

23 organization.

24 ‘‘(2) MINIMUM PAYMENT LEVELS WHERE PROVID25 ING POINT-OF-SERVICE COVERAGE.—If a
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1 MedicarePlus product provides benefits for items and

2 services (not described in paragraph (1)(C)) through

3 a network of providers and also permits payment to

4 be made under the product for such items and services

5 not provided through such a network, the payment

6 level under the product with respect to such items and

7 services furnished outside the network shall be at least

8 70 percent (or, if the effective cost-sharing rate is 50

9 percent, at least 35 percent) of the lesser of—

10 ‘‘(A) the payment basis (determined without

11 regard to deductibles and cost-sharing) that

12 would have applied for such items and services

13 under parts A and B, or

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

16 ‘‘(3) PROTECTION OF ENROLLEES FOR CERTAIN

17 EMERGENCY SERVICES.—

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

19 case of emergency services described in subpara20 graph (C) which are furnished by a participat21 ing physician or provider of services to an indi22 vidual enrolled with a MedicarePlus organiza23 tion under this section, the applicable participa24 tion agreement is deemed to provide that the

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

2 amount that would be payable to the physician

3 or provider of services under part B and from

4 the individual under such part, if the individual

5 were not enrolled with such an organization

6 under this part.

7 ‘‘(B) NONPARTICIPATING PROVIDERS.—In

8 the case of emergency services described in sub9 paragraph (C) which are furnished by a

10 nonparticipating physician, the limitations on

11 actual charges for such services otherwise appli12 cable under part B (to services furnished by in13 dividuals not enrolled with a MedicarePlus orga14 nization under this section) shall apply in the

15 same manner as such limitations apply to serv16 ices furnished to individuals not enrolled with

17 such an organization.

18 ‘‘(C) EMERGENCY SERVICES DESCRIBED.—

19 The emergency services described in this sub20 paragraph are emergency services which which

21 are furnished to an enrollee of a MedicarePlus

22 organization under this part by a physician or

23 provider of services that is not under a contract

24 with the organization.
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1 ‘‘(4) DEFINITION OF EMERGENCY SERVICES.—In

2 this subsection, the term ‘emergency services’ means,

3 with respect to an individual enrolled with an orga4 nization, covered inpatient and outpatient services

5 that—

6 ‘‘(A) are furnished by an appropriate

7 source other than the organization,

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

9 injury or sudden illness, and

10 ‘‘(C) are needed because the time required to

11 reach the organization’s providers or suppliers

12 would have meant risk of serious damage to the

13 patient’s health.

14 ‘‘(c) CONFIDENTIALITY AND ACCURACY OF ENROLLEE

15 RECORDS.—Each MedicarePlus organization shall establish

16 procedures—

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

18 identifiable enrollee information, and

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

20 records for enrollees.

21 ‘‘(d) QUALITY ASSURANCE PROGRAM.—

22 ‘‘(1) IN GENERAL.—Each MedicarePlus organi23 zation must have arrangements, established in accord24 ance with regulations of the Secretary, for an ongoing
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1 quality assurance program for health care services it

2 provides to such individuals.

3 ‘‘(2) ELEMENTS OF PROGRAM.—The quality as4 surance program shall—

5 ‘‘(A) stress health outcomes;

6 ‘‘(B) provide for the establishment of writ7 ten protocols for utilization review, based on cur8 rent standards of medical practice;

9 ‘‘(C) provide review by physicians and

10 other health care professionals of the process fol11 lowed in the provision of such health care serv12 ices;

13 ‘‘(D) monitors and evaluates high volume

14 and high risk services and the care of acute and

15 chronic conditions;

16 ‘‘(E) evaluates the continuity and coordina17 tion of care that enrollees receive;

18 ‘‘(F) has mechanisms to detect both under19 utilization and overutilization of services;

20 ‘‘(G) after identifying areas for improve21 ment, establishes or alters practice parameters;

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

23 assesses the effectiveness of such action through

24 systematic follow-up;
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1 ‘‘(I) makes available information on quality

2 and outcomes measures to facilitate beneficiary

3 comparison and choice of health coverage options

4 (in such form and on such quality and outcomes

5 measures as the Secretary determines to be ap6 propriate);

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

8 its effectiveness; and

9 ‘‘(K) provide for external accreditation or

10 review, by a utilization and quality control peer

11 review organization under part B of title XI or

12 other qualified independent review organization,

13 of the quality of services furnished by the organi14 zation meets professionally recognized standards

15 of health care (including providing adequate ac16 cess of enrollees to services).

17 ‘‘(3) EXCEPTION FOR CERTAIN FEE-FOR-SERVICE

18 PLANS.—Paragraph (1) and subsection (c)(2) shall

19 not apply in the case of a MedicarePlus organization

20 in relation to a MedicarePlus product to the extent

21 the organization provides for coverage of benefits

22 without restrictions relating to utilization and with23 out regard to whether the provider has a contract or

24 other arrangement with the plan for the provision of

25 such benefits.
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1 ‘‘(4) TREATMENT OF ACCREDITATION.—The Sec2 retary shall provide that a MedicarePlus organization

3 is deemed to meet the requirements of paragraphs (1)

4 and (2) of this subsection and subsection (c) if the or5 ganization is accredited (and periodically

6 reaccredited) by a private organization under a proc7 ess that the Secretary has determined assures that the

8 organization meets standards that are no less strin9 gent than the standards established under section

10 1856 to carry out this subsection and subsection (c).

11 ‘‘(e) COVERAGE DETERMINATIONS.—

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

13 MedicarePlus organization shall make determinations

14 regarding authorization requests for nonemergency

15 care on a timely basis, depending on the urgency of

16 the situation.

17 ‘‘(2) APPEALS.—

18 ‘‘(A) IN GENERAL.—Appeals from a deter19 mination of an organization denying coverage

20 shall be decided within 30 days of the date of re21 ceipt of medical information, but not later than

22 60 days after the date of the decision.

23 ‘‘(B) PHYSICIAN DECISION ON CERTAIN AP24 PEALS.—Appeal decisions relating to a deter25 mination to deny coverage based on a lack of
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1 medical necessity shall be made only by a physi2 cian.

3 ‘‘(C) EMERGENCY CASES.—Appeals from

4 such a determination involving a life-threatening

5 or emergency situation shall be decided on an ex6 pedited basis.

7 ‘‘(f) GRIEVANCES AND APPEALS.—

8 ‘‘(1) GRIEVANCE MECHANISM.—Each

9 MedicarePlus organization must provide meaningful

10 procedures for hearing and resolving grievances be11 tween the organization (including any entity or indi12 vidual through which the organization provides health

13 care services) and enrollees under this part.

14 ‘‘(2) APPEALS.—An enrollee with an organiza15 tion under this part who is dissatisfied by reason of

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

17 which the enrollee believes the enrollee is entitled and

18 at no greater charge than the enrollee believes the en19 rollee is required to pay is entitled, if the amount in

20 controversy is $100 or more, to a hearing before the

21 Secretary to the same extent as is provided in section

22 205(b), and in any such hearing the Secretary shall

23 make the organization a party. If the amount in con24 troversy is $1,000 or more, the individual or organi25 zation shall, upon notifying the other party, be enti-
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1 tled to judicial review of the Secretary’s final decision

2 as provided in section 205(g), and both the individual

3 and the organization shall be entitled to be parties to

4 that judicial review. In applying sections 205(b) and

5 205(g) as provided in this subparagraph, and in ap6 plying section 205(l) thereto, any reference therein to

7 the Commissioner of Social Security or the Social Se8 curity Administration shall be considered a reference

9 to the Secretary or the Department of Health and

10 Human Services, respectively.

11 ‘‘(3) COORDINATION WITH SECRETARY OF

12 LABOR.—The Secretary shall consult with the Sec13 retary of Labor so as to ensure that the requirements

14 of this subsection, as they apply in the case of griev15 ances referred to in paragraph (1) to which section

16 503 of the Employee Retirement Income Security Act

17 of 1974 applies, are applied in a manner consistent

18 with the requirements of such section 503.

19 ‘‘(g) INFORMATION ON ADVANCE DIRECTIVES.—Each

20 MedicarePlus organization shall meet the requirement of

21 section 1866(f) (relating to maintaining written policies

22 and procedures respecting advance directives).

23 ‘‘(h) APPROVAL OF MARKETING MATERIALS.—
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1 ‘‘(1) SUBMISSION.—Each MedicarePlus organi2 zation may not distribute marketing materials un3 less—

4 ‘‘(A) at least 45 days before the date of dis5 tribution the organization has submitted the ma6 terial to the Secretary for review, and

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

8 distribution of such material.

9 ‘‘(2) REVIEW.—The standards established under

10 section 1856 shall include guidelines for the review of

11 all such material submitted and under such guide12 lines the Secretary shall disapprove such material if

13 the material is materially inaccurate or misleading

14 or otherwise makes a material misrepresentation.

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

16 In the case of material that is submitted under para17 graph (1)(A) to the Secretary or a regional office of

18 the Department of Health and Human Services and

19 the Secretary or the office has not disapproved the

20 distribution of marketing materials under paragraph

21 (1)(B) with respect to a MedicarePlus product in an

22 area, the Secretary is deemed not to have disapproved

23 such distribution in all other areas covered by the

24 product and organization.
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1 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

2 PRACTICES.—Each MedicarePlus organization shall

3 conform to fair marketing standards in relation to

4 MedicarePlus products offered under this part, in5 cluded in the standards established under section

6 1856. Such standards shall include a prohibition

7 against an organization (or agent of such an organi8 zation) completing any portion of any election form

9 under section 1805 on behalf of any individual.

10 ‘‘PROVIDER-SPONSORED ORGANIZATIONS

11 ‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZA12 TION DEFINED.—

13 ‘‘(1) IN GENERAL.—In this part, the term ‘pro14 vider-sponsored organization’ means a public or pri15 vate entity that (in accordance with standards estab16 lished under subsection (b)) is a provider, or group of

17 affiliated providers, that provides a substantial pro18 portion (as defined by the Secretary under such

19 standards) of the health care items and services under

20 the contract under this part directly through the pro21 vider or affiliated group of providers.

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

23 what is a ‘substantial proportion’ for purposes of

24 paragraph (1), the Secretary—

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

26 such an organization to assume responsibility for
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1 a substantial proportion of services in order to

2 assure financial stability and the practical dif3 ficulties in such an organization integrating a

4 very wide range of service providers; and

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

6 relevant differences among organizations, such as

7 their location in an urban or rural area.

8 ‘‘(3) AFFILIATION.—For purposes of this sub9 section, a provider is ‘affiliated’ with another pro10 vider if, through contract, ownership, or otherwise—

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

12 controls, is controlled by, or is under common

13 control with the other,

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

15 lawful combination under which each provider

16 shares, directly or indirectly, substantial finan17 cial risk in connection with their operations,

18 ‘‘(C) both providers are part of a controlled

19 group of corporations under section 1563 of the

20 Internal Revenue Code of 1986, or

21 ‘‘(D) both providers are part of an affiliated

22 service group under section 414 of such Code.

23 ‘‘(4) CONTROL.—For purposes of paragraph (3),

24 control is presumed to exist if one party, directly or

25 indirectly, owns, controls, or holds the power to vote,
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1 or proxies for, not less than 51 percent of the voting

2 rights or governance rights of another.

3 ‘‘(b) PROCESS FOR ESTABLISHING STANDARDS FOR

4 PROVIDER-SPONSORED ORGANIZATIONS.—For process of

5 establishing of standards for provider-sponsored organiza6 tions, see section 1856(c).

7 ‘‘(c) PROCESS FOR STATE CERTIFICATION OF PRO8 VIDER-SPONSORED ORGANIZATIONS.—For process of State

9 certification of provider-sponsored organizations, see section

10 1857(c).

11 ‘‘(d) PREEMPTION OF STATE INSURANCE LICENSING

12 REQUIREMENTS.—

13 ‘‘(1) IN GENERAL.—This section supersedes any

14 State law which—

15 ‘‘(A) requires that a provider-sponsored or16 ganization meet requirements for insurers of

17 health services or health maintenance organiza18 tions doing business in the State with respect to

19 initial capitalization and establishment of finan20 cial reserves against insolvency, or

21 ‘‘(B) imposes requirements that would have

22 the effect of prohibiting the organization from

23 complying with the applicable requirements of

24 this part,
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1 insofar as such the law applies to individuals enrolled

2 with the organization under this part.

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

4 apply with respect to any State law to the extent that

5 such law provides standards or requirements, or pro6 vides for enforcement thereof, so as to meet the re7 quirements of section 1857(c)(2) with respect to ap8 proval by the Secretary of State certification require9 ments thereunder.

10 ‘‘(3) CONSTRUCTION.—Nothing in this subsection

11 shall be construed as affecting the operation of section

12 514 of the Employee Retirement Income Security Act

13 of 1974.

14 ‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS

15 ‘‘SEC. 1855. (a) PAYMENTS.—

16 ‘‘(1) IN GENERAL.—Under a contract under sec17 tion 1858 the Secretary shall pay to each

18 MedicarePlus organization, with respect to coverage of

19 an individual under this part in a payment area for

20 a month, an amount equal to the monthly adjusted

21 MedicarePlus capitation rate (as provided under sub22 section (b)) with respect to that individual for that

23 area.

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

25 shall annually determine, and shall announce (in a

26 manner intended to provide notice to interested par-
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1 ties) not later than September 7 before the calendar

2 year concerned—

3 ‘‘(A) the annual MedicarePlus capitation

4 rate for each payment area for the year, and

5 ‘‘(B) the factors to be used in adjusting such

6 rates under subsection (b) for payments for

7 months in that year.

8 ‘‘(3) ADVANCE NOTICE OF METHODOLOGICAL

9 CHANGES.—At least 45 days before making the an10 nouncement under paragraph (2) for a year, the Sec11 retary shall provide for notice to MedicarePlus orga12 nizations of proposed changes to be made in the meth13 odology or benefit coverage assumptions from the

14 methodology and assumptions used in the previous

15 announcement and shall provide such organizations

16 an opportunity to comment on such proposed changes.

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

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

19 the Secretary shall include an explanation of the as20 sumptions (including any benefit coverage assump21 tions) and changes in methodology used in the an22 nouncement in sufficient detail so that MedicarePlus

23 organizations can compute monthly adjusted

24 MedicarePlus capitation rates for classes of individ25 uals located in each payment area which is in whole
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1 or in part within the service area of such an organi2 zation.

3 ‘‘(b) MONTHLY ADJUSTED MEDICAREPLUS CAPITA4 TION RATE.—

5 ‘‘(1) IN GENERAL.—For purposes of this section,

6 the ‘monthly adjusted MedicarePlus capitation rate’

7 under this subsection, for a month in a year for an

8 individual in a payment area (specified under para9 graph (3)) and in a class (established under paragraph (4)), is 1 10 ⁄12 of the annual MedicarePlus capita11 tion rate specified in paragraph (2) for that area for

12 the year, adjusted to reflect the actuarial value of ben13 efits under this title with respect to individuals in

14 such class compared to the national average for indi15 viduals in all classes.

16 ‘‘(2) ANNUAL MEDICAREPLUS CAPITATION

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

18 MedicarePlus capitation rate for a payment area for

19 a year is equal to the annual MedicarePlus capitation

20 rate for the area for the previous year (or, in the case

21 of 1996, the average annual per capita rate of pay22 ment described in section 1876(a)(1)(C) for the area

23 for 1995) increased by the per capita growth rate for

24 that area and year (as determined under subsection

25 (c)).
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1 ‘‘(3) PAYMENT AREA DEFINED.—In this section,

2 the term ‘payment area’ means a county (or equiva3 lent area specified by the Secretary), except that in

4 the case of the population group described in para5 graph (5)(C), the payment area shall be each State.

6 ‘‘(4) CLASSES.—

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

8 section, the Secretary shall define appropriate

9 classes of enrollees, consistent with paragraph

10 (5), based on age, gender, welfare status, institu11 tionalization, and such other factors as the Sec12 retary determines to be appropriate, so as to en13 sure actuarial equivalence. The Secretary may

14 add to, modify, or substitute for such classes, if

15 such changes will improve the determination of

16 actuarial equivalence.

17 ‘‘(B) RESEARCH.—The Secretary shall con18 duct such research as may be necessary to pro19 vide for greater accuracy in the adjustment of

20 capitation rates under this subsection. Such re21 search may include research into the addition or

22 modification of classes under subparagraph (A).

23 The Secretary shall submit to Congress a report

24 on such research by not later than January 1,

25 1997.
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1 ‘‘(5) DIVISION OF MEDICARE POPULATION.—In

2 carrying out paragraph (4) and this section, the Sec3 retary shall recognize the following separate popu4 lation groups:

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

6 older who are not described in subparagraph (C).

7 ‘‘(B) DISABLED.—Disabled individuals who

8 are under 65 years of age and not described in

9 subparagraph (C).

10 ‘‘(C) INDIVIDUALS WITH END STAGE RENAL

11 DISEASE.—Individuals who are determined to

12 have end stage renal disease.

13 ‘‘(c) PER CAPITA GROWTH RATES.—

14 ‘‘(1) FOR 1996.—

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

16 section and subject to subparagraph (B), the per

17 capita growth rates for 1996, for a payment area

18 assigned to a service utilization cohort under

19 subsection (d), shall be the following:

20 ‘‘(i) LOWEST SERVICE UTILIZATION CO21 HORT.—For areas assigned to the lowest

22 service utilization cohort, 9.7 percent.

23 ‘‘(ii) LOWER SERVICE UTILIZATION CO24 HORT.—For areas assigned to the lower

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

2 COHORT.—For areas assigned to the median

3 service utilization cohort, 5.3 percent.

4 ‘‘(iv) HIGHER SERVICE UTILIZATION

5 COHORT.—For areas assigned to the higher

6 service utilization cohort, 4.7 percent.

7 ‘‘(v) HIGHEST SERVICE UTILIZATION

8 COHORT.—For areas assigned to the highest

9 service utilization cohort, 4.0 percent.

10 ‘‘(B) BUDGET NEUTRAL ADJUSTMENT.—The

11 Secretary shall adjust the per capita growth

12 rates specified in subparagraph (A) for all the

13 areas by such uniform factor as may be nec14 essary to assure that the total capitation pay15 ments under this section during 1996 are the

16 same as the amount such payments would have

17 been if the per capita growth rate for all such

18 areas for 1996 were equal to the national average

19 per capita growth rate, specified in paragraph

20 (3) for 1996.

21 ‘‘(2) FOR SUBSEQUENT YEARS.—

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

23 section and subject to subparagraph (B), the Sec24 retary shall compute a per capita growth rate

25 for each year after 1996, for each payment area
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1 as assigned to a service utilization cohort under

2 subsection (d), consistent with the following

3 rules:

4 ‘‘(i) MEDIAN SERVICE UTILIZATION CO5 HORT SET AT NATIONAL AVERAGE PER CAP6 ITA GROWTH RATE.—The per capita growth

7 rate for areas assigned to the median service

8 utilization cohort for the year shall be the

9 national average per capita growth rate for

10 the year (as specified under paragraph (3)).

11 ‘‘(ii) HIGHEST SERVICE UTILIZATION

12 COHORT SET AT 75 PERCENT OF NATIONAL

13 AVERAGE PER CAPITA GROWTH RATE.—The

14 per capita growth rate for areas assigned to

15 the highest service utilization cohort for the

16 year shall be 75 percent of the national av17 erage per capita growth rate for the year.

18 ‘‘(iii) LOWEST SERVICE UTILIZATION

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

21 RATE.—The per capita growth rate for

22 areas assigned to the lowest service utiliza23 tion cohort for the year shall be 187.5 per24 cent of the national average per capita

25 growth rate for the year.
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1 ‘‘(iv) LOWER SERVICE UTILIZATION CO2 HORT SET AT 150 PERCENT OF NATIONAL

3 AVERAGE PER CAPITA GROWTH RATE.—

4 ‘‘(I) IN GENERAL.—Subject to

5 subclause (II), the per capita growth

6 rate for areas assigned to the lower

7 service utilization cohort for the year

8 shall be 150 percent of the national av9 erage per capita growth rate for the

10 year.

11 ‘‘(II) ADJUSTMENT.—If the Sec12 retary has established under clause (v)

13 the per capita growth rate for areas as14 signed to the higher service utilization

15 cohort for the year at 75 percent of the

16 national average per capita growth

17 rate, the Secretary may provide for a

18 reduced per capita growth rate under

19 subclause (I) to the extent necessary to

20 comply with subparagraph (B).

21 ‘‘(v) HIGHER SERVICE UTILIZATION

22 COHORT.—The per capita growth rate for

23 areas assigned to the higher service utiliza24 tion cohort for the year shall be such percent

25 (not less than 75 percent) of the national
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1 average per capita growth rate, as the Sec2 retary may determine consistent with sub3 paragraph (B).

4 ‘‘(B) AVERAGE PER CAPITA GROWTH RATE

5 AT NATIONAL AVERAGE TO ASSURE BUDGET NEU6 TRALITY.—The Secretary shall compute per cap7 ita growth rates for a year under subparagraph

8 (A) in a manner so that the weighted average

9 per capita growth rate for all areas for the year

10 (weighted to reflect the number of medicare bene11 ficiaries in each area) is equal to the national

12 average per capita growth rate under paragraph

13 (3) for the year.

14 ‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH

15 RATES.—In this subsection, the ‘national average per

16 capita growth rate’ for—

17 ‘‘(A) 1996 is 5.3 percent,

18 ‘‘(B) 1997 is 3.8 percent,

19 ‘‘(C) 1998 is 4.6 percent,

20 ‘‘(D) 1999 is 4.3 percent,

21 ‘‘(E) 2000 is 3.8 percent,

22 ‘‘(F) 2001 is 5.5 percent,

23 ‘‘(G) 2002 is 5.6 percent, and

24 ‘‘(H) each subsequent year is 5.0 percent.
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1 ‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE

2 UTILIZATION COHORTS.—

3 ‘‘(1) IN GENERAL.—For purposes of determining

4 per capita growth rates under subsection (c) for areas

5 for a year, the Secretary shall assign each payment

6 area to a service utilization cohort (based on the serv7 ice utilization index value for that area determined

8 under paragraph (2)) as follows:

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

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

12 lowest service utilization cohort.

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

15 value of at least .80 but less than .90 shall be as16 signed to the lower service utilization cohort.

17 ‘‘(C) MEDIAN SERVICE UTILIZATION CO18 HORT.—Areas with a service utilization index

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

20 assigned to the median service utilization cohort.

21 ‘‘(D) HIGHER SERVICE UTILIZATION CO22 HORT.—Areas with a service utilization index

23 value of at least 1.10 but less than 1.20 shall be

24 assigned to the higher service utilization cohort.
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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 capita

7 growth rate for a payment area for each year (begin8 ning with 1996), the Secretary shall determine for

9 such area and year a service utilization index value,

10 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 rate

15 of payment (described in section 1876(a)(1)(C))

16 for the area for 1995); divided by

17 ‘‘(B) the input-price-adjusted annual na18 tional MedicarePlus capitation rate (as deter19 mined under paragraph (3)) for that area for the

20 year in which the determination is made.

21 ‘‘(3) DETERMINATION OF INPUT-PRICE-ADJUSTED

22 RATES.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (2), the ‘input-price-adjusted annual na25 tional MedicarePlus capitation rate’ for a pay-
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1 ment area for a year is equal to the sum, for all

2 the types of medicare services (as classified by

3 the Secretary), of the product (for each such

4 type) of—

5 ‘‘(i) the national standardized

6 MedicarePlus capitation rate (determined

7 under subparagraph (B)) for the year,

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

9 year which is attributable to such type of

10 services, and

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

12 year and that type of services) the relative

13 input price of such services in the area com14 pared to the national average input price of

15 such services.

16 In applying clause (iii), the Secretary shall, sub17 ject to subparagraph (C), apply those indices

18 under this title that are used in applying (or up19 dating) national payment rates for specific areas

20 and localities.

21 ‘‘(B) NATIONAL STANDARDIZED

22 MEDICAREPLUS CAPITATION RATE.—In this

23 paragraph, the ‘national standardized

24 MedicarePlus capitation rate’ for a year is equal

25 to—
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1 ‘‘(i) the sum (for all payment areas) of

2 the product of (I) the annual MedicarePlus

3 capitation rate for that year for the area

4 under subsection (b)(2), and (II) the aver5 age number of medicare beneficiaries resid6 ing in that area in the year; divided by

7 ‘‘(ii) the total average number of medi8 care beneficiaries residing in all the pay9 ment areas for that year.

10 ‘‘(C) SPECIAL RULES FOR 1996.—In apply11 ing this paragraph for 1996—

12 ‘‘(i) medicare services shall be divided

13 into 2 types of services: part A services and

14 part B services;

15 ‘‘(ii) the proportions described in sub16 paragraph (A)(ii) for such types of services

17 shall be—

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

19 (expressed as a percentage) of the aver20 age annual per capita rate of payment

21 for the area for part A for 1995 to the

22 total average annual per capita rate of

23 payment for the area for parts A and

24 B for 1995, and
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1 ‘‘(II) for part B services, 100 per2 cent minus the ratio described in

3 subclause (I);

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

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

9 for hospitals located in the payment area

10 involved;

11 ‘‘(iv) for part B services—

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

15 area factors under section 1848(e) used

16 to adjust payment rates for physicians’

17 services furnished in the payment area,

18 and

19 ‘‘(II) of the remaining 34 percent

20 of the amount of such payments, 70

21 percent shall be adjusted by the index

22 described in clause (iii);

23 ‘‘(v) the index values shall be computed

24 based only on the beneficiary population de25 scribed in subsection (b)(5)(A).
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1 The Secretary may continue to apply the rules

2 described in this subparagraph (or similar rules)

3 for 1997.

4 ‘‘(e) PAYMENT PROCESS.—

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

6 Secretary shall make monthly payments under this

7 section in advance and in accordance with the rate

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

9 individual enrolled with a MedicarePlus organization

10 under this part.

11 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF EN12 ROLLEES.—

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

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

17 with an organization under this part and the

18 number of such individuals estimated to be so

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

21 ‘‘(B) SPECIAL RULE FOR CERTAIN ENROLL22 EES.—

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

24 (ii), the Secretary may make retroactive ad25 justments under subparagraph (A) to take
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1 into account individuals enrolled during the

2 period beginning on the date on which the

3 individual enrolls with a MedicarePlus or4 ganization under a product operated, spon5 sored, or contributed to by the individual’s

6 employer or former employer (or the em7 ployer or former employer of the individ8 ual’s spouse) and ending on the date on

9 which the individual is enrolled in the orga10 nization under this part, except that for

11 purposes of making such retroactive adjust12 ments under this subparagraph, such period

13 may not exceed 90 days.

14 ‘‘(ii) EXCEPTION.—No adjustment may

15 be made under clause (i) with respect to

16 any individual who does not certify that the

17 organization provided the individual with

18 the disclosure statement described in section

19 1853(a) at the time the individual enrolled

20 with the organization.

21 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

22 HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—

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

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

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

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

6 premium for the product, and

7 ‘‘(B) subject to paragraph (2), the difference

8 between the amount of payment that would oth9 erwise be made and the amount of payment to

10 such organization shall be made directly into a

11 MedicarePlus MSA established (and, if applica12 ble, designated) by the individual under para13 graph (2).

14 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

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

17 case of an individual who has elected coverage under

18 a high deductible/medisave product, no payment shall

19 be made under paragraph (1)(B) on behalf of an in20 dividual for a month unless the individual—

21 ‘‘(A) has established before the beginning of

22 the month (or by such other deadline as the Sec23 retary may specify) a MedicarePlus MSA (as de24 fined in section 137(b) of the Internal Revenue

25 Code of 1986), and
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1 ‘‘(B) if the individual has established more

2 than one MedicarePlus MSA, has designated one

3 of such accounts as the individual’s

4 MedicarePlus MSA for purposes of this part.

5 Under rules under this section, such an individual

6 may change the designation of such account under

7 subparagraph (B) for purposes of this part.

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

9 ACCOUNT CONTRIBUTION.—In the case of an individ10 ual electing a high deductible/medisave product effec11 tive beginning with a month in a year, the amount

12 of the contribution to the MedicarePlus MSA on be13 half of the individual for that month and all succes14 sive months in the year shall be deposited during that

15 first month. In the case of a termination of such an

16 election as of a month before the end of a year, the

17 Secretary shall provide for a procedure for the recov18 ery of deposits attributable to the remaining months

19 in the year.

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

21 a MedicarePlus organization under this section for individ22 uals enrolled under this part with the organization, and

23 payments to a MedicarePlus MSA under subsection

24 (f)(1)(B), shall be made from the Federal Hospital Insur25 ance Trust Fund and the Federal Supplementary Medical
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1 Insurance Trust Fund in such proportion as the Secretary

2 determines reflects the relative weight that benefits under

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

4 of the total benefits under this title.

5 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS6 PITAL STAYS.—In the case of an individual who is receiv7 ing inpatient hospital services from a subsection (d) hos8 pital (as defined in section 1886(d)(1)(B)) as of the effective

9 date of the individual’s—

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

11 product offered by a MedicarePlus organization—

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

13 date of the individual’s discharge shall be made

14 under this title through the MedicarePlus prod15 uct or Non-MedicarePlus option (as the case may

16 be) elected before the election with such organiza17 tion,

18 ‘‘(B) the elected organization shall not be fi19 nancially responsible for payment for such serv20 ices until the date after the date of the individ21 ual’s discharge, and

22 ‘‘(C) the organization shall nonetheless be

23 paid the full amount otherwise payable to the or24 ganization under this part; or
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1 ‘‘(2) termination of election with respect to a

2 MedicarePlus organization under this part—

3 ‘‘(A) the organization shall be financially

4 responsible for payment for such services after

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

6 discharge,

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

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

9 by any succeeding MedicarePlus organization,

10 and

11 ‘‘(C) the terminated organization shall not

12 receive any payment with respect to the individ13 ual under this part during the period the indi14 vidual is not enrolled.

15 ‘‘ESTABLISHMENT OF STANDARDS FOR MEDICARE-PLUS

16 ORGANIZATIONS AND PRODUCTS

17 ‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO STATE18 REGULATED ORGANIZATIONS AND PRODUCTS.—

19 ‘‘(1) RECOMMENDATIONS OF NAIC.—The Sec20 retary shall request the National Association of Insur21 ance Commissioners to develop and submit to the Sec22 retary, not later than 12 months after the date of the

23 enactment of the Medicare Preservation Act of 1995,

24 proposed standards consistent with the requirements

25 of this part for MedicarePlus organizations (other

26 than Taft-Hartley sponsors and provider-sponsored
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1 organizations) and MedicarePlus products offered by

2 such organizations, except that such proposed stand3 ards may relate to MedicarePlus organizations that

4 are qualified associations only with respect to

5 MedicarePlus products offered by them and only if

6 such products are issued by organizations to which

7 section 1851(b)(1) applies.

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

9 standards on a timely basis, the Secretary shall re10 view such standards to determine if the standards

11 meet the requirements of the part. The Secretary shall

12 complete the review of the standards not later than 90

13 days after the date of their submission. The Secretary

14 shall promulgate such proposed standards to apply to

15 organizations and products described in paragraph

16 (1) except to the extent that the Secretary modifies

17 such proposed standards because they do not meet

18 such requirements.

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

20 does not submit such standards on a timely basis, the

21 Secretary shall promulgate such standards by not

22 later than the date the Secretary would otherwise

23 have been required to promulgate standards under

24 paragraph (2).
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1 ‘‘(4) USE OF INTERIM RULES.—For the period in

2 which this part is in effect and standards are being

3 developed and established under the preceding provi4 sions of this subsection, the Secretary shall provide by

5 not later than June 1, 1996, for the application of

6 such interim standards (without regard to any re7 quirements for notice and public comment) as may be

8 appropriate to provide for the expedited implementa9 tion of this part. Such interim standards shall not

10 apply after the date standards are established under

11 the preceding provisions of this subsection.

12 ‘‘(b) TAFT-HARTLEY SPONSORS, QUALIFIED ASSOCIA13 TIONS, AND PRODUCTS.—

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

15 and promulgate by regulation standards consistent

16 with the requirements of this part for Taft-Hartley

17 sponsors, for qualified associations, and for

18 MedicarePlus products offered by such organizations

19 (other than MedicarePlus products offered by quali20 fied associations that are issued by organizations to

21 which section 1851(b)(1) applies).

22 ‘‘(2) CONSULTATION WITH LABOR.—The Sec23 retary shall consult with the Secretary of Labor with

24 respect to such standards for such sponsors and prod25 ucts.
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1 ‘‘(3) TIMING.—Standards under this subsection

2 shall be promulgated at or about the time standards

3 are promulgated under subsection (a).

4 ‘‘(c) ESTABLISHMENT OF STANDARDS FOR PROVIDER5 SPONSORED ORGANIZATIONS.—

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

7 on an expedited basis and using a negotiated rule8 making process under subchapter 3 of chapter 5 of

9 title 5, United States Code, standards that entities

10 must meet to qualify as provider-sponsored organiza11 tions under this part.

12 ‘‘(2) PUBLICATION OF NOTICE.—In carrying out

13 the rulemaking process under this subsection, the Sec14 retary, after consultation with the National Associa15 tion of Insurance Commissioners, the American Acad16 emy of Actuaries, organizations representative of

17 medicare beneficiaries, and other interested parties,

18 shall publish the notice provided for under section

19 564(a) of title 5, United States Code, by not later

20 than 45 days after the date of the enactment of Medi21 care Preservation Act of 1995.

22 ‘‘(3) TARGET DATE FOR PUBLICATION OF

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

24 and for purposes of this subsection, the ‘target date
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1 for publication’ (referred to in section 564(a)(5) of

2 such title) shall be September 1, 1996.

3 ‘‘(4) ABBREVIATED PERIOD FOR SUBMISSION OF

4 COMMENTS.—In applying section 564(c) of such title

5 under this subsection, ‘15 days’ shall be substituted

6 for ‘30 days’.

7 ‘‘(5) APPOINTMENT OF NEGOTIATED RULE8 MAKING COMMITTEE AND FACILITATOR.—The Sec9 retary shall provide for—

10 ‘‘(A) the appointment of a negotiated rule11 making committee under section 565(a) of such

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

13 the comment period provided for under section

14 564(c) of such title (as shortened under para15 graph (4)), and

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

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

18 days after the date of appointment of the com19 mittee.

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

21 negotiated rulemaking committee appointed under

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

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

24 progress on achieving a concensus with regard to the

25 rulemaking proceeding and whether such consensus is
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1 likely to occur before one month before the target date

2 for publication of the rule. If the committee reports

3 that the committee has failed to make significant

4 progress towards such consensus or is unlikely to

5 reach such consensus by the target date, the Secretary

6 may terminate such process and provide for the publi7 cation of a rule under this subsection through such

8 other methods as the Secretary may provide.

9 ‘‘(7) FINAL COMMITTEE REPORT.—If the commit10 tee is not terminated under paragraph (6), the rule11 making committee shall submit a report containing a

12 proposed rule by not later than one month before the

13 target publication date.

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

15 shall publish a rule under this subsection in the Fed16 eral Register by not later than the target publication

17 date. Such rule shall be effective and final imme18 diately on an interim basis, but is subject to change

19 and revision after public notice and opportunity for

20 a period (of not less than 60 days) for public com21 ment. In connection with such rule, the Secretary

22 shall specify the process for the timely review and ap23 proval of applications of entities to be certified as

24 provider-sponsored organizations pursuant to such

25 rules and consistent with this subsection.
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1 ‘‘(9) PUBLICATION OF RULE AFTER PUBLIC COM2 MENT.—The Secretary shall provide for consideration

3 of such comments and republication of such rule by

4 not later than 1 year after the target publication

5 date.

6 ‘‘(10) PROCESS FOR APPROVAL OF APPLICATIONS

7 FOR CERTIFICATION.—

8 ‘‘(A) IN GENERAL.—The Secretary shall es9 tablish a process for the receipt and approval of

10 applications of entities for certification as pro11 vider-sponsored organizations under this part.

12 Under such process, the Secretary shall act upon

13 a complete application submitted within 60 days

14 after the date it is received.

15 ‘‘(B) CIRCULATION OF PROPOSED APPLICA16 TION FORM.—By March 1, 1996, the Secretary,

17 after consultation with the negotiated rule18 making committee, shall circulate a proposed ap19 plication form that could be used by entities con20 sidering becoming certified as a provider-spon21 sored organization under this part.

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

23 establishing standards (other than on an interim basis)

24 under the previous provisions of this section, the Secretary

25 shall seek to provide for consistency (as appropriate) across
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1 the different types of MedicarePlus organizations, in order

2 to promote equitable treatment of different types of organi3 zations and consistent protection for individuals who elect

4 products offered by the different types of MedicarePlus orga5 nizations.

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

7 STANDARDS.—To the extent practicable and consistent with

8 the requirements of this part, standards established on an

9 interim basis to carry out requirements of this part may

10 be based on currently applicable standards, such as the

11 rules established under section 1876 (as in effect as of the

12 date of the enactment of this section) to carry out analogous

13 provisions of such section or standards established or devel14 oped for application in the private health insurance market.

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

16 WITH A CONTRACT.—In the case of a MedicarePlus organi17 zation with a contract in effect under this part at the time

18 standards applicable to the organization under this section

19 are changed, the organization may elect not to have such

20 changes apply to the organization until the end of the cur21 rent contract year (or, if there is less than 6 months remain22 ing in the contract year, until 1 year after the end of the

23 current contract year).

24 ‘‘(g) RELATION TO STATE LAWS.—The standards es25 tablished under this section shall supersede any State law
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1 or regulation with respect to MedicarePlus products which

2 are offered by MedicarePlus organizations and are issued

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

4 extent such law or regulation is inconsistent with such

5 standards.

6 ‘‘MEDICARE-PLUS CERTIFICATION

7 ‘‘SEC. 1857. (a) STATE CERTIFICATION PROCESS FOR

8 STATE-REGULATED ORGANIZATIONS.—

9 ‘‘(1) APPROVAL OF STATE PROCESS.—The Sec10 retary shall approve a MedicarePlus certification and

11 enforcement program established by a State for ap12 plying the standards established under section 1856 to

13 MedicarePlus organizations (other than Taft-Hartley

14 sponsors and provider-sponsored organizations) and

15 MedicarePlus products offered by such organizations

16 if the Secretary determines that the program effec17 tively provides for the application and enforcement of

18 such standards in the State with respect to such orga19 nizations and products. Such program shall provide

20 for certification of compliance of MedicarePlus orga21 nizations and products with the applicable require22 ments of this part not less often than once every 3

23 years.

24 ‘‘(2) EFFECT OF CERTIFICATION UNDER STATE

25 PROCESS.—A MedicarePlus organization and

26 MedicarePlus product offered by such an organization
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1 that is certified under such program is considered to

2 have been certified under this subsection with respect

3 to the offering of the product to individuals residing

4 in the State.

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

6 fees on organizations seeking certification under this

7 subsection in such amounts as the State deems suffi8 cient to finance the costs of such certification. Nothing

9 in this paragraph shall be construed as restricting a

10 State’s authority to impose premium taxes, other

11 taxes, or other levies.

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

13 review State programs approved under paragraph (1)

14 to determine if they continue to provide for certifi15 cation and enforcement described in such paragraph.

16 If the Secretary finds that a State program no longer

17 so provides, before making a final determination, the

18 Secretary shall provide the State an opportunity to

19 adopt such a plan of correction as would permit the

20 State program to meet the requirements of paragraph

21 (1). If the Secretary makes a final determination that

22 the State program, after such an opportunity, fails to

23 meet such requirements, the provisions of subsection

24 (b) shall apply to MedicarePlus organizations and

25 products in the State.
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1 ‘‘(5) EFFECT OF NO STATE PROGRAM.—Begin2 ning on the date standards are established under sec3 tion 1856, in the case of organizations and products

4 in States in which a certification program has not

5 been approved and in operation under paragraph (1),

6 the Secretary shall establish a process for the certifi7 cation of MedicarePlus organizations (other than

8 Taft-Hartley sponsors and provider-sponsored organi9 zations) and products of such organizations as meet10 ing such standards.

11 ‘‘(6) PUBLICATION OF LIST OF APPROVED STATE

12 PROGRAMS.—The Secretary shall publish (and peri13 odically update) a list of those State programs which

14 are approved for purposes of this subsection.

15 ‘‘(b) FEDERAL CERTIFICATION PROCESS FOR TAFT16 HARTLEY SPONSORS AND PROVIDER-SPONSORED ORGANI17 ZATIONS.—

18 ‘‘(1) ESTABLISHMENT.—The Secretary shall es19 tablish a process for the certification of Taft-Hartley

20 sponsors and provider-sponsored organizations and

21 MedicarePlus products offered by such sponsors and

22 organizations as meeting the applicable standards es23 tablished under section 1856.

24 ‘‘(2) INVOLVEMENT OF SECRETARY OF LABOR.—

25 Such process shall be established and operated in co-
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1 operation with the Secretary of Labor with respect to

2 Taft-Hartley sponsors.

3 ‘‘(3) USE OF STATE LICENSING AND PRIVATE AC4 CREDITATION PROCESSES.—

5 ‘‘(A) IN GENERAL.—The process under this

6 subsection shall, to the maximum extent prac7 ticable, provide that MedicarePlus organizations

8 and products that are licensed or certified

9 through a qualified private accreditation process

10 that the Secretary finds applies standards that

11 are no less stringent than the requirements of

12 this part are deemed to meet the corresponding

13 requirements of this part for such an organiza14 tion or product.

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

16 of an accreditation under subparagraph (A)

17 shall be valid only for such period as the Sec18 retary specifies.

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

20 user fees on entities seeking certification under this

21 subsection in such amounts as the Secretary deems

22 sufficient to finance the costs of such certification.

23 ‘‘(c) CERTIFICATION OF PROVIDER-SPONSORED ORGA24 NIZATIONS BY STATES.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall establish

2 a process under which a State may propose to provide

3 for certification of entities as meeting the require4 ments of this part to be provider-sponsored organiza5 tions.

6 ‘‘(2) CONDITIONS FOR APPROVAL.—The Sec7 retary may not approve a State program for certifi8 cation under paragraph (1) unless the Secretary de9 termines that the certification program applies stand10 ards and requirements that are identical to the stand11 ards and requirements of this part and the applicable

12 provisions for enforcement of such standards and re13 quirements do not result in a lower level or quality

14 of enforcement than that which is otherwise applicable

15 under this title.

16 ‘‘(d) NOTICE TO ENROLLEES IN CASE OF DECERTI17 FICATION.—If a MedicarePlus organization or product is

18 decertified under this section, the organization shall notify

19 each enrollee with the organization and product under this

20 part of such decertification.

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

22 MedicarePlus products offered by a MedicarePlus organiza23 tion that is a qualified association (as defined in section

24 1854(c)(4)(C)) and issued by an organization to which sec25 tion 1851(b)(1) applies or by a provider-sponsored organi-
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1 zation (as defined in section 1854(a)), nothing in this sec2 tion shall be construed as limiting the authority of States

3 to regulate such products.

4 ‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS

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

6 not permit the election under section 1805 of a

7 MedicarePlus product offered by a MedicarePlus organiza8 tion under this part, and no payment shall be made under

9 section 1856 to an organization, unless the Secretary has

10 entered into a contract under this section with an organiza11 tion with respect to the offering of such product. Such a

12 contract with an organization may cover more than one

13 MedicarePlus product. Such contract shall provide that the

14 organization agrees to comply with the applicable require15 ments and standards of this part and the terms and condi16 tions of payment as provided for in this part.

17 ‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—

18 ‘‘(1) IN GENERAL.—Subject to paragraphs (1)

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

20 under this section with a MedicarePlus organization

21 (other than a Taft-Hartley sponsor) unless the organi22 zation has at least 5,000 individuals (or 1,500 indi23 viduals in the case of an organization that is a pro24 vider-sponsored organization) who are receiving

25 health benefits through the organization, except that

26 the standards under section 1856 may permit the or-
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1 ganization to have a lesser number of beneficiaries

2 (but not less than 500 in the case of an organization

3 that is a provider-sponsored organization) if the orga4 nization primarily serves individuals residing outside

5 of urbanized areas.

6 ‘‘(2) EXCEPTION FOR HIGH DEDUCTIBLE/

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

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

9 deductible/medisave product.

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

11 may waive the requirement of paragraph (1) during

12 the first 3 contract years with respect to an organiza13 tion.

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

15 ‘‘(1) PERIOD.—Each contract under this section

16 shall be for a term of at least one year, as determined

17 by the Secretary, and may be made automatically re18 newable from term to term in the absence of notice by

19 either party of intention to terminate at the end of

20 the current term.

21 ‘‘(2) TERMINATION AUTHORITY.—In accordance

22 with procedures established under subsection (h), the

23 Secretary may at any time terminate any such con24 tract or may impose the intermediate sanctions de25 scribed in an applicable paragraph of subsection (g)
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1 on the MedicarePlus organization if the Secretary de2 termines that the organization—

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

4 the contract;

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

7 administration of this part;

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

9 in the best interests of the individuals covered

10 under the contract; or

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

13 ‘‘(3) EFFECTIVE DATE OF CONTRACTS.—The ef14 fective date of any contract executed pursuant to this

15 section shall be specified in the contract, except that

16 in no case shall a contract under this section which

17 provides for coverage under a high deductible/

18 medisave account be effective before January 1997

19 with respect to such coverage.

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

21 may not enter into a contract with a MedicarePlus

22 organization if a previous contract with that organi23 zation under this section was terminated at the re24 quest of the organization within the preceding five-
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1 year period, except in circumstances which warrant

2 special consideration, as determined by the Secretary.

3 ‘‘(5) NO CONTRACTING AUTHORITY.—The author4 ity vested in the Secretary by this part may be per5 formed without regard to such provisions of law or

6 regulations relating to the making, performance,

7 amendment, or modification of contracts of the Unit8 ed States as the Secretary may determine to be incon9 sistent with the furtherance of the purpose of this

10 title.

11 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY

12 PROTECTIONS.—

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

14 under this section shall provide that the Secretary, or

15 any person or organization designated by the Sec16 retary—

17 ‘‘(A) shall have the right to inspect or other18 wise evaluate (i) the quality, appropriateness,

19 and timeliness of services performed under the

20 contract and (ii) the facilities of the organization

21 when there is reasonable evidence of some need

22 for such inspection, and

23 ‘‘(B) shall have the right to audit and in24 spect any books and records of the MedicarePlus

25 organization that pertain (i) to the ability of the
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1 organization to bear the risk of potential finan2 cial losses, or (ii) to services performed or deter3 minations of amounts payable under the con4 tract.

5 ‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI6 NATION.—Each contract under this section shall re7 quire the organization to provide (and pay for) writ8 ten notice in advance of the contract’s termination, as

9 well as a description of alternatives for obtaining ben10 efits under this title, to each individual enrolled with

11 the organization under this part.

12 ‘‘(3) DISCLOSURE.—

13 ‘‘(A) IN GENERAL.—Each MedicarePlus or14 ganization shall, in accordance with regulations

15 of the Secretary, report to the Secretary finan16 cial information which shall include the follow17 ing:

18 ‘‘(i) Such information as the Secretary

19 may require demonstrating that the organi20 zation has a fiscally sound operation.

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

22 with the Health Care Financing Adminis23 tration containing the information required

24 to be reported under section 1124 by disclos25 ing entities.
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1 ‘‘(iii) A description of transactions, as

2 specified by the Secretary, between the orga3 nization and a party in interest. Such

4 transactions shall include—

5 ‘‘(I) any sale or exchange, or leas6 ing of any property between the orga7 nization and a party in interest;

8 ‘‘(II) any furnishing for consider9 ation of goods, services (including

10 management services), or facilities be11 tween the organization and a party in

12 interest, but not including salaries

13 paid to employees for services provided

14 in the normal course of their employ15 ment and health services provided to

16 members by hospitals and other pro17 viders and by staff, medical group (or

18 groups), individual practice associa19 tion (or associations), or any combina20 tion thereof; and

21 ‘‘(III) any lending of money or

22 other extension of credit between an or23 ganization and a party in interest.

24 The Secretary may require that information re25 ported respecting an organization which controls,
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1 is controlled by, or is under common control

2 with, another entity be in the form of a consoli3 dated financial statement for the organization

4 and such entity.

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

6 the purposes of this paragraph, the term ‘party

7 in interest’ means—

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

9 employee responsible for management or ad10 ministration of a MedicarePlus organiza11 tion, any person who is directly or indi12 rectly the beneficial owner of more than 5

13 percent of the equity of the organization,

14 any person who is the beneficial owner of a

15 mortgage, deed of trust, note, or other inter16 est secured by, and valuing more than 5

17 percent of the organization, and, in the case

18 of a MedicarePlus organization organized

19 as a nonprofit corporation, an incorporator

20 or member of such corporation under appli21 cable State corporation law;

22 ‘‘(ii) any entity in which a person de23 scribed in clause (i)—

24 ‘‘(I) is an officer or director;
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1 ‘‘(II) is a partner (if such entity

2 is organized as a partnership);

3 ‘‘(III) has directly or indirectly a

4 beneficial interest of more than 5 per5 cent of the equity; or

6 ‘‘(IV) has a mortgage, deed of

7 trust, note, or other interest valuing

8 more than 5 percent of the assets of

9 such entity;

10 ‘‘(iii) any person directly or indirectly

11 controlling, controlled by, or under common

12 control with an organization; and

13 ‘‘(iv) any spouse, child, or parent of an

14 individual described in clause (i).

15 ‘‘(C) ACCESS TO INFORMATION.—Each

16 MedicarePlus organization shall make the infor17 mation reported pursuant to subparagraph (A)

18 available to its enrollees upon reasonable request.

19 ‘‘(4) LOAN INFORMATION.—The contract shall re20 quire the organization to notify the Secretary of loans

21 and other special financial arrangements which are

22 made between the organization and subcontractors,

23 affiliates, and related parties.

24 ‘‘(e) ADDITIONAL CONTRACT TERMS.—The contract

25 shall contain such other terms and conditions not inconsist-
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1 ent with this part (including requiring the organization to

2 provide the Secretary with such information) as the Sec3 retary may find necessary and appropriate.

4 ‘‘(f) INTERMEDIATE SANCTIONS.—

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

6 that a MedicarePlus organization with a contract

7 under this section—

8 ‘‘(A) fails substantially to provide medically

9 necessary items and services that are required

10 (under law or under the contract) to be provided

11 to an individual covered under the contract, if

12 the failure has adversely affected (or has substan13 tial likelihood of adversely affecting) the individ14 ual;

15 ‘‘(B) imposes premiums on individuals en16 rolled under this part in excess of the premiums

17 permitted;

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

19 individual in violation of the provisions of this

20 part;

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

22 reasonably be expected to have the effect of deny23 ing or discouraging enrollment (except as per24 mitted by this part) by eligible individuals with

25 the organization whose medical condition or his-
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1 tory indicates a need for substantial future medi2 cal services;

3 ‘‘(E) misrepresents or falsifies information

4 that is furnished—

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

6 or

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

8 entity under this part;

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

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

11 ‘‘(G) employs or contracts with any indi12 vidual or entity that is excluded from participa13 tion under this title under section 1128 or 1128A

14 for the provision of health care, utilization re15 view, medical social work, or administrative

16 services or employs or contracts with any entity

17 for the provision (directly or indirectly) through

18 such an excluded individual or entity of such

19 services;

20 the Secretary may provide, in addition to any other

21 remedies authorized by law, for any of the remedies

22 described in paragraph (2).

23 ‘‘(2) REMEDIES.—The remedies described in this

24 paragraph are—
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1 ‘‘(A) civil money penalties of not more than

2 $25,000 for each determination under paragraph

3 (1) or, with respect to a determination under

4 subparagraph (D) or (E)(i) of such paragraph,

5 of not more than $100,000 for each such deter6 mination, plus, with respect to a determination

7 under paragraph (1)(B), double the excess

8 amount charged in violation of such paragraph

9 (and the excess amount charged shall be deducted

10 from the penalty and returned to the individual

11 concerned), and plus, with respect to a deter12 mination under paragraph (1)(D), $15,000 for

13 each individual not enrolled as a result of the

14 practice involved,

15 ‘‘(B) suspension of enrollment of individ16 uals under this part after the date the Secretary

17 notifies the organization of a determination

18 under paragraph (1) and until the Secretary is

19 satisfied that the basis for such determination

20 has been corrected and is not likely to recur, or

21 ‘‘(C) suspension of payment to the organiza22 tion under this part for individuals enrolled

23 after the date the Secretary notifies the organiza24 tion of a determination under paragraph (1)

25 and until the Secretary is satisfied that the basis
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1 for such determination has been corrected and is

2 not likely to recur.

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

4 case of a MedicarePlus organization for which the

5 Secretary makes a determination under subsection

6 (c)(2) the basis of which is not described in para7 graph (1), the Secretary may apply the following in8 termediate sanctions:

9 ‘‘(A) civil money penalties of not more than

10 $25,000 for each determination under subsection

11 (c)(2) if the deficiency that is the basis of the de12 termination has directly adversely affected (or

13 has the substantial likelihood of adversely affect14 ing) an individual covered under the organiza15 tion’s contract;

16 ‘‘(B) civil money penalties of not more than

17 $10,000 for each week beginning after the initi18 ation of procedures by the Secretary under sub19 section (h) during which the deficiency that is

20 the basis of a determination under subsection

21 (c)(2) exists; and

22 ‘‘(C) suspension of enrollment of individuals

23 under this part after the date the Secretary noti24 fies the organization of a determination under

25 subsection (c)(2) and until the Secretary is satis-
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1 fied that the deficiency that is the basis for the

2 determination has been corrected and is not like3 ly to recur.

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

5 The provisions of section 1128A (other than sub6 sections (a) and (b)) shall apply to a civil money

7 penalty under paragraph (1) or (2) in the same man8 ner as they apply to a civil money penalty or pro9 ceeding under section 1128A(a).

10 ‘‘(g) PROCEDURES FOR IMPOSING SANCTIONS.—The

11 Secretary may terminate a contract with a MedicarePlus

12 organization under this section or may impose the inter13 mediate sanctions described in subsection (f) on the organi14 zation in accordance with formal investigation and compli15 ance procedures established by the Secretary under which—

16 ‘‘(1) the Secretary provides the organization with

17 the opportunity to develop and implement a correc18 tive action plan to correct the deficiencies that were

19 the basis of the Secretary’s determination under sub20 section (c)(2);

21 ‘‘(2) the Secretary shall impose more severe sanc22 tions on organizations that have a history of defi23 ciencies or that have not taken steps to correct defi24 ciencies the Secretary has brought to their attention;
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1 ‘‘(3) there are no unreasonable or unnecessary

2 delays between the finding of a deficiency and the im3 position of sanctions; and

4 ‘‘(4) the Secretary provides the organization with

5 reasonable notice and opportunity for hearing (in6 cluding the right to appeal an initial decision) before

7 imposing any sanction or terminating the contract.’’.

8 (b) CONFORMING REFERENCES TO PREVIOUS PART

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

10 enactment of this Act) to part C of title XVIII of the Social

11 Security Act is deemed a reference to part D of such title

12 (as in effect after such date).

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

14 to carry out the amendment made by subsection (a) in a

15 timely manner, the Secretary of Health and Human Serv16 ices may promulgate regulations that take effect on an in17 terim basis, after notice and pending opportunity for public

18 comment.

19 (d) ADVANCE DIRECTIVES.—Section 1866(f) (42

20 U.S.C. 1395cc(f)) is amended—

21 (1) in paragraph (1)—

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

23 ‘‘1833(s),’’, and

24 (B) by inserting ‘‘, MedicarePlus organiza25 tion,’’ after ‘‘provider of services’’, and
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1 (2) by adding at the end the following new para2 graph:

3 ‘‘(4) Nothing in this subsection shall be construed to

4 require the provision of information regarding assisted sui5 cide, euthanasia, or mercy killing.’’.

6 (e) CONFORMING AMENDMENT.—Section

7 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended by

8 inserting before the semicolon at the end the following: ‘‘and

9 in the case of hospitals to accept as payment in full for

10 inpatient hospital services that are emergency services (as

11 defined in section 1853(b)(4)) that are covered under this

12 title and are furnished to any individual enrolled under

13 part C with a MedicarePlus organization which does not

14 have a contract establishing payment amounts for services

15 furnished to members of the organization the amounts that

16 would be made as a payment in full under this title if the

17 individuals were not so enrolled’’.

18 SEC. 15003. DUPLICATION AND COORDINATION OF MEDI19 CARE-RELATED PRODUCTS.

20 (a) TREATMENT OF CERTAIN HEALTH INSURANCE

21 POLICIES AS NONDUPLICATIVE.—

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

23 enactment of section 4354 of the Omnibus Budget

24 Reconciliation Act of 1990, section 1882(d)(3)(A) (42

25 U.S.C. 1395ss(d)(3)(A)) is amended—
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1 (A) by amending clause (i) to read as fol2 lows:

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

4 individual entitled to benefits under part A or enrolled

5 under part B of this title or electing a MedicarePlus prod6 uct under section 1805—

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

8 medicare supplemental policy) with knowledge that

9 the policy duplicates health benefits to which the indi10 vidual is otherwise entitled under this title or title

11 XIX,

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

13 MedicarePlus product, a medicare supplemental pol14 icy with knowledge that the individual is entitled to

15 benefits under another medicare supplemental policy,

16 or

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

18 MedicarePlus product, a medicare supplemental pol19 icy with knowledge that the policy duplicates health

20 benefits to which the individual is otherwise entitled

21 under this title or under another medicare supple22 mental policy.’’;

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

24 and inserting ‘‘clause (i)(II)’’; and
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1 (C) by adding at the end the following new

2 clauses:

3 ‘‘(iv) For purposes of this subparagraph a health in4 surance policy shall be considered to ‘duplicate’ benefits

5 under this title only when, under its terms, the policy pro6 vides specific reimbursement for identical items and serv7 ices to the extent paid for under this title, and a health

8 insurance policy providing for benefits which are payable

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

10 health benefit coverage of such individual is not considered

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

12 ‘‘(v) For purposes of this subparagraph, a health in13 surance policy (or a rider to an insurance contract which

14 is not a health insurance policy), including a policy (such

15 as a long-term care insurance contract described in section

16 7702B(b) of the Internal Revenue Code of 1986, as added

17 by the Contract with America Tax Relief Act of 1995 (H.R.

18 1215)) providing benefits for long-term care, nursing home

19 care, home health care, or community-based care, that co20 ordinates against or excludes items and services available

21 or paid for under this title and (for policies sold or issued

22 after January 1, 1996) that discloses such coordination or

23 exclusion in the policy’s outline of coverage, is not consid24 ered to ‘duplicate’ health benefits under this title. For pur25 poses of this clause, the terms ‘coordinates’ and ‘coordina-
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1 tion’ mean, with respect to a policy in relation to health

2 benefits under this title, that the policy under its terms is

3 secondary to, or excludes from payment, items and services

4 to the extent available or paid for under this title.

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

6 criminal or civil penalty may be imposed at any time

7 under this subparagraph and no legal action may be

8 brought or continued at any time in any Federal or State

9 court if the penalty or action is based on an act or omission

10 that occurred after November 5, 1991, and before the date

11 of the enactment of this clause, and relates to the sale, issu12 ance, or renewal of any health insurance policy during such

13 period, if such policy meets the requirements of clause (iv)

14 or (v).

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

16 or issuance of a policy (or rider) that meets the require17 ments of this title pursuant to clause (iv) or (v) to an indi18 vidual entitled to benefits under part A or enrolled under

19 part B or enrolled under a MedicarePlus product under

20 part C, any requirement based on the premise that such

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

23 (2) CONFORMING AMENDMENTS.—Section

24 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—
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1 (A) in subparagraph (B), by inserting ‘‘(in2 cluding any MedicarePlus product)’’ after

3 ‘‘health insurance policies’’;

4 (B) in subparagraph (C)—

5 (i) by striking ‘‘with respect to (i)’’

6 and inserting ‘‘with respect to’’, and

7 (ii) by striking ‘‘, (ii) the sale’’ and all

8 that follows up to the period at the end; and

9 (C) by striking subparagraph (D).

10 (3) MEDICAREPLUS PRODUCTS NOT TREATED AS

11 MEDICARE SUPPLEMENTARY POLICIES.—Section

12 1882(g) (42 U.S.C. 1395ss(g)) is amended by insert13 ing ‘‘a MedicarePlus product or’’ after ‘‘and does not

14 include’’

15 (4) REPORT ON DUPLICATION AND COORDINA16 TION OF HEALTH INSURANCE POLICIES THAT ARE NOT

17 MEDICARE SUPPLEMENTAL POLICIES.—Not later than

18 3 years after the date of the enactment of this Act, the

19 Secretary of Health and Human Services shall pre20 pare and submit to Congress a report on the advis21 ability and feasibility of restricting the sale to medi22 care beneficiaries of health insurance policies that du23 plicate (within the meaning of section 1882(d)(3)(A)

24 of the Social Security Act) other health insurance

25 policies that such a beneficiary may have. In prepar-
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1 ing such report, the Secretary shall seek the advice of

2 the National Association of Insurance Commissioners

3 and shall take into account the standards established

4 under section 1807 of the Social Security Act for the

5 electronic coordination of benefits.

6 (b) ADDITIONAL RULES RELATING TO INDIVIDUALS

7 ENROLLED IN MEDICAREPLUS PRODUCTS.—Section 1882

8 (42 U.S.C. 1395ss) is further amended by adding at the

9 end the following new subsection:

10 ‘‘(u)(1) Notwithstanding the previous provisions of

11 this section, the following provisions shall not apply to a

12 health insurance policy (other than a medicare supple13 mental policy) provided to an individual who has elected

14 the MedicarePlus option under section 1805:

15 ‘‘(A) Subsections (o)(1), (o)(2), (p)(1)(A)(i),

16 (p)(2), (p)(3), (p)(8), and (p)(9) (insofar as they re17 late to limitations on benefits or groups of benefits

18 that may be offered).

19 ‘‘(B) Subsection (r) (relating to loss-ratios).

20 ‘‘(2)(A) It is unlawful for a person to sell or issue a

21 policy described in subparagraph (B) to an individual with

22 knowledge that the individual has in effect under section

23 1805 an election of a high deductible/medisave product.

24 ‘‘(B) A policy described in this subparagraph is a

25 health insurance policy that provides for coverage of ex-
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1 penses that are otherwise required to be counted toward

2 meeting the annual deductible amount provided under the

3 high deductible/medisave product.’’.

4 SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI5 CARE HMO PROGRAM.

6 (a) TRANSITION FROM CURRENT CONTRACTS.—

7 (1) LIMITATION ON NEW CONTRACTS.—

8 (A) NO NEW RISK-SHARING CONTRACTS

9 AFTER NEW STANDARDS ESTABLISHED.—The

10 Secretary of Health and Human Services (in

11 this section referred to as the ‘‘Secretary’’) shall

12 not enter into any risk-sharing contract under

13 section 1876 of the Social Security Act with an

14 eligible organization for any contract year begin15 ning on or after the date standards for

16 MedicarePlus organizations and products are

17 first established under section 1856(a) of such

18 Act with respect to MedicarePlus organizations

19 that are insurer or health maintenance organiza20 tions unless such a contract had been in effect

21 under section 1876 of such Act for the organiza22 tion for the previous contract year.

23 (B) NO NEW COST REIMBURSEMENT CON24 TRACTS.—The Secretary shall not enter into any

25 cost reimbursement contract under section 1876
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1 of the Social Security Act beginning for any con2 tract year beginning on or after the date of the

3 enactment of this Act.

4 (2) TERMINATION OF CURRENT CONTRACTS.—

5 (A) RISK-SHARING CONTRACTS.—Notwith6 standing any other provision of law, the Sec7 retary shall not extend or continue any risk8 sharing contract with an eligible organization

9 under section 1876 of the Social Security Act

10 (for which a contract was entered into consistent

11 with paragraph (1)(A)) for any contract year be12 ginning on or after 1 year after the date stand13 ards described in paragraph (1)(A) are estab14 lished.

15 (B) COST REIMBURSEMENT CONTRACTS.—

16 The Secretary shall not extend or continue any

17 reasonable cost reimbursement contract with an

18 eligible organization under section 1876 of the

19 Social Security Act for any contract year begin20 ning on or after January 1, 1998.

21 (b) CONFORMING PAYMENT RATES.—

22 (1) RISK-SHARING CONTRACTS.—Notwithstand23 ing any other provision of law, the Secretary shall

24 provide that payment amounts under risk-sharing

25 contracts under section 1876(a) of the Social Security
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1 Act for months in a year (beginning with January

2 1996) shall be computed—

3 (A) with respect to individuals both entitled

4 to benefits under both parts A and B of title

5 XVIII of such Act, by substituting payment rates

6 under section 1855(a) of such Act for the pay7 ment rates otherwise established under section

8 1876(a) of such Act, and

9 (B) with respect to individuals only entitled

10 to benefits under part B of such title, by sub11 stituting an appropriate proportion of such rates

12 (reflecting the relative proportion of payments

13 under such title attributable to such part) for the

14 payment rates otherwise established under sec15 tion 1876(a) of such Act.

16 For purposes of carrying out this paragraph for pay17 ment for months in 1996, the Secretary shall com18 pute, announce, and apply the payment rates under

19 section 1855(a) of such Act (notwithstanding any

20 deadlines specified in such section) in as timely a

21 manner as possible and may (to the extent necessary)

22 provide for retroactive adjustment in payments made

23 not in accordance with such rates.

24 (2) COST CONTRACTS.—Notwithstanding any

25 other provision of law, the Secretary shall provide
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1 that payment amounts under cost reimbursement con2 tracts under section 1876(a) of the Social Security

3 Act shall take into account adjustments in payment

4 amounts made in parts A and B of title XVIII of

5 such Act pursuant to the amendments made by this

6 title.

7 (c) ELIMINATION OF 50:50 RULE.—

8 (1) IN GENERAL.—Section 1876 (42 U.S.C.

9 1395mm) is amended by striking subsection (f).

10 (2) CONFORMING AMENDMENTS.—Section 1876

11 is further amended—

12 (A) in subsection (c)(3)(A)(i), by striking

13 ‘‘would result in failure to meet the requirements

14 of subsection (f) or’’, and

15 (B) in subsection (i)(1)(C), by striking ‘‘(e),

16 and (f)’’ and inserting ‘‘and (e)’’.

17 (3) EFFECTIVE DATE.—The amendments made

18 by this section shall apply to contract years beginning

19 on or after January 1, 1996.

20 PART 2—SPECIAL RULES FOR MEDICAREPLUS

21 MEDICAL SAVINGS ACCOUNTS

22 SEC. 15011. MEDICAREPLUS MSA’S.

23 (a) IN GENERAL.—Part III of subchapter B of chapter

24 1 of the Internal Revenue Code of 1986 (relating to amounts

25 specifically excluded from gross income) is amended by re-
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1 designating section 137 as section 138 and by inserting

2 after section 136 the following new section:

3 ‘‘SEC. 137. MEDICAREPLUS MSA’S.

4 ‘‘(a) EXCLUSION.—Gross income shall not include any

5 payment to the MedicarePlus MSA of an individual by the

6 Secretary of Health and Human Services under section

7 1855(f)(1)(B) of the Social Security Act.

8 ‘‘(b) MEDICAREPLUS MSA.—For purposes of this sec9 tion—

10 ‘‘(1) MEDICAREPLUS MSA.—The term

11 ‘MedicarePlus MSA’ means a trust created or orga12 nized in the United States exclusively for the purpose

13 of paying the qualified medical expenses of the ac14 count holder, but only if the written governing instru15 ment creating the trust meets the following require16 ments:

17 ‘‘(A) Except in the case of a trustee-to-trust18 ee transfer described in subsection (d)(4), no con19 tribution will be accepted unless it is made by

20 the Secretary of Health and Human Services

21 under section 1855(f)(1)(B) of the Social Secu22 rity Act.

23 ‘‘(B) The trustee is a bank (as defined in

24 section 408(n)), an insurance company (as de25 fined in section 816), or another person who
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1 demonstrates to the satisfaction of the Secretary

2 that the manner in which such person will ad3 minister the trust will be consistent with the re4 quirements of this section.

5 ‘‘(C) No part of the trust assets will be in6 vested in life insurance contracts.

7 ‘‘(D) The assets of the trust will not be com8 mingled with other property except in a common

9 trust fund or common investment fund.

10 ‘‘(E) The interest of an individual in the

11 balance in his account is nonforfeitable.

12 ‘‘(F) Trustee-to-trustee transfers described

13 in subsection (d)(4) may be made to and from

14 the trust.

15 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

16 ‘‘(A) IN GENERAL.—The term ‘qualified

17 medical expenses’ means, with respect to an ac18 count holder, amounts paid by such holder—

19 ‘‘(i) for medical care (as defined in sec20 tion 213(d)) for the account holder, but only

21 to the extent such amounts are not com22 pensated for by insurance or otherwise, or

23 ‘‘(ii) for long-term care insurance for

24 the account holder.
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1 ‘‘(B) HEALTH INSURANCE MAY NOT BE PUR2 CHASED FROM ACCOUNT.—Subparagraph (A)(i)

3 shall not apply to any payment for insurance.

4 ‘‘(3) ACCOUNT HOLDER.—The term ‘account

5 holder’ means the individual on whose behalf the

6 MedicarePlus MSA is maintained.

7 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

8 to the rules of subsections (g) and (h) of section 408

9 shall apply for purposes of this section.

10 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

11 ‘‘(1) IN GENERAL.—A MedicarePlus MSA is ex12 empt from taxation under this subtitle unless such

13 MSA has ceased to be a MedicarePlus MSA by reason

14 of paragraph (2). Notwithstanding the preceding sen15 tence, any such MSA is subject to the taxes imposed

16 by section 511 (relating to imposition of tax on unre17 lated business income of charitable, etc. organiza18 tions).

19 ‘‘(2) ACCOUNT ASSETS TREATED AS DISTRIB20 UTED IN THE CASE OF PROHIBITED TRANSACTIONS

21 OR ACCOUNT PLEDGED AS SECURITY FOR LOAN.—

22 Rules similar to the rules of paragraphs (2) and (4)

23 of section 408(e) shall apply to MedicarePlus MSA’s,

24 and any amount treated as distributed under such
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1 rules shall be treated as not used to pay qualified

2 medical expenses.

3 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

4 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

5 QUALIFIED MEDICAL EXPENSES.—No amount shall be

6 included in the gross income of the account holder by

7 reason of a payment or distribution from a

8 MedicarePlus MSA which is used exclusively to pay

9 the qualified medical expenses of the account holder.

10 Any amount paid or distributed from a MedicarePlus

11 MSA which is not so used shall be included in the

12 gross income of such holder.

13 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

14 FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM BAL15 ANCE NOT MAINTAINED.—

16 ‘‘(A) IN GENERAL.—The tax imposed by

17 this chapter for any taxable year in which there

18 is a payment or distribution from a

19 MedicarePlus MSA which is not used exclusively

20 to pay the qualified medical expenses of the ac21 count holder shall be increased by 50 percent of

22 the excess (if any) of—

23 ‘‘(i) the amount of such payment or

24 distribution, over

25 ‘‘(ii) the excess (if any) of—
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1 ‘‘(I) the fair market value of the

2 assets in the MedicarePlus MSA as of

3 the close of the calendar year preceding

4 the calendar year in which the taxable

5 year begins, over

6 ‘‘(II) an amount equal to 60 per7 cent of the deductible under the high

8 deductible/medisave product covering

9 the account holder as of January 1 of

10 the calendar year in which the taxable

11 year begins.

12 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

13 shall not apply if the payment or distribution is

14 made on or after the date the account holder—

15 ‘‘(i) becomes disabled within the mean16 ing of section 72(m)(7), or

17 ‘‘(ii) dies.

18 ‘‘(C) SPECIAL RULES.—For purposes of sub19 paragraph (A)—

20 ‘‘(i) all MedicarePlus MSA’s of the ac21 count holder shall be treated as 1 account,

22 ‘‘(ii) all payments and distributions

23 not used exclusively to pay the qualified

24 medical expenses of the account holder dur-
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1 ing any taxable year shall be treated as 1

2 distribution, and

3 ‘‘(iii) any distribution of property

4 shall be taken into account at its fair mar5 ket value on the date of the distribution.

6 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU7 TIONS.—Paragraphs (1) and (2) shall not apply to

8 any payment or distribution from a MedicarePlus

9 MSA to the Secretary of Health and Human Services

10 of an erroneous contribution to such MSA and of the

11 net income attributable to such contribution.

12 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—Para13 graphs (1) and (2) shall not apply to any trustee-to14 trustee transfer from a MedicarePlus MSA of an ac15 count holder to another MedicarePlus MSA of such

16 account holder.

17 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

18 DEDUCTION.—For purposes of section 213, any pay19 ment or distribution out of a MedicarePlus MSA for

20 qualified medical expenses shall not be treated as an

21 expense paid for medical care.

22 ‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF AC23 COUNT HOLDER.—

24 ‘‘(1) TREATMENT IF DESIGNATED BENEFICIARY

25 IS SPOUSE.—
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1 ‘‘(A) IN GENERAL.—In the case of an ac2 count holder’s interest in a MedicarePlus MSA

3 which is payable to (or for the benefit of) such

4 holder’s spouse upon the death of such holder,

5 such MedicarePlus MSA shall be treated as a

6 MedicarePlus MSA of such spouse as of the date

7 of such death.

8 ‘‘(B) SPECIAL RULES IF SPOUSE NOT MEDI9 CARE ELIGIBLE.—If, as of the date of such death,

10 such spouse is not entitled to benefits under title

11 XVIII of the Social Security Act, then after the

12 date of such death—

13 ‘‘(i) the Secretary of Health and

14 Human Services may not make any pay15 ments to such MedicarePlus MSA, other

16 than payments attributable to periods before

17 such date,

18 ‘‘(ii) in applying subsection (b)(2)

19 with respect to such MedicarePlus MSA, ref20 erences to the account holder shall be treated

21 as including references to any dependent (as

22 defined in section 152) of such spouse and

23 any subsequent spouse of such spouse, and
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1 ‘‘(iii) in lieu of applying subsection

2 (d)(2), the rules of section 220(f)(2) shall

3 apply.

4 ‘‘(2) TREATMENT IF DESIGNATED BENEFICIARY

5 IS NOT SPOUSE.—In the case of an account holder’s

6 interest in a MedicarePlus MSA which is payable to

7 (or for the benefit of) any person other than such

8 holder’s spouse upon the death of such holder—

9 ‘‘(A) such account shall cease to be a

10 MedicarePlus MSA as of the date of death, and

11 ‘‘(B) an amount equal to the fair market

12 value of the assets in such account on such date

13 shall be includible—

14 ‘‘(i) if such person is not the estate of

15 such holder, in such person’s gross income

16 for the taxable year which includes such

17 date, or

18 ‘‘(ii) if such person is the estate of such

19 holder, in such holder’s gross income for last

20 taxable year of such holder.

21 ‘‘(f) REPORTS.—

22 ‘‘(1) IN GENERAL.—The trustee of a

23 MedicarePlus MSA shall make such reports regarding

24 such account to the Secretary and to the account hold25 er with respect to—
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1 ‘‘(A) the fair market value of the assets in

2 such MedicarePlus MSA as of the close of each

3 calendar year, and

4 ‘‘(B) contributions, distributions, and other

5 matters,

6 as the Secretary may require by regulations.

7 ‘‘(2) TIME AND MANNER OF REPORTS.—The re8 ports required by this subsection—

9 ‘‘(A) shall be filed at such time and in such

10 manner as the Secretary prescribes in such regu11 lations, and

12 ‘‘(B) shall be furnished to the account hold13 er—

14 ‘‘(i) not later than January 31 of the

15 calendar year following the calendar year to

16 which such reports relate, and

17 ‘‘(ii) in such manner as the Secretary

18 prescribes in such regulations.’’

19 (b) EXCLUSION OF MEDICAREPLUS MSA’S FROM ES20 TATE TAX.—Part IV of subchapter A of chapter 11 of such

21 Code is amended by adding at the end the following new

22 section:

23 ‘‘SEC. 2057. MEDICAREPLUS MSA’S.

24 ‘‘For purposes of the tax imposed by section 2001, the

25 value of the taxable estate shall be determined by deducting
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1 from the value of the gross estate an amount equal to the

2 value of any MedicarePlus MSA (as defined in section

3 137(b)) included in the gross estate.’’

4 (c) TAX ON PROHIBITED TRANSACTIONS.—

5 (1) Section 4975 of such Code (relating to tax on

6 prohibited transactions) is amended by adding at the

7 end of subsection (c) the following new paragraph:

8 ‘‘(4) SPECIAL RULE FOR MEDICAREPLUS

9 MSA’S.—An individual for whose benefit a

10 MedicarePlus MSA (within the meaning of section

11 137(b)) is established shall be exempt from the tax

12 imposed by this section with respect to any trans13 action concerning such account (which would other14 wise be taxable under this section) if, with respect to

15 such transaction, the account ceases to be a

16 MedicarePlus MSA by reason of the application of

17 section 137(c)(2) to such account.’’

18 (2) Paragraph (1) of section 4975(e) of such

19 Code is amended to read as follows:

20 ‘‘(1) PLAN.—For purposes of this section, the

21 term ‘plan’ means—

22 ‘‘(A) a trust described in section 401(a)

23 which forms a part of a plan, or a plan de24 scribed in section 403(a), which trust or plan is

25 exempt from tax under section 501(a),
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1 ‘‘(B) an individual retirement account de2 scribed in section 408(a),

3 ‘‘(C) an individual retirement annuity de4 scribed in section 408(b),

5 ‘‘(D) a medical savings account described in

6 section 220(d),

7 ‘‘(E) a MedicarePlus MSA described in sec8 tion 137(b), or

9 ‘‘(F) a trust, plan, account, or annuity

10 which, at any time, has been determined by the

11 Secretary to be described in any preceding sub12 paragraph of this paragraph.’’

13 (d) FAILURE TO PROVIDE REPORTS ON

14 MEDICAREPLUS MSA’S.—

15 (1) Subsection (a) of section 6693 of such Code

16 (relating to failure to provide reports on individual

17 retirement accounts or annuities) is amended to read

18 as follows:

19 ‘‘(a) REPORTS.—

20 ‘‘(1) IN GENERAL.—If a person required to file

21 a report under a provision referred to in paragraph

22 (2) fails to file such report at the time and in the

23 manner required by such provision, such person shall

24 pay a penalty of $50 for each failure unless it is

25 shown that such failure is due to reasonable cause.
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1 ‘‘(2) PROVISIONS.—The provisions referred to in

2 this paragraph are—

3 ‘‘(A) subsections (i) and (l) of section 408

4 (relating to individual retirement plans),

5 ‘‘(B) section 220(h) (relating to medical

6 savings accounts), and

7 ‘‘(C) section 137(f) (relating to

8 MedicarePlus MSA’s).’’

9 (2) The section heading for section 6693 of such

10 Code is amended to read as follows:

11 ‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE12 TIREMENT PLANS AND CERTAIN OTHER TAX13 FAVORED ACCOUNTS; PENALTIES RELATING

14 TO DESIGNATED NONDEDUCTIBLE CON15 TRIBUTIONS.’’

16 (e) CLERICAL AMENDMENTS.—

17 (1) The table of sections for part III of sub18 chapter B of chapter 1 of such Code is amended by

19 striking the last item and inserting the following:

‘‘Sec. 137. MedicarePlus MSA’s.

‘‘Sec. 138. Cross references to other Acts.’’

20 (2) The table of sections for part 1 of subchapter

21 B of chapter 68 of such Code is amended by striking
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1 the item relating to section 6693 and inserting the

2 following new item:

‘‘Sec. 6693. Failure to file reports on individual retirement plans

and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’’

3 (3) The table of sections for part IV of sub4 chapter A of chapter 11 of such Code is amended by

5 adding at the end the following new item:

‘‘Sec. 2057. MedicarePlus MSA’s.’’

6 (f) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to taxable years beginning after Decem8 ber 31, 1996.

9 SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS IN10 COME.

11 (a) IN GENERAL.—Section 105 of the Internal Revenue

12 Code of 1986 (relating to amounts received under accident

13 and health plans) is amended by adding at the end the fol14 lowing new subsection:

15 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY

16 ACT.—Gross income does not include any rebate received

17 under section 1852(e)(1)(A) of the Social Security Act dur18 ing the taxable year.’’

19 (b) EFFECTIVE DATE.—The amendment made by sub20 section (a) shall apply to amounts received after the date

21 of the enactment of this Act.
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1 PART 3—SPECIAL ANTITRUST RULE FOR

2 PROVIDER SERVICE NETWORKS

3 SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON

4 TO PROVIDER SERVICE NETWORKS.

5 (a) RULE OF REASON STANDARD.—In any action

6 under the antitrust laws, or under any State law similar

7 to the antitrust laws—

8 (1) the conduct of a provider service network in

9 negotiating, making, or performing a contract (in10 cluding the establishment and modification of a fee

11 schedule and the development of a panel of physi12 cians), to the extent such contract is for the purpose

13 of providing health care services to individuals under

14 the terms of a MedicarePlus PSO product, and

15 (2) the conduct of any member of such network

16 for the purpose of providing such health care services

17 under such contract to such extent,

18 shall not be deemed illegal per se. Such conduct shall be

19 judged on the basis of its reasonableness, taking into ac20 count all relevant factors affecting competition, including

21 the effects on competition in properly defined markets.

22 (b) DEFINITIONS.—For purposes of subsection (a):

23 (1) ANTITRUST LAWS.—The term ‘‘antitrust

24 laws’’ has the meaning given it in subsection (a) of

25 the first section of the Clayton Act (15 U.S.C. 12), ex26 cept that such term includes section 5 of the Federal
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1 Trade Commission Act (15 U.S.C. 45) to the extent

2 that such section 5 applies to unfair methods of com3 petition.

4 (2) HEALTH CARE PROVIDER.—The term ‘‘health

5 care provider’’ means any individual or entity that

6 is engaged in the delivery of health care services in

7 a State and that is required by State law or regula8 tion to be licensed or certified by the State to engage

9 in the delivery of such services in the State.

10 (3) HEALTH CARE SERVICE.—The term ‘‘health

11 care service’’ means any service for which payment

12 may be made under a MedicarePlus PSO product in13 cluding services related to the delivery or administra14 tion of such service.

15 (4) MEDICAREPLUS PROGRAM.—The term

16 ‘‘MedicarePlus program’’ means the program under

17 part C of title XVIII of the Social Security Act.

18 (5) MEDICAREPLUS PSO PRODUCT.—The term

19 ‘‘MedicarePlus PSO product’’ means a MedicarePlus

20 product offered by a provider-sponsored organization

21 under part C of title XVIII of the Social Security Act.

22 (6) PROVIDER SERVICE NETWORK.—The term

23 ‘‘provider service network’’ means an organization

24 that—
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1 (A) is organized by, operated by, and com2 posed of members who are health care providers

3 and for purposes that include providing health

4 care services,

5 (B) is funded in part by capital contribu6 tions made by the members of such organization,

7 (C) with respect to each contract made by

8 such organization for the purpose of providing a

9 type of health care service to individuals under

10 the terms of a MedicarePlus PSO product—

11 (i) requires all members of such orga12 nization who engage in providing such type

13 of health care service to agree to provide

14 health care services of such type under such

15 contract,

16 (ii) receives the compensation paid for

17 the health care services of such type pro18 vided under such contract by such members,

19 and

20 (iii) provides for the distribution of

21 such compensation,

22 (D) has established, consistent with the re23 quirements of the MedicarePlus program for pro24 vider-sponsored organizations, a program to re25 view, pursuant to written guidelines, the quality,
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1 efficiency, and appropriateness of treatment

2 methods and setting of services for all health care

3 providers and all patients participating in such

4 product, along with internal procedures to cor5 rect identified deficiencies relating to such meth6 ods and such services,

7 (E) has established, consistent with the re8 quirements of the MedicarePlus program for pro9 vider-sponsored organizations, a program to

10 monitor and control utilization of health care

11 services provided under such product, for the

12 purpose of improving efficient, appropriate care

13 and eliminating the provision of unnecessary

14 health care services,

15 (F) has established a management program

16 to coordinate the delivery of health care services

17 for all health care providers and all patients

18 participating in such product, for the purpose of

19 achieving efficiencies and enhancing the quality

20 of health care services provided, and

21 (G) has established, consistent with the re22 quirements of the MedicarePlus program for pro23 vider-sponsored organizations, a grievance and

24 appeal process for such organization designed to
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1 review and promptly resolve beneficiary or pa2 tient grievances and complaints.

3 Such term may include a provider-sponsored organi4 zation.

5 (7) PROVIDER-SPONSORED ORGANIZATION.—The

6 term ‘‘provider-sponsored organization’’ means a

7 MedicarePlus organization under the MedicarePlus

8 program that is a provider-sponsored organization

9 (as defined in section ll of the Social Security

10 Act).

11 (8) STATE.—The term ‘‘State’’ has the meaning

12 given it in section 4G(2) of the Clayton Act (15

13 U.S.C. 15g(2)).

14 (c) ISSUANCE OF GUIDELINES.—Not later than 120

15 days after the date of the enactment of this Act, the Attorney

16 General and the Federal Trade Commission shall issue

17 jointly guidelines specifying the enforcement policies and

18 analytical principles that will be applied by the Depart19 ment of Justice and the Commission with respect to the op20 eration of subsection (a).

21 PART 4—COMMISSIONS

22 SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

23 (a) IN GENERAL.—Title XVIII, as amended by section

24 15001(a), is amended by inserting after section 1805 the

25 following new section:
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1 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

2 ‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby es3 tablished the Medicare Payment Review Commission (in

4 this section referred to as the ‘Commission’).

5 ‘‘(b) DUTIES.—

6 ‘‘(1) GENERAL DUTIES AND REPORTS.—The

7 Commission shall review, and make recommendations

8 to Congress concerning, payment policies under this

9 title. By not later than June 1 of each year, the Com10 mission shall submit a report to Congress containing

11 an examination of issues affecting the medicare pro12 gram, including the implications of changes in health

13 care delivery in the United States and in the market

14 for health care services on the medicare program. The

15 Commission may submit to Congress from time to

16 time such other reports as the Commission deems ap17 propriate. The Secretary shall respond to rec18 ommendations of the Commission in notices of rule19 making proceedings under this title.

20 ‘‘(2) SPECIFIC DUTIES RELATING TO

21 MEDICAREPLUS PROGRAM.—Specifically, the Commis22 sion shall review, with respect to the MedicarePlus

23 program under part C—

24 ‘‘(A) the appropriateness of the methodology

25 for making payment to plans under such pro-
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1 gram, including the making of differential pay2 ments and the distribution of differential up3 dates among different payment areas,

4 ‘‘(B) the appropriateness of the mechanisms

5 used to adjust payments for risk and the need to

6 adjust such mechanisms to take into account

7 health status of beneficiaries,

8 ‘‘(C) the implications of risk selection both

9 among MedicarePlus organizations and between

10 the MedicarePlus option and the non11 MedicarePlus option,

12 ‘‘(D) in relation to payment under part C,

13 the development and implementation of mecha14 nisms to assure the quality of care for those en15 rolled with MedicarePlus organizations,

16 ‘‘(E) the impact of the MedicarePlus pro17 gram on access to care for medicare beneficiaries,

18 and

19 ‘‘(F) other major issues in implementation

20 and further development of the MedicarePlus

21 program.

22 ‘‘(3) SPECIFIC DUTIES RELATING TO THE

23 FAILSAFE BUDGET MECHANISM.—Specifically, the

24 Commission shall review, with respect to the failsafe

25 budget mechanism described in section 1895—
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1 ‘‘(A) the appropriateness of the expenditure

2 projections by the Secretary under section

3 1895(c) for each medicare sector;

4 ‘‘(B) the appropriateness of the growth fac5 tors for each sector and the ability to take into

6 account substitution across sectors;

7 ‘‘(C) the appropriateness of the mechanisms

8 for implementing reductions in payment

9 amounts for different sectors, including any ad10 justments to reflect changes in volume or inten11 sity resulting for any payment reductions;

12 ‘‘(D) the impact of the mechanism on pro13 vider participation in parts A and B and in the

14 MedicarePlus program; and

15 ‘‘(E) the appropriateness of the medicare

16 benefit budget (under section 1895(c)(2)(C) of the

17 Social Security Act), particularly for fiscal years

18 after fiscal year 2002.

19 ‘‘(4) SPECIFIC DUTIES RELATING TO THE FEE20 FOR-SERVICE SYSTEM.—Specifically, the Commission

21 shall review payment policies under parts A and B,

22 including—

23 ‘‘(A) the factors affecting expenditures for

24 services in different sectors, including the process

25 for updating hospital, physician, and other fees;
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1 ‘‘(B) payment methodologies; and

2 ‘‘(C) the impact of payment policies on ac3 cess and quality of care for Medicare bene4 ficiaries.

5 ‘‘(5) SPECIFIC DUTIES RELATING TO INTER6 ACTION OF PAYMENT POLICIES WITH HEALTH CARE

7 DELIVERY GENERALLY.—Specifically the Commission

8 shall review the effect of payment policies under this

9 title on the delivery of health care services under this

10 title and assess the implications of changes in the

11 health services market on the Medicare Program.

12 ‘‘(c) MEMBERSHIP.—

13 ‘‘(1) NUMBER AND APPOINTMENT.—The Commis14 sion shall be composed of 15 members appointed by

15 Comptroller General.

16 ‘‘(2) QUALIFICATIONS.—The membership of the

17 Commission shall include individuals with national

18 recognition for their expertise in health finance and

19 economics, actuarial science, health facility manage20 ment, health plans and integrated delivery systems,

21 reimbursement of health facilities, physicians, and

22 other providers of services, and other related fields,

23 who provide a mix of different professionals, broad ge24 ographic representation, and a balance between urban

25 and rural representatives, including physicians and
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1 other health professionals, employers, third party

2 payors, individuals skilled in the conduct and inter3 pretation of biomedical, health services, and health ec4 onomics research and expertise in outcomes and effec5 tiveness research and technology assessment. Such

6 membership shall also include representatives of con7 sumers and the elderly.

8 ‘‘(3) CONSIDERATIONS IN INITIAL APPOINT9 MENT.—To the extent possible, in first appointing

10 members to the Commission shall consider appointing

11 individuals who (as of the date of the enactment of

12 this section) were serving on the Prospective Payment

13 Assessment Commission or the Physician Payment

14 Review Commission.

15 ‘‘(4) TERMS.—

16 ‘‘(A) IN GENERAL.—The terms of members

17 of the Commission shall be for 3 years except

18 that the Comptroller General shall designate

19 staggered terms for the members first appointed.

20 ‘‘(B) VACANCIES.—Any member appointed

21 to fill a vacancy occurring before the expiration

22 of the term for which the member’s predecessor

23 was appointed shall be appointed only for the re24 mainder of that term. A member may serve after

25 the expiration of that member’s term until a suc-
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1 cessor has taken office. A vacancy in the Com2 mission shall be filled in the manner in which

3 the original appointment was made.

4 ‘‘(5) COMPENSATION.—While serving on the busi5 ness of the Commission (including traveltime), a

6 member of the Commission shall be entitled to com7 pensation at the per diem equivalent of the rate pro8 vided for level IV of the Executive Schedule under sec9 tion 5315 of title 5, United States Code; and while so

10 serving away from home and member’s regular place

11 of business, a member may be allowed travel expenses,

12 as authorized by the Chairman of the Commission.

13 Physicians serving as personnel of the Commission

14 may be provided a physician comparability allow15 ance by the Commission in the same manner as Gov16 ernment physicians may be provided such an allow17 ance by an agency under section 5948 of title 5,

18 United States Code, and for such purpose subsection

19 (i) of such section shall apply to the Commission in

20 the same manner as it applies to the Tennessee Valley

21 Authority. For purposes of pay (other than pay of

22 members of the Commission) and employment bene23 fits, rights, and privileges, all personnel of the Com24 mission shall be treated as if they were employees of

25 the United States Senate.
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1 ‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp2 troller General shall designate a member of the Com3 mission, at the time of appointment of the member,

4 as Chairman and a member as Vice Chairman for

5 that term of appointment.

6 ‘‘(7) MEETINGS.—The Commission shall meet at

7 the call of the Chairman.

8 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT9 ANTS.—Subject to such review as the Comptroller General

10 deems necessary to assure the efficient administration of the

11 Commission, the Commission may—

12 ‘‘(1) employ and fix the compensation of an Ex13 ecutive Director (subject to the approval of the Comp14 troller General) and such other personnel as may be

15 necessary to carry out its duties (without regard to

16 the provisions of title 5, United States Code, govern17 ing appointments in the competitive service);

18 ‘‘(2) seek such assistance and support as may be

19 required in the performance of its duties from appro20 priate Federal departments and agencies;

21 ‘‘(3) enter into contracts or make other arrange22 ments, as may be necessary for the conduct of the

23 work of the Commission (without regard to section

24 3709 of the Revised Statutes (41 U.S.C. 5));
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1 ‘‘(4) make advance, progress, and other pay2 ments which relate to the work of the Commission;

3 ‘‘(5) provide transportation and subsistence for

4 persons serving without compensation; and

5 ‘‘(6) prescribe such rules and regulations as it

6 deems necessary with respect to the internal organiza7 tion and operation of the Commission.

8 ‘‘(e) POWERS.—

9 ‘‘(1) OBTAINING OFFICIAL DATA.—The Commis10 sion may secure directly from any department or

11 agency of the United States information necessary to

12 enable it to carry out this section. Upon request of the

13 Chairman, the head of that department or agency

14 shall furnish that information to the Commission on

15 an agreed upon schedule.

16 ‘‘(2) DATA COLLECTION.—In order to carry out

17 its functions, the Commission shall collect and assess

18 information—

19 ‘‘(A) utilize existing information, both pub20 lished and unpublished, where possible, collected

21 and assessed either by its own staff or under

22 other arrangements made in accordance with

23 this section,
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1 ‘‘(B) carry out, or award grants or con2 tracts for, original research and experimentation,

3 where existing information is inadequate, and

4 ‘‘(C) adopt procedures allowing any inter5 ested party to submit information for the Com6 mission’s use in making reports and rec7 ommendations.

8 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

9 Comptroller General shall have unrestricted access to

10 all deliberations, records, and data of the Commis11 sion, immediately upon request.

12 ‘‘(4) PERIODIC AUDIT.—The Commission shall be

13 subject to periodic audit by the General Accounting

14 Office.

15 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—

16 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

17 Commission shall submit requests for appropriations

18 in the same manner as the Comptroller General sub19 mits requests for appropriations, but amounts appro20 priated for the Commission shall be separate from

21 amounts appropriated for the Comptroller General.

22 ‘‘(2) AUTHORIZATION.—There are authorized to

23 be appropriated such sums as may be necessary to

24 carry out the provisions of this section. 60 percent of

25 such appropriation shall be payable from the Federal
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1 Hospital Insurance Trust Fund, and 40 percent of

2 such appropriation shall be payable from the Federal

3 Supplementary Medical Insurance Trust Fund.’’.

4 (b) ABOLITION OF PROPAC AND PPRC.—

5 (1) PROPAC.—

6 (A) IN GENERAL.—Section 1886(e) (42

7 U.S.C. 1395ww(e)) is amended—

8 (i) by striking paragraphs (2) and (6);

9 and

10 (ii) in paragraph (3), by striking ‘‘(A)

11 The Commission’’ and all that follows

12 through ‘‘(B)’’.

13 (B) CONFORMING AMENDMENT.—Section

14 1862 (42 U.S.C. 1395y) is amended by striking

15 ‘‘Prospective Payment Assessment Commission’’

16 each place it appears in subsection (a)(1)(D)

17 and subsection (i) and inserting ‘‘Medicare Pay18 ment Review Commission’’.

19 (2) PPRC.—

20 (A) IN GENERAL.—Title XVIII is amended

21 by striking section 1845 (42 U.S.C. 1395w–1).

22 (B) CONFORMING AMENDMENTS.—

23 (i) Section 1834(b)(2) (42 U.S.C.

24 1395m(b)(2)) is amended by striking ‘‘Phy25 sician Payment Review Commission’’ and
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1 inserting ‘‘Medicare Payment Review Com2 mission’’.

3 (ii) Section 1842(b) (42 U.S.C.

4 1395u(b)) is amended by striking ‘‘Physi5 cian Payment Review Commission’’ each

6 place it appears in paragraphs (9)(D) and

7 (14)(C)(i) and inserting ‘‘Medicare Pay8 ment Review Commission’’.

9 (iii) Section 1848 (42 U.S.C. 1395w–

10 4) is amended by striking ‘‘Physician Pay11 ment Review Commission’’ and inserting

12 ‘‘Medicare Payment Review Commission’’

13 each place it appears in paragraph

14 (2)(A)(ii), (2)(B)(iii), and (5) of subsection

15 (c), subsection (d)(2)(F), paragraphs (1)(B),

16 (3), and (4)(A) of subsection (f), and para17 graphs (6)(C) and (7)(C) of subsection (g).

18 (c) EFFECTIVE DATE; TRANSITION.—

19 (1) IN GENERAL.—The Comptroller General shall

20 first provide for appointment of members to the Medi21 care Payment Review Commission (in this subsection

22 referred to as ‘‘MPRC’’) by not later than March 31,

23 1996.

24 (2) TRANSITION.—Effective on a date (not later

25 than 30 days after the date a majority of members of
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1 the MPRC have first been appointed, the Prospective

2 Payment Assessment Commission (in this subsection

3 referred to as ‘‘ProPAC’’) and the Physician Payment

4 Review Commission (in this subsection referred to as

5 ‘‘PPRC’’), and amendments made by subsection (b),

6 are terminated. The Comptroller General, to the max7 imum extent feasible, shall provide for the transfer to

8 the MPRC of assets and staff of ProPAC and PPRC,

9 without any loss of benefits or seniority by virtue of

10 such transfers. Fund balances available to the

11 ProPAC or PPRC for any period shall be available

12 to the MPRC for such period for like purposes.

13 (3) CONTINUING RESPONSIBILITY FOR RE14 PORTS.—The MPRC shall be responsible for the prep15 aration and submission of reports required by law to

16 be submitted (and which have not been submitted by

17 the date of establishment of the MPRC) by the

18 ProPAC and PPRC, and, for this purpose, any ref19 erence in law to either such Commission is deemed,

20 after the appointment of the MPRC to refer to the

21 MPRC.
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1 SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY

2 BOOM GENERATION ON THE MEDICARE PRO3 GRAM.

4 (a) ESTABLISHMENT.—There is established a commis5 sion to be known as the Commission on the Effect of the

6 Baby Boom Generation on the Medicare Program (in this

7 section referred to as the ‘‘Commission’’).

8 (b) DUTIES.—

9 (1) IN GENERAL.—The Commission shall—

10 (A) examine the financial impact on the

11 medicare program of the significant increase in

12 the number of medicare eligible individuals

13 which will occur beginning approximately dur14 ing 2010 and lasting for approximately 25

15 years, and

16 (B) make specific recommendations to the

17 Congress respecting a comprehensive approach to

18 preserve the medicare program for the period

19 during which such individuals are eligible for

20 medicare.

21 (2) CONSIDERATIONS IN MAKING RECOMMENDA22 TIONS.—In making its recommendations, the Com23 mission shall consider the following:

24 (A) The amount and sources of Federal

25 funds to finance the medicare program, includ-
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1 ing the potential use of innovative financing

2 methods.

3 (B) The most efficient and effective manner

4 of administering the program, including the ap5 propriateness of continuing the application of

6 the failsafe budget mechanism under section

7 1895 of the Social Security Act for fiscal years

8 after fiscal year 2002 and the appropriate long9 term growth rates for contributions electing cov10 erage under MedicarePlus under part C of title

11 XVIII of such Act.

12 (C) Methods used by other nations to re13 spond to comparable demographic patterns in

14 eligibility for health care benefits for elderly and

15 disabled individuals.

16 (D) Modifying age-based eligibility to cor17 respond to changes in age-based eligibility under

18 the OASDI program.

19 (E) Trends in employment-related health

20 care for retirees, including the use of medical

21 savings accounts and similar financing devices.

22 (c) MEMBERSHIP.—

23 (1) APPOINTMENT.—The Commission shall be

24 composed of 15 members appointed as follows:

25 (A) The President shall appoint 3 members.
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1 (B) The Majority Leader of the Senate shall

2 appoint, after consultation with the minority

3 leader of the Senate, 6 members, of whom not

4 more than 4 may be of the same political party.

5 (C) The Speaker of the House of Represent6 atives shall appoint, after consultation with the

7 minority leader of the House of Representatives,

8 6 members, of whom not more than 4 may be of

9 the same political party.

10 (2) CHAIRMAN AND VICE CHAIRMAN.—The Com11 mission shall elect a Chairman and Vice Chairman

12 from among its members.

13 (3) VACANCIES.—Any vacancy in the member14 ship of the Commission shall be filled in the manner

15 in which the original appointment was made and

16 shall not affect the power of the remaining members

17 to execute the duties of the Commission.

18 (4) QUORUM.—A quorum shall consist of 8 mem19 bers of the Commission, except that 4 members may

20 conduct a hearing under subsection (e).

21 (5) MEETINGS.—The Commission shall meet at

22 the call of its Chairman or a majority of its members.

23 (6) COMPENSATION AND REIMBURSEMENT OF EX24 PENSES.—Members of the Commission are not enti25 tled to receive compensation for service on the Com-
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1 mission. Members may be reimbursed for travel, sub2 sistence, and other necessary expenses incurred in car3 rying out the duties of the Commission.

4 (d) STAFF AND CONSULTANTS.—

5 (1) STAFF.—The Commission may appoint and

6 determine the compensation of such staff as may be

7 necessary to carry out the duties of the Commission.

8 Such appointments and compensation may be made

9 without regard to the provisions of title 5, United

10 States Code, that govern appointments in the com11 petitive services, and the provisions of chapter 51 and

12 subchapter III of chapter 53 of such title that relate

13 to classifications and the General Schedule pay rates.

14 (2) CONSULTANTS.—The Commission may pro15 cure such temporary and intermittent services of con16 sultants under section 3109(b) of title 5, United

17 States Code, as the Commission determines to be nec18 essary to carry out the duties of the Commission.

19 (e) POWERS.—

20 (1) HEARINGS AND OTHER ACTIVITIES.—For the

21 purpose of carrying out its duties, the Commission

22 may hold such hearings and undertake such other ac23 tivities as the Commission determines to be necessary

24 to carry out its duties.
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1 (2) STUDIES BY GAO.—Upon the request of the

2 Commission, the Comptroller General shall conduct

3 such studies or investigations as the Commission de4 termines to be necessary to carry out its duties.

5 (3) COST ESTIMATES BY CONGRESSIONAL BUDG6 ET OFFICE.—

7 (A) Upon the request of the Commission, the

8 Director of the Congressional Budget Office shall

9 provide to the Commission such cost estimates as

10 the Commission determines to be necessary to

11 carry out its duties.

12 (B) The Commission shall reimburse the

13 Director of the Congressional Budget Office for

14 expenses relating to the employment in the office

15 of the Director of such additional staff as may

16 be necessary for the Director to comply with re17 quests by the Commission under subparagraph

18 (A).

19 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon the

20 request of the Commission, the head of any Federal

21 agency is authorized to detail, without reimburse22 ment, any of the personnel of such agency to the Com23 mission to assist the Commission in carrying out its

24 duties. Any such detail shall not interrupt or other-
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1 wise affect the civil service status or privileges of the

2 Federal employee.

3 (5) TECHNICAL ASSISTANCE.—Upon the request

4 of the Commission, the head of a Federal agency shall

5 provide such technical assistance to the Commission

6 as the Commission determines to be necessary to

7 carry out its duties.

8 (6) USE OF MAILS.—The Commission may use

9 the United States mails in the same manner and

10 under the same conditions as Federal agencies and

11 shall, for purposes of the frank, be considered a com12 mission of Congress as described in section 3215 of

13 title 39, United States Code.

14 (7) OBTAINING INFORMATION.—The Commission

15 may secure directly from any Federal agency infor16 mation necessary to enable it to carry out its duties,

17 if the information may be disclosed under section 552

18 of title 5, United States Code. Upon request of the

19 Chairman of the Commission, the head of such agency

20 shall furnish such information to the Commission.

21 (8) ADMINISTRATIVE SUPPORT SERVICES.—Upon

22 the request of the Commission, the Administrator of

23 General Services shall provide to the Commission on

24 a reimbursable basis such administrative support

25 services as the Commission may request.
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1 (9) ACCEPTANCE OF DONATIONS.—The Commis2 sion may accept, use, and dispose of gifts or dona3 tions of services or property.

4 (10) PRINTING.—For purposes of costs relating

5 to printing and binding, including the cost of person6 nel detailed from the Government Printing Office, the

7 Commission shall be deemed to be a committee of the

8 Congress.

9 (f) REPORT.—Not later than May 1, 1997, the Com10 mission shall submit to Congress a report containing its

11 findings and recommendations regarding how to protect

12 and preserve the medicare program in a financially solvent

13 manner until 2030 (or, if later, throughout the period of

14 projected solvency of the Federal Old-Age and Survivors In15 surance Trust Fund). The report shall include detailed rec16 ommendations for appropriate legislative initiatives re17 specting how to accomplish this objective.

18 (g) TERMINATION.—The Commission shall terminate

19 60 days after the date of submission of the report required

20 in subsection (f).

21 (h) AUTHORIZATION OF APPROPRIATIONS.—There are

22 authorized to be appropriated $1,500,000 to carry out this

23 section. Amounts appropriated to carry out this section

24 shall remain available until expended.
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1 SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR

2 OF HCFA.

3 (a) IN GENERAL.—Section 1117 (42 U.S.C. 1317) is

4 amended by striking ‘‘President by and with the advice and

5 consent of the Senate’’ and inserting ‘‘Secretary of Health

6 and Human Services’’.

7 (b) EFFECTIVE DATE.—The amendment made by sub8 section (a) shall take effect on the date of the enactment

9 of this Act and shall apply to Administrators appointed

10 on or after the date of the enactment of this Act.

11 PART 5—TREATMENT OF HOSPITALS WHICH PAR12 TICIPATE IN PROVIDER-SPONSORED ORGANI13 ZATIONS

14 SEC. 15041. TREATMENT OF HOSPITALS WHICH PARTICI15 PATE IN PROVIDER-SPONSORED ORGANIZA16 TIONS.

17 (a) IN GENERAL.—Section 501 of the Internal Revenue

18 Code of 1986 (relating to exemption from tax on corpora19 tions, certain trusts, etc.) is amended by redesignating sub20 section (n) as subsection (o) and by inserting after sub21 section (m) the following new subsection:

22 ‘‘(n) TREATMENT OF HOSPITALS PARTICIPATING IN

23 PROVIDER-SPONSORED ORGANIZATIONS.—An organization

24 shall not fail to be treated as organized and operated exclu25 sively for a charitable purpose for purposes of subsection

26 (c)(3) solely because a hospital which is owned and operated
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1 by such organization participates in a provider-sponsored

2 organization (as defined in section 1854(a)(1) of the Social

3 Security Act), whether or not the provider-sponsored orga4 nization is exempt from tax. For purposes of subsection

5 (c)(3), any person with a material financial interest in

6 such a provider-sponsored organization shall be treated as

7 a private shareholder or individual with respect to the hos8 pital.’’

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall take effect on the date of the enactment

11 of this Act.

12 Subtitle B—Preventing Fraud and

13 Abuse

14 SEC. 15101. INCREASING AWARENESS OF FRAUD AND

15 ABUSE.

16 (a) BENEFICIARY OUTREACH EFFORTS.—The Sec17 retary of Health and Human Services (acting through the

18 Administrator of the Health Care Financing Administra19 tion and the Inspector General of the Department of Health

20 and Human Services) shall make ongoing efforts (through

21 public service announcements, publications, and other ap22 propriate methods) to alert individuals entitled to benefits

23 under the medicare program of the existence of fraud and

24 abuse committed against the program and the costs to the

25 program of such fraud and abuse, and of the existence of
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1 the toll-free telephone line operated by the Secretary to re2 ceive information on fraud and abuse committed against

3 the program.

4 (b) CLARIFICATION OF REQUIREMENT TO PROVIDE

5 EXPLANATION OF MEDICARE BENEFITS.—The Secretary

6 shall provide an explanation of benefits under the medicare

7 program with respect to each item or service for which pay8 ment may be made under the program which is furnished

9 to an individual, without regard to whether or not a deduct10 ible or coinsurance may be imposed against the individual

11 with respect to the item or service.

12 (c) PROVIDER OUTREACH EFFORTS; PUBLICATION OF

13 FRAUD ALERTS.—

14 (1) SPECIAL FRAUD ALERTS.—

15 (A) IN GENERAL.—

16 (i) REQUEST FOR SPECIAL FRAUD

17 ALERTS.—Any person may present, at any

18 time, a request to the Secretary to issue and

19 publish a special fraud alert.

20 (ii) SPECIAL FRAUD ALERT DE21 FINED.—In this section, a ‘‘special fraud

22 alert’’ is a notice which informs the public

23 of practices which the Secretary considers to

24 be suspect or of particular concern under

25 the medicare program or a State health care
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1 program (as defined in section 1128(h) of

2 the Social Security Act).

3 (B) ISSUANCE AND PUBLICATION OF SPE4 CIAL FRAUD ALERTS.—

5 (i) INVESTIGATION.—Upon receipt of a

6 request for a special fraud alert under sub7 paragraph (A), the Secretary shall inves8 tigate the subject matter of the request to de9 termine whether a special fraud alert should

10 be issued. If appropriate, the Secretary (in

11 consultation with the Attorney General)

12 shall issue a special fraud alert in response

13 to the request. All special fraud alerts issued

14 pursuant to this subparagraph shall be pub15 lished in the Federal Register.

16 (ii) CRITERIA FOR ISSUANCE.—In de17 termining whether to issue a special fraud

18 alert upon a request under subparagraph

19 (A), the Secretary may consider—

20 (I) whether and to what extent the

21 practices that would be identified in

22 the special fraud alert may result in

23 any of the consequences described in

24 15214(b); and
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1 (II) the extent and frequency of

2 the conduct that would be identified in

3 the special fraud alert.

4 (2) PUBLICATION OF ALL HCFA FRAUD ALERTS

5 IN FEDERAL REGISTER.—Each notice issued by the

6 Health Care Financing Administration which in7 forms the public of practices which the Secretary con8 siders to be suspect or of particular concern under the

9 medicare program or a State health care program (as

10 defined in section 1128(h) of the Social Security Act)

11 shall be published in the Federal Register, without re12 gard to whether or not the notice is issued by a re13 gional office of the Health Care Financing Adminis14 tration.

15 SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.

16 (a) PROGRAM TO COLLECT INFORMATION ON FRAUD

17 AND ABUSE.—

18 (1) ESTABLISHMENT OF PROGRAM.—Not later

19 than 3 months after the date of the enactment of this

20 Act, the Secretary of Health and Human Services

21 (hereinafter in this subtitle referred to as the ‘‘Sec22 retary’’) shall establish a program under which the

23 Secretary shall encourage individuals to report to the

24 Secretary information on individuals and entities

25 who are engaging or who have engaged in acts or
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1 omissions which constitute grounds for the imposition

2 of a sanction under section 1128, section 1128A, or

3 section 1128B of the Social Security Act, or who have

4 otherwise engaged in fraud and abuse against the

5 medicare program for which there is a sanction pro6 vided under law. The program shall discourage provi7 sion of, and not consider, information which is frivo8 lous or otherwise not relevant or material to the im9 position of such a sanction.

10 (2) PAYMENT OF PORTION OF AMOUNTS COL11 LECTED.—If an individual reports information to the

12 Secretary under the program established under para13 graph (1) which serves as the basis for the collection

14 by the Secretary or the Attorney General of any

15 amount of at least $100 (other than any amount paid

16 as a penalty under section 1128B of the Social Secu17 rity Act), the Secretary may pay a portion of the

18 amount collected to the individual (under procedures

19 similar to those applicable under section 7623 of the

20 Internal Revenue Code of 1986 to payments to indi21 viduals providing information on violations of such

22 Code).

23 (b) PROGRAM TO COLLECT INFORMATION ON PROGRAM

24 EFFICIENCY.—
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1 (1) ESTABLISHMENT OF PROGRAM.—Not later

2 than 3 months after the date of the enactment of this

3 Act, the Secretary shall establish a program under

4 which the Secretary shall encourage individuals to

5 submit to the Secretary suggestions on methods to im6 prove the efficiency of the medicare program.

7 (2) PAYMENT OF PORTION OF PROGRAM SAV8 INGS.—If an individual submits a suggestion to the

9 Secretary under the program established under para10 graph (1) which is adopted by the Secretary and

11 which results in savings to the program, the Secretary

12 may make a payment to the individual of such

13 amount as the Secretary considers appropriate.

14 SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE

15 HEALTH MAINTENANCE ORGANIZATIONS.

16 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

17 ANY PROGRAM VIOLATIONS.—

18 (1) IN GENERAL.—Section 1876(i)(1) (42 U.S.C.

19 1395mm(i)(1)) is amended by striking ‘‘the Secretary

20 may terminate’’ and all that follows and inserting the

21 following: ‘‘in accordance with procedures established

22 under paragraph (9), the Secretary may at any time

23 terminate any such contract or may impose the inter24 mediate sanctions described in paragraph (6)(B) or

25 (6)(C) (whichever is applicable) on the eligible orga-
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1 nization if the Secretary determines that the organi2 zation—

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

4 contract;

5 ‘‘(B) is carrying out the contract in a manner

6 inconsistent with the efficient and effective adminis7 tration of this section;

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

9 best interests of the individuals covered under the con10 tract; or

11 ‘‘(D) no longer substantially meets the applicable

12 conditions of subsections (b), (c), and (e).’’.

13 (2) OTHER INTERMEDIATE SANCTIONS FOR MIS14 CELLANEOUS PROGRAM VIOLATIONS.—Section

15 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

16 adding at the end the following new subparagraph:

17 ‘‘(C) In the case of an eligible organization for which

18 the Secretary makes a determination under paragraph (1)

19 the basis of which is not described in subparagraph (A),

20 the Secretary may apply the following intermediate sanc21 tions:

22 ‘‘(i) civil money penalties of not more than

23 $25,000 for each determination under paragraph (1)

24 if the deficiency that is the basis of the determination

25 has directly adversely affected (or has the substantial
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1 likelihood of adversely affecting) an individual cov2 ered under the organization’s contract;

3 ‘‘(ii) civil money penalties of not more than

4 $10,000 for each week beginning after the initiation

5 of procedures by the Secretary under paragraph (9)

6 during which the deficiency that is the basis of a de7 termination under paragraph (1) exists; and

8 ‘‘(iii) suspension of enrollment of individuals

9 under this section after the date the Secretary notifies

10 the organization of a determination under paragraph

11 (1) and until the Secretary is satisfied that the defi12 ciency that is the basis for the determination has been

13 corrected and is not likely to recur.’’.

14 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

15 Section 1876(i) (42 U.S.C. 1395mm(i)) is amended

16 by adding at the end the following new paragraph:

17 ‘‘(9) The Secretary may terminate a contract with an

18 eligible organization under this section or may impose the

19 intermediate sanctions described in paragraph (6) on the

20 organization in accordance with formal investigation and

21 compliance procedures established by the Secretary under

22 which—

23 ‘‘(A) the Secretary provides the organization

24 with the opportunity to develop and implement a cor25 rective action plan to correct the deficiencies that
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1 were the basis of the Secretary’s determination under

2 paragraph (1);

3 ‘‘(B) the Secretary shall impose more severe

4 sanctions on organizations that have a history of defi5 ciencies or that have not taken steps to correct defi6 ciencies the Secretary has brought to their attention;

7 ‘‘(C) there are no unreasonable or unnecessary

8 delays between the finding of a deficiency and the im9 position of sanctions; and

10 ‘‘(D) the Secretary provides the organization

11 with reasonable notice and opportunity for hearing

12 (including the right to appeal an initial decision) be13 fore imposing any sanction or terminating the con14 tract.’’.

15 (4) CONFORMING AMENDMENTS.—(A) Section

16 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

17 amended by striking the second sentence.

18 (B) Section 1876(i)(6) (42 U.S.C.

19 1395mm(i)(6)) is further amended by adding at the

20 end the following new subparagraph:

21 ‘‘(D) The provisions of section 1128A (other than sub22 sections (a) and (b)) shall apply to a civil money penalty

23 under subparagraph (A) or (B) in the same manner as they

24 apply to a civil money penalty or proceeding under section

25 1128A(a).’’.
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply with respect to contract years beginning

3 on or after January 1, 1996.

4 SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.

5 Title XI (42 U.S.C. 1301 et seq.) is amended by insert6 ing after section 1128B the following new section:

7 ‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS

8 ‘‘SEC. 1129. (a) ESTABLISHMENT OF VOLUNTARY DIS9 CLOSURE PROGRAM.—Not later than 3 months after the

10 date of the enactment of this section, the Secretary shall

11 establish a program to encourage individuals and entities

12 to voluntarily disclose to the Secretary information on acts

13 or omissions of the individual or entity which constitute

14 grounds for the imposition of a sanction described in section

15 1128, 1128A, or 1128B.

16 ‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If an in17 dividual or entity voluntarily discloses information with re18 spect to an act or omission to the Secretary under sub19 section (a), the following rules shall apply:

20 ‘‘(1) The Secretary may waive, reduce, or other21 wise mitigate any sanction which would otherwise be

22 applicable to the individual or entity under section

23 1128, 1128A, or 1128B as a result of the act or omis24 sion involved.

25 ‘‘(2) No qui tam action may be brought pursu26 ant to chapter 37 of title 31, United States Code,
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1 against the individual or entity with respect to the

2 act or omission involved.’’.

3 SEC. 15105. REVISIONS TO CURRENT SANCTIONS.

4 (a) DOUBLING THE AMOUNT OF CIVIL MONETARY

5 PENALTIES.—The maximum amount of civil monetary

6 penalties specified in section 1128A of the Social Security

7 Act or under title XVIII of such Act (as in effect on the

8 day before the date of the enactment of this Act) shall, effec9 tive for violations occurring after the date of the enactment

10 of this Act, be double the amount otherwise provided as of

11 such date.

12 (b) ESTABLISHMENT OF MINIMUM PERIOD OF EXCLU13 SION FOR CERTAIN INDIVIDUALS AND ENTITIES SUBJECT

14 TO PERMISSIVE EXCLUSION.—Section 1128(c)(3) (42

15 U.S.C. 1320a–7(c)(3)) is amended by adding at the end the

16 following new subparagraphs:

17 ‘‘(D) In the case of an exclusion of an individual or

18 entity under paragraph (1), (2), or (3) of subsection (b),

19 the period of the exclusion shall be 3 years, unless the Sec20 retary determines in accordance with regulations that a

21 shorter period is appropriate because of mitigating cir22 cumstances or that a longer period is appropriate because

23 of aggravating circumstances.

24 ‘‘(E) In the case of an exclusion of an individual or

25 entity under subsection (b)(4) or (b)(5), the period of the
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1 exclusion shall not be less than the period during which the

2 individual’s or entity’s license to provide health care is re3 voked, suspended, or surrendered, or the individual or the

4 entity is excluded or suspended from a Federal or State

5 health care program.

6 ‘‘(F) In the case of an exclusion of an individual or

7 entity under subsection (b)(6)(B), the period of the exclu8 sion shall be not less than 1 year.’’.

9 (c) EFFECTIVE DATE.—The amendments made by this

10 section shall apply with respect to acts or omissions occur11 ring on or after January 1, 1996.

12 SEC. 15106. DIRECT SPENDING FOR ANTI-FRAUD ACTIVI13 TIES UNDER MEDICARE.

14 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO15 GRAM.—Title XVIII is amended by adding at the end the

16 following new section:

17 ‘‘MEDICARE INTEGRITY PROGRAM

18 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—

19 There is hereby established the Medicare Integrity Program

20 (hereafter in this section referred to as the ‘Program’) under

21 which the Secretary shall promote the integrity of the medi22 care program by entering into contracts in accordance with

23 this section with eligible private entities to carry out the

24 activities described in subsection (b).

25 ‘‘(b) ACTIVITIES DESCRIBED.—The activities described

26 in this subsection are as follows:
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1 ‘‘(1) Review of activities of providers of services

2 or other individuals and entities furnishing items and

3 services for which payment may be made under this

4 title (including skilled nursing facilities and home

5 health agencies), including medical and utilization

6 review and fraud review (employing similar stand7 ards, processes, and technologies used by private

8 health plans, including equipment and software tech9 nologies which surpass the capability of the equip10 ment and technologies used in the review of claims

11 under this title as of the date of the enactment of this

12 section).

13 ‘‘(2) Audit of cost reports.

14 ‘‘(3) Determinations as to whether payment

15 should not be, or should not have been, made under

16 this title by reason of section 1862(b), and recovery

17 of payments that should not have been made.

18 ‘‘(4) Education of providers of services, bene19 ficiaries, and other persons with respect to payment

20 integrity and benefit quality assurance issues.

21 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

22 to enter into a contract under the Program to carry out

23 any of the activities described in subsection (b) if—

24 ‘‘(1) the entity has demonstrated capability to

25 carry out such activities;
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1 ‘‘(2) in carrying out such activities, the entity

2 agrees to cooperate with the Inspector General of the

3 Department of Health and Human Services, the At4 torney General of the United States, and other law

5 enforcement agencies, as appropriate, in the inves6 tigation and deterrence of fraud and abuse in relation

7 to this title and in other cases arising out of such ac8 tivities;

9 ‘‘(3) the entity’s financial holdings, interests, or

10 relationships will not interfere with its ability to per11 form the functions to be required by the contract in

12 an effective and impartial manner; and

13 ‘‘(4) the entity meets such other requirements as

14 the Secretary may impose.

15 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—The

16 Secretary shall enter into contracts under the Program in

17 accordance with such procedures as the Secretary may by

18 regulation establish, except that such procedures shall in19 clude the following:

20 ‘‘(1) The Secretary shall determine the appro21 priate number of separate contracts which are nec22 essary to carry out the Program and the appropriate

23 times at which the Secretary shall enter into such

24 contracts.
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1 ‘‘(2) The provisions of section 1153(e)(1) shall

2 apply to contracts and contracting authority under

3 this section, except that competitive procedures must

4 be used when entering into new contracts under this

5 section, or at any other time considered appropriate

6 by the Secretary.

7 ‘‘(3) A contract under this section may be re8 newed without regard to any provision of law requir9 ing competition if the contractor has met or exceeded

10 the performance requirements established in the cur11 rent contract.

12 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

13 Secretary shall by regulation provide for the limitation of

14 a contractor’s liability for actions taken to carry out a con15 tract under the Program, and such regulation shall, to the

16 extent the Secretary finds appropriate, employ the same or

17 comparable standards and other substantive and procedural

18 provisions as are contained in section 1157.

19 ‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI20 FRAUD AND ABUSE TRUST FUND.—For each fiscal year,

21 the Secretary shall transfer from the Federal Hospital In22 surance Trust Fund and the Federal Supplementary Medi23 cal Insurance Trust Fund to the Medicare Anti-Fraud and

24 Abuse Trust Fund under subsection (g) such amounts as

25 are necessary to carry out the activities described in sub-
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1 section (b). Such transfer shall be in an allocation as rea2 sonably reflects the proportion of such expenditures associ3 ated with part A and part B.

4 ‘‘(g) MEDICARE ANTI-FRAUD AND ABUSE TRUST

5 FUND.—

6 ‘‘(1) ESTABLISHMENT.—

7 ‘‘(A) IN GENERAL.—There is hereby estab8 lished in the Treasury of the United States the

9 Anti-Fraud and Abuse Trust Fund (hereafter in

10 this subsection referred to as the ‘Trust Fund’).

11 The Trust Fund shall consist of such gifts and

12 bequests as may be made as provided in sub13 paragraph (B) and such amounts as may be de14 posited in the Trust Fund as provided in sub15 section (f), paragraph (3), and title XI.

16 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS

17 AND BEQUESTS.—The Trust Fund is authorized

18 to accept on behalf of the United States money

19 gifts and bequests made unconditionally to the

20 Trust Fund, for the benefit of the Trust Fund or

21 any activity financed through the Trust Fund.

22 ‘‘(2) INVESTMENT.—

23 ‘‘(A) IN GENERAL.—The Secretary of the

24 Treasury shall invest such amounts of the Fund

25 as such Secretary determines are not required to
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1 meet current withdrawals from the Fund in gov2 ernment account serial securities.

3 ‘‘(B) USE OF INCOME.—Any interest de4 rived from investments under subparagraph (A)

5 shall be credited to the Fund.

6 ‘‘(3) AMOUNTS DEPOSITED INTO TRUST FUND.—

7 In addition to amounts transferred under subsection

8 (f), there shall be deposited in the Trust Fund—

9 ‘‘(A) that portion of amounts recovered in

10 relation to section 1128A arising out of a claim

11 under title XVIII as remains after application of

12 subsection (f)(2) (relating to repayment of the

13 Federal Hospital Insurance Trust Fund or the

14 Federal Supplementary Medical Insurance Trust

15 Fund) of that section, as may be applicable,

16 ‘‘(B) fines imposed under section 1128B

17 arising out of a claim under this title, and

18 ‘‘(C) penalties and damages imposed (other

19 than funds awarded to a relator or for restitu20 tion) under sections 3729 through 3732 of title

21 31, United States Code (pertaining to false

22 claims) in cases involving claims relating to pro23 grams under title XVIII, XIX, or XXI.

24 ‘‘(4) DIRECT APPROPRIATION OF FUNDS TO

25 CARRY OUT PROGRAM.—
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1 ‘‘(A) IN GENERAL.—There are appropriated

2 from the Trust Fund for each fiscal year such

3 amounts as are necessary to carry out the Medi4 care Integrity Program under this section, sub5 ject to subparagraph (B).

6 ‘‘(B) AMOUNTS SPECIFIED.—The amount

7 appropriated under subparagraph (A) for a fis8 cal year is as follows:

9 ‘‘(i) For fiscal year 1996, such amount

10 shall be not less than $430,000,000 and not

11 more than $440,000,000.

12 ‘‘(ii) For fiscal year 1997, such

13 amount shall be not less than $490,000,000

14 and not more than $500,000,000.

15 ‘‘(iii) For fiscal year 1998, such

16 amount shall be not less than $550,000,000

17 and not more than $560,000,000.

18 ‘‘(iv) For fiscal year 1999, such

19 amount shall be not less than $620,000,000

20 and not more than $630,000,000.

21 ‘‘(v) For fiscal year 2000, such amount

22 shall be not less than $670,000,000 and not

23 more than $680,000,000.
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1 ‘‘(vi) For fiscal year 2001, such

2 amount shall be not less than $690,000,000

3 and not more than $700,000,000.

4 ‘‘(vii) For fiscal year 2002, such

5 amount shall be not less than $710,000,000

6 and not more than $720,000,000.

7 ‘‘(5) ANNUAL REPORT.—The Secretary shall sub8 mit an annual report to Congress on the amount of

9 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 (42

16 U.S.C. 1395h) is amended by adding at the end the

17 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 activ21 ity is carried out pursuant to a contract under the Medicare

22 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 for

4 carrying out) any activity pursuant to a contract under

5 this subsection to the extent that the activity is carried out

6 pursuant to a contract under the Medicare Integrity Pro7 gram under section 1893.’’.

8 (c) CONFORMING AMENDMENT.—Section 1128A(f)(3)

9 (42 U.S.C. 1320a–7a(f)(3)) is amended by striking ‘‘as mis10 cellaneous receipts of the Treasury of the United States’’

11 and inserting ‘‘in the Anti-Fraud and Abuse Trust Fund

12 established under section 1893(g)’’.

13 (d) DIRECT SPENDING FOR MEDICARE-RELATED AC14 TIVITIES OF INSPECTOR GENERAL.—Section 1893, as added

15 by subsection (a), is amended by adding at the end the fol16 lowing new subsection:

17 ‘‘(h) DIRECT SPENDING FOR MEDICARE-RELATED AC18 TIVITIES OF INSPECTOR GENERAL.—

19 ‘‘(1) IN GENERAL.—There are appropriated from

20 the Federal Hospital Insurance Trust Fund and the

21 Federal Supplementary Medical Insurance Trust

22 Fund to the Inspector General of the Department of

23 Health and Human Services for each fiscal year such

24 amounts as are necessary to enable the Inspector Gen25 eral to carry out activities relating to the medicare
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1 program (as described in paragraph (2)), subject to

2 paragraph (3).

3 ‘‘(2) ACTIVITIES DESCRIBED.—The activities de4 scribed in this paragraph are as follows:

5 ‘‘(A) Prosecuting medicare-related matters

6 through criminal, civil, and administrative pro7 ceedings.

8 ‘‘(B) Conducting investigations relating to

9 the medicare program.

10 ‘‘(C) Performing financial and performance

11 audits of programs and operations relating to

12 the medicare program.

13 ‘‘(D) Performing inspections and other eval14 uations relating to the medicare program.

15 ‘‘(E) Conducting provider and consumer

16 education activities regarding the requirements

17 of this title.

18 ‘‘(3) AMOUNTS SPECIFIED.—The amount appro19 priated under paragraph (1) for a fiscal year is as

20 follows:

21 ‘‘(A) For fiscal year 1996, such amount

22 shall be $130,000,000.

23 ‘‘(B) For fiscal year 1997, such amount

24 shall be $181,000,000.
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1 ‘‘(C) For fiscal year 1998, such amount

2 shall be $204,000,000.

3 ‘‘(D) For each subsequent fiscal year, the

4 amount appropriated for the previous fiscal

5 year, increased by the percentage increase in ag6 gregate expenditures under this title for the fiscal

7 year involved over the previous fiscal year.

8 ‘‘(4) ALLOCATION OF PAYMENTS AMONG TRUST

9 FUNDS.—The appropriations made under paragraph

10 (1) shall be in an allocation as reasonably reflects the

11 proportion of such expenditures associated with part

12 A and part B.’’.

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 Social

18 Security Act Amendments of 1994, is amended by adding

19 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 wheth6 er or not the Secretary has promulgated a regu7 lation with respect to the list, except that the

8 carrier may not make such an advance deter9 mination with respect to an item or supplier on

10 a list until the expiration of the 30-day period

11 beginning on the date the Secretary or the car12 rier places the item or supplier on the list.’’.

13 (b) EFFECTIVE DATE.—The amendment made by sub14 section (a) shall take effect as if included in the enactment

15 of the Social Security Act Amendments of 1994.

16 SEC. 15108. ESTABLISHMENT OF HEALTH CARE ANTI-FRAUD

17 TASK FORCE.

18 (a) IN GENERAL.—Not later than 120 days after the

19 date of the enactment of this Act, the Attorney General shall

20 establish (in consultation with the Advisory Group de21 scribed in subsection (c)) within the Department of Justice

22 a task force (similar to the Organized Crime Drug Enforce23 ment Task Force) to be known as the ‘‘Health Care Anti24 Fraud Task Force’’ (hereafter in this section referred to as

25 the ‘‘Task Force’’) to prosecute health care fraud offenses.
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1 Nothing in this section may be construed as affecting the

2 powers of the Attorney General or any other individual.

3 (b) OPERATIONS OF TASK FORCE.—The Attorney Gen4 eral shall establish and operate the Task Force in a manner

5 such that—

6 (1) at least one fully staffed operational segment

7 of the Task Force (including at least one Federal rep8 resentative engaged in Task Force activities on a full9 time basis) shall operate in each judicial district of

10 the United States; and

11 (2) the Task Force maintains separate account12 ing of its finances, personnel, case load, and resolu13 tion of claims and actions.

14 (c) ADVISORY GROUP DESCRIBED.—The Advisory

15 Group described in this subsection is a group consisting of

16 the following individuals (or their designees):

17 (1) The Secretary of Health and Human Serv18 ices.

19 (2) The Secretary of the Treasury.

20 (3) The Secretary of Veterans’ Affairs.

21 (4) The Chair of the Board of Governors of the

22 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 enact8 ment of this Act of the adequacy of the quality assurance

9 programs and consumer protections used by the

10 MedicarePlus program under part C of title XVIII of the

11 Social Security Act (as inserted by section 15002(a)), and

12 shall include in the study an analysis of the effectiveness

13 of such programs in protecting plan enrollees against the

14 risk of insufficient provision of benefits which may result

15 from utilization controls.

16 (b) REPORT.—Not later than 6 months after the con17 clusion of the 5-year period described in subsection (a), the

18 Administrator shall submit a report to Congress on the

19 study conducted under subsection (a).

20 SEC. 15110. PENALTY FOR FALSE CERTIFICATION FOR

21 HOME HEALTH SERVICES.

22 (a) IN GENERAL.—Section 1128A(b) (42 U.S.C.

23 1320a–7a(b)) is amended by adding at the end the following

24 new paragraph:

25 ‘‘(3)(A) Any physician who executes a document de26 scribed in subparagraph (B) with respect to an individual
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1 knowing that all of the requirements referred to in such sub2 paragraph are not met with respect to the individual shall

3 be subject to a civil monetary penalty of not more than the

4 greater of—

5 ‘‘(i) $5,000, or

6 ‘‘(ii) three times the amount of the payments

7 under title XVIII for home health services which are

8 made pursuant to such certification.

9 ‘‘(B) A document described in this subparagraph is

10 any document that certifies, for purposes of title XVIII, that

11 an individual meets the requirements of section

12 1814(a)(2)(C) or 1835(a)(2)(A) in the case of home health

13 services furnished to the individual.’’.

14 (b) EFFECTIVE DATE.—The amendment made by sub15 section (a) shall apply to certifications made on or after

16 the date of the enactment of this Act.

17 Subtitle C—Regulatory Relief

18 PART 1—PHYSICIAN OWNERSHIP REFERRAL

19 REFORM

20 SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM21 PENSATION ARRANGEMENTS.

22 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

23 1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that

24 follows through ‘‘equity,’’ and inserting the following: ‘‘is
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1 (except as provided in subsection (c)) an ownership or in2 vestment interest in the entity through equity,’’.

3 (b) CONFORMING AMENDMENTS.—Section 1877 (42

4 U.S.C. 1395nn) is amended as follows:

5 (1) In subsection (b)—

6 (A) in the heading, by striking ‘‘TO BOTH

7 OWNERSHIP AND COMPENSATION ARRANGEMENT

8 PROHIBITIONS’’ and inserting ‘‘WHERE FINAN9 CIAL RELATIONSHIP EXISTS’’; and

10 (B) by redesignating paragraph (4) as

11 paragraph (7).

12 (2) In subsection (c)—

13 (A) by amending the heading to read as fol14 lows: ‘‘EXCEPTION FOR OWNERSHIP OR INVEST15 MENT INTEREST IN PUBLICLY TRADED SECURI16 TIES AND MUTUAL FUNDS’’; and

17 (B) in the matter preceding paragraph (1),

18 by striking ‘‘subsection (a)(2)(A)’’ and inserting

19 ‘‘subsection (a)(2)’’.

20 (3) In subsection (d)—

21 (A) by striking the matter preceding para22 graph (1);

23 (B) in paragraph (3), by striking ‘‘para24 graph (1)’’ and inserting ‘‘paragraph (4)’’; and
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1 (C) by redesignating paragraphs (1), (2),

2 and (3) as paragraphs (4), (5), and (6), and by

3 transferring and inserting such paragraphs after

4 paragraph (3) of subsection (b).

5 (4) By striking subsection (e).

6 (5) In subsection (f)(2)—

7 (A) in the matter preceding paragraph (1),

8 by striking ‘‘ownership, investment, and com9 pensation’’ and inserting ‘‘ownership and invest10 ment’’;

11 (B) in paragraph (2), by striking ‘‘sub12 section (a)(2)(A)’’ and all that follows through

13 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub14 section (a)(2),’’; and

15 (C) in paragraph (2), by striking ‘‘or who

16 have such a compensation relationship with the

17 entity’’.

18 (6) In subsection (h)—

19 (A) by striking paragraphs (1), (2), and

20 (3);

21 (B) in paragraph (4)(A), by striking

22 clauses (iv) and (vi);

23 (C) in paragraph (4)(B), by striking

24 ‘‘RULES.—’’ and all that follows through ‘‘(ii)
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1 FACULTY’’ and inserting ‘‘RULES FOR FACULTY’’;

2 and

3 (D) by adding at the end of paragraph (4)

4 the following new subparagraph:

5 ‘‘(C) MEMBER OF A GROUP.—A physician

6 is a ‘member’ of a group if the physician is an

7 owner or a bona fide employee, or both, of the

8 group.’’.

9 SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES

10 SUBJECT TO PROHIBITION.

11 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

12 1395nn(h)(6)) is amended by striking subparagraphs (B)

13 through (K) and inserting the following:

14 ‘‘(B) Parenteral and enteral nutrients,

15 equipment, and supplies.

16 ‘‘(C) Magnetic resonance imaging and com17 puterized tomography services.

18 ‘‘(D) Outpatient physical or occupational

19 therapy services.’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2))

22 is amended in the matter preceding subparagraph (A)

23 by striking ‘‘services’’ and all that follows through

24 ‘‘supplies)—’’ and inserting ‘‘services—’’.
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1 (2) Section 1877(h)(5)(C) (42 U.S.C.

2 1395nn(h)(5)(C)) is amended—

3 (A) by striking ‘‘, a request by a radiologist

4 for diagnostic radiology services, and a request

5 by a radiation oncologist for radiation therapy,’’

6 and inserting ‘‘and a request by a radiologist for

7 magnetic resonance imaging or for computerized

8 tomography’’, and

9 (B) by striking ‘‘radiologist, or radiation

10 oncologist’’ and inserting ‘‘or radiologist’’.

11 SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMULGA12 TION OF REGULATIONS.

13 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

14 (42 U.S.C. 1395nn note) is amended—

15 (1) in paragraph (1), by striking ‘‘paragraph

16 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

17 (2) by adding at the end the following new para18 graph:

19 ‘‘(3) PROMULGATION OF REGULATIONS.—Not20 withstanding paragraphs (1) and (2), the amend21 ments made by this section shall not apply to any re22 ferrals made before the effective date of final regula23 tions promulgated by the Secretary of Health and

24 Human Services to carry out such amendments.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall take effect as if included in the enactment

3 of OBRA–1993.

4 SEC. 15204. EXCEPTIONS TO PROHIBITION.

5 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE ANCIL6 LARY SERVICES.—

7 (1) REPEAL OF SITE-OF-SERVICE REQUIRE8 MENT.—Section 1877 (42 U.S.C. 1395nn) is amend9 ed—

10 (A) by amending subparagraph (A) of sub11 section (b)(2) to read as follows:

12 ‘‘(A) that are furnished personally by the

13 referring physician, personally by a physician

14 who is a member of the same group practice as

15 the referring physician, or personally by individ16 uals who are under the general supervision of the

17 physician or of another physician in the group

18 practice, and’’, and

19 (B) by adding at the end of subsection (h)

20 the following new paragraph:

21 ‘‘(7) GENERAL SUPERVISION.—An individual is

22 considered to be under the ‘general supervision’ of a

23 physician if the physician (or group practice of which

24 the physician is a member) is legally responsible for

25 the services performed by the individual and for en-
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1 suring that the individual meets licensure and certifi2 cation requirements, if any, applicable under other

3 provisions of law, regardless of whether or not the

4 physician is physically present when the individual

5 furnishes an item or service.’’.

6 (2) CLARIFICATION OF TREATMENT OF PHYSI7 CIAN OWNERS OF GROUP PRACTICE.—Section

8 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is amend9 ed by striking ‘‘physician or such group practice’’

10 and inserting ‘‘physician, such group practice, or the

11 physician owners of such group practice’’.

12 (3) CONFORMING AMENDMENT.—Section

13 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

14 amending the heading to read as follows: ‘‘ANCILLARY

15 SERVICES FURNISHED PERSONALLY OR THROUGH

16 GROUP PRACTICE.—’’.

17 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

18 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

19 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

20 15201(b)(3)(C), is amended by striking ‘‘substantially all’’

21 and inserting ‘‘not less than 75 percent’’.

22 (c) REVISION OF EXCEPTION FOR CERTAIN MANAGED

23 CARE ARRANGEMENTS.—Section 1877(b)(3) (42 U.S.C.

24 1395nn(b)(3)) is amended—
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1 (1) in the heading by inserting ‘‘MANAGED CARE

2 ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;

3 (2) in the matter preceding subparagraph (A),

4 by striking ‘‘organization—’’ and inserting ‘‘organi5 zation, directly or through contractual arrangements

6 with other entities, to individuals enrolled with the

7 organization—’’;

8 (3) in subparagraph (A), by inserting ‘‘or part

9 C’’ after ‘‘section 1876’’;

10 (4) by striking ‘‘or’’ at the end of subparagraph

11 (C);

12 (5) by striking the period at the end of subpara13 graph (D) and inserting a comma; and

14 (6) by adding at the end the following new sub15 paragraphs:

16 ‘‘(E) with a contract with a State to pro17 vide services under the State plan under title

18 XIX (in accordance with section 1903(m)) or a

19 State MediGrant plan under title XXI; or

20 ‘‘(F) which is a MedicarePlus organization

21 under part C or which provides or arranges for

22 the provision of health care items or services

23 pursuant to a written agreement between the or24 ganization and an individual or entity if the

25 written agreement places the individual or entity
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1 at substantial financial risk for the cost or utili2 zation of the items or services which the individ3 ual or entity is obligated to provide, whether

4 through a withhold, capitation, incentive pool,

5 per diem payment, or any other similar risk ar6 rangement which places the individual or entity

7 at substantial financial risk.’’.

8 (d) NEW EXCEPTION FOR SHARED FACILITY SERV9 ICES.—

10 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

11 1395nn(b)), as amended by section 15201(b)(3)(C), is

12 amended—

13 (A) by redesignating paragraphs (4)

14 through (7) as paragraphs (5) through (8); and

15 (B) by inserting after paragraph (3) the fol16 lowing new paragraph:

17 ‘‘(4) SHARED FACILITY SERVICES.—In the case

18 of a designated health service consisting of a shared

19 facility service of a shared facility—

20 ‘‘(A) that is furnished—

21 ‘‘(i) personally by the referring physi22 cian who is a shared facility physician or

23 personally by an individual directly em24 ployed or under the general supervision of

25 such a physician,
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1 ‘‘(ii) by a shared facility in a building

2 in which the referring physician furnishes

3 substantially all of the services of the physi4 cian that are unrelated to the furnishing of

5 shared facility services, and

6 ‘‘(iii) to a patient of a shared facility

7 physician; and

8 ‘‘(B) that is billed by the referring physi9 cian or a group practice of which the physician

10 is a member.’’.

11 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

12 1395nn(h)), as amended by section 15201(b)(6), is

13 amended by inserting before paragraph (4) the follow14 ing new paragraph:

15 ‘‘(1) SHARED FACILITY RELATED DEFINI16 TIONS.—

17 ‘‘(A) SHARED FACILITY SERVICE.—The

18 term ‘shared facility service’ means, with respect

19 to a shared facility, a designated health service

20 furnished by the facility to patients of shared fa21 cility physicians.

22 ‘‘(B) SHARED FACILITY.—The term ‘shared

23 facility’ means an entity that furnishes shared

24 facility services under a shared facility arrange25 ment.
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1 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

2 term ‘shared facility physician’ means, with re3 spect to a shared facility, a physician (or a

4 group practice of which the physician is a mem5 ber) who has a financial relationship under a

6 shared facility arrangement with the facility.

7 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

8 The term ‘shared facility arrangement’ means,

9 with respect to the provision of shared facility

10 services in a building, a financial arrange11 ment—

12 ‘‘(i) which is only between physicians

13 who are providing services (unrelated to

14 shared facility services) in the same build15 ing,

16 ‘‘(ii) in which the overhead expenses of

17 the facility are shared, in accordance with

18 methods previously determined by the phy19 sicians in the arrangement, among the phy20 sicians in the arrangement, and

21 ‘‘(iii) which, in the case of a corpora22 tion, is wholly owned and controlled by

23 shared facility physicians.’’.

24 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

25 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—Sec-
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1 tion 1877(b) (42 U.S.C. 1395nn(b)), as amended by section

2 15201(b)(3)(C) and subsection (d)(1), is amended—

3 (1) by redesignating paragraphs (5) through (8)

4 as paragraphs (6) through (9); and

5 (2) by inserting after paragraph (4) the follow6 ing new paragraph:

7 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—In

8 the case of a designated health service furnished in

9 any area with respect to which the Secretary deter10 mines that individuals residing in the area do not

11 have reasonable access to such a designated health

12 service for which subsection (a)(1) does not apply.’’.

13 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

14 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

15 U.S.C. 1395nn(b)), as amended by section 15201(b)(3)(C),

16 subsection (d)(1), and subsection (e)(1), is amended—

17 (1) by redesignating paragraphs (6) through (9)

18 as paragraphs (7) through (10); and

19 (2) by inserting after paragraph (5) the follow20 ing new paragraph:

21 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

22 SURGICAL CENTERS.—In the case of a designated

23 health service furnished in an ambulatory surgical

24 center described in section 1832(a)(2)(F)(i).’’.
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1 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

2 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42 U.S.C.

3 1395nn(b)), as amended by section 15201(b)(3)(C), sub4 section (d)(1), subsection (e)(1), and subsection (f), is

5 amended—

6 (1) by redesignating paragraphs (7) through (10)

7 as paragraphs (8) through (11); and

8 (2) by inserting after paragraph (6) the follow9 ing new paragraph:

10 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

11 FACILITIES.—In the case of a designated health serv12 ice furnished in a renal dialysis facility under section

13 1881.’’.

14 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN A

15 HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

16 amended by section 15201(b)(3)(C), subsection (d)(1), sub17 section (e)(1), subsection (f), and subsection (g), is amend18 ed—

19 (1) by redesignating paragraphs (8) through (11)

20 as paragraphs (9) through (12); and

21 (2) by inserting after paragraph (7) the follow22 ing new paragraph:

23 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO24 GRAM.—In the case of a designated health service fur-
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1 nished by a hospice program under section

2 1861(dd)(2).’’.

3 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN A

4 COMPREHENSIVE OUTPATIENT REHABILITATION FACIL5 ITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as amended

6 by section 15201(b)(3)(C), subsection (d)(1), subsection

7 (e)(1), subsection (f), subsection (g), and subsection (h), is

8 amended—

9 (1) by redesignating paragraphs (9) through (12)

10 as paragraphs (10) through (13); and

11 (2) by inserting after paragraph (8) the follow12 ing new paragraph:

13 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN14 SIVE OUTPATIENT REHABILITATION FACILITY.—In the

15 case of a designated health service furnished in a com16 prehensive outpatient rehabilitation facility (as de17 fined in section 1861(cc)(2)).’’.

18 (i) DEFINITION OF REFERRAL.—Section

19 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amended—

20 (1) by striking ‘‘an item or service’’ and insert21 ing ‘‘a designated health service’’, and

22 (2) by striking ‘‘the item or service’’ and insert23 ing ‘‘the designated health service’’.

24 SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.

25 Section 1877 (42 U.S.C. 1395nn) is amended—
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1 (1) by striking subsection (f); and

2 (2) by striking subsection (g)(5).

3 SEC. 15206. PREEMPTION OF STATE LAW.

4 Section 1877 (42 U.S.C. 1395nn) is amended by add5 ing at the end the following new subsection:

6 ‘‘(i) PREEMPTION OF STATE LAW.—This section pre7 empts State law to the extent State law is inconsistent with

8 this section.’’.

9 SEC. 15207. EFFECTIVE DATE.

10 Except as provided in section 15203(b), the amend11 ments made by this part shall apply to referrals made on

12 or after August 14, 1995, regardless of whether or not regu13 lations are promulgated to carry out such amendments.

14 PART 2—OTHER MEDICARE REGULATORY RELIEF

15 SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV16 ERAGE DATA BANK.

17 (a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–14)

18 is repealed.

19 (b) CONFORMING AMENDMENTS.—

20 (1) MEDICARE.—Section 1862(b)(5) (42 U.S.C.

21 1395y(b)(5)) is amended—

22 (A) in subparagraph (B), by striking

23 ‘‘under—’’ and all that follows through the end

24 and inserting ‘‘subparagraph (A) for purposes of

25 carrying out this subsection.’’, and
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1 (B) in subparagraph (C)(i), by striking

2 ‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara3 graph (B)’’.

4 (2) MEDICAID.—Section 1902(a)(25)(A)(i) (42

5 U.S.C. 1396a(a)(25)(A)(i)) is amended by striking

6 ‘‘including the use of’’ and all that follows through

7 ‘‘any additional measures’’.

8 (3) ERISA.—Section 101(f) of the Employee Re9 tirement Income Security Act of 1974 (29 U.S.C.

10 1021(f)) is repealed.

11 (4) DATA MATCHES.—Section 552a(a)(8)(B) of

12 title 5, United States Code, is amended—

13 (A) by adding ‘‘; or’’ at the end of clause

14 (v),

15 (B) by striking ‘‘or’’ at the end of clause

16 (vi), and

17 (C) by striking clause (vii).

18 SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE19 QUIRED FOR IMPOSITION OF SANCTIONS.

20 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE21 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN22 ALTIES.—

23 (1) IN GENERAL.—Section 1128A(a) (42 U.S.C.

24 1320a–7a(a)) is amended—
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1 (A) in paragraphs (1) and (2), by inserting

2 ‘‘knowingly’’ before ‘‘presents’’ each place it ap3 pears; and

4 (B) in paragraph (3), by striking ‘‘gives’’

5 and inserting ‘‘knowingly gives or causes to be

6 given’’.

7 (2) DEFINITION OF STANDARD.—Section

8 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

9 adding at the end the following new paragraph:

10 ‘‘(6) The term ‘should know’ means that a per11 son, with respect to information—

12 ‘‘(A) acts in deliberate ignorance of the

13 truth or falsity of the information; or

14 ‘‘(B) acts in reckless disregard of the truth

15 or falsity of the information,

16 and no proof of specific intent to defraud is re17 quired.’’.

18 (b) CLARIFICATION OF EFFECT AND APPLICATION OF

19 SAFE HARBOR EXCEPTIONS.—For purposes of section

20 1128B(b)(3) of the Social Security Act, the specification of

21 any payment practice in regulations promulgated pursuant

22 to section 14(a) of the Medicare and Medicaid Program and

23 Patient Protection Act of 1987 is—

24 (1) solely for the purpose of adding additional

25 exceptions to the types of conduct which are not sub-
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1 ject to an anti-kickback penalty under such section

2 and not for the purpose of limiting the scope of such

3 exceptions; and

4 (2) for the purpose of prescribing criteria for

5 qualifying for such an exception notwithstanding the

6 intent of the party involved.

7 (c) LIMITING IMPOSITION OF ANTI-KICKBACK PEN8 ALTIES TO ACTIONS WITH SIGNIFICANT PURPOSE TO IN9 DUCE REFERRALS.—Section 1128B(b)(2) (42 U.S.C.

10 1320a–7b(b)(2)) is amended in the matter preceding sub11 paragraph (A) by striking ‘‘to induce’’ and inserting ‘‘for

12 the significant purpose of inducing’’.

13 (d) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to acts or omissions occurring on or

15 after January 1, 1996.

16 SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK

17 PENALTIES FOR MANAGED CARE ARRANGE18 MENTS.

19 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.

20 1320a–7b(b)(3)) is amended—

21 (1) by striking ‘‘and’’ at the end of subpara22 graph (D);

23 (2) by striking the period at the end of subpara24 graph (E) and inserting ‘‘; and’’; and
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1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(F) any remuneration between an organization

4 and an individual or entity providing services pursu5 ant to a written agreement between the organization

6 and the individual or entity if the organization is a

7 MedicarePlus organization under part C of title

8 XVIII or if the written agreement places the individ9 ual or entity at substantial financial risk for the cost

10 or utilization of the items or services which the indi11 vidual or entity is obligated to provide, whether

12 through a withhold, capitation, incentive pool, per

13 diem payment, or any other similar risk arrangement

14 which places the individual or entity at substantial

15 financial risk.’’.

16 (b) EFFECTIVE DATE.—The amendment made by sub17 section (a) shall apply to acts or omissions occurring on

18 or after January 1, 1996.

19 SEC. 15214. SOLICITATION AND PUBLICATION OF MODI20 FICATIONS TO EXISTING SAFE HARBORS AND

21 NEW SAFE HARBORS.

22 (a) IN GENERAL.—

23 (1) SOLICITATIONS.—Not later than January 1,

24 1996, and not less than annually thereafter, the Sec25 retary of Health and Human Services shall publish
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1 a notice in the Federal Register soliciting proposals,

2 which will be accepted during a 60-day period, for—

3 (A) modifications to existing safe harbors

4 issued pursuant to section 14(a) of the Medicare

5 and Medicaid Patient and Program Protection

6 Act of 1987;

7 (B) additional safe harbors specifying pay8 ment practices that shall not be treated as a

9 criminal offense under section 1128B(b) of the

10 Social Security Act and shall not serve as the

11 basis for an exclusion under section 1128(b)(7) of

12 such Act; and

13 (C) special fraud alerts to be issued pursu14 ant to section 15101(c).

15 (2) PUBLICATION OF PROPOSED MODIFICATIONS

16 AND PROPOSED ADDITIONAL SAFE HARBORS.—Not

17 later than 120 days after receiving the proposals de18 scribed in subparagraphs (A) and (B) of paragraph

19 (1), the Secretary, after considering such proposals in

20 consultation with the Attorney General, shall publish

21 in the Federal Register proposed modifications to ex22 isting safe harbors and proposed additional safe har23 bors, if appropriate, with a 60-day comment period.

24 After considering any public comments received dur25 ing this period, the Secretary shall issue final rules
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1 modifying the existing safe harbors and establishing

2 new safe harbors, as appropriate.

3 (3) REPORT.—The Inspector General shall, in an

4 annual report to Congress or as part of the year-end

5 semiannual report required by section 5 of the Inspec6 tor General Act of 1978, describe the proposals re7 ceived under subparagraphs (A) and (B) of para8 graph (1) and explain which proposals were included

9 in the publication described in paragraph (2), which

10 proposals were not included in that publication, and

11 the reasons for the rejection of the proposals that were

12 not included.

13 (b) CRITERIA FOR MODIFYING AND ESTABLISHING

14 SAFE HARBORS.—In modifying and establishing safe har15 bors under subsection (a)(2), the Secretary may consider

16 the extent to which providing a safe harbor for the specified

17 payment practice may result in any of the following:

18 (1) An increase or decrease in access to health

19 care services.

20 (2) An increase or decrease in the quality of

21 health care services.

22 (3) An increase or decrease in patient freedom of

23 choice among health care providers.

24 (4) An increase or decrease in competition

25 among health care providers.
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1 (5) An increase or decrease in the cost to health

2 care programs of the Federal Government.

3 (6) An increase or decrease in the potential

4 overutilization of health care services.

5 (7) Any other factors the Secretary deems appro6 priate in the interest of preventing fraud and abuse

7 in health care programs of the Federal Government.

8 SEC. 15215. ISSUANCE OF ADVISORY OPINIONS UNDER

9 TITLE XI.

10 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),

11 as amended by section 15104(a), is amended by inserting

12 after section 1129 the following new section:

13 ‘‘ADVISORY OPINIONS

14 ‘‘SEC. 1130. (a) ISSUANCE OF ADVISORY OPINIONS.—

15 The Secretary shall issue written advisory opinions as pro16 vided in this section.

17 ‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—

18 The Secretary shall issue advisory opinions as to the follow19 ing matters:

20 ‘‘(1) What constitutes prohibited remuneration

21 within the meaning of section 1128B(b).

22 ‘‘(2) Whether an arrangement or proposed ar23 rangement satisfies the criteria set forth in section

24 1128B(b)(3) for activities which do not result in pro25 hibited remuneration.
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1 ‘‘(3) Whether an arrangement or proposed ar2 rangement satisfies the criteria which the Secretary

3 has established, or shall establish by regulation for ac4 tivities which do not result in prohibited remunera5 tion.

6 ‘‘(4) What constitutes an inducement to reduce

7 or limit services to individuals entitled to benefits

8 under title XVIII or title XIX or title XXI within the

9 meaning of section 1128B(b).

10 ‘‘(5) Whether any activity or proposed activity

11 constitutes grounds for the imposition of a sanction

12 under section 1128, 1128A, or 1128B.

13 ‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN14 IONS.—Such advisory opinions shall not address the follow15 ing matters:

16 ‘‘(1) Whether the fair market value shall be, or

17 was paid or received for any goods, services or prop18 erty.

19 ‘‘(2) Whether an individual is a bona fide em20 ployee within the requirements of section 3121(d)(2)

21 of the Internal Revenue Code of 1986.

22 ‘‘(d) EFFECT OF ADVISORY OPINIONS.—

23 ‘‘(1) BINDING AS TO SECRETARY AND PARTIES

24 INVOLVED.—Each advisory opinion issued by the Sec-
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1 retary shall be binding as to the Secretary and the

2 party or parties requesting the opinion.

3 ‘‘(2) FAILURE TO SEEK OPINION.—The failure of

4 a party to seek an advisory opinion may not be in5 troduced into evidence to prove that the party in6 tended to violate the provisions of sections 1128,

7 1128A, or 1128B.

8 ‘‘(e) REGULATIONS.—

9 ‘‘(1) IN GENERAL.—Not later than 180 days

10 after the date of the enactment of this section, the Sec11 retary shall issue regulations to carry out this section.

12 Such regulations shall provide for—

13 ‘‘(A) the procedure to be followed by a party

14 applying for an advisory opinion;

15 ‘‘(B) the procedure to be followed by the

16 Secretary in responding to a request for an advi17 sory opinion;

18 ‘‘(C) the interval in which the Secretary

19 shall respond;

20 ‘‘(D) the reasonable fee to be charged to the

21 party requesting an advisory opinion; and

22 ‘‘(E) the manner in which advisory opin23 ions will be made available to the public.

24 ‘‘(2) SPECIFIC CONTENTS.—Under the regula25 tions promulgated pursuant to paragraph (1)—
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1 ‘‘(A) the Secretary shall be required to re2 spond to a party requesting an advisory opinion

3 by not later than 30 days after the request is re4 ceived; and

5 ‘‘(B) the fee charged to the party requesting

6 an advisory opinion shall be equal to the costs

7 incurred by the Secretary in responding to the

8 request.’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall apply to requests for advisory opinions

11 made on or after January 1, 1996.

12 SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND

13 CLAIMS PROCESSING REQUIREMENTS FOR

14 PHYSICIANS’ SERVICES.

15 Except as may be specifically provided by Congress,

16 the Secretary of Health and Human Services may not im17 plement any change in the requirements imposed on the

18 billing and processing of claims for payment for physicians’

19 services under part B of the medicare program unless the

20 Secretary notifies the individuals furnishing such services

21 of the change not later than 120 days before the effective

22 date of the change.
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1 PART 3—PROMOTING PHYSICIAN SELF-POLICING

2 SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CER3 TAIN ACTIVITIES OF MEDICAL SELF-REGU4 LATORY ENTITIES.

5 (a) EXEMPTION DESCRIBED.—An activity relating to

6 the provision of health care services shall be exempt from

7 the antitrust laws, and any State law similar to the anti8 trust laws, if the activity is within the safe harbor described

9 in subsection (b).

10 (b) SAFE HARBOR FOR ACTIVITIES OF MEDICAL SELF11 REGULATORY ENTITIES.—

12 (1) IN GENERAL.—Subject to paragraph (2), any

13 activity of a medical self-regulatory entity relating to

14 standard setting or standard enforcement activities

15 that are designed to promote the quality of health care

16 services provided to patients.

17 (2) EXCEPTION.—No activity of a medical self18 regulatory entity may be deemed to fall under the safe

19 harbor established under paragraph (1) if the activ20 ity—

21 (A) is conducted for purposes of financial

22 gain, or

23 (B) interferes with the provision of health

24 care services by any health care provider who is

25 not a member of the specific profession which is
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1 subject to the authority of the medical self-regu2 latory entity.

3 (c) DEFINITIONS.—For purposes of this section:

4 (1) ANTITRUST LAWS.—The term ‘‘antitrust

5 laws’’ has the meaning given it in subsection (a) of

6 the first section of the Clayton Act (15 U.S.C. 12(a)),

7 except that such term includes section 5 of the Federal

8 Trade Commission Act (15 U.S.C. 45) to the extent

9 such section applies to unfair methods of competition.

10 (2) HEALTH BENEFIT PLAN.—The term ‘‘health

11 benefit plan’’ means—

12 (A) a hospital or medical expense incurred

13 policy or certificate,

14 (B) a hospital or medical service plan con15 tract,

16 (C) a health maintenance subscriber con17 tract,

18 (D) a multiple employer welfare arrange19 ment or employee benefit plan (as defined under

20 the Employee Retirement Income Security Act of

21 1974), or

22 (E) a MedicarePlus product (offered under

23 part C of title XVIII of the Social Security Act),

24 that provides benefits with respect to health care serv25 ices.
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1 (3) HEALTH CARE SERVICE.—The term ‘‘health

2 care service’’ means any service for which payment

3 may be made under a health benefit plan including

4 services related to the delivery or administration of

5 such service.

6 (4) MEDICAL SELF-REGULATORY ENTITY.—The

7 term ‘‘medical self-regulatory entity’’ means a medi8 cal society or association, a specialty board, a recog9 nized accrediting agency, or a hospital medical staff,

10 and includes the members, officers, employees, consult11 ants, and volunteers or committees of such an entity.

12 (5) HEALTH CARE PROVIDER.—The term ‘‘health

13 care provider’’ means any individual or entity that

14 is engaged in the delivery of health care services in

15 a State and that is required by State law or regula16 tion to be licensed or certified by the State to engage

17 in the delivery of such services in the State.

18 (6) STANDARD SETTING OR STANDARD ENFORCE19 MENT ACTIVITIES.—The term ‘‘standard setting or

20 standard enforcement activities’’ means—

21 (A) accreditation of health care practition22 ers, health care providers, medical education in23 stitutions, or medical education programs,

24 (B) technology assessment and risk manage25 ment activities,
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1 (C) the development and implementation of

2 practice guidelines or practice parameters, or

3 (D) official peer review proceedings under4 taken by a hospital medical staff (or committee

5 thereof) or a medical society or association for

6 purposes of evaluating the professional conduct

7 or quality of health care provided by a medical

8 professional.

9 Subtitle D—Medical Liability

10 Reform

11 PART 1—GENERAL PROVISIONS

12 SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY

13 ACTIONS.

14 (a) APPLICABILITY.—This subtitle shall apply with re15 spect to any health care liability action brought in any

16 State or Federal court, except that this subtitle shall not

17 apply to an action for damages arising from a vaccine-re18 lated injury or death to the extent that title XXI of the Pub19 lic Health Service Act applies to the action.

20 (b) PREEMPTION.—This subtitle shall preempt any

21 State law to the extent such law is inconsistent with the

22 limitations contained in this subtitle. This subtitle shall not

23 preempt any State law that provides for defenses or places

24 limitations on a person’s liability in addition to those con-
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1 tained in this subtitle or otherwise imposes greater restric2 tions than those provided in this subtitle.

3 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE OF

4 LAW OR VENUE.—Nothing in subsection (b) shall be con5 strued to—

6 (1) waive or affect any defense of sovereign im7 munity asserted by any State under any provision of

8 law;

9 (2) waive or affect any defense of sovereign im10 munity asserted by the United States;

11 (3) affect the applicability of any provision of

12 the Foreign Sovereign Immunities Act of 1976;

13 (4) preempt State choice-of-law rules with re14 spect to claims brought by a foreign nation or a citi15 zen of a foreign nation; or

16 (5) affect the right of any court to transfer venue

17 or to apply the law of a foreign nation or to dismiss

18 a claim of a foreign nation or of a citizen of a foreign

19 nation on the ground of inconvenient forum.

20 (d) AMOUNT IN CONTROVERSY.—In an action to which

21 this subtitle applies and which is brought under section

22 1332 of title 28, United States Code, the amount of non23 economic damages or punitive damages, and attorneys’ fees

24 or costs, shall not be included in determining whether the

25 matter in controversy exceeds the sum or value of $50,000.
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1 (e) FEDERAL COURT JURISDICTION NOT ESTAB2 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

3 this subtitle shall be construed to establish any jurisdiction

4 in the district courts of the United States over health care

5 liability actions on the basis of section 1331 or 1337 of title

6 28, United States Code.

7 SEC. 15302. DEFINITIONS.

8 As used in this subtitle:

9 (1) ACTUAL DAMAGES.—The term ‘‘actual dam10 ages’’ means damages awarded to pay for economic

11 loss.

12 (2) ALTERNATIVE DISPUTE RESOLUTION SYSTEM;

13 ADR.—The term ‘‘alternative dispute resolution sys14 tem’’ or ‘‘ADR’’ means a system established under

15 Federal or State law that provides for the resolution

16 of health care liability claims in a manner other than

17 through health care liability actions.

18 (3) CLAIMANT.—The term ‘‘claimant’’ means

19 any person who brings a health care liability action

20 and any person on whose behalf such an action is

21 brought. If such action is brought through or on behalf

22 of an estate, the term includes the claimant’s dece23 dent. If such action is brought through or on behalf

24 of a minor or incompetent, the term includes the

25 claimant’s legal guardian.
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1 (4) CLEAR AND CONVINCING EVIDENCE.—The

2 term ‘‘clear and convincing evidence’’ is that measure

3 or degree of proof that will produce in the mind of

4 the trier of fact a firm belief or conviction as to the

5 truth of the allegations sought to be established, except

6 that such measure or degree of proof is more than that

7 required under preponderance of the evidence but less

8 than that required for proof beyond a reasonable

9 doubt.

10 (5) COLLATERAL SOURCE PAYMENTS.—The term

11 ‘‘collateral source payments’’ means any amount paid

12 or reasonably likely to be paid in the future to or on

13 behalf of a claimant, or any service, product, or other

14 benefit provided or reasonably likely to be provided in

15 the future to or on behalf of a claimant, as a result

16 of an injury or wrongful death, pursuant to—

17 (A) any State or Federal health, sickness,

18 income-disability, accident or workers’ com19 pensation Act;

20 (B) any health, sickness, income-disability,

21 or accident insurance that provides health bene22 fits or income-disability coverage;

23 (C) any contract or agreement of any

24 group, organization, partnership, or corporation

25 to provide, pay for, or reimburse the cost of med-
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1 ical, hospital, dental, or income disability bene2 fits; and

3 (D) any other publicly or privately funded

4 program.

5 (6) ECONOMIC LOSS.—The term ‘‘economic loss’’

6 means any pecuniary loss resulting from harm (in7 cluding the loss of earnings, medical expense loss, re8 placement services loss, loss due to death, and burial

9 costs), to the extent recovery for such loss is allowed

10 under applicable State law.

11 (7) HARM.—The term ‘‘harm’’ means any legally

12 cognizable wrong or injury for which punitive dam13 ages may be imposed.

14 (8) HEALTH CARE LIABILITY ACTION.—The term

15 ‘‘health care liability action’’ means a civil action

16 brought in a State or Federal court against a health

17 care provider, an entity which is obligated to provide

18 or pay for health benefits under any health plan (in19 cluding any person or entity acting under a contract

20 or arrangement to provide or administer any health

21 benefit), or the manufacturer, distributor, supplier,

22 marketer, promoter, or seller of a medical product, in

23 which the claimant alleges a claim (including third

24 party claims, cross claims, counter claims, or dis25 tribution claims) based upon the provision of (or the
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1 failure to provide or pay for) health care services or

2 the use of a medical product, regardless of the theory

3 of liability on which the claim is based or the number

4 of plaintiffs, or defendants or causes of action.

5 (9) HEALTH CARE LIABILITY CLAIM.—The term

6 ‘‘health care liability claim’’ means a claim in which

7 the claimant alleges that injury was caused by the

8 provision of (or the failure to provide) health care

9 services.

10 (10) HEALTH CARE PROVIDER.—The term

11 ‘‘health care provider’’ means any individual, organi12 zation, or institution that is engaged in the delivery

13 of health care services in a State and that is required

14 by the laws or regulations of the State to be licensed

15 or certified by the State to engage in the delivery of

16 such services in the State.

17 (11) NONECONOMIC DAMAGES.—The term ‘‘non18 economic damages’’ means damages paid to an indi19 vidual for pain and suffering, inconvenience, emo20 tional distress, mental anguish, loss of consortium, in21 jury to reputation, humiliation, and other

22 nonpecuniary losses.

23 (12) PERSON.—The term ‘‘person’’ means any

24 individual, corporation, company, association, firm,
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1 partnership, society, joint stock company, or any

2 other entity, including any governmental entity.

3 (13) PUNITIVE DAMAGES.—The term ‘‘punitive

4 damages’’ means damages awarded against any per5 son not to compensate for actual injury suffered, but

6 to punish or deter such person or others from engag7 ing in similar behavior in the future.

8 (14) STATE.—The term ‘‘State’’ means each of

9 the several States, the District of Columbia, the Com10 monwealth of Puerto Rico, the Virgin Islands, Guam,

11 American Samoa, the Northern Mariana Islands, the

12 Trust Territories of the Pacific Islands, and any other

13 territory or possession of the United States.

14 SEC. 15303. EFFECTIVE DATE.

15 This subtitle will apply to any health care liability

16 action brought in a Federal or State court and to any

17 health care liability claim subject to an alternative dispute

18 resolution system, that is initiated on or after the date of

19 enactment of this subtitle, except that any health care liabil20 ity claim or action arising from an injury occurring prior

21 to the date of enactment of this subtitle shall be governed

22 by the applicable statute of limitations provisions in effect

23 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 after

5 the expiration of the 2-year period that begins on the date

6 on which the alleged injury that is the subject of the action

7 was discovered or should reasonably have been discovered,

8 but in no case after the expiration of the 5-year period that

9 begins on the date the alleged injury occurred.

10 SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.

11 (a) TREATMENT OF NONECONOMIC DAMAGES.—

12 (1) LIMITATION ON NONECONOMIC DAMAGES.—

13 The total amount of noneconomic damages that may

14 be awarded to a claimant for losses resulting from the

15 injury which is the subject of a health care liability

16 action may not exceed $250,000, regardless of the

17 number of parties against whom the action is brought

18 or the number of actions brought with respect to the

19 injury.

20 (2) JOINT AND SEVERAL LIABILITY.—In any

21 health care liability action brought in State or Fed22 eral court, a defendant shall be liable only for the

23 amount of noneconomic damages attributable to such

24 defendant in direct proportion to such defendant’s

25 share of fault or responsibility for the claimant’s ac26 tual damages, as determined by the trier of fact. In
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1 all such cases, the liability of a defendant for non2 economic damages shall be several and not joint.

3 (b) TREATMENT OF PUNITIVE DAMAGES.—

4 (1) GENERAL RULE.—Punitive damages may, to

5 the extent permitted by applicable State law, be

6 awarded in any health care liability action for harm

7 in any Federal or State court against a defendant if

8 the claimant establishes by clear and convincing evi9 dence that the harm suffered was result of conduct—

10 (A) specifically intended to cause harm, or

11 (B) conduct manifesting a conscious, fla12 grant indifference to the rights or safety of oth13 ers.

14 (2) PROPORTIONAL AWARDS.—The amount of

15 punitive damages that may be awarded in any health

16 care liability action subject to this subtitle shall not

17 exceed 3 times the amount of damages awarded to the

18 claimant for economic loss, or $250,000, whichever is

19 greater. This section shall be applied by the court and

20 shall not be disclosed to the jury.

21 (c) APPLICABILITY.—This section shall apply to any

22 health care liability action brought in any Federal or State

23 court on any theory where punitive damages are sought.

24 This section does not create a cause of action for punitive

25 damages. This section does not preempt or supersede any
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1 State or Federal law to the extent that such law would fur2 ther limit the award of punitive damages.

3 (d) BIFURCATION.—At the request of any party, the

4 trier of fact shall consider in a separate proceeding whether

5 punitive damages are to be awarded and the amount of such

6 award. If a separate proceeding is requested, evidence rel7 evant only to the claim of punitive damages, as determined

8 by applicable State law, shall be inadmissible in any pro9 ceeding to determine whether actual damages are to be

10 awarded.

11 (e) DRUGS AND DEVICES.—

12 (1)(A) Punitive damages shall not be awarded

13 against a manufacturer or product seller of a drug

14 (as defined in section 201(g)(1) of the Federal Food,

15 Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or

16 medical device (as defined in section 201(h) of the

17 Federal Food, Drug, and Cosmetic Act (21 U.S.C.

18 321(h)) which caused the claimant’s harm where—

19 (i) such drug or device was subject to pre20 market approval by the Food and Drug Admin21 istration with respect to the safety of the formu22 lation or performance of the aspect of such drug

23 or device which caused the claimant’s harm or

24 the adequacy of the packaging or labeling of such
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1 drug or device, and such drug was approved by

2 the Food and Drug Administration; or

3 (ii) the drug is generally recognized as safe

4 and effective pursuant to conditions established

5 by the Food and Drug Administration and ap6 plicable regulations, including packaging and la7 beling regulations.

8 (B) Subparagraph (A) shall not apply in any

9 case in which the defendant, before or after premarket

10 approval of a drug or device—

11 (i) intentionally and wrongfully withheld

12 from or misrepresented to the Food and Drug

13 Administration information concerning such

14 drug or device required to be submitted under the

15 Federal Food, Drug, and Cosmetic Act (21

16 U.S.C. 301 et seq.) or section 351 of the Public

17 Health Service Act (42 U.S.C. 262) that is mate18 rial and relevant to the harm suffered by the

19 claimant, or

20 (ii) made an illegal payment to an official

21 or employee of the Food and Drug Administra22 tion for the purpose of securing or maintaining

23 approval of such drug or device.

24 (2) PACKAGING.—In a health care liability ac25 tion for harm which is alleged to relate to the ade-
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1 quacy of the packaging (or labeling relating to such

2 packaging) of a drug which is required to have tam3 per-resistant packaging under regulations of the Sec4 retary of Health and Human Services (including la5 beling regulations related to such packaging), the

6 manufacturer of the drug shall not be held liable for

7 punitive damages unless the drug is found by the

8 court by clear and convincing evidence to be substan9 tially out of compliance with such regulations.

10 (f) PERIODIC PAYMENTS FOR FUTURE LOSSES.—

11 (1) GENERAL RULE.—In any health care liabil12 ity action in which the damages awarded for future

13 economic and noneconomic loss exceeds $50,000, a

14 person shall not be required to pay such damages in

15 a single, lump-sum payment, but shall be permitted

16 to make such payments periodically based on when

17 the damages are found likely to occur, as such pay18 ments are determined by the court.

19 (2) FINALITY OF JUDGMENT.—The judgment of

20 the court awarding periodic payments under this sub21 section may not, in the absence of fraud, be reopened

22 at any time to contest, amend, or modify the schedule

23 or amount of the payments.
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1 (3) LUMP-SUM SETTLEMENTS.—This subsection

2 shall not be construed to preclude a settlement provid3 ing for a single, lump-sum payment.

4 (g) TREATMENT OF COLLATERAL SOURCE PAY5 MENTS.—

6 (1) INTRODUCTION INTO EVIDENCE.—In any

7 health care liability action, any defendant may intro8 duce evidence of collateral source payments. If any

9 defendant elects to introduce such evidence, the claim10 ant may introduce evidence of any amount paid or

11 contributed or reasonably likely to be paid or contrib12 uted in the future by or on behalf of the claimant to

13 secure the right to such collateral source payments.

14 (2) NO SUBROGATION.—No provider of collateral

15 source payments shall recover any amount against the

16 claimant or receive any lien or credit against the

17 claimant’s recovery or be equitably or legally sub18 rogated the right of the claimant in a health care li19 ability action. This subsection shall apply to an ac20 tion that is settled as well as an action that is re21 solved by a fact finder.

22 SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.

23 Any ADR used to resolve a health care liability action

24 or claim shall contain provisions relating to statute of limi25 tations, non-economic damages, joint and several liability,
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1 punitive damages, collateral source rule, and periodic pay2 ments which are identical to the provisions relating to such

3 matters in this subtitle.

4 Subtitle E—Teaching Hospitals and

5 Graduate Medical Education

6 PART 1—TEACHING HOSPITAL AND GRADUATE

7 MEDICAL EDUCATION TRUST FUND

8 SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO

9 TEACHING HOSPITALS.

10 The Social Security Act (42 U.S.C. 300 et seq.) is

11 amended by adding after title XXI the following title:

12 ‘‘TITLE XXII—TEACHING HOSPITAL AND

13 GRADUATE MEDICAL EDUCATION TRUST FUND

14 ‘‘PART A—ESTABLISHMENT OF FUND

15 ‘‘SEC. 2201. ESTABLISHMENT OF FUND.

16 ‘‘(a) IN GENERAL.—There is established in the Treas17 ury of the United States a fund to be known as the Teaching

18 Hospital and Graduate Medical Education Trust Fund (in

19 this title referred to as the ‘Fund’), consisting of amounts

20 appropriated to the Fund in subsection (d) and subsection

21 (e)(3), amounts transferred to the Fund under section

22 1886(j), and such gifts and bequests as may be deposited

23 in the Fund pursuant to subsection (f). Amounts in the

24 Fund are available until expended.
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1 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

2 Fund are available to the Secretary for making payments

3 under section 2211.

4 ‘‘(c) ACCOUNTS IN FUND.—There are established with5 in the Fund the following accounts:

6 ‘‘(1) The Indirect-Costs Medical Education Ac7 count.

8 ‘‘(2) The Medicare Direct-Costs Medical Edu9 cation Account.

10 ‘‘(3) The General Direct-Costs Medical Edu11 cation Account.

12 ‘‘(d) GENERAL TRANSFERS TO FUND.—

13 ‘‘(1) IN GENERAL.—For fiscal year 1997 and

14 each subsequent fiscal year, there are appropriated to

15 the Fund (effective on the applicable date under para16 graph (2)), out of any money in the Treasury not oth17 erwise appropriated, the following amounts (as appli18 cable to the fiscal year involved):

19 ‘‘(A) For fiscal year 1997, $400,000,000.

20 ‘‘(B) For fiscal year 1998, $600,000,000.

21 ‘‘(C) For fiscal year 1999, $2,000,000,000.

22 ‘‘(D) For fiscal year 2000, $3,000,000,000.

23 ‘‘(E) For fiscal year 2001, $4,000,000,000.

24 ‘‘(F) For fiscal year 2002, $5,800,000,000.
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1 ‘‘(G) For fiscal year 2003 and each subse2 quent fiscal year, the greater of the amount ap3 propriated for the preceding fiscal year or an

4 amount equal to the product of—

5 ‘‘(i) the amount appropriated for the

6 preceding fiscal year; and

7 ‘‘(ii) 1 plus the percentage increase in

8 the nominal gross domestic product for the

9 one-year period ending upon July 1 of such

10 preceding fiscal year.

11 ‘‘(2) EFFECTIVE DATE FOR ANNUAL APPROPRIA12 TION.—For purposes of paragraph (1) (and for pur13 poses of section 2221(a)(1), and subsections (b)(1)(A)

14 and (c)(1)(A) of section 2231)), the applicable date

15 for a fiscal year is the first day of the fiscal year, ex16 clusive of Saturdays, Sundays, and Federal holidays.

17 ‘‘(3) ALLOCATION AMONG CERTAIN ACCOUNTS.—

18 Of the amount appropriated in paragraph (1) for a

19 fiscal year—

20 ‘‘(A) there shall be allocated to the Indirect21 Costs Medical Education Account the percentage

22 determined under paragraph (4)(B); and

23 ‘‘(B) there shall be allocated to the General

24 Direct-Costs Medical Education Account the per25 centage determined under paragraph (4)(C).
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1 ‘‘(4) DETERMINATION OF PERCENTAGES.—The

2 Secretary of Health and Human Services, acting

3 through the Administrator of the Health Care Financ4 ing Administration, shall determine the following:

5 ‘‘(A) The total amount of payments that

6 were made under subsections (d)(5)(B) and (h)

7 of section 1886 for fiscal year 1994.

8 ‘‘(B) The percentage of such total that was

9 constituted by payments under subsection

10 (d)(5)(B) of such section.

11 ‘‘(C) The percentage of such total that was

12 constituted by payments under subsection (h) of

13 such section.

14 ‘‘(e) INVESTMENT.—

15 ‘‘(1) IN GENERAL.—The Secretary of the Treas16 ury shall invest such amounts of the Fund as such

17 Secretary determines are not required to meet current

18 withdrawals from the Fund. Such investments may be

19 made only in interest-bearing obligations of the

20 United States. For such purpose, such obligations

21 may be acquired on original issue at the issue price,

22 or by purchase of outstanding obligations at the mar23 ket price.
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1 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation ac2 quired by the Fund may be sold by the Secretary of

3 the Treasury at the market price.

4 ‘‘(3) AVAILABILITY OF INCOME.—Any interest de5 rived from obligations acquired by the Fund, and

6 proceeds from any sale or redemption of such obliga7 tions, are hereby appropriated to the Fund.

8 ‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—The

9 Fund may accept on behalf of the United States money gifts

10 and bequests made unconditionally to the Fund for the ben11 efit of the Fund or any activity financed through the Fund.

12 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

13 ‘‘Subpart 1—Requirement of Payments

14 ‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.

15 ‘‘(a) IN GENERAL.—Subject to subsection (d), in the

16 case of each teaching hospital that in accordance with sub17 section (b) submits to the Secretary a payment document

18 for fiscal year 1997 or any subsequent fiscal year, the Sec19 retary shall make payments for the year to the teaching

20 hospital for the costs of operating approved medical resi21 dency training programs. Such payments shall be made

22 from the Fund, and the total of the payments to the hospital

23 for the fiscal year shall equal the sum of the following:
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1 ‘‘(1) An amount determined under section 2221

2 (relating to the indirect costs of graduate medical

3 education).

4 ‘‘(2) An amount determined under section 2231

5 (relating to the direct costs of graduate medical edu6 cation).

7 ‘‘(b) PAYMENT DOCUMENT.—For purposes of sub8 section (a), a payment document is a document containing

9 such information as may be necessary for the Secretary to

10 make payments under such subsection to a teaching hospital

11 for a fiscal year. The document is submitted in accordance

12 with this subsection if the document is submitted not later

13 than the date specified by the Secretary, and the document

14 is in such form and is made in such manner as the Sec15 retary may require. The Secretary may require that infor16 mation under this subsection be submitted to the Secretary

17 in periodic reports.

18 ‘‘(c) ADMINISTRATOR OF PROGRAMS.—This part, and

19 the subsequent parts of this title, shall be carried out by

20 the Secretary acting through the Administrator of the

21 Health Care Financing Administration.

22 ‘‘(d) SPECIAL RULES.—

23 ‘‘(1) AUTHORITY REGARDING PAYMENTS TO CON24 SORTIA OF PROVIDERS.—In the case of payments
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1 under subsection (a) that are determined under sec2 tion 2231:

3 ‘‘(A) The requirement under such subsection

4 to make the payments to teaching hospitals is

5 subject to the authority of the Secretary under

6 section 2233(a) to make payments to qualifying

7 consortia.

8 ‘‘(B) If the Secretary authorizes such a con9 sortium for purposes of section 2233(a), sub10 sections (a) and (b) of this section apply to the

11 consortium to the same extent and in the same

12 manner as the subsections apply to teaching hos13 pitals.

14 ‘‘(2) CERTAIN HOSPITALS.—Paragraph (1) of

15 subsection (a) is subject to sections 2222 and 2223 of

16 subpart 2. Paragraph (2) of subsection (a) is subject

17 to sections 2232 through 2234 of subpart 3.

18 ‘‘(e) APPROVED MEDICAL RESIDENCY TRAINING PRO19 GRAM.—For purposes of this title, the term ‘approved medi20 cal residency training program’ has the meaning given such

21 term in section 1886(h)(5)(A).
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1 ‘‘Subpart 2—Amount Relating to Indirect Costs of

2 Graduate Medical Education

3 ‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN4 DIRECT COSTS.

5 ‘‘(a) IN GENERAL.—For purposes of section

6 2211(a)(1), the amount determined under this section for

7 a teaching hospital for a fiscal year is the product of—

8 ‘‘(1) the amount in the Indirect-Costs Medical

9 Education Account on the applicable date under sec10 tion 2201(d) (once the appropriation under such sec11 tion is made); and

12 ‘‘(2) the percentage determined for the hospital

13 under subsection (b).

14 ‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—

15 ‘‘(1) IN GENERAL.—For purposes of subsection

16 (a)(2), the percentage determined under this sub17 section for a teaching hospital is the mean average of

18 the respective percentages determined under para19 graph (3) for each fiscal year of the applicable period

20 (as defined in paragraph (2)), adjusted by the Sec21 retary (upward or downward, as the case may be) on

22 a pro rata basis to the extent necessary to ensure that

23 the sum of the percentages determined under this

24 paragraph for all teaching hospitals is equal to 100
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1 percent. The preceding sentence is subject to sections

2 2222 and 2223.

3 ‘‘(2) APPLICABLE PERIOD REGARDING RELEVANT

4 DATA; FISCAL YEARS 1992 THROUGH 1994.—For pur5 poses of this part, the term ‘applicable period’ means

6 the period beginning on the first day of fiscal year

7 1992 and continuing through the end of fiscal year

8 1994.

9 ‘‘(3) RESPECTIVE DETERMINATIONS FOR FISCAL

10 YEARS OF APPLICABLE PERIOD.—For purposes of

11 paragraph (1), the percentage determined under this

12 paragraph for a teaching hospital for a fiscal year of

13 the applicable period is the percentage constituted by

14 the ratio of—

15 ‘‘(A) the total amount of payments received

16 by the hospital under section 1886(d)(5)(B) for

17 discharges occurring during the fiscal year in18 volved; to

19 ‘‘(B) the sum of the respective amounts de20 termined under subparagraph (A) for the fiscal

21 year for all teaching hospitals.

22 ‘‘(c) AVAILABILITY OF DATA.—If a teaching hospital

23 received the payments specified in subsection (b)(3)(A) dur24 ing the applicable period but a complete set of the relevant

25 data is not available to the Secretary for purposes of deter-
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1 mining an amount under such subsection for the fiscal year

2 involved, the Secretary shall for purposes of such subsection

3 make an estimate on the basis of such data as are available

4 to the Secretary for the applicable period.

5 ‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING

6 DETERMINATION OF HOSPITAL-SPECIFIC

7 PERCENTAGE.

8 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995

9 AND 1996.—

10 ‘‘(1) IN GENERAL.—In the case of a teaching hos11 pital whose first payments under 1886(d)(5)(B) were

12 for discharges occurring in fiscal year 1995 or in fis13 cal year 1996 (referred to in this subsection individ14 ually as a ‘first payment year’), the percentage deter15 mined under paragraph (2) for the hospital is deemed

16 to be the percentage applicable under section 2221(b)

17 to the hospital, except that the percentage under para18 graph (2) shall be adjusted in accordance with section

19 2221(b)(1) to the extent determined by the Secretary

20 to be necessary with respect to a sum that equals 100

21 percent.

22 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

23 purposes of paragraph (1), the percentage determined

24 under this paragraph for a teaching hospital is the

25 percentage constituted by the ratio of the amount de-
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1 termined under subparagraph (A) to the amount de2 termined under subparagraph (B), as follows:

3 ‘‘(A)(i) If the first payment year for the

4 hospital is fiscal year 1995, the amount deter5 mined under this subparagraph is the total

6 amount of payments received by the hospital

7 under section 1886(d)(5)(B) for discharges occur8 ring during fiscal year 1995.

9 ‘‘(ii) If the first payment year for the hos10 pital is fiscal year 1996, the amount determined

11 under this subparagraph is an amount equal to

12 an estimate by the Secretary of the total amount

13 of payments that would have been paid to the

14 hospital under section 1886(d)(5)(B) for dis15 charges occurring during fiscal year 1995 if such

16 section, as in effect for fiscal year 1996, had ap17 plied to the hospital for discharges occurring

18 during fiscal year 1995.

19 ‘‘(B)(i) If the first payment year for the

20 hospital is fiscal year 1995, the amount deter21 mined under this subparagraph is the aggregate

22 total of the payments received by teaching hos23 pitals under section 1886(d)(5)(B) for discharges

24 occurring during fiscal year 1995.
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1 ‘‘(ii) If the first payment year for the hos2 pital is fiscal year 1996—

3 ‘‘(I) the Secretary shall make an esti4 mate in accordance with subparagraph

5 (A)(ii) for all teaching hospitals; and

6 ‘‘(II) the amount determined under

7 this subparagraph is the sum of the esti8 mates made by the Secretary under

9 subclause (I).

10 ‘‘(b) NEW TEACHING HOSPITALS.—

11 ‘‘(1) IN GENERAL.—In the case of a teaching hos12 pital that did not receive payments under section

13 1886(d)(5)(B) for any of the fiscal years 1992 through

14 1996, the percentage determined under paragraph (3)

15 for the hospital is deemed to be the percentage appli16 cable under section 2221(b) to the hospital, except

17 that the percentage under paragraph (3) shall be ad18 justed in accordance with section 2221(b)(1) to the ex19 tent determined by the Secretary to be necessary with

20 respect to a sum that equals 100 percent. This sub21 section does not apply to a teaching hospital described

22 in the preceding sentence if the hospital is in a State

23 for which a demonstration project under section

24 1814(b)(3) is in effect.
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1 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

2 DATA.—The determination under paragraph (3) of a

3 percentage for a teaching hospital described in para4 graph (1) shall be made for the most recent fiscal year

5 for which the Secretary has sufficient data to make

6 the determination (referred to in this subsection as the

7 ‘designated fiscal year’).

8 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

9 purposes of paragraph (1), the percentage determined

10 under this paragraph for the teaching hospital in11 volved is the percentage constituted by the ratio of the

12 amount determined under subparagraph (A) to the

13 amount determined under subparagraph (B), as fol14 lows:

15 ‘‘(A) The amount determined under this

16 subparagraph is an amount equal to an estimate

17 by the Secretary of the total amount of payments

18 that would have been paid to the hospital under

19 section 1886(d)(5)(B) for the designated fiscal

20 year if such section, as in effect for the first fis21 cal year for which payments pursuant to this

22 subsection are to be made to the hospital, had

23 applied to the hospital for the designated fiscal

24 year.
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1 ‘‘(B) The Secretary shall make an estimate

2 in accordance with subparagraph (A) for all

3 teaching hospitals. The amount determined

4 under this subparagraph is the sum of the esti5 mates made by the Secretary under the preceding

6 sentence.

7 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of

8 two or more teaching hospitals that have each received pay9 ments pursuant to section 2221 for one or more fiscal years

10 and that undergo a consolidation or merger, the percentage

11 applicable to the resulting teaching hospital for purposes

12 of section 2221(b) is the sum of the respective percentages

13 that would have applied pursuant to such section if the hos14 pitals had not undergone the consolidation or merger.

15 ‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE16 GARDING TEACHING HOSPITALS IN CERTAIN

17 STATES.

18 ‘‘(a) IN GENERAL.—In the case of a teaching hospital

19 in a State for which a demonstration project under section

20 1814(b)(3) is in effect, this section applies in lieu of section

21 2221. For purposes of section 2211(a)(1), the amount deter22 mined for a teaching hospital for a fiscal year is the product

23 of—

24 ‘‘(1) the amount in the Indirect-Costs Medical

25 Education Account for the fiscal year pursuant to the
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1 allocation under section 2201(d)(3)(A) for the year;

2 and

3 ‘‘(2) the percentage determined under subsection

4 (b) for the hospital.

5 ‘‘(b) DETERMINATION OF PERCENTAGE.—For purposes

6 of subsection (a)(2):

7 ‘‘(1) The Secretary shall make an estimate of the

8 total amount of payments that would have been re9 ceived under section 1886(d)(5)(B) by the hospital in10 volved with respect to each of the fiscal years of the

11 applicable period if such section (as in effect for such

12 fiscal years) had applied to the hospital for such

13 years.

14 ‘‘(2) The percentage determined under this sub15 section for the hospital for a fiscal year is a mean av16 erage percentage determined for the hospital in ac17 cordance with the methodology of section 2221(b)(1),

18 except that the estimate made by the Secretary under

19 paragraph (1) of this subsection for a fiscal year of

20 the applicable period is deemed to be the amount that

21 applies for purposes of section 2221(b)(3)(A) for such

22 year.

23 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

24 AMOUNTS.—In the case of a teaching hospital in a State

25 for which a demonstration project under section 1814(b)(3)
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1 is in effect, this section does not provide any payment to

2 the hospital from amounts transferred to the Fund under

3 section 1886(j).

4 ‘‘(d) ADJUSTMENT REGARDING PAYMENTS TO OTHER

5 HOSPITALS.—In the case of a fiscal year for which pay6 ments pursuant to subsection (a) are made to one or more

7 teaching hospitals, the following applies:

8 ‘‘(1) The Secretary shall determine a percentage

9 equal to the sum of the respective percentages deter10 mined for the hospitals under subsection (b).

11 ‘‘(2) The Secretary shall determine an amount

12 equal to the product of—

13 ‘‘(A) the percentage determined under para14 graph (1); and

15 ‘‘(B) the amount in the Indirect-Costs Medi16 cal Education Account for the fiscal year pursu17 ant to the transfer under section 1886(j)(1).

18 ‘‘(3) The Secretary shall, for each hospital (other

19 than hospitals described in subsection (a)), make pay20 ments to the hospital whose sum is equal to the prod21 uct of—

22 ‘‘(A) the amount determined under para23 graph (2); and

24 ‘‘(B) the percentage that applies to the hos25 pital for purposes of section 2221(b), except that
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1 such percentage shall be adjusted in accordance

2 with the methodology of section 2221(b)(1) to the

3 extent determined by the Secretary to be nec4 essary with respect to a sum that equals 100 per5 cent.

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

7 Medical Education

8 ‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI9 RECT COSTS.

10 ‘‘(a) IN GENERAL.—For purposes of section

11 2211(a)(2), the amount determined under this section for

12 a teaching hospital for a fiscal year is the sum of—

13 ‘‘(1) the amount determined under subsection (b)

14 (relating to the General Direct-Costs Medical Edu15 cation Account); and

16 ‘‘(2) the amount determined under subsection (c)

17 (relating to the Medicare Direct-Costs Medical Edu18 cation Account).

19 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—

20 ‘‘(1) IN GENERAL.—For purposes of subsection

21 (a)(1), the amount determined under this subsection

22 for a teaching hospital for a fiscal year is the product

23 of—

24 ‘‘(A) the amount in the General Direct25 Costs Medical Education Account on the applica-
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1 ble date under section 2201(d) (once the appro2 priation under such section is made); and

3 ‘‘(B) the percentage determined for the hos4 pital under paragraph (2).

5 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—

6 ‘‘(A) IN GENERAL.—For purposes of para7 graph (1)(B), the percentage determined under

8 this paragraph for a teaching hospital is the

9 mean average of the respective percentages deter10 mined under subparagraph (B) for each fiscal

11 year of the applicable period (as defined in sec12 tion 2221(b)(2)), adjusted by the Secretary (up13 ward or downward, as the case may be) on a pro

14 rata basis to the extent necessary to ensure that

15 the sum of the percentages determined under this

16 subparagraph for all teaching hospitals is equal

17 to 100 percent. The preceding sentence is subject

18 to sections 2232 through 2234.

19 ‘‘(B) RESPECTIVE DETERMINATIONS FOR

20 FISCAL YEARS OF APPLICABLE PERIOD.—For

21 purposes of subparagraph (A), the percentage de22 termined under this subparagraph for a teaching

23 hospital for a fiscal year of the applicable period

24 is the percentage constituted by the ratio of—
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1 ‘‘(i) the total amount of payments re2 ceived by the hospital under section 1886(h)

3 for cost reporting periods beginning during

4 the fiscal year involved; to

5 ‘‘(ii) the sum of the respective amounts

6 determined under clause (i) for the fiscal

7 year for all teaching hospitals.

8 ‘‘(3) AVAILABILITY OF DATA.—If a teaching hos9 pital received the payments specified in paragraph

10 (2)(B)(i) during the applicable period but a complete

11 set of the relevant data is not available to the Sec12 retary for purposes of determining an amount under

13 such paragraph for the fiscal year involved, the Sec14 retary shall for purposes of such paragraph make an

15 estimate on the basis of such data as are available to

16 the Secretary for the applicable period.

17 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—

18 ‘‘(1) IN GENERAL.—For purposes of subsection

19 (a)(2), the amount determined under this subsection

20 for a teaching hospital for a fiscal year is the product

21 of—

22 ‘‘(A) the amount in the Medicare Direct23 Costs Medical Education Account on the applica24 ble date under section 2201(d) (once the appro25 priation under such section is made); and
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1 ‘‘(B) the percentage determined for the hos2 pital under paragraph (2).

3 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—For

4 purposes of paragraph (1)(B), the percentage deter5 mined under this subsection for a teaching hospital

6 for a fiscal year is the percentage constituted by the

7 ratio of—

8 ‘‘(A) the estimate made by the Secretary for

9 the hospital for the fiscal year under section

10 1886(j)(2)(B); to

11 ‘‘(B) the sum of the respective estimates re12 ferred to in subparagraph (A) for all teaching

13 hospitals.

14 ‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING DE15 TERMINATION OF HOSPITAL-SPECIFIC PER16 CENTAGE.

17 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995

18 AND 1996.—

19 ‘‘(1) IN GENERAL.—In the case of a teaching hos20 pital whose first payments under 1886(h) were for

21 cost reporting period beginning in fiscal year 1995 or

22 in fiscal year 1996 (referred to in this subsection in23 dividually as a ‘first payment year’), the percentage

24 determined under paragraph (2) for the hospital is

25 deemed to be the percentage applicable under section
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1 2231(b)(2) to the hospital, except that the percentage

2 under paragraph (2) shall be adjusted in accordance

3 with section 2231(b)(2)(A) to the extent determined

4 by the Secretary to be necessary with respect to a sum

5 that equals 100 percent.

6 ‘‘(2) DETERMINATION OF PERCENTAGE.—For

7 purposes of paragraph (1), the percentage determined

8 under this paragraph for a teaching hospital is the

9 percentage constituted by the ratio of the amount de10 termined under subparagraph (A) to the amount de11 termined under subparagraph (B), as follows:

12 ‘‘(A)(i) If the first payment year for the

13 hospital is fiscal year 1995, the amount deter14 mined under this subparagraph is the total

15 amount of payments received by the hospital

16 under section 1886(h) for cost reporting periods

17 beginning in fiscal year 1995.

18 ‘‘(ii) If the first payment year for the hos19 pital is fiscal year 1996, the amount determined

20 under this subparagraph is an amount equal to

21 an estimate by the Secretary of the total amount

22 of payments that would have been paid to the

23 hospital under section 1886(h) for cost reporting

24 periods beginning in fiscal year 1995 if such sec-
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1 tion, as in effect for fiscal year 1996, had ap2 plied to the hospital for fiscal year 1995.

3 ‘‘(B)(i) If the first payment year for the

4 hospital is fiscal year 1995, the amount deter5 mined under this subparagraph is the aggregate

6 total of the payments received by teaching hos7 pitals under section 1886(h) for cost reporting

8 periods beginning in fiscal year 1995.

9 ‘‘(ii) If the first payment year for the hos10 pital is fiscal year 1996—

11 ‘‘(I) the Secretary shall make an esti12 mate in accordance with subparagraph

13 (A)(ii) for all teaching hospitals; and

14 ‘‘(II) the amount determined under

15 this subparagraph is the sum of the esti16 mates made by the Secretary under

17 subclause (I).

18 ‘‘(b) NEW TEACHING HOSPITALS.—

19 ‘‘(1) IN GENERAL.—In the case of a teaching hos20 pital that did not receive payments under section

21 1886(h) for any of the fiscal years 1992 through 1996,

22 the percentage determined under paragraph (3) for

23 the hospital is deemed to be the percentage applicable

24 under section 2231(b)(2) to the hospital, except that

25 the percentage under paragraph (3) shall be adjusted
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1 in accordance with section 2231(b)(2)(A) to the extent

2 determined by the Secretary to be necessary with re3 spect to a sum that equals 100 percent. This sub4 section does not apply to a teaching hospital described

5 in the preceding sentence if the hospital is in a State

6 for which a demonstration project under section

7 1814(b)(3) is in effect.

8 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

9 DATA.—The determination under paragraph (3) of a

10 percentage for a teaching hospital described in para11 graph (1) shall be made for the most recent fiscal year

12 for which the Secretary has sufficient data to make

13 the determination (referred to in this subsection as the

14 ‘designated fiscal year’).

15 ‘‘(3) DETERMINATION OF PERCENTAGE.—For

16 purposes of paragraph (1), the percentage determined

17 under this paragraph for the teaching hospital in18 volved is the percentage constituted by the ratio of the

19 amount determined under subparagraph (A) to the

20 amount determined under subparagraph (B), as fol21 lows:

22 ‘‘(A) The amount determined under this

23 subparagraph is an amount equal to an estimate

24 by the Secretary of the total amount of payments

25 that would have been paid to the hospital under
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1 section 1886(h) for the designated fiscal year if

2 such section, as in effect for the first fiscal year

3 for which payments pursuant to this subsection

4 are to be made to the hospital, had applied to the

5 hospital for cost reporting periods beginning in

6 the designated fiscal year.

7 ‘‘(B) The Secretary shall make an estimate

8 in accordance with subparagraph (A) for all

9 teaching hospitals. The amount determined

10 under this subparagraph is the sum of the esti11 mates made by the Secretary under the preceding

12 sentence.

13 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of

14 two or more teaching hospitals that have each received pay15 ments pursuant to section 2231 for one or more fiscal years

16 and that undergo a consolidation or merger, the percentage

17 applicable to the resulting teaching hospital for purposes

18 of section 2231(b) is the sum of the respective percentages

19 that would have applied pursuant to such section if the hos20 pitals had not undergone the consolidation or merger.

21 ‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO

22 CONSORTIA OF PROVIDERS.

23 ‘‘(a) IN GENERAL.—In lieu of making payments to

24 teaching hospitals pursuant to section 2231, the Secretary
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1 may make payments under this section to consortia that

2 meet the requirements of subsection (b).

3 ‘‘(b) QUALIFYING CONSORTIUM.—For purposes of sub4 section (a), a consortium meets the requirements of this sub5 section if the consortium is in compliance with the follow6 ing:

7 ‘‘(1) The consortium consists of an approved

8 medical residency training program, a teaching hos9 pital, and one or more of the following entities:

10 ‘‘(A) Schools of medicine or osteopathic

11 medicine.

12 ‘‘(B) Other teaching hospitals (or the ap13 proved medical residency training programs of

14 the hospitals).

15 ‘‘(C) Community health centers (under sec16 tion 330 of the Public Health Service Act), mi17 grant health centers (under section 329 of such

18 Act), or facilities described in section 340 of such

19 Act.

20 ‘‘(D) Medical group practices.

21 ‘‘(E) Managed care entities.

22 ‘‘(F) Entities furnishing outpatient services.

23 ‘‘(G) Such other entities as the Secretary

24 determines to be appropriate.
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1 ‘‘(2) The members of the consortium have agreed

2 to participate in the programs of graduate medical

3 education that are operated by the teaching hospitals

4 in 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), the

13 total of payments to a qualifying consortium for a

14 fiscal year pursuant to subsection (a) shall be the sum

15 of—

16 ‘‘(A) the aggregate amount determined for

17 the teaching hospitals of the consortium pursu18 ant to paragraph (1) of section 2231(a); and

19 ‘‘(B) an amount determined in accordance

20 with the methodology that applies pursuant to

21 paragraph (2) of such section, except that the es22 timate used for purposes of subsection (c)(2)(A)

23 of such section shall be the estimate made for the

24 consortium under section 1886(j)(2)(C)(ii).
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1 ‘‘(d) LIMITATION ON AGGREGATE TOTAL OF PAYMENTS

2 TO CONSORTIA.—The aggregate total of the amounts paid

3 under subsection (c)(2) to qualifying consortia for a fiscal

4 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 amount

11 that applies under paragraph (1)(A) of such section

12 for the fiscal year (relating to the Medicare Direct13 Costs Medical Education Account).

14 ‘‘(e) DEFINITION.—For purposes of this title, the term

15 ‘qualifying consortium’ means a consortium that meets the

16 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 section

23 2231. For purposes of section 2211(a)(2), the amount deter24 mined for a teaching hospital for a fiscal year is the product

25 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 subsection

6 (b) for the hospital.

7 ‘‘(b) DETERMINATION OF PERCENTAGE.—For purposes

8 of subsection (a)(2):

9 ‘‘(1) The Secretary shall make an estimate of the

10 total amount of payments that would have been re11 ceived under section 1886(h) by the hospital involved

12 with respect to each of the fiscal years of the applica13 ble period if such section (as in effect for such fiscal

14 years) had applied to the hospital for such years.

15 ‘‘(2) The percentage determined under this sub16 section for the hospital for a fiscal year is a mean av17 erage percentage determined for the hospital in ac18 cordance with the methodology of section

19 2231(b)(2)(A), except that the estimate made by the

20 Secretary under paragraph (1) of this subsection for

21 a fiscal year of the applicable period is deemed to be

22 the amount that applies for purposes of section

23 2231(b)(2)(B)(i) for such year.

24 ‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN

25 AMOUNTS.—In the case of a teaching hospital in a State
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1 for which a demonstration project under section 1814(b)(3)

2 is in effect, this section does not provide any payment to

3 the hospital from amounts transferred to the Fund under

4 section 1886(j).

5 ‘‘Subpart 4—General Provisions

6 ‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.

7 ‘‘(a) COLLECTION OF DATA ON ACCURACY OF ESTI8 MATES.—The Secretary shall collect data on whether the es9 timates made by the Secretary under section 1886(j) for a

10 fiscal year were substantially accurate.

11 ‘‘(b) ADJUSTMENTS.—If the Secretary determines

12 under subsection (a) that an estimate for a fiscal year was

13 not substantially accurate, the Secretary shall, for the first

14 fiscal year beginning after the Secretary makes the deter15 mination—

16 ‘‘(1) make adjustments accordingly in transfers

17 to the Fund under section 1886(j); and

18 ‘‘(2) make adjustments accordingly in the

19 amount of payments to teaching hospitals pursuant to

20 2231(c) (or, as applicable, to qualifying consortia

21 pursuant to section 2233(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 preced7 ing clause (i), by striking ‘‘The Secretary shall pro8 vide’’ and inserting the following: ‘‘For discharges oc9 curring on or before September 30, 1996, the Sec10 retary shall provide’’;

11 (2) in subsection (h)—

12 (A) in paragraph (1), in the first sentence,

13 by striking ‘‘the Secretary shall provide’’ and in14 serting ‘‘the Secretary shall, subject to paragraph

15 (6), provide’’; and

16 (B) by adding at the end the following

17 paragraph:

18 ‘‘(6) LIMITATION.—

19 ‘‘(A) IN GENERAL.—The authority to make

20 payments under this subsection applies only

21 with respect to cost reporting periods ending on

22 or before September 30, 1996, except as provided

23 in subparagraph (B).

24 ‘‘(B) RULE REGARDING PORTION OF LAST

25 COST REPORTING PERIOD.—In the case of a cost

26 reporting period that extends beyond September
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1 30, 1996, payments under this subsection shall

2 be made with respect to such portion of the pe3 riod as has lapsed as of such date.

4 ‘‘(C) RULE OF CONSTRUCTION.—This para5 graph may not be construed as authorizing any

6 payment under section 1861(v) with respect to

7 graduate medical education.’’; and

8 (3) by adding at the end the following subsection:

9 ‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND GRAD10 UATE MEDICAL EDUCATION TRUST FUND.—

11 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU12 CATION.—

13 ‘‘(A) IN GENERAL.—From the Federal Hos14 pital Insurance Trust Fund, the Secretary shall,

15 for fiscal year 1997 and each subsequent fiscal

16 year, transfer to the Indirect-Costs Medical Edu17 cation Account (under section 2201) an amount

18 determined by the Secretary in accordance with

19 subparagraph (B).

20 ‘‘(B) DETERMINATION OF AMOUNTS.—The

21 Secretary shall make an estimate for the fiscal

22 year involved of the nationwide total of the

23 amounts that would have been paid under sub24 section (d)(5)(B) to hospitals during the fiscal

25 year if such payments had not been terminated
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1 for discharges occurring after September 30,

2 1996. For purposes of subparagraph (A), the

3 amount determined under this subparagraph for

4 the fiscal year is the estimate made by the Sec5 retary under the preceding sentence.

6 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

7 ‘‘(A) IN GENERAL.—From the Federal Hos8 pital Insurance Trust Fund and the Federal

9 Supplementary Medical Insurance Trust Fund,

10 the Secretary shall, for fiscal year 1997 and each

11 subsequent fiscal year, transfer to the Medicare

12 Direct-Costs Medical Education Account (under

13 section 2201) the sum of—

14 ‘‘(i) an amount determined by the Sec15 retary in accordance with subparagraph

16 (B); and

17 ‘‘(ii) as applicable, an amount deter18 mined by the Secretary in accordance with

19 subparagraph (C)(ii).

20 ‘‘(B) DETERMINATION OF AMOUNTS.—For

21 each hospital (other than a hospital that is a

22 member of a qualifying consortium referred to in

23 subparagraph (C)), the Secretary shall make an

24 estimate for the fiscal year involved of the

25 amount that would have been paid under sub-
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1 section (h) to the hospital during the fiscal year

2 if such payments had not been terminated for

3 cost reporting periods ending on or before Sep4 tember 30, 1996. For purposes of subparagraph

5 (A)(i), the amount determined under this sub6 paragraph for the fiscal year is the sum of all

7 estimates made by the Secretary under the pre8 ceding sentence.

9 ‘‘(C) ESTIMATES REGARDING QUALIFYING

10 CONSORTIA.—If the Secretary elects to authorize

11 one or more qualifying consortia for purposes of

12 section 2233(a), the Secretary shall carry out the

13 following:

14 ‘‘(i) The Secretary shall establish a

15 methodology for making payments to quali16 fying consortia with respect to the reason17 able direct costs of such consortia in carry18 ing out programs of graduate medical edu19 cation. The methodology shall be the meth20 odology established in subsection (h), modi21 fied to the extent necessary to take into ac22 count the participation in such programs of

23 entities other than hospitals.

24 ‘‘(ii) For each qualifying consortium,

25 the Secretary shall make an estimate for the
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1 fiscal year involved of the amount that

2 would have been paid to the consortium

3 during the fiscal year if, using the meth4 odology under clause (i), payments had been

5 made to the consortium for the fiscal year

6 as reimbursements with respect to cost re7 porting periods. For purposes of subpara8 graph (A)(ii), the amount determined under

9 this clause for the fiscal year is the sum of

10 all estimates made by the Secretary under

11 the preceding sentence.

12 ‘‘(D) ALLOCATION BETWEEN FUNDS.—In

13 providing for a transfer under subparagraph (A)

14 for a fiscal year, the Secretary shall provide for

15 an allocation of the amounts involved between

16 part A and part B (and the trust funds estab17 lished under the respective parts) as reasonably

18 reflects the proportion of direct graduate medical

19 education costs of hospitals associated with the

20 provision of services under each respective part.

21 ‘‘(3) APPLICABILITY OF CERTAIN AMEND22 MENTS.—Amendments made to subsection (d)(5)(B)

23 and subsection (h) that are effective on or after Octo24 ber 1, 1996, apply only for purposes of estimates

25 under paragraphs (1) and (2) and for purposes of de-
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1 termining the amount of payments under 2211. Such

2 amendments do not require any adjustment to

3 amounts paid under subsection (d)(5)(B) or (h) with

4 respect to fiscal year 1996 or any prior fiscal year.

5 ‘‘(4) RELATIONSHIP TO CERTAIN DEMONSTRA6 TION PROJECTS.—In the case of a State for which a

7 demonstration project under section 1814(b)(3) is in

8 effect, the Secretary, in making determinations of the

9 rates of increase under such section, shall include all

10 amounts transferred under this subsection. Such

11 amounts shall be so included to the same extent and

12 in the same manner as amounts determined under

13 subsections (d)(5)(B) and (h) were included in such

14 determination under the provisions of this title in ef15 fect on September 30, 1996.’’.

16 SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD17 ING GRADUATE MEDICAL EDUCATION.

18 (a) INDIRECT COSTS OF MEDICAL EDUCATION; APPLI19 CABLE PERCENTAGE.—

20 (1) MODIFICATION REGARDING 5.6 PERCENT.—

21 Section 1886(d)(5)(B)(ii) (42 U.S.C.

22 1395ww(d)(5)(B)(ii)) is amended—

23 (A) by striking ‘‘on or after October 1,

24 1988,’’ and inserting ‘‘on or after October 1,

25 1999,’’; and
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1 (B) by striking ‘‘1.89’’ and inserting

2 ‘‘1.38’’.

3 (2) SPECIAL RULE REGARDING FISCAL YEARS

4 1996 THROUGH 1998; MODIFICATION REGARDING 6 PER5 CENT.—Section 1886(d)(5)(B)(ii), as amended by

6 paragraph (1), is amended by adding at the end the

7 following: ‘‘In the case of discharges occurring on or

8 after October 1, 1995, and before October 1, 1999, the

9 preceding sentence applies to the same extent and in

10 the same manner as the sentence applies to discharges

11 occurring on or after October 1, 1999, except that the

12 term ‘1.38’ is deemed to be ‘1.48’.’’.

13 (3) CONFORMING AMENDMENT RELATING TO DE14 TERMINATION OF STANDARDIZED AMOUNTS.—Section

15 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is

16 amended by striking ‘‘1985’’ and inserting the follow17 ing: ‘‘1985, but (for discharges occurring after Sep18 tember 30, 1995) not taking into account any reduc19 tions in such costs resulting from the amendments

20 made by section 15412(a) of the Medicare Preserva21 tion Act of 1995’’.

22 (b) DIRECT COSTS OF MEDICAL EDUCATION.—

23 (1) LIMITATION ON NUMBER OF FULL-TIME24 EQUIVALENT RESIDENTS.—Section 1886(h)(4) (42
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1 U.S.C. 1395ww(h)(4)) is amended by adding at the

2 end the following new subparagraph:

3 ‘‘(F) LIMITATION ON NUMBER OF RESI4 DENTS FOR CERTAIN FISCAL YEARS.—Such rules

5 shall provide that for purposes of a cost report6 ing period beginning on or after October 1, 1995,

7 and on or before September 30, 2002, the number

8 of full-time-equivalent residents determined

9 under this paragraph with respect to an ap10 proved medical residency training program may

11 not exceed the number of full-time-equivalent

12 residents with respect to the program as of Au13 gust 1, 1995 (except that this subparagraph does

14 not apply to any nonphysician teaching pro15 gram that is approved for purposes of section

16 1861(b)(6) and that, under paragraph (5)(A), is

17 an approved medical residency training pro18 gram).’’.

19 (2) EXCLUSION OF RESIDENTS AFTER INITIAL

20 RESIDENCY PERIOD.—Section 1886(h)(4)(C) (42

21 U.S.C. 1395ww(h)(4)(C)) is amended to read as fol22 lows:

23 ‘‘(C) WEIGHTING FACTORS FOR RESI24 DENTS.—Effective for cost reporting periods be25 ginning on or after October 1, 1997, such rules
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1 shall provide that, in the calculation of the num2 ber of full-time-equivalent residents in an ap3 proved residency program, the weighting factor

4 for a resident who is in the initial residency pe5 riod (as defined in paragraph (5)(F)) is 1.0 and

6 the weighting factor for a resident who has com7 pleted such period is 0.0. (In the case of cost re8 porting periods beginning before October 1, 1997,

9 the weighting factors that apply in such calcula10 tion are the weighting factors that were applica11 ble under this subparagraph on the day before

12 the date of the enactment of the Medicare Preser13 vation Act of 1995.)’’.

14 (3) REDUCTIONS IN PAYMENTS FOR ALIEN RESI15 DENTS.—Section 1886(h)(4) (42 U.S.C.

16 1395ww(h)(4)), as amended by paragraph (1), is

17 amended by adding at the end the following new sub18 paragraph:

19 ‘‘(G) SPECIAL RULES FOR ALIEN RESI20 DENTS.—In the case of individuals who are not

21 citizens or nationals of the United States and

22 who are not citizens of Canada, in the calcula23 tion of the number of full-time-equivalent resi24 dents in an approved medical residency pro25 gram, the following rules shall apply with re-
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1 spect to such individuals who are residents in

2 the program:

3 ‘‘(i) For a cost reporting period begin4 ning during fiscal year 1996, for each such

5 individual the Secretary shall apply a

6 weighting factor of .75.

7 ‘‘(ii) For a cost reporting period begin8 ning during fiscal year 1997, for each such

9 individual the Secretary shall apply a

10 weighting factor of .50.

11 ‘‘(iii) For a cost reporting period be12 ginning during fiscal year 1998, for each

13 such individual the Secretary shall apply a

14 weighting factor of .25.

15 ‘‘(iv) For a cost reporting period be16 ginning during fiscal year 1999 or any sub17 sequent fiscal year, such individuals shall be

18 excluded from the calculation of the number

19 of full-time-equivalent residents in an ap20 proved medical residency program under

21 this paragraph.’’.

22 (4) EFFECTIVE DATE.—Except as provided oth23 erwise in this subsection (or in the amendments made

24 by this subsection), the amendments made by this sub-
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1 section apply to hospital cost reporting periods begin2 ning on or after October 1, 1995.

3 PART 3—REFORM OF FEDERAL POLICIES RE4 GARDING TEACHING HOSPITALS AND GRAD5 UATE MEDICAL EDUCATION

6 SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR REC7 OMMENDING POLICIES.

8 Title XXII of the Social Security Act, as added by sec9 tion 15401, is amended by adding at the end the following

10 part:

11 ‘‘PART C—OTHER MATTERS

12 ‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING OF

13 TEACHING HOSPITALS AND GRADUATE MEDI14 CAL EDUCATION.

15 ‘‘(a) ESTABLISHMENT.—The Chair of the Medicare

16 Payment Review Commission under section 1806 shall es17 tablish a temporary advisory panel to be known as the Ad18 visory Panel on Financing for Teaching Hospitals and

19 Graduate Medical Education (in this section referred to as

20 the ‘Panel’).

21 ‘‘(b) DUTIES.—The Panel shall develop recommenda22 tions on whether and to what extent Federal policies regard23 ing teaching hospitals and graduate medical education

24 should be reformed, including recommendations regarding

25 the following:
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1 ‘‘(1) The financing of graduate medical edu2 cation, including consideration of alternative broad3 based sources of funding for such education.

4 ‘‘(2) The financing of teaching hospitals, includ5 ing consideration of the difficulties encountered by

6 such hospitals as competition among health care enti7 ties increases. Matters considered under this para8 graph shall include consideration of the effects on

9 teaching hospitals of the method of financing used for

10 the MedicarePlus program under part C of title

11 XVIII.

12 ‘‘(3) The methodology for making payments for

13 graduate medical education, and the selection of enti14 ties to receive the payments. Matters considered under

15 this paragraph shall include the following:

16 ‘‘(A) The methodology under part B for

17 making payments from the Fund, including the

18 use of data from the fiscal years 1992 through

19 1994, and including the methodology that ap20 plies with respect to consolidations and mergers

21 of participants in the program under such part

22 and with respect to the inclusion of additional

23 participants in the program.
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1 ‘‘(B) Issues regarding children’s hospitals,

2 and approved medical residency training pro3 grams in pediatrics.

4 ‘‘(C) Whether and to what extent payments

5 are being made (or should be made) for graduate

6 training in the various nonphysician health pro7 fessions.

8 ‘‘(4) Federal policies regarding international

9 medical graduates.

10 ‘‘(5) The dependence of schools of medicine on

11 service-generated income.

12 ‘‘(6) The effects of the amendments made by sec13 tion 15412 of the Medicare Preservation Act of 1995,

14 including adverse effects on teaching hospitals that re15 sult from modifications in policies regarding inter16 national medical graduates.

17 ‘‘(7) Whether and to what extent the needs of the

18 United States regarding the supply of physicians will

19 change during the 10-year beginning on October 1,

20 1995, and whether and to what extent any such

21 changes will have significant financial effects on

22 teaching hospitals.

23 ‘‘(8) The appropriate number and mix of resi24 dents.
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1 ‘‘(c) COMPOSITION.—Not later than three months after

2 being designated as the initial chairman of the Medicare

3 Payment Review Commission, the chairman of the Commis4 sion shall appoint to the Panel 19 individuals who are not

5 members of the Commission, who are not officers or employ6 ees of the United States, and who possess expertise on mat7 ters on which the Panel is to make recommendations under

8 subsection (b). Such individuals shall include the following:

9 ‘‘(1) Deans from allopathic and osteopathic

10 schools of medicine.

11 ‘‘(2) Chief executive officers (or equivalent ad12 ministrative heads) from academic health centers, in13 tegrated health care systems, and approved medical

14 residency training programs.

15 ‘‘(3) Chairs of departments or divisions from

16 allopathic and osteopathic schools of medicine, schools

17 of dentistry, and approved medical residency training

18 programs in oral surgery.

19 ‘‘(4) Individuals with leadership experience from

20 each of the fields of advanced practice nursing, physi21 cian assistants, and podiatric medicine.

22 ‘‘(5) Individuals with substantial experience in

23 the study of issues regarding the composition of the

24 health care workforce of the United States.
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1 ‘‘(6) Individuals with expertise on the financing

2 of health care.

3 ‘‘(7) Representatives from health insurance orga4 nizations and health plan organizations.

5 ‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE PAY6 MENT REVIEW COMMISSION.—From amounts appropriated

7 under subsection (n), the Medicare Review Payment Com8 mission shall provide for the Panel such staff and adminis9 trative support (including quarters for the Panel) as may

10 be necessary for the Panel to carry out the duties under

11 subsection (b).

12 ‘‘(e) CHAIR.—The Panel shall designate a member of

13 the Panel to serve as the Chair of the Panel.

14 ‘‘(f) MEETINGS.—The Panel shall meet at the call of

15 the Chair or a majority of the members, except that the first

16 meeting of the Panel shall be held not later than three

17 months after the date on which appointments under sub18 section (c) are completed.

19 ‘‘(g) TERMS.—The term of a member of the Panel is

20 the duration of the Panel.

21 ‘‘(h) VACANCIES.—

22 ‘‘(1) IN GENERAL.—A vacancy in the member23 ship of the Panel does not affect the power of the re24 maining members to carry out the duties under sub25 section (b). A vacancy in the membership of the Panel
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1 shall be filled in the manner in which the original

2 appointment was made.

3 ‘‘(2) INCOMPLETE TERM.—If a member of the

4 Panel does not serve the full term applicable to the

5 member, the individual appointed to fill the resulting

6 vacancy shall be appointed for the remainder of the

7 term of the predecessor of the individual.

8 ‘‘(i) COMPENSATION; REIMBURSEMENT OF EX9 PENSES.—

10 ‘‘(1) COMPENSATION.—Members of the Panel

11 shall receive compensation for each day (including

12 traveltime) engaged in carrying out the duties of the

13 Committee. Such compensation may not be in an

14 amount in excess of the daily equivalent of the annual

15 maximum rate of basic pay payable under the Gen16 eral Schedule (under title 5, United States Code) for

17 positions above GS–15.

18 ‘‘(2) REIMBURSEMENT.—Members of the Panel

19 may, in accordance with chapter 57 of title 5, United

20 States Code, be reimbursed for travel, subsistence, and

21 other necessary expenses incurred in carrying out the

22 duties of the Panel.

23 ‘‘(j) CONSULTANTS.—The Panel may procure such

24 temporary and intermittent services of consultants under

25 section 3109(b) of title 5, United States Code, as the Panel
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1 may determine to be useful in carrying out the duties under

2 subsection (b). The Panel may not procure services under

3 this subsection at any rate in excess of the daily equivalent

4 of the maximum annual rate of basic pay payable under

5 the General Schedule for positions above GS–15. Consult6 ants under this subsection may, in accordance with chapter

7 57 of title 5, United States Code, be reimbursed for travel,

8 subsistence, and other necessary expenses incurred for ac9 tivities carried out on behalf of the Panel pursuant to sub10 section (b).

11 ‘‘(k) POWERS.—

12 ‘‘(1) IN GENERAL.—For the purpose of carrying

13 out the duties of the Panel under subsection (b), the

14 Panel may hold such hearings, sit and act at such

15 times and places, take such testimony, and receive

16 such evidence as the Panel considers appropriate.

17 ‘‘(2) OBTAINING OFFICIAL INFORMATION.—Upon

18 the request of the Panel, the heads of Federal agencies

19 shall furnish directly to the Panel information nec20 essary for the Panel to carry out the duties under sub21 section (b).±

22 ‘‘(3) USE OF MAILS.—The Panel may use the

23 United States mails in the same manner and under

24 the same conditions as Federal agencies.

25 ‘‘(l) REPORTS.—
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1 ‘‘(1) FIRST INTERIM REPORT.—Not later than

2 one year after the date of the enactment of the Medi3 care Preservation Act of 1995, the Panel shall submit

4 to the Congress a report providing the recommenda5 tions of the Panel regarding the matters specified in

6 paragraphs (1) through (4) of subsection (b).

7 ‘‘(2) SECOND INTERIM REPORT.—Not later than

8 2 years after the date of enactment specified in para9 graph (1), the Panel shall submit to the Congress a

10 report providing the recommendations of the Panel

11 regarding the matters specified in paragraphs (5) and

12 (6) of subsection (b).

13 ‘‘(3) FINAL REPORT.—Not later than 3 years

14 after the date of enactment specified in paragraph

15 (1), the Panel shall submit to the Congress a final re16 port providing the recommendations of the Panel

17 under subsection (b).

18 ‘‘(m) DURATION.—The Panel terminates upon the ex19 piration of the 180-day period beginning on the date on

20 which the final report under subsection (l)(3) is submitted

21 to the Congress.

22 ‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—

23 ‘‘(1) IN GENERAL.—Subject to paragraph (2), for

24 the purpose of carrying out this section, there are au-
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1 thorized to be appropriated such sums as may be nec2 essary for each of the fiscal years 1996 through 2000.

3 ‘‘(2) LIMITATION.—The authorization of appro4 priations established in paragraph (1) is effective

5 only with respect to appropriations made from alloca6 tions under section 302(b) of the Congressional Budg7 et Act of 1974—

8 ‘‘(A) for the Subcommittee on Labor, Health

9 and Human Services, and Education, Committee

10 on Appropriations of the House of Representa11 tives, in the case of any bill, resolution, or

12 amendment considered in the House; and

13 ‘‘(B) for the Subcommittee on Labor, Health

14 and Human Services, and Education, Committee

15 on Appropriations of the Senate, in the case of

16 any bill, resolution, or amendment considered in

17 the Senate.’’.
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1 Subtitle F—Provisions Relating to

2 Medicare Part A

3 PART 1—HOSPITALS

4 Subpart A—General Provisions Relating to Hospitals

5 SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS

6 HOSPITALS.

7 Section 1886(b)(3)(B)(i) (42 U.S.C.

8 1395ww(b)(3)(B)(i)) is amended by striking subclauses

9 (XI), (XII), and (XIII) and inserting the following:

10 ‘‘(XI) for fiscal year 1996, the market basket per11 centage increase minus 2.5 percentage points for hos12 pitals in all areas,

13 ‘‘(XII) for each of the fiscal years 1997 through

14 2002, the market basket percentage increase minus 2.0

15 percentage points for hospitals in all areas, and

16 ‘‘(XIII) for fiscal year 2003 and each subsequent

17 fiscal year, the market basket percentage increase for

18 hospitals in all areas.’’.

19 SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE

20 PAYMENT ADJUSTMENTS.

21 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

22 1395ww(d)(5)(F)) is amended—

23 (1) in clause (ii), by striking ‘‘The amount’’ and

24 inserting ‘‘Subject to clause (ix), the amount’’; and
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1 (2) by adding at the end the following new

2 clause:

3 ‘‘(ix) In the case of discharges occurring on or after

4 October 1, 1995, the additional payment amount otherwise

5 determined under clause (ii) shall be reduced as follows:

6 ‘‘(I) For discharges occurring on or after October

7 1, 1995, and on or before September 30, 1996, by 20

8 percent.

9 ‘‘(II) For discharges occurring on or after Octo10 ber 1, 1996, and on or before September 30, 1997, by

11 25 percent.

12 ‘‘(III) For discharges occurring on or after Octo13 ber 1, 1997, by 30 percent.’’.

14 (b) CONFORMING AMENDMENT RELATING TO DETER15 MINATION OF STANDARDIZED AMOUNTS.—Section

16 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is

17 amended by striking the period at the end and inserting

18 the following: ‘‘, and the Secretary shall not take into ac19 count any reductions in the amount of such additional pay20 ments resulting from the amendments made by section

21 15502(a) of the Medicare Preservation Act of 1995.’’.

22 SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR

23 INPATIENT HOSPITAL SERVICES.

24 (a) REDUCTION IN PAYMENTS FOR PPS HOSPITALS.—
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1 (1) CONTINUATION OF CURRENT REDUCTIONS.—

2 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

3 is amended in the second sentence—

4 (A) by striking ‘‘through 1995’’ and insert5 ing ‘‘through 2002’’; and

6 (B) by inserting after ‘‘10 percent reduc7 tion’’ the following: ‘‘(or a 15 percent reduction

8 in the case of payments during fiscal years 1996

9 through 2002)’’.

10 (2) REDUCTION IN BASE PAYMENT RATES.—Sec11 tion 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is

12 amended by adding at the end the following new sen13 tence: ‘‘In addition to the reduction described in the

14 preceding sentence, for discharges occurring after Sep15 tember 30, 1995, the Secretary shall reduce by 7.47

16 percent the unadjusted standard Federal capital pay17 ment rate (as described in 42 CFR 412.308(c), as in

18 effect on the date of the enactment of the Medicare

19 Preservation Act of 1995) and shall reduce by 8.27

20 percent the unadjusted hospital-specific rate (as de21 scribed in 42 CFR 412.328(e)(1), as in effect on such

22 date of enactment).’’.

23 (b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT HOS24 PITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is amend25 ed by adding at the end the following new paragraph:
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1 ‘‘(4)(A) Except as provided in subparagraph (B), in

2 determining the amount of the payments that may be made

3 under this title with respect to all the capital-related costs

4 of inpatient hospital services furnished during fiscal years

5 1996 through 2002 of a hospital which is not a subsection

6 (d) hospital or a subsection (d) Puerto Rico hospital, the

7 Secretary shall reduce the amounts of such payments other8 wise determined under this title by 15 percent.

9 ‘‘(B) Subparagraph (A) shall not apply to payments

10 with respect to the capital-related costs of any hospital that

11 is a sole community hospital (as defined in subsection

12 (d)(5)(D)(iii) or a rural primary care hospital (as defined

13 in section 1861(mm)(1)).’’.

14 (c) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL15 RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.

16 1395ww(g)(1)) is amended—

17 (1) by redesignating subparagraph (C) as sub18 paragraph (D), and

19 (2) by inserting after subparagraph (B) the fol20 lowing:

21 ‘‘(C)(i) For discharges occurring after September 30,

22 1995, such system shall provide for an adjustment in an

23 amount equal to the amount determined under clause (iv)

24 for capital-related tax costs for each hospital that is eligible

25 for such adjustment.
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1 ‘‘(ii) Subject to clause (iii), a hospital is eligible for

2 an adjustment under this subparagraph, with respect to dis3 charges occurring in a fiscal year, if the hospital—

4 ‘‘(I) is a hospital that may otherwise receive

5 payments under this subsection,

6 ‘‘(II) is not a public hospital, and

7 ‘‘(III) incurs capital-related tax costs for the fis8 cal year.

9 ‘‘(iii)(I) In the case of a hospital that first incurs cap10 ital-related tax costs in a fiscal year after fiscal year 1992

11 because of a change from nonproprietary to proprietary sta12 tus or because the hospital commenced operation after such

13 fiscal year, the first fiscal year for which the hospital shall

14 be eligible for such adjustment is the second full fiscal year

15 following the fiscal year in which the hospital first incurs

16 such costs.

17 ‘‘(II) In the case of a hospital that first incurs capital18 related tax costs in a fiscal year after fiscal year 1992 be19 cause of a change in State or local tax laws, the first fiscal

20 year for which the hospital shall be eligible for such adjust21 ment is the fourth full fiscal year following the fiscal year

22 in which the hospital first incurs such costs.

23 ‘‘(iv) The per discharge adjustment under this clause

24 shall be equal to the hospital-specific capital-related tax

25 costs per discharge of a hospital for fiscal year 1992 (or,
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1 in the case of a hospital that first incurs capital-related

2 tax costs for a fiscal year after fiscal year 1992, for the

3 first full fiscal year for which such costs are incurred), up4 dated to the fiscal year to which the adjustment applies.

5 Such per discharge adjustment shall be added to the Federal

6 capital rate, after such rate has been adjusted as described

7 in 42 CFR 412.312 (as in effect on the date of the enactment

8 of the Medicare Preservation Act of 1995), and before such

9 rate is multiplied by the applicable Federal rate percentage.

10 ‘‘(v) For purposes of this subparagraph, capital-related

11 tax costs include—

12 ‘‘(I) the costs of taxes on land and depreciable

13 assets owned by a hospital (or related organization)

14 and used for patient care,

15 ‘‘(II) payments in lieu of such taxes (made by

16 hospitals that are exempt from taxation), and

17 ‘‘(III) the costs of taxes paid by a hospital (or

18 related organization) as lessee of land, buildings, or

19 fixed equipment from a lessor that is unrelated to the

20 hospital (or related organization) under the terms of

21 a lease that requires the lessee to pay all expenses (in22 cluding mortgage, interest, and amortization) and

23 leaves the lessor with an amount free of all claims

24 (sometimes referred to as a ‘net net net’ or ‘triple net’

25 lease).
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1 In determining the adjustment required under clause (i),

2 the Secretary shall not take into account any capital-related

3 tax costs of a hospital to the extent that such costs are based

4 on tax rates and assessments that exceed those for similar

5 commercial properties.

6 ‘‘(vi) The system shall provide that the Federal capital

7 rate for any fiscal year after September 30, 1995, shall be

8 reduced by a percentage sufficient to ensure that the adjust9 ments required to be paid under clause (i) for a fiscal year

10 neither increase nor decrease the total amount that would

11 have been paid under this system but for the payment of

12 such adjustments for such fiscal year.’’.

13 (d) REVISION OF EXCEPTIONS PROCESS UNDER PRO14 SPECTIVE PAYMENT SYSTEM FOR CERTAIN PROJECTS.—

15 (1) IN GENERAL.—Section 1886(g)(1) (42 U.S.C.

16 1395ww(g)(1)), as amended by subsection (c), is

17 amended—

18 (A) by redesignating subparagraph (D) as

19 subparagraph (E), and

20 (B) by inserting after subparagraph (C) the

21 following:

22 ‘‘(D) The exceptions under the system provided by the

23 Secretary under subparagraph (B)(iii) shall include the

24 provision of exception payments under the special excep25 tions process provided under 42 CFR 412.348(g) (as in ef-
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1 fect on September 1, 1995), except that the Secretary shall

2 revise such process as follows:

3 ‘‘(i) A hospital with at least 100 beds which is

4 located in an urban area shall be eligible under such

5 process without regard to its disproportionate patient

6 percentage under subsection (d)(5)(F) or whether it

7 qualifies for additional payment amounts under such

8 subsection.

9 ‘‘(ii) The minimum payment level for qualifying

10 hospitals shall be 85 percent.

11 ‘‘(iii) A hospital shall be considered to meet the

12 requirement that it completes the project involved no

13 later than the end of the hospital’s last cost reporting

14 period beginning after October 1, 2001, if—

15 ‘‘(I) the hospital has obtained a certificate

16 of need for the project approved by the State or

17 a local planning authority, and

18 ‘‘(II) by September 1, 1995, the hospital has

19 expended on the project at least $750,000 or 10

20 percent of the estimated cost of the project.

21 ‘‘(iv) The amount of the exception payment made

22 shall not be reduced by any offsetting amounts.’’.

23 (2) CONFORMING AMENDMENT.—Section

24 1886(g)(1)(B)(iii) (42 U.S.C. 1395ww(g)(1)(B)(iii))

25 is amended by striking ‘‘may provide’’ and inserting
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1 ‘‘shall provide (in accordance with subparagraph

2 (D))’’.

3 SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT

4 MEDICAL EDUCATION.

5 For provisions modifying medicare payment policies

6 regarding graduate medical education, see part 2 of subtitle

7 E.

8 SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.

9 (a) UPDATES.—Section 1886(b)(3)(B)(ii)(V) (42

10 U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended by striking

11 ‘‘through 1997’’ and inserting ‘‘through 2002’’.

12 (b) REBASING FOR CERTAIN LONG-TERM CARE HOS13 PITALS.—

14 (1) IN GENERAL.—Section 1886(b)(3) (42 U.S.C.

15 1395ww(b)(3)) is amended—

16 (A) in subparagraph (A), by striking ‘‘and

17 (E)’’ and inserting ‘‘(E), and (F)’’;

18 (B) in subparagraph (B)(ii), by striking

19 ‘‘(A) and (E)’’ and inserting ‘‘(A), (E), and

20 (F)’’; and

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

22 subparagraph:

23 ‘‘(F)(i) In the case of a qualified long-term care hos24 pital (as defined in clause (ii)), the term ‘target amount’

25 means—
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1 ‘‘(I) with respect to the first 12-month cost re2 porting period in which this subparagraph is applied

3 to the hospital, the allowable operating costs of inpa4 tient hospital services (as defined in subsection (a)(4))

5 recognized under this title for the hospital for the 12-

6 month cost reporting period beginning during fiscal

7 year 1991; or

8 ‘‘(II) with respect to a later cost reporting pe9 riod, the target amount for the preceding cost report10 ing period, increase by the applicable percentage in11 crease under subparagraph (B)(ii) for that later cost

12 reporting period.

13 ‘‘(ii) In clause (i), a ‘qualified long-term care hospital’

14 means, with respect to a cost reporting period, a hospital

15 described in clause (iv) of subsection (d)(1)(B) during fiscal

16 year 1995 for which the hospital’s allowable operating costs

17 of inpatient hospital services recognized under this title for

18 each of the two most recent previous 12-month cost report19 ing periods exceeded the hospital’s target amount deter20 mined under this paragraph for such cost reporting periods,

21 if the hospital—

22 ‘‘(I) has a disproportionate patient percentage

23 during such cost reporting period (as determined by

24 the Secretary under subsection (d)(5)(F)(vi) as if the
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1 hospital were a subsection (d) hospital) of at least 25

2 percent, or

3 ‘‘(II) is located in a State for which no payment

4 is made under the State plan under title XIX for

5 days of inpatient hospital services furnished to any

6 individual in excess of the limit on the number of

7 days of such services furnished to the individual for

8 which payment may be made under this title.’’.

9 (2) EFFECTIVE DATE.—The amendment made by

10 paragraph (1) shall apply to discharges occurring

11 during cost reporting periods beginning on or after

12 October 1, 1995.

13 (c) TREATMENT OF CERTAIN LONG-TERM CARE HOS14 PITALS LOCATED WITHIN OTHER HOSPITALS.—

15 (1) IN GENERAL.—Section 1886(d)(1)(B) (42

16 U.S.C. 1395ww(d)(1)(B)) is amended in the matter

17 following clause (v) by striking the period and insert18 ing the following: ‘‘, or a hospital classified by the

19 Secretary as a long-term care hospital on or before

20 September 30, 1995, and located in the same building

21 as, or on the same campus as, another hospital.’’.

22 (2) STUDY BY REVIEW COMMISSION.—Not later

23 than 12 months after the date a majority of the mem24 bers of the Medicare Payment Review Commission are

25 first appointed, the Commission shall submit a report
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1 to Congress containing recommendations for appro2 priate revisions in the treatment of long-term care

3 hospitals located in the same building as or on the

4 same campus as another hospital for purposes of sec5 tion 1886 of the Social Security Act.

6 (3) EFFECTIVE DATE.—The amendment made by

7 paragraph (1) shall apply to discharges occurring on

8 or after October 1, 1995.

9 (d) STUDY OF PROSPECTIVE PAYMENT SYSTEM FOR

10 REHABILITATION HOSPITALS AND UNITS.—

11 (1) IN GENERAL.—After consultation with the

12 Prospective Payment Assessment Commission, provid13 ers of rehabilitation services, and other appropriate

14 parties, the Secretary of Health and Human Services

15 shall submit to Congress, by not later than June 1,

16 1996, a report on the advisability and feasibility of

17 providing for payment based on a prospective pay18 ment system for inpatient services of rehabilitation

19 hospitals and units under the medicare program.

20 (2) ITEMS INCLUDED.—The report shall include

21 the following:

22 (A) The available and preferred systems of

23 classifying rehabilitation patients relative to du24 ration and intensity of inpatient services, in-
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1 cluding the use of functional-related groups

2 (FRGs).

3 (B) The means of calculating medicare pro4 gram payments to reflect such patient require5 ments.

6 (C) Other appropriate adjustments which

7 should be made, such as for geographic vari8 ations in wages and other costs and outliers.

9 (D) A timetable under which such a system

10 might be introduced.

11 (E) Whether such a system should be ap12 plied to other types of providers of inpatient re13 habilitation services.

14 SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR

15 ENROLLEES’ BAD DEBTS.

16 (a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.

17 1395x(v)(1)) is amended by adding at the end the following

18 new subparagraph:

19 ‘‘(T)(i) In determining such reasonable costs for hos20 pitals, the amount of bad debts otherwise treated as allow21 able costs which are attributable to the deductibles and coin22 surance amounts under this title shall be reduced by—

23 ‘‘(I) 75 percent for cost reporting periods begin24 ning during fiscal year 1996,
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1 ‘‘(II) 60 percent for cost reporting periods begin2 ning during fiscal year 1997, and

3 ‘‘(III) 50 percent for subsequent cost reporting

4 periods.

5 ‘‘(ii) Clause (i) shall not apply with respect to bad

6 debt of a hospital described in section 1886(d)(1)(B)(iv) if

7 the debt is attributable to uncollectable deductible and coin8 surance payments owed by individuals enrolled in a State

9 plan under title XIX or under the MediGrant program

10 under title XXI.’’.

11 (b) EFFECTIVE DATE.—The amendment made by sub12 section (a) shall apply to hospital cost reporting periods

13 beginning on or after October 1, 1995.

14 SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS15 THROUGH.

16 Effective as if included in the enactment of OBRA–

17 1989, section 6011(d) of such Act (as amended by section

18 13505 of OBRA–1993) is amended by striking ‘‘and shall

19 expire September 30, 1994’’.

20 SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION

21 OF CHRISTIAN SCIENCE PROVIDERS.

22 (a) HOSPITALS.—Section 1861(e) (42 U.S.C.

23 1395x(e)) is amended in the sixth sentence by inserting

24 after ‘‘Massachusetts,’’ the following: ‘‘or by the Commission
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1 for Accreditation of Christian Science Nursing Organiza2 tions/Facilities, Inc.,’’.

3 (b) SKILLED NURSING FACILITIES.—Section

4 1861(y)(1) is amended by inserting after ‘‘Massachusetts,’’

5 the following: ‘‘or by the Commission for Accreditation of

6 Christian Science Nursing Organizations/Facilities, Inc.,’’.

7 Subpart B—Provisions Relating to Rural Hospitals

8 SEC. 15511. SOLE COMMUNITY HOSPITALS.

9 (a) UPDATE.—Section 1886(b)(3)(B)(iv) (42 U.S.C.

10 1395ww(b)(3)(B)(iv)) is amended—

11 (1) in subclause (III), by striking ‘‘and’’ at the

12 end; and

13 (2) by striking subclause (IV) and inserting the

14 following:

15 ‘‘(IV) for each of the fiscal years 1996 through

16 2000, the market basket percentage increase minus 1

17 percentage points, and

18 ‘‘(V) for fiscal year 2001 and each subsequent

19 fiscal year, the applicable percentage increase under

20 clause (i).’’.

21 (b) STUDY OF IMPACT OF SOLE COMMUNITY HOSPITAL

22 DESIGNATIONS.—

23 (1) STUDY.—The Medicare Payment Review

24 Commission shall conduct a study of the impact of

25 the designation of hospitals as sole community hos-
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1 pitals under the medicare program on the delivery of

2 health care services to individuals in rural areas, and

3 shall include in the study an analysis of the charac4 teristics of the hospitals designated as such sole com5 munity hospitals under the program.

6 (2) REPORT.—Not later than 12 months after the

7 date a majority of the members of the Commission are

8 first appointed, the Commission shall submit to Con9 gress a report on the study conducted under para10 graph (1).

11 SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND

12 RPC HOSPITALS.

13 Paragraphs (1)(A)(i) and (2)(A)(i) of section 1820(i)

14 (42 U.S.C. 1395i–4(i)) are each amended by striking the

15 semicolon at the end and inserting the following: ‘‘, or in

16 a State which the Secretary finds would receive a grant

17 under such subsection during a fiscal year if funds were

18 appropriated for grants under such subsection for the fiscal

19 year;’’.

20 SEC. 15513. ESTABLISHMENT OF RURAL EMERGENCY AC21 CESS CARE HOSPITALS.

22 (a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x) is

23 amended by adding at the end the following new subsection:
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1 ‘‘Rural Emergency Access Care Hospital; Rural

2 Emergency Access Care Hospital Services

3 ‘‘(oo)(1) The term ‘rural emergency access care hos4 pital’ means, for a fiscal year, a facility with respect to

5 which the Secretary finds the following:

6 ‘‘(A) The facility is located in a rural area (as

7 defined in section 1886(d)(2)(D)).

8 ‘‘(B) The facility was a hospital under this title

9 at any time during the 5-year period that ends on the

10 date of the enactment of this subsection.

11 ‘‘(C) The facility is in danger of closing due to

12 low inpatient utilization rates and operating losses,

13 and the closure of the facility would limit the access

14 to emergency services of individuals residing in the

15 facility’s service area.

16 ‘‘(D) The facility has entered into (or plans to

17 enter into) an agreement with a hospital with a par18 ticipation agreement in effect under section 1866(a),

19 and under such agreement the hospital shall accept

20 patients transferred to the hospital from the facility

21 and receive data from and transmit data to the facil22 ity.

23 ‘‘(E) There is a practitioner who is qualified to

24 provide advanced cardiac life support services (as de-
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1 termined by the State in which the facility is located)

2 on-site at the facility on a 24-hour basis.

3 ‘‘(F) A physician is available on-call to provide

4 emergency medical services on a 24-hour basis.

5 ‘‘(G) The facility meets such staffing require6 ments as would apply under section 1861(e) to a hos7 pital located in a rural area, except that—

8 ‘‘(i) the facility need not meet hospital

9 standards relating to the number of hours during

10 a day, or days during a week, in which the facil11 ity must be open, except insofar as the facility

12 is required to provide emergency care on a 24-

13 hour basis under subparagraphs (E) and (F);

14 and

15 ‘‘(ii) the facility may provide any services

16 otherwise required to be provided by a full-time,

17 on-site dietitian, pharmacist, laboratory techni18 cian, medical technologist, or radiological tech19 nologist on a part-time, off-site basis.

20 ‘‘(H) The facility meets the requirements appli21 cable to clinics and facilities under subparagraphs

22 (C) through (J) of paragraph (2) of section 1861(aa)

23 and of clauses (ii) and (iv) of the second sentence of

24 such paragraph (or, in the case of the requirements

25 of subparagraph (E), (F), or (J) of such paragraph,
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1 would meet the requirements if any reference in such

2 subparagraph to a ‘nurse practitioner’ or to ‘nurse

3 practitioners’ were deemed to be a reference to a

4 ‘nurse practitioner or nurse’ or to ‘nurse practitioners

5 or nurses’); except that in determining whether a fa6 cility meets the requirements of this subparagraph,

7 subparagraphs (E) and (F) of that paragraph shall

8 be applied as if any reference to a ‘physician’ is a

9 reference to a physician as defined in section

10 1861(r)(1).

11 ‘‘(2) The term ‘rural emergency access care hospital

12 services’ means the following services provided by a rural

13 emergency access care hospital and furnished to an individ14 ual over a continuous period not to exceed 24 hours (except

15 that such services may be furnished over a longer period

16 in the case of an individual who is unable to leave the hos17 pital because of inclement weather):

18 ‘‘(A) An appropriate medical screening examina19 tion (as described in section 1867(a)).

20 ‘‘(B) Necessary stabilizing examination and

21 treatment services for an emergency medical condition

22 and labor (as described in section 1867(b)).’’.

23 (b) REQUIRING RURAL EMERGENCY ACCESS CARE

24 HOSPITALS TO MEET HOSPITAL ANTI-DUMPING REQUIRE25 MENTS.—Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is
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1 amended by striking ‘‘1861(mm)(1))’’ and inserting

2 ‘‘1861(mm)(1)) and a rural emergency access care hospital

3 (as defined in section 1861(oo)(1))’’.

4 (c) REFERENCE TO PAYMENT PROVISIONS UNDER

5 PART B.—For provisions relating to payment for rural

6 emergency access care hospital services under part B, see

7 section 15607.

8 (d) EFFECTIVE DATE.—The amendments made by this

9 section shall apply to fiscal years beginning on or after Oc10 tober 1, 1995.

11 SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN12 TERS.

13 (a) PROHIBITING DENIAL OF REQUEST FOR RECLAS14 SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—

15 (1) IN GENERAL.—Section 1886(d)(10)(D) (42

16 U.S.C. 1395ww(d)(10)(D)) is amended—

17 (A) by redesignating clause (iii) as clause

18 (iv); and

19 (B) by inserting after clause (ii) the follow20 ing new clause:

21 ‘‘(iii) Under the guidelines published by the Secretary

22 under clause (i), in the case of a hospital which is classified

23 by the Secretary as a rural referral center under paragraph

24 (5)(C), the Board may not reject the application of the hos25 pital under this paragraph on the basis of any comparison
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1 between the average hourly wage of the hospital and the

2 average hourly wage of hospitals in the area in which it

3 is located.’’.

4 (2) EFFECTIVE DATE.—Notwithstanding section

5 1886(d)(10)(C)(ii) of the Social Security Act, a hos6 pital may submit an application to the Medicare Ge7 ographic Classification Review Board during the 30-

8 day period beginning on the date of the enactment of

9 this Act requesting a change in its classification for

10 purposes of determining the area wage index applica11 ble to the hospital under section 1886(d)(3)(D) of such

12 Act for fiscal year 1997, if the hospital would be eligi13 ble for such a change in its classification under the

14 standards described in section 1886(d)(10)(D) (as

15 amended by paragraph (1)) but for its failure to meet

16 the deadline for applications under section

17 1886(d)(10)(C)(ii).

18 (b) CONTINUING TREATMENT OF PREVIOUSLY DES19 IGNATED CENTERS.—Any hospital classified as a rural re20 ferral center by the Secretary of Health and Human Serv21 ices under section 1886(d)(5)(C) of the Social Security Act

22 for fiscal year 1994 shall be classified as such a rural refer23 ral center for fiscal year 1996 and each subsequent fiscal

24 year.
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1 SEC. 15515. FLOOR ON AREA WAGE INDEX.

2 (a) IN GENERAL.—For purposes of section

3 1886(d)(3)(E) of the Social Security Act for discharges oc4 curring on or after October 1, 1995, the area wage index

5 applicable under such section to any hospital which is not

6 located in a rural area (as defined in section 1886(d)(2)(D)

7 of such Act) may not be less than the average of the area

8 wage indices applicable under such section to hospitals lo9 cated in rural areas in the State in which the hospital is

10 located.

11 (b) BUDGET-NEUTRALITY IN IMPLEMENTATION.—The

12 Secretary of Health and Human Services shall adjust the

13 area wage indices referred to in subsection (a) for hospitals

14 not described in such subsection in a manner which assures

15 that the aggregate payments made under section 1886(d)

16 of the Social Security Act in a fiscal year for the operating

17 costs of inpatient hospital services are not greater or less

18 than those which would have been made in the year if this

19 section did not apply.

20 PART 2—PAYMENTS TO SKILLED NURSING

21 FACILITIES

22 SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.

23 (a) CLARIFICATION OF DEFINITION OF ROUTINE SERV24 ICE COSTS.—Section 1888 (42 U.S.C. 1395yy) is amended

25 by adding at the end the following new subsection:
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1 ‘‘(e) For purposes of this section, the ‘routine service

2 costs’ of a skilled nursing facility are all costs which are

3 attributable to nursing services, room and board, adminis4 trative costs, other overhead costs, and all other ancillary

5 services (including supplies and equipment), excluding costs

6 attributable to covered non-routine services subject to pay7 ment limits under section 1888A.’’.

8 (b) CONFORMING AMENDMENT.—Section 1888 (42

9 U.S.C. 1395yy) is amended in the heading by inserting

10 ‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERVICE’’.

11 SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE12 MENT OF COVERED NON-ROUTINE SERVICES.

13 (a) IN GENERAL.—Title XVIII is amended by insert14 ing after section 1888 the following new section:

15 ‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT OF COV16 ERED NON-ROUTINE SERVICES OF SKILLED NURSING

17 FACILITIES

18 ‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of this

19 section:

20 ‘‘(1) COVERED NON-ROUTINE SERVICES.—The

21 term ‘covered non-routine services’ means post-hos22 pital extended care services consisting of any of the

23 following:

24 ‘‘(A) Physical or occupational therapy or

25 speech-language pathology services, or res26 piratory therapy, including supplies and sup-
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1 port services incident to such services and ther2 apy.

3 ‘‘(B) Prescription drugs.

4 ‘‘(C) Complex medical equipment.

5 ‘‘(D) Intravenous therapy and solutions (in6 cluding enteral and parenteral nutrients, sup7 plies, and equipment).

8 ‘‘(E) Radiation therapy.

9 ‘‘(F) Diagnostic services, including labora10 tory, radiology (including computerized tomog11 raphy services and imaging services), and pul12 monary services.

13 ‘‘(2) SNF MARKET BASKET PERCENTAGE IN14 CREASE.—The term ‘SNF market basket percentage

15 increase’ for a fiscal year means a percentage equal

16 to the percentage increase in routine service cost lim17 its for the year under section 1888(a).

18 ‘‘(3) STAY.—The term ‘stay’ means, with respect

19 to an individual who is a resident of a skilled nurs20 ing facility, a period of continuous days during

21 which the facility provides extended care services for

22 which payment may be made under this title with re23 spect to the individual during the individual’s spell

24 of illness.
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1 ‘‘(b) NEW PAYMENT METHOD FOR COVERED NON2 ROUTINE SERVICES.—

3 ‘‘(1) IN GENERAL.—Subject to subsection (c), a

4 skilled nursing facility shall receive interim payments

5 under this title for covered non-routine services fur6 nished to an individual during a cost reporting pe7 riod beginning during a fiscal year (after fiscal year

8 1996) in an amount equal to the reasonable cost of

9 providing such services in accordance with section

10 1861(v). The Secretary may adjust such payments if

11 the Secretary determines (on the basis of such esti12 mated information as the Secretary considers appro13 priate) that payments to the facility under this para14 graph for a cost reporting period would substantially

15 exceed the cost reporting period limit determined

16 under subsection (c)(1)(B).

17 ‘‘(2) RESPONSIBILITY OF SKILLED NURSING FA18 CILITY TO MANAGE BILLINGS.—

19 ‘‘(A) CLARIFICATION RELATING TO PART A

20 BILLING.—In the case of a covered non-routine

21 service furnished to an individual who (at the

22 time the service is furnished) is a resident of a

23 skilled nursing facility who is entitled to cov24 erage under section 1812(a)(2) for such service,

25 the skilled nursing facility shall submit a claim
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1 for payment under this title for such service

2 under part A (without regard to whether or not

3 the item or service was furnished by the facility,

4 by others under arrangement with them made by

5 the facility, under any other contracting or con6 sulting arrangement, or otherwise).

7 ‘‘(B) PART B BILLING.—In the case of a

8 covered non-routine service (other than a port9 able X-ray or portable electrocardiogram treated

10 as a physician’s service for purposes of section

11 1848(j)(3)) furnished to an individual who (at

12 the time the service is furnished) is a resident of

13 a skilled nursing facility who is not entitled to

14 coverage under section 1812(a)(2) for such serv15 ice but is entitled to coverage under part B for

16 such service, the skilled nursing facility shall

17 submit a claim for payment under this title for

18 such service under part B (without regard to

19 whether or not the item or service was furnished

20 by the facility, by others under arrangement

21 with them made by the facility, under any other

22 contracting or consulting arrangement, or other23 wise).

24 ‘‘(C) MAINTAINING RECORDS ON SERVICES

25 FURNISHED TO RESIDENTS.—Each skilled nurs-
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1 ing facility receiving payments for extended care

2 services under this title shall document on the fa3 cility’s cost report all covered non-routine serv4 ices furnished to all residents of the facility to

5 whom the facility provided extended care services

6 for which payment was made under part A dur7 ing a fiscal year (beginning with fiscal year

8 1996) (without regard to whether or not the serv9 ices were furnished by the facility, by others

10 under arrangement with them made by the facil11 ity, under any other contracting or consulting

12 arrangement, or otherwise).

13 ‘‘(c) RECONCILIATION OF AMOUNTS.—

14 ‘‘(1) LIMIT BASED ON PER STAY LIMIT AND NUM15 BER OF STAYS.—

16 ‘‘(A) IN GENERAL.—If a skilled nursing fa17 cility has received aggregate payments under

18 subsection (b) for covered non-routine services

19 during a cost reporting period beginning during

20 a fiscal year in excess of an amount equal to the

21 cost reporting period limit determined under

22 subparagraph (B), the Secretary shall reduce the

23 payments made to the facility with respect to

24 such services for cost reporting periods beginning

25 during the following fiscal year in an amount
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1 equal to such excess. The Secretary shall reduce

2 payments under this subparagraph at such times

3 and in such manner during a fiscal year as the

4 Secretary finds necessary to meet the require5 ment of this subparagraph.

6 ‘‘(B) COST REPORTING PERIOD LIMIT.—The

7 cost reporting period limit determined under this

8 subparagraph is an amount equal to the product

9 of—

10 ‘‘(i) the per stay limit applicable to the

11 facility under subsection (d) for the period;

12 and

13 ‘‘(ii) the number of stays beginning

14 during the period for which payment was

15 made to the facility for such services.

16 ‘‘(C) PROSPECTIVE REDUCTION IN PAY17 MENTS.—In addition to the process for reducing

18 payments described in subparagraph (A), the

19 Secretary may reduce payments made to a facil20 ity under this section during a cost reporting pe21 riod if the Secretary determines (on the basis of

22 such estimated information as the Secretary con23 siders appropriate) that payments to the facility

24 under this section for the period will substan-
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1 tially exceed the cost reporting period limit for

2 the period determined under this paragraph.

3 ‘‘(2) INCENTIVE PAYMENTS.—

4 ‘‘(A) IN GENERAL.—If a skilled nursing fa5 cility has received aggregate payments under

6 subsection (b) for covered non-routine services

7 during a cost reporting period beginning during

8 a fiscal year in an amount that is less than the

9 amount determined under paragraph (1)(B), the

10 Secretary shall pay the skilled nursing facility

11 in the following fiscal year an incentive payment

12 equal to 50 percent of the difference between such

13 amounts, except that the incentive payment may

14 not exceed 5 percent of the aggregate payments

15 made to the facility under subsection (b) for the

16 previous fiscal year (without regard to subpara17 graph (B)).

18 ‘‘(B) INSTALLMENT INCENTIVE PAY19 MENTS.—The Secretary may make installment

20 payments during a fiscal year to a skilled nurs21 ing facility based on the estimated incentive

22 payment that the facility would be eligible to re23 ceive with respect to such fiscal year.

24 ‘‘(d) DETERMINATION OF FACILITY PER STAY

25 LIMIT.—
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1 ‘‘(1) LIMIT FOR FISCAL YEAR 1997.—

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

3 subparagraph (B), the Secretary shall establish

4 separate per stay limits for hospital-based and

5 freestanding skilled nursing facilities for the 12-

6 month cost reporting period beginning during

7 fiscal year 1997 that are equal to the sum of—

8 ‘‘(i) 50 percent of the facility-specific

9 stay amount for the facility (as determined

10 under subsection (e)) for the last 12-month

11 cost reporting period ending on or before

12 September 30, 1994, increased (in a

13 compounded manner) by the SNF market

14 basket percentage increase for fiscal years

15 1995 through 1997; and

16 ‘‘(ii) 50 percent of the average of all

17 facility-specific stay amounts for all hos18 pital-based facilities or all freestanding fa19 cilities (whichever is applicable) during the

20 cost reporting period described in clause (i),

21 increased (in a compounded manner) by the

22 SNF market basket percentage increase for

23 fiscal years 1995 through 1997.

24 ‘‘(B) FACILITIES NOT HAVING 1994 COST

25 REPORTING PERIOD.—In the case of a skilled
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1 nursing facility for which payments were not

2 made under this title for covered non-routine

3 services for the last 12-month cost reporting pe4 riod ending on or before September 30, 1994, the

5 per stay limit for the 12-month cost reporting

6 period beginning during fiscal year 1997 shall be

7 twice the amount determined under subpara8 graph (A)(ii).

9 ‘‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS.—

10 The per stay limit for a skilled nursing facility for

11 a 12-month cost reporting period beginning during a

12 fiscal year after fiscal year 1997 is equal to the per

13 stay limit established under this subsection for the 12-

14 month cost reporting period beginning during the

15 previous fiscal year, increased by the SNF market

16 basket percentage increase for such subsequent fiscal

17 year minus 2 percentage points.

18 ‘‘(3) REBASING OF AMOUNTS.—

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

20 provide for an update to the facility-specific

21 amounts used to determine the per stay limits

22 under this subsection for cost reporting periods

23 beginning on or after October 1, 1999, and every

24 2 years thereafter.
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1 ‘‘(B) TREATMENT OF FACILITIES NOT HAV2 ING REBASED COST REPORTING PERIODS.—

3 Paragraph (1)(B) shall apply with respect to a

4 skilled nursing facility for which payments were

5 not made under this title for covered non-routine

6 services for the 12-month cost reporting period

7 used by the Secretary to update facility-specific

8 amounts under subparagraph (A) in the same

9 manner as such paragraph applies with respect

10 to a facility for which payments were not made

11 under this title for covered non-routine services

12 for the last 12-month cost reporting period end13 ing on or before September 30, 1994.

14 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY

15 AMOUNTS.—The ‘facility-specific stay amount’ for a skilled

16 nursing facility for a cost reporting period is the sum of—

17 ‘‘(1) the average amount of payments made to

18 the facility under part A during the period which are

19 attributable to covered non-routine services furnished

20 during a stay; and

21 ‘‘(2) the Secretary’s best estimate of the average

22 amount of payments made under part B during the

23 period for covered non-routine services furnished to

24 all residents of the facility to whom the facility pro25 vided extended care services for which payment was
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1 made under part A during the period (without regard

2 to whether or not the services were furnished by the

3 facility, by others under arrangement with them

4 made by the facility, under any other contracting or

5 consulting arrangement, or otherwise), as estimated

6 by the Secretary.

7 ‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—

8 ‘‘(1) IN GENERAL.—In applying subsection (b) to

9 covered non-routine services furnished during a stay

10 beginning during a cost reporting period beginning

11 during a fiscal year to a resident of a skilled nursing

12 facility who requires intensive nursing or therapy

13 services, the per stay limit determined for the fiscal

14 year under the methodology for such resident shall be

15 the per stay limit developed under paragraph (2) in16 stead of the per stay limit determined under sub17 section (d)(1)(A).

18 ‘‘(2) PER STAY LIMIT FOR INTENSIVE NEED

19 RESIDENTS.—Not later than June 30, 1996, the Sec20 retary, after consultation with the Medicare Payment

21 Review Commission and skilled nursing facility ex22 perts, shall develop and publish a methodology for de23 termining on an annual basis a per stay limit for

24 residents of a skilled nursing facility who require in25 tensive nursing or therapy services.
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1 ‘‘(3) BUDGET NEUTRALITY.—The Secretary shall

2 adjust payments under subsection (b) in a manner

3 that ensures that total payments for covered non-rou4 tine services under this section are not greater or less

5 than total payments for such services would have been

6 but for the application of paragraph (1).

7 ‘‘(g) SPECIAL TREATMENT FOR MEDICARE LOW VOL8 UME SKILLED NURSING FACILITIES.—This section shall

9 not apply with respect to a skilled nursing facility for

10 which payment is made for routine service costs during a

11 cost reporting period on the basis of prospective payments

12 under section 1888(d).

13 ‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS.—

14 ‘‘(1) IN GENERAL.—The Secretary may make ex15 ceptions and adjustments to the cost reporting limits

16 applicable to a skilled nursing facility under sub17 section (c)(1)(B) for a cost reporting period, except

18 that the total amount of any additional payments

19 made under this section for covered non-routine serv20 ices during the cost reporting period as a result of

21 such exceptions and adjustments may not exceed 5

22 percent of the aggregate payments made to all skilled

23 nursing facilities for covered non-routine services dur24 ing the cost reporting period (determined without re25 gard to this paragraph).
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1 ‘‘(2) BUDGET NEUTRALITY.—The Secretary shall

2 adjust payments under subsection (b) in a manner

3 that ensures that total payments for covered non-rou4 tine services under this section are not greater or less

5 than total payments for such services would have been

6 but for the application of paragraph (1).

7 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before

8 furnishing a covered non-routine service consisting of an

9 X-ray service for which payment may be made under part

10 A or part B to a resident, a skilled nursing facility shall

11 consider whether furnishing the service through a provider

12 of portable X-ray services would be appropriate, taking into

13 account the cost effectiveness of the service and the conven14 ience to the resident.’’.

15 (b) CONFORMING AMENDMENT.—Section 1814(b) (42

16 U.S.C. 1395f(b)) is amended in the matter preceding para17 graph (1) by striking ‘‘1813 and 1886’’ and inserting

18 ‘‘1813, 1886, 1888, and 1888A’’.

19 SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.

20 (a) MAINTAINING SAVINGS RESULTING FROM TEM21 PORARY FREEZE ON PAYMENT INCREASES.—

22 (1) BASING UPDATES TO PER DIEM COST LIMITS

23 ON LIMITS FOR FISCAL YEAR 1993.—

24 (A) IN GENERAL.—The last sentence of sec25 tion 1888(a) (42 U.S.C. 1395yy(a)) is amended
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1 by inserting before the period at the end the fol2 lowing: ‘‘(except that such updates may not take

3 into account any changes in the routine service

4 costs of skilled nursing facilities occurring dur5 ing cost reporting periods which began during

6 fiscal year 1994 or fiscal year 1995)’’.

7 (B) NO EXCEPTIONS PERMITTED BASED ON

8 AMENDMENT.—The Secretary of Health and

9 Human Services shall not consider the amend10 ment made by subparagraph (A) in making any

11 adjustments pursuant to section 1888(c) of the

12 Social Security Act.

13 (2) PAYMENTS DETERMINED ON PROSPECTIVE

14 BASIS.—Any change made by the Secretary of Health

15 and Human Services in the amount of any prospec16 tive payment paid to a skilled nursing facility under

17 section 1888(d) of the Social Security Act for cost re18 porting periods beginning on or after October 1, 1995,

19 may not take into account any changes in the costs

20 of services occurring during cost reporting periods

21 which began during fiscal year 1994 or fiscal year

22 1995.

23 (b) ESTABLISHMENT OF SCHEDULE FOR MAKING AD24 JUSTMENTS TO LIMITS.—Section 1888(c) (42 U.S.C.

25 1395yy(c)) is amended by striking the period at the end
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1 of the second sentence and inserting ‘‘, and may only make

2 adjustments under this subsection with respect to a facility

3 which applies for an adjustment during an annual applica4 tion period established by the Secretary.’’.

5 (c) LIMITATION ON AGGREGATE INCREASE IN PAY6 MENTS RESULTING FROM ADJUSTMENTS TO LIMITS.—Sec7 tion 1888(c) (42 U.S.C. 1395yy(c)) is amended—

8 (1) by striking ‘‘(c) The Secretary’’ and inserting

9 ‘‘(c)(1) Subject to paragraph (2), the Secretary’’; and

10 (2) by adding at the end the following new para11 graph:

12 ‘‘(2) The Secretary may not make any adjustments

13 under this subsection in the limits set forth in subsection

14 (a) for a cost reporting period beginning during a fiscal

15 year to the extent that the total amount of the additional

16 payments made under this title as a result of such adjust17 ments is greater than an amount equal to—

18 ‘‘(A) for cost reporting periods beginning during

19 fiscal year 1997, the total amount of the additional

20 payments made under this title as a result of adjust21 ments under this subsection for cost reporting periods

22 beginning during fiscal year 1996 increased by the

23 SNF market basket percentage increase (as defined in

24 section 1888A(e)(3)) for fiscal year 1997; and
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1 ‘‘(B) for cost reporting periods beginning during

2 a subsequent fiscal year, the amount determined

3 under this paragraph for the previous fiscal year in4 creased by the SNF market basket percentage increase

5 for such subsequent fiscal year.’’.

6 (d) IMPOSITION OF LIMITS FOR ALL COST REPORTING

7 PERIODS.—Section 1888(a) (42 U.S.C. 1395yy(a)) is

8 amended in the matter preceding paragraph (1) by insert9 ing after ‘‘extended care services’’ the following: ‘‘(for any

10 cost reporting period for which payment is made under this

11 title to the skilled nursing facility for such services)’’.

12 SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RELAT13 ED COSTS.

14 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amend15 ed by section 15506, is amended by adding at the end the

16 following new subparagraph:

17 ‘‘(U) Such regulations shall provide that, in determin18 ing the amount of the payments that may be made under

19 this title with respect to all the capital-related costs of

20 skilled nursing facilities, the Secretary shall reduce the

21 amounts of such payments otherwise established under this

22 title by 15 percent for payments attributable to portions

23 of cost reporting periods occurring during fiscal years 1996

24 through 2002.’’.
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1 SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID FOR

2 UNDER PART B.

3 (a) REQUIRING PAYMENT FOR ALL ITEMS AND SERV4 ICES TO BE MADE TO FACILITY.—

5 (1) IN GENERAL.—The first sentence of section

6 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended—

7 (A) by striking ‘‘and (D)’’ and inserting

8 ‘‘(D)’’; and

9 (B) by striking the period at the end and

10 inserting the following: ‘‘, and (E) in the case of

11 an item or service (other than physicians’ serv12 ices and other than a portable X-ray or portable

13 electrocardiogram treated as a physician’s serv14 ice for purposes of section 1848(j)(3)) furnished

15 to an individual who (at the time the item or

16 service is furnished) is a resident of a skilled

17 nursing facility, payment shall be made to the

18 facility (without regard to whether or not the

19 item or service was furnished by the facility, by

20 others under arrangement with them made by

21 the facility, or otherwise).’’.

22 (2) EXCLUSION FOR ITEMS AND SERVICES NOT

23 BILLED BY FACILITY.—Section 1862(a) (42 U.S.C.

24 1395y(a)) is amended—

25 (A) by striking ‘‘or’’ at the end of para26 graph (14);
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1 (B) by striking the period at the end of

2 paragraph (15) and inserting ‘‘; or’’; and

3 (C) by inserting after paragraph (15) the

4 following new paragraph:

5 ‘‘(16) where such expenses are for covered non6 routine services (as defined in section 1888A(a)(1))

7 (other than a portable X-ray or portable electrocardio8 gram treated as a physician’s service for purposes of

9 section 1848(j)(3)) furnished to an individual who is

10 a resident of a skilled nursing facility and for which

11 the claim for payment under this title is not submit12 ted by the facility.’’.

13 (3) CONFORMING AMENDMENT.—Section

14 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended by

15 striking ‘‘(2);’’ and inserting ‘‘(2) and section

16 1842(b)(6)(E);’’.

17 (b) REDUCTION IN PAYMENTS FOR ITEMS AND SERV18 ICES FURNISHED BY OR UNDER ARRANGEMENTS WITH FA19 CILITIES.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

20 amended by sections 15506 and 15524, is amended by add21 ing at the end the following new subparagraph:

22 ‘‘(V) In the case of an item or service furnished by

23 a skilled nursing facility (or by others under arrangement

24 with them made by a skilled nursing facility) for which

25 payment is made under part B in an amount determined
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1 in accordance with section 1833(a)(2)(B), the Secretary

2 shall reduce the reasonable cost for such item or service oth3 erwise determined under clause (i)(I) of such section by 5.8

4 percent for payments attributable to portions of cost report5 ing periods occurring during fiscal years 1996 through

6 2002.’’.

7 SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE8 VISED NURSING HOME REFORM STANDARDS.

9 (a) IN GENERAL.—Section 1819(a)(3) (42 U.S.C.

10 1395i@3(a)(3)) is amended to read as follows:

11 ‘‘(3)(A) is certified by the Secretary as meeting

12 the standards established under subsection (b), or (B)

13 is a State-certified facility (as defined in subsection

14 (d)).’’.

15 (b) REQUIREMENTS DESCRIBED.—Section 1819 (42

16 U.S.C. 1395i@3) is amended by striking subsections (b)

17 through (i) and inserting the following:

18 ‘‘(b) STANDARDS FOR AND CERTIFICATION OF FACILI19 TIES.—

20 ‘‘(1) STANDARDS FOR FACILITIES.—

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

22 provide for the establishment and maintenance of

23 standards consistent with the contents described

24 in subparagraph (B) for skilled nursing facilities
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1 which furnish services for which payment may

2 be made under this title.

3 ‘‘(B) CONTENTS OF STANDARDS.—The

4 standards established for facilities under this

5 paragraph shall contain provisions relating to

6 the following items:

7 ‘‘(i) The treatment of resident medical

8 records.

9 ‘‘(ii) Policies, procedures, and bylaws

10 for operation.

11 ‘‘(iii) Quality assurance systems.

12 ‘‘(iv) Resident assessment procedures,

13 including care planning and outcome eval14 uation.

15 ‘‘(v) The assurance of a safe and ade16 quate physical plant for the facility.

17 ‘‘(vi) Qualifications for staff sufficient

18 to provide adequate care.

19 ‘‘(vii) Utilization review.

20 ‘‘(viii) The protection and enforcement

21 of resident rights described in subparagraph

22 (C).

23 ‘‘(C) RESIDENT RIGHTS DESCRIBED.—The

24 resident rights described in this subparagraph

25 are the rights of residents to the following:
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1 ‘‘(i) To exercise the individual’s rights

2 as a resident of the facility and as a citizen

3 or resident of the United States.

4 ‘‘(ii) To receive notice of rights and

5 services.

6 ‘‘(iii) To be protected against the mis7 use of resident funds.

8 ‘‘(iv) To be provided privacy and con9 fidentiality.

10 ‘‘(v) To voice grievances.

11 ‘‘(vi) To examine the results of inspec12 tions under the certification program.

13 ‘‘(vii) To refuse to perform services for

14 the facility.

15 ‘‘(viii) To be provided privacy in com16 munications and to receive mail.

17 ‘‘(ix) To have the facility provide im18 mediate access to any resident by any rep19 resentative of the certification program, the

20 resident’s individual physician, the State

21 long term care ombudsman, and any person

22 the resident has designated as a visitor.

23 ‘‘(x) To retain and use personal prop24 erty.
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1 ‘‘(xi) To be free from abuse, including

2 verbal, sexual, physical and mental abuse,

3 corporal punishment, and involuntary se4 clusion.

5 ‘‘(xii) To be provided with prior writ6 ten notice of a pending transfer or dis7 charge.

8 ‘‘(D) REQUIRING NOTICE AND COMMENT.—

9 The standards established for facilities under this

10 paragraph may only take effect after the Sec11 retary has provided the public with notice and

12 an opportunity for comment.

13 ‘‘(2) CERTIFICATION PROGRAM.—

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

15 provide for the establishment and operation of a

16 program consistent with the requirements of sub17 paragraph (B) for the certification of skilled

18 nursing facilities which meet the standards es19 tablished under paragraph (1) and the decerti20 fication of facilities which fail to meet such

21 standards.

22 ‘‘(B) REQUIREMENTS FOR PROGRAM.—In

23 addition to any other requirements the Secretary

24 may impose, in establishing and operating the
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1 certification program under subparagraph (A),

2 the Secretary shall ensure the following:

3 ‘‘(i) The Secretary shall ensure public

4 access (as defined by the Secretary) to the

5 certification program’s evaluations of par6 ticipating facilities, including compliance

7 records and enforcement actions and other

8 reports by the Secretary regarding the own9 ership, compliance histories, and services

10 provided by certified facilities.

11 ‘‘(ii) Not less often than every 4 years,

12 the Secretary shall audit its expenditures

13 under the program, through an entity des14 ignated by the Secretary which is not affili15 ated with the program, as designated by the

16 Secretary.

17 ‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—

18 ‘‘(1) AUTHORITY.—In addition to any other au19 thority, where the Secretary determines that a nurs20 ing facility which is certified for participation under

21 this title (whether certified by the Secretary as meet22 ing the standards established under subsection (b) or

23 a State-ceritified facility) no longer or does not sub24 stantially meet the requirements for such a facility
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1 under this title as specified under subsection (b) and

2 further determines that the facility’s deficiencies—

3 ‘‘(A) immediately jeopardize the health and

4 safety of its residents, the Secretary shall at least

5 provide for the termination of the facility’s cer6 tification for participation under this title, or

7 ‘‘(B) do not immediately jeopardize the

8 health and safety of its residents, the Secretary

9 may, in lieu of providing for terminating the fa10 cility’s certification for participation under the

11 plan, provide lesser sanctions including one that

12 provides that no payment will be made under

13 this title with respect to any individual admitted

14 to such facility after a date specified by the Sec15 retary.

16 ‘‘(2) NOTICE.—The Secretary shall not make

17 such a decision with respect to a facility until the fa18 cility has had a reasonable opportunity, following the

19 initial determination that it no longer or does not

20 substantially meet the requirements for such a facility

21 under this title, to correct its deficiencies, and, follow22 ing this period, has been given reasonable notice and

23 opportunity for a hearing.

24 ‘‘(3) EFFECTIVENESS.—The Secretary’s decision

25 to deny payment may be made effective only after
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1 such notice to the public and to the facility as may

2 be provided for by the Secretary, and its effectiveness

3 shall terminate (A) when the Secretary finds that the

4 facility is in substantial compliance (or is making

5 good faith efforts to achieve substantial compliance)

6 with the requirements for such a facility under this

7 title, or (B) in the case described in paragraph

8 (1)(B), with the end of the eleventh month following

9 the month such decision is made effective, whichever

10 occurs first. If a facility to which clause (B) of the

11 previous sentence applies still fails to substantially

12 meet the provisions of the respective section on the

13 date specified in such clause, the Secretary shall ter14 minate such facility’s certification for participation

15 under this title effective with the first day of the first

16 month following the month specified in such clause.

17 ‘‘(d) STATE-CERTIFIED FACILITY DEFINED.—In sub18 section (a), a ‘State-certified facility’ means a facility li19 censed or certified as a skilled nursing facility by the State

20 in which it is located, or a facility which otherwise meets

21 the requirements applicable to providers of nursing facility

22 services under the State plan under title XIX or the

23 MediGrant program under title XXI.’’.
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1 (c) CONFORMING AMENDMENTS.—(1) Section

2 1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is amended by

3 striking the second sentence.

4 (2) Section 1864 (42 U.S.C. 1395aa) is amended by

5 striking subsection (d).

6 (3) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is

7 amended by striking ‘‘1819(c)(2)(E),’’.

8 (4) Section 1883(f) (42 U.S.C. 1395tt(f)) is amended—

9 (A) in the second sentence, by striking ‘‘such a

10 hospital’’ and inserting ‘‘a hospital which enters into

11 an agreement with the Secretary under this section’’;

12 and

13 (B) by striking the first sentence.

14 (d) EFFECTIVE DATE.—The amendments made by this

15 section shall apply with respect to cost reporting periods

16 beginning on or after October 1, 1995.

17 SEC. 15527. MEDICAL REVIEW PROCESS.

18 In order to ensure that medicare beneficiaries are fur19 nished appropriate extended care services, the Secretary of

20 Health and Human Services shall establish and implement

21 a thorough medical review process to examine the effects of

22 the amendments made by this part on the quality of ex23 tended care services furnished to medicare beneficiaries. In

24 developing such a medical review process, the Secretary

25 shall place a particular emphasis on the quality of non-
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1 routine covered services for which payment is made under

2 section 1888A of the Social Security Act.

3 SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM4 MISSION.

5 Not later than October 1, 1997, the Medicare Payment

6 Review Commission shall submit to Congress a report on

7 the system under which payment is made under the medi8 care program for extended care services furnished by skilled

9 nursing facilities, and shall include in the report the follow10 ing:

11 (1) An analysis of the effect of the methodology

12 established under section 1888A of the Social Security

13 Act (as added by section 15522) on the payments for,

14 and the quality of, extended care services under the

15 medicare program.

16 (2) An analysis of the advisability of determin17 ing the amount of payment for covered non-routine

18 services of facilities (as described in such section) on

19 the basis of the amounts paid for such services when

20 furnished by suppliers under part B of the medicare

21 program.

22 (3) An analysis of the desirability of maintain23 ing separate limits for hospital-based and freestand24 ing facilities in the costs of extended care services rec25 ognized as reasonable under the medicare program.
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1 (4) An analysis of the quality of services fur2 nished by skilled nursing facilities.

3 (5) An analysis of the adequacy of the process

4 and standards used to provide exceptions to the limits

5 described in paragraph (3).

6 SEC. 15529. EFFECTIVE DATE.

7 Except as otherwise provided in this part, the amend8 ments made by this part shall apply to services furnished

9 during cost reporting periods (or portions of cost reporting

10 periods) beginning on or after October 1, 1996.

11 Subtitle G—Provisions Relating to

12 Medicare Part B

13 PART 1—PAYMENT REFORMS

14 SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.

15 (a) REPLACEMENT OF VOLUME PERFORMANCE STAND16 ARD WITH SUSTAINABLE GROWTH RATE.—Section 1848(f)

17 (42 U.S.C. 1395w–4(f)) is amended to read as follows:

18 ‘‘(f) SUSTAINABLE GROWTH RATE.—

19 ‘‘(1) SPECIFICATION OF GROWTH RATE.—

20 ‘‘(A) FISCAL YEAR 1996.—The sustainable

21 growth rate for all physicians’ services for fiscal

22 year 1996 shall be equal to the product of—

23 ‘‘(i) 1 plus the Secretary’s estimate of

24 the percentage change in the medicare eco25 nomic index for 1996 (described in the
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1 fourth sentence of section 1842(b)(3)) (di2 vided by 100),

3 ‘‘(ii) 1 plus the Secretary’s estimate of

4 the percentage change (divided by 100) in

5 the average number of individuals enrolled

6 under this part (other than private plan en7 rollees) from fiscal year 1995 to fiscal year

8 1996,

9 ‘‘(iii) 1 plus the Secretary’s estimate of

10 the projected percentage growth in real gross

11 domestic product per capita (divided by

12 100) from fiscal year 1995 to fiscal year

13 1996, plus 2 percentage points, and

14 ‘‘(iv) 1 plus the Secretary’s estimate of

15 the percentage change (divided by 100) in

16 expenditures for all physicians’ services in

17 fiscal year 1996 (compared with fiscal year

18 1995) which will result from changes in

19 law, determined without taking into ac20 count estimated changes in expenditures due

21 to changes in the volume and intensity of

22 physicians’ services or changes in expendi23 tures resulting from changes in the update

24 to the conversion factor under subsection

25 (d),
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1 minus 1 and multiplied by 100.

2 ‘‘(B) SUBSEQUENT FISCAL YEARS.—The

3 sustainable growth rate for all physicians’ serv4 ices for fiscal year 1997 and each subsequent fis5 cal year shall be equal to the product of—

6 ‘‘(i) 1 plus the Secretary’s estimate of

7 the percentage change in the medicare eco8 nomic index for the fiscal year involved (de9 scribed in the fourth sentence of section

10 1842(b)(3)) (divided by 100),

11 ‘‘(ii) 1 plus the Secretary’s estimate of

12 the percentage change (divided by 100) in

13 the average number of individuals enrolled

14 under this part (other than private plan en15 rollees) from the previous fiscal year to the

16 fiscal year involved,

17 ‘‘(iii) 1 plus the Secretary’s estimate of

18 the projected percentage growth in real gross

19 domestic product per capita (divided by

20 100) from the previous fiscal year to the fis21 cal year involved, plus 2 percentage points,

22 and

23 ‘‘(iv) 1 plus the Secretary’s estimate of

24 the percentage change (divided by 100) in

25 expenditures for all physicians’ services in
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1 the fiscal year (compared with the previous

2 fiscal year) which will result from changes

3 in law (including changes made by the Sec4 retary in response to section 1895), deter5 mined without taking into account esti6 mated changes in expenditures due to

7 changes in the volume and intensity of phy8 sicians’ services or changes in expenditures

9 resulting from changes in the update to the

10 conversion factor under subsection (d)(3),

11 minus 1 and multiplied by 100.

12 ‘‘(2) EXCLUSION OF SERVICES FURNISHED TO

13 PRIVATE PLAN ENROLLEES.—In this subsection, the

14 term ‘physicians’ services’ with respect to a fiscal

15 year does not include services furnished to an individ16 ual enrolled under this part who has elected to receive

17 benefits under this title for the fiscal year through a

18 MedicarePlus product offered under part C or through

19 enrollment with an eligible organization with a risk20 sharing contract under section 1876.’’.

21 (b) ESTABLISHING UPDATE TO CONVERSION FACTOR

22 TO MATCH SPENDING UNDER SUSTAINABLE GROWTH

23 RATE.—

24 (1) IN GENERAL.—Section 1848(d) (42 U.S.C.

25 1395w–4(d)) is amended—
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1 (A) by striking paragraph (2);

2 (B) by amending paragraph (3) to read as

3 follows:

4 ‘‘(3) UPDATE.—

5 ‘‘(A) IN GENERAL.—Subject to subpara6 graph (E), for purposes of this section the update

7 for a year (beginning with 1997) is equal to the

8 product of—

9 ‘‘(i) 1 plus the Secretary’s estimate of

10 the percentage increase in the medicare eco11 nomic index (described in the fourth sen12 tence of section 1842(b)(3)) for the year (di13 vided by 100), and

14 ‘‘(ii) 1 plus the Secretary’s estimate of

15 the update adjustment factor for the year

16 (divided by 100),

17 minus 1 and multiplied by 100.

18 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

19 ‘update adjustment factor’ for a year is equal to

20 the quotient of—

21 ‘‘(i) the difference between (I) the sum

22 of the allowed expenditures for physicians’

23 services furnished during each of the years

24 1995 through the year involved and (II) the

25 sum of the amount of actual expenditures
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1 for physicians’ services furnished during

2 each of the years 1995 through the previous

3 year; divided by

4 ‘‘(ii) the Secretary’s estimate of al5 lowed expenditures for physicians’ services

6 furnished during the year.

7 ‘‘(C) DETERMINATION OF ALLOWED EX8 PENDITURES.—For purposes of subparagraph

9 (B), allowed expenditures for physicians’ services

10 shall be determined as follows (as estimated by

11 the Secretary):

12 ‘‘(i) In the case of allowed expenditures

13 for 1995, such expenditures shall be equal to

14 actual expenditures for services furnished

15 during the 12-month period ending with

16 June of 1995.

17 ‘‘(ii) In the case of allowed expendi18 tures for 1996 and each subsequent year,

19 such expenditures shall be equal to allowed

20 expenditures for the previous year, in21 creased by the sustainable growth rate

22 under subsection (f) for the fiscal year

23 which begins during the year.

24 ‘‘(D) DETERMINATION OF ACTUAL EXPENDI25 TURES.—For purposes of subparagraph (B), the
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1 amount of actual expenditures for physicians’

2 services furnished during a year shall be equal to

3 the amount of expenditures for such services dur4 ing the 12-month period ending with June of the

5 previous year.

6 ‘‘(E) RESTRICTION ON VARIATION FROM

7 MEDICARE ECONOMIC INDEX.—Notwithstanding

8 the amount of the update adjustment factor de9 termined under subparagraph (B) for a year, the

10 update in the conversion factor under this para11 graph for the year may not be—

12 ‘‘(i) greater than 103 percent of 1 plus

13 the Secretary’s estimate of the percentage

14 increase in the medicare economic index

15 (described in the fourth sentence of section

16 1842(b)(3)) for the year (divided by 100); or

17 ‘‘(ii) except as required to carry out

18 section 1895, less than 93 percent of 1 plus

19 the Secretary’s estimate of the percentage

20 increase in the medicare economic index

21 (described in the fourth sentence of section

22 1842(b)(3)) for the year (divided by 100).’’;

23 and

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

25 paragraph:
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1 ‘‘(4) REPORTING REQUIREMENTS.—

2 ‘‘(A) IN GENERAL.—Not later than Novem3 ber 1 of each year (beginning with 1996), the

4 Secretary shall transmit to the Congress a report

5 that describes the update in the conversion factor

6 for physicians’ services (as defined in subsection

7 (f)(3)(A)) in the following year.

8 ‘‘(B) COMMISSION REVIEW.—The Medicare

9 Payment Review Commission shall review the

10 report submitted under subparagraph (A) for a

11 year and shall submit to the Congress, by not

12 later than December 1 of the year, a report con13 taining its analysis of the conversion factor for

14 the following year.’’.

15 (2) EFFECTIVE DATE.—The amendments made

16 by this subsection shall apply to physicians’ services

17 furnished on or after January 1, 1997.

18 (c) ESTABLISHMENT OF SINGLE CONVERSION FACTOR

19 FOR 1996.—

20 (1) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.

21 1395w–4(d)(1)) is amended—

22 (A) by redesignating subparagraph (C) as

23 subparagraph (D); and

24 (B) by inserting after subparagraph (B) the

25 following new subparagraph:
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1 ‘‘(C) SPECIAL RULE FOR 1996.—For 1996,

2 the conversion factor under this subsection shall

3 be $34.60 for all physicians’ services.’’.

4 (2) CONFORMING AMENDMENTS.—Section 1848

5 (42 U.S.C. 1395w–4), as amended by paragraph (1),

6 is amended—

7 (A) by striking ‘‘(or factors)’’ each place it

8 appears in subsection (d)(1)(A) and

9 (d)(1)(D)(ii);

10 (B) in subsection (d)(1)(A), by striking ‘‘or

11 updates’’;

12 (C) in subsection (d)(1)(D)(ii), by striking

13 ‘‘(or updates)’’; and

14 (D) in subsection (i)(1)(C), by striking

15 ‘‘conversion factors’’ and inserting ‘‘the conver16 sion factor’’.

17 SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY18 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

19 SERVICES.

20 (a) AMBULATORY SURGICAL CENTER PROCEDURES.—

21 Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

22 1395l(i)(3)(B)(i)(II)) is amended—

23 (1) by striking ‘‘of 80 percent’’; and

24 (2) by striking the period at the end and insert25 ing the following: ‘‘, less the amount a provider may
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1 charge as described in clause (ii) of section

2 1866(a)(2)(A).’’.

3 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE4 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

5 1395l(n)(1)(B)(i)(II)) is amended—

6 (1) by striking ‘‘of 80 percent’’; and

7 (2) by striking the period at the end and insert8 ing the following: ‘‘, less the amount a provider may

9 charge as described in clause (ii) of section

10 1866(a)(2)(A).’’.

11 (c) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to services furnished during portions of

13 cost reporting periods occurring on or after October 1, 1995.

14 SEC. 15603. REDUCTION IN UPDATES TO PAYMENT

15 AMOUNTS FOR DURABLE MEDICAL EQUIP16 MENT.

17 (a) IN GENERAL.—

18 (1) FREEZE IN UPDATE FOR COVERED ITEMS.—

19 Section 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is

20 amended—

21 (A) by striking ‘‘and’’ at the end of sub22 paragraph (A);

23 (B) in subparagraph (B)—

24 (i) by striking ‘‘a subsequent year’’

25 and inserting ‘‘1993, 1994, and 1995’’, and
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1 (ii) by striking the period at the end

2 and inserting a semicolon; 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 follow19 ing 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 in2 serting ‘‘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)) is

20 amended by striking ‘‘1994 and 1995’’ and inserting ‘‘1994

21 through 2002’’.

22 (b) LOWERING CAP ON PAYMENT AMOUNTS.—Section

23 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amended—

24 (1) in clause (vi), by striking ‘‘and’’ at the end;

25 (2) in clause (vii)—
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1 (A) by inserting ‘‘and before January 1,

2 1997,’’ after ‘‘1995,’’, and

3 (B) by striking the period at the end and

4 inserting ‘‘, and’’; and

5 (3) by adding at the end the following new

6 clause:

7 ‘‘(viii) after December 31, 1996, is equal to 65

8 percent of such median.’’.

9 SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

10 COSTS OF HOSPITAL OUTPATIENT SERVICES.

11 (a) REDUCTION IN PAYMENTS FOR CAPITAL-RELATED

12 COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

13 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through

14 1998’’ and inserting ‘‘through 2002’’.

15 (b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—

16 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

17 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through

18 1998’’ and inserting ‘‘through 2002’’.

19 SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR20 GICAL CENTER SERVICES.

21 The Secretary of Health and Human Services shall not

22 provide for any inflation update in the payment amounts

23 under subparagraphs (A) and (B) of section 1833(i)(2) of

24 the Social Security Act for any of the fiscal years 1996

25 through 2002.
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1 SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.

2 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

3 (42 U.S.C. 1395k(a)(2)) is amended—

4 (1) by striking ‘‘and’’ at the end of subpara5 graph (I);

6 (2) by striking the period at the end of subpara7 graph (J) and inserting ‘‘; and’’; and

8 (3) by adding at the end the following new sub9 paragraph:

10 ‘‘(K) rural emergency access care hospital

11 services (as defined in section 1861(oo)(2)).’’.

12 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

13 RURAL PRIMARY CARE HOSPITAL SERVICES.—

14 (1) IN GENERAL.—Section 1833(a)(6) (42 U.S.C.

15 1395l(a)(6)) is amended by striking ‘‘services,’’ and

16 inserting ‘‘services and rural emergency access care

17 hospital services,’’.

18 (2) PAYMENT METHODOLOGY DESCRIBED.—Sec19 tion 1834(g) (42 U.S.C. 1395m(g)) is amended—

20 (A) in the heading, by striking ‘‘SERVICES’’

21 and inserting ‘‘SERVICES AND RURAL EMER22 GENCY ACCESS CARE HOSPITAL SERVICES’’; and

23 (B) by adding at the end the following new

24 sentence: ‘‘The amount of payment for rural

25 emergency access care hospital services provided

26 during a year shall be determined using the ap-
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1 plicable method provided under this subsection

2 for determining payment for outpatient rural

3 primary care hospital services during the year.’’.

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to services furnished on or after October

6 1, 1995.

7 PART 2—PART B PREMIUM

8 SEC. 15611. EXTENSION OF PART B PREMIUM.

9 (a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.

10 1395r(e)(1)) is amended—

11 (1) in subparagraph (A)—

12 (A) by striking ‘‘and prior to January

13 1999’’, and

14 (B) by inserting ‘‘(or, if higher, the percent

15 described in subparagraph (C))’’ after ‘‘50 per16 cent’’; and

17 (2) by adding at the end the following new sub18 paragraph:

19 ‘‘(C) For purposes of subparagraph (A), the percent

20 described in this subparagraph is the ratio (expressed as

21 a percentage) of the monthly premium established under

22 this section for months in 1995 to the monthly actuarial

23 rate for enrollees age 65 and over applicable to such months

24 (as specified in the most recent report of the Board of Trust25 ees of the Federal Supplementary Medical Insurance Trust
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1 Fund published prior to the date of the enactment of the

2 Medicare Preservation Act of 1995).’’.

3 (b) EFFECTIVE DATE.—The amendments made by sub4 section (a) apply to premiums for months beginning with

5 January 1996.

6 SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE

7 SUBSIDY.

8 (a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r) is

9 amended by adding at the end the following:

10 ‘‘(h)(1) Notwithstanding the previous subsections of

11 this section, in the case of an individual whose modified

12 adjusted gross income for a taxable year ending with or

13 within a calendar year (as initially determined by the Sec14 retary in accordance with paragraph (3)) exceeds the

15 threshold amount described in paragraph (4), the Secretary

16 shall increase the amount of the monthly premium for

17 months in the calendar year by an amount equal to the

18 difference between—

19 ‘‘(A) 200 percent of the monthly actuarial rate

20 for enrollees age 65 and over as determined under

21 subsection (a)(1) for that calendar year; and

22 ‘‘(B) the total of the monthly premiums paid by

23 the individual under this section (determined without

24 regard to subsection (b)) during such calendar year.
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1 ‘‘(2) In the case of an individual described in para2 graph (1) whose modified adjusted gross exceeds the thresh3 old amount by less than $25,000, the amount of the increase

4 in the monthly premium applicable under paragraph (1)

5 shall be an amount which bears the same ratio to the

6 amount of the increase described in paragraph (1) (deter7 mined without regard to this paragraph) as such excess

8 bears to $25,000. In the case of a joint return filed under

9 section 6013 of the Internal Revenue Code of 1986 by

10 spouses both of whom are enrolled under this part, the pre11 vious sentence shall be applied by substituting ‘$50,000’ for

12 ‘$25,000’. The preceding provisions of this paragraph shall

13 not apply to any individual whose threshold amount is zero.

14 ‘‘(3) The Secretary shall make an initial determina15 tion of the amount of an individual’s adjusted gross income

16 for a taxable year ending with or within a calendar year

17 for purposes of this subsection as follows:

18 ‘‘(A) Not later than October 1 of the year preced19 ing the year, the Secretary shall provide notice to

20 each individual whom the Secretary finds (on the

21 basis of the individual’s actual adjusted gross income

22 for the most recent taxable year for which such infor23 mation is available or other information provided to

24 the Secretary by the Secretary of the Treasury) will

25 be subject to an increase under this subsection that
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1 the individual will be subject to such an increase, and

2 shall include in such notice the Secretary’s estimate

3 of the individual’s adjusted gross income for the year.

4 ‘‘(B) If, during the 30-day period beginning on

5 the date notice is provided to an individual under

6 subparagraph (A), the individual provides the Sec7 retary with information on the individual’s antici8 pated adjusted gross income for the year, the amount

9 initially determined by the Secretary under this

10 paragraph with respect to the individual shall be

11 based on the information provided by the individual.

12 ‘‘(C) If an individual does not provide the Sec13 retary with information under subparagraph (B), the

14 amount initially determined by the Secretary under

15 this paragraph with respect to the individual shall be

16 the amount included in the notice provided to the in17 dividual under subparagraph (A).

18 ‘‘(4)(A) If the Secretary determines (on the basis of

19 final information provided by the Secretary of the Treas20 ury) that the amount of an individual’s actual adjusted

21 gross income for a taxable year ending with or within a

22 calendar year is less than or greater than the amount ini23 tially determined by the Secretary under paragraph (3), the

24 Secretary shall increase or decrease the amount of the indi25 vidual’s monthly premium under this section (as the case
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1 may be) for months during the following calendar year by

an amount equal to 1 2 ⁄12 of the difference between—

3 ‘‘(i) the total amount of all monthly premiums

4 paid by the individual under this section during the

5 previous calendar year; and

6 ‘‘(ii) the total amount of all such premiums

7 which would have been paid by the individual during

8 the previous calendar year if the amount of the indi9 vidual’s adjusted gross income initially determined

10 under paragraph (3) were equal to the actual amount

11 of the individual’s adjusted gross income determined

12 under this paragraph.

13 ‘‘(B) In the case of an individual who is not enrolled

14 under this part for any calendar year for which the individ15 ual’s monthly premium under this section for months dur16 ing the year would be increased pursuant to subparagraph

17 (A) if the individual were enrolled under this part for the

18 year, the Secretary may take such steps as the Secretary

19 considers appropriate to recover from the individual the

20 total amount by which the individual’s monthly premium

21 for months during the year would have been increased

22 under subparagraph (A) if the individual were enrolled

23 under this part for the year.

24 ‘‘(C) In the case of a deceased individual for whom

25 the amount of the monthly premium under this section for
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1 months in a year would have been decreased pursuant to

2 subparagraph (A) if the individual were not deceased, the

3 Secretary shall make a payment to the individual’s surviv4 ing spouse (or, in the case of an individual who does not

5 have a surviving spouse, to the individual’s estate) in an

6 amount equal to the difference between—

7 ‘‘(i) the total amount by which the individual’s

8 premium would have been decreased for all months

9 during the year pursuant to subparagraph (A); and

10 ‘‘(ii) the amount (if any) by which the individ11 ual’s premium was decreased for months during the

12 year pursuant to subparagraph (A).

13 ‘‘(5) In this subsection, the following definitions apply:

14 ‘‘(A) The term ‘modified adjusted gross income’

15 means, with respect to an individual for a taxable

16 year, the individual’s adjusted gross income under the

17 Internal Revenue Code of 1986—

18 ‘‘(i) determined without regard to sections

19 135, 911, 931, and 933 of such Code, and

20 ‘‘(ii) increased by the amount of interest re21 ceived or accrued by the individual during the

22 taxable year which is exempt from tax under

23 such Code.

24 ‘‘(B) The term ‘threshold amount’ means—
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1 ‘‘(i) except as otherwise provided in this

2 paragraph, $75,000,

3 ‘‘(ii) $125,000, in the case of a joint return,

4 and

5 ‘‘(iii) zero in the case of a taxpayer who—

6 ‘‘(I) is married at the close of the tax7 able year but does not file a joint return for

8 such year, and

9 ‘‘(II) does not live apart from his

10 spouse at all times during the taxable

11 year.’’.

12 (b) CONFORMING AMENDMENT.—Section 1839(f) (42

13 U.S.C. 1395r(f)) is amended by striking ‘‘if an individual’’

14 and inserting the following: ‘‘if an individual (other than

15 an individual subject to an increase in the monthly pre16 mium under this section pursuant to subsection (h))’’.

17 (c) REPORTING REQUIREMENTS FOR SECRETARY OF

18 THE TREASURY.—Notwithstanding section 6103 of the In19 ternal Revenue Code of 1986, the Secretary of the Treasury

20 shall provide, at the request of the Secretary of Health and

21 Human Services, such information (at such times and in

22 such form as the Secretary of Health and Human Services

23 may require) as is necessary for the Secretary of Health

24 and Human Services to carry out section 1839(h) of the

25 Social Security Act (as added by subsection (a)).
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1 (d) EFFECTIVE DATE.—The amendments made by

2 subsections (a) and (b) shall apply to the monthly premium

3 under section 1839 of the Social Security Act for months

4 beginning with January 1997.

5 PART 3—ADMINISTRATIVE SIMPLIFICATION FOR

6 LABORATORY SERVICES

7 SEC. 15621. ADMINISTRATIVE SIMPLIFICATION FOR LAB8 ORATORY SERVICES.

9 (a) IN GENERAL.—Not later than 1 year after the date

10 of the enactment of this Act, the Secretary of Health and

11 Human Services (in accordance with the process described

12 in subsection (b)) shall adopt uniform coverage, adminis13 tration, and payment policies for clinical diagnostic labora14 tory tests under part B of the medicare program.

15 (b) PROCESS FOR ADOPTION OF POLICIES.—The Sec16 retary shall adopt uniform policies under subsection (a) in

17 accordance with the following process:

18 (1) The Secretary shall select from carriers with

19 whom the Secretary has a contract under part B dur20 ing 1995 15 medical directors, who will meet and de21 velop recommendations for such uniform policies. The

22 medical directors selected shall represent various geo23 graphic areas and have a varied range of experience

24 in relevant medical fields, including pathology and

25 clinical laboratory practice.
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1 (2) The medical directors selected under para2 graph (1) shall consult with independent experts in

3 each major discipline of clinical laboratory medicine,

4 including clinical laboratory personnel, bioanalysts,

5 pathologists, and practicing physicians. The medical

6 directors shall also solicit comments from other indi7 viduals and groups who wish to participate, includ8 ing consumers and other affected parties. This process

9 shall be conducted as a negotiated rulemaking under

10 title 5, United States Code.

11 (3) Under the negotiated rulemaking, the rec12 ommendations for uniform policies shall be designed

13 to simplify and reduce unnecessary administrative

14 burdens in connection with the following:

15 (A) Beneficiary information required to be

16 submitted with each claim.

17 (B) Physicians’ obligations regarding docu18 mentation requirements and recordkeeping.

19 (C) Procedures for filing claims and for

20 providing remittances by electronic media.

21 (D) The performance of post-payment re22 view of test claims.

23 (E) The prohibition of the documentation of

24 medical necessity except when determined to be
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1 appropriate after identification of aberrant utili2 zation pattern through focused medical review.

3 (F) Beneficiary responsibility for payment.

4 (4) During the pendency of the adoption by the

5 Secretary of the uniform policies, fiscal

6 intermediaries and carriers under the medicare pro7 gram may not implement any new requirement relat8 ing to the submission of a claim for clinical diag9 nostic laboratory tests retroactive to January 1, 1995,

10 and carriers may not initiate any new coverage, ad11 ministrative, or payment policy unless the policy pro12 motes the goal of administrative simplification of re13 quirements imposed on clinical laboratories in ac14 cordance with the Secretary’s promulgation of the ne15 gotiated rulemaking.

16 (5) Not later than 6 months after the date of the

17 enactment of this Act, the medical directors shall sub18 mit their recommendations to the Secretary, and the

19 Secretary shall publish the recommendations and so20 licit public comment using negotiated rulemaking in

21 accordance with title 5, United States Code. The Sec22 retary shall publish final uniform policies for cov23 erage, administration, and payment of claims for

24 clinical diagnostic laboratory tests, effective after the
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1 expiration of the 180-day period which begins on the

2 date of publication.

3 (6) After the publication of the final uniform

4 policies, the Secretary shall implement identical uni5 form documentation and processing policies for all

6 clinical diagnostic laboratory tests paid under the

7 medicare program through fiscal intermediaries or

8 carriers.

9 (c) OPTIONAL SELECTION OF SINGLE CARRIER.—Ef10 fective for claims submitted after the expiration of the 90-

11 day period which begins on the date of the enactment of

12 this Act, an independent laboratory may select a single car13 rier for the processing of all of its claims for payment under

14 part B of the medicare program, without regard to the loca15 tion where the laboratory or the patient or provider in16 volved resides or conducts business. Such election of a single

17 carrier shall be made by the clinical laboratory and an

18 agreement made between the carrier and the laboratory

19 shall be forwarded to the Secretary of Health and Human

20 Services. Nothing in this subsection shall be construed to

21 require a laboratory to select a single carrier under this

22 subsection.
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1 PART 4—COVERAGE OF CERTAIN ANTI-NAUSEA

2 DRUGS

3 SEC. 15631. COVERAGE OF ORAL ANTI-NAUSEA DRUGS

4 UNDER CHEMOTHERAPEUTIC REGIMEN.

5 Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is amend6 ed—

7 (1) by striking ‘‘and’’ at the end of subpara8 graphs (N) and (O);

9 (2) in subparagraph (Q), by adding ‘‘and’’ at

10 the end; and

11 (3) by adding at the end the following new sub12 paragraph:

13 ‘‘(R) an oral drug (which is approved by the

14 Federal Food and Drug Administration) prescribed

15 for use as an anti-emetic used as part of an

16 anticancer chemotherapeutic regimen, if the drug is

17 prescribed or dispensed—

18 ‘‘(i) for use not later than 12 hours after the

19 administration of the anticancer

20 chemotherapeutic agent; and

21 ‘‘(ii) as a substitute for any other anti22 emetic therapy which would otherwise be admin23 istered intravenously.’’.

24 SEC. 15632. EFFECTIVE DATE.

25 The amendments made by this part shall apply to

26 items and services furnished on or after January 1, 1996.
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1 PART 5—COVERAGE OF CERTAIN SERVICES

2 ORDERED OR REFERRED BY CHIROPRACTORS

3 SEC. 15641. COVERAGE OF CERTAIN SERVICES ORDERED OR

4 REFERRED BY CHIROPRACTORS.

5 (a) CLARIFYING THAT CHIROPRACTORS MAY ORDER,

6 AND REFER PATIENTS TO OTHER PRACTITIONERS FOR, X7 RAYS.—Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) is

8 amended by striking the period at the end and inserting

9 the following: ‘‘, and for the ordering or referral of diag10 nostic X-ray tests under subsection (s)(3) which are not fur11 nished by the chiropractor and for which payment may oth12 erwise be made under this title.’’.

13 (b) BUDGET NEUTRALITY ADJUSTMENT.—Notwith14 standing any other provision of law, for each year (begin15 ning with 1996), the Secretary shall reduce the amount of

16 payments under section 1833 of the Social Security Act

17 with respect to services furnished by chiropractors by such

18 uniform percentage as the Secretary determines to be re19 quired to assure that the amendment made by subsection

20 (a) does not result in expenditures under title XVIII of such

21 Act in the year that exceed the amount of such expenditures

22 that would have been made in such year if such amendment

23 had not been made.

24 (c) EFFECTIVE DATE.—The amendments made by sub25 section (a) shall apply to items and services furnished on

26 or after January 1, 1996.
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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 each

15 type of home health service described in paragraph

16 (2) furnished to an individual who at the time the

17 service is furnished is under a plan of care by the

18 home health agency under this title (without regard

19 to whether or not the item or service was furnished

20 by the agency or by others under arrangement with

21 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 fol24 lowing:
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1 ‘‘(A) Part-time or intermittent nursing care

2 provided by or under the supervision of a reg3 istered professional nurse.

4 ‘‘(B) Physical therapy.

5 ‘‘(C) Occupational therapy.

6 ‘‘(D) Speech-language pathology services.

7 ‘‘(E) Medical social services under the direc8 tion of a physician.

9 ‘‘(F) To the extent permitted in regulations,

10 part-time or intermittent services of a home

11 health aide who has successfully completed a

12 training program approved by the Secretary.

13 ‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR EACH

14 TYPE OF SERVICES.—

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

16 to paragraph (3), establish a per visit payment rate

17 for a home health agency in an area for each type of

18 home health service described in subsection (a)(2).

19 Such rate shall be equal to the national per visit pay20 ment rate determined under paragraph (2) for each

21 such type, except that the labor-related portion of such

22 rate shall be adjusted by the area wage index applica23 ble under section 1886(d)(3)(E) for the area in which

24 the agency is located (as determined without regard

25 to any reclassification of the area under section
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1 1886(d)(8)(B) or a decision of the Medicare Geo2 graphic Classification Review Board or the Secretary

3 under section 1886(d)(10) for cost reporting periods

4 beginning after October 1, 1995).

5 ‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—The

6 national per visit payment rate for each type of serv7 ice described in subsection (a)(2)—

8 ‘‘(A) for fiscal year 1997, is an amount

9 equal to the national average amount paid per

10 visit under this title to home health agencies for

11 such type of service during the most recent 12-

12 month cost reporting period ending on or before

13 June 30, 1994, increased (in a compounded

14 manner) by the home health market basket per15 centage increase for fiscal years 1995, 1996, and

16 1997; and

17 ‘‘(B) for each subsequent fiscal year, is an

18 amount equal to the national per visit payment

19 rate in effect for the preceding fiscal year, in20 creased by the home health market basket per21 centage increase for such subsequent fiscal year

22 minus 2 percentage points.

23 ‘‘(3) REBASING OF RATES.—The Secretary shall

24 provide for an update to the national per visit pay25 ment rates under this subsection for cost reporting pe-
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1 riods beginning not later than the first day of the

2 fifth fiscal year which begins after fiscal year 1997,

3 and not later than every 5 years thereafter, to reflect

4 the most recent available data.

5 ‘‘(4) HOME HEALTH MARKET BASKET PERCENT6 AGE INCREASE.—For purposes of this subsection, the

7 term ‘home health market basket percentage increase’

8 means, with respect to a fiscal year, a percentage (es9 timated by the Secretary before the beginning of the

10 fiscal year) determined and applied with respect to

11 the types of home health services described in sub12 section (a)(2) in the same manner as the market

13 basket percentage increase under section

14 1886(b)(3)(B)(iii) is determined and applied to inpa15 tient hospital services for the fiscal year.

16 ‘‘(c) PER EPISODE LIMIT.—

17 ‘‘(1) AGGREGATE LIMIT.—

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

19 paragraph (2), a home health agency may not

20 receive aggregate per visit payments under sub21 section (a) for a fiscal year in excess of an

22 amount equal to the sum of the following prod23 ucts determined for each case-mix category for

24 which the agency receives payments:
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1 ‘‘(i) The number of episodes of each

2 case-mix category during the fiscal year;

3 multiplied by

4 ‘‘(ii) the per episode limit determined

5 for such case-mix category for such fiscal

6 year.

7 ‘‘(B) ESTABLISHMENT OF PER EPISODE

8 LIMITS.—

9 ‘‘(i) IN GENERAL.—The per episode

10 limit for a fiscal year for any case-mix cat11 egory for the area in which a home health

12 agency is located is equal to—

13 ‘‘(I) the mean number of visits for

14 each type of home health service de15 scribed in subsection (a)(2) furnished

16 during an episode of such case-mix cat17 egory in such area during fiscal year

18 1994, adjusted by the case-mix adjust19 ment factor determined in clause (ii)

20 for the fiscal year involved; multiplied

21 by

22 ‘‘(II) the per visit payment rate

23 established under subsection (b) for

24 such type of home health service for the
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1 fiscal year for which the determination

2 is being made.

3 ‘‘(ii) CASE MIX ADJUSTMENT FAC4 TOR.—For purposes of clause (i), the case5 mix adjustment factor for a year is the fac6 tor determined by the Secretary to assure

7 that aggregate payments for home health

8 services under this section during the year

9 will not exceed the payment for such serv10 ices during the previous year as a result of

11 changes in the number and type of home

12 health visits within case-mix categories over

13 the previous year.

14 ‘‘(iii) REBASING OF PER EPISODE

15 AMOUNTS.—Beginning with fiscal year

16 1999 and every 2 years thereafter, the Sec17 retary shall revise the mean number of

18 home health visits determined under clause

19 (i)(I) for each type of home health service

20 visit described in subsection (a)(2) fur21 nished during an episode in a case-mix cat22 egory to reflect the most recently available

23 data on the number of visits.

24 ‘‘(iv) DETERMINATION OF APPLICABLE

25 AREA.—For purposes of determining per
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1 episode limits under this subparagraph, the

2 area in which a home health agency is con3 sidered to be located shall be such area as

4 the Secretary finds appropriate for purposes

5 of this subparagraph.

6 ‘‘(C) CASE-MIX CATEGORY.—For purposes of

7 this paragraph, the term ‘case-mix category’

8 means each of the 18 case-mix categories estab9 lished under the Phase II Home Health Agency

10 Prospective Payment Demonstration Project con11 ducted by the Health Care Financing Adminis12 tration. The Secretary may develop an alternate

13 methodology for determining case-mix categories.

14 ‘‘(D) EPISODE.—

15 ‘‘(i) IN GENERAL.—For purposes of

16 this paragraph, the term ‘episode’ means the

17 continuous 120-day period that—

18 ‘‘(I) begins on the date of an indi19 vidual’s first visit for a type of home

20 health service described in subsection

21 (a)(2) for a case-mix category, and

22 ‘‘(II) is immediately preceded by

23 a 60-day period in which the individ24 ual did not receive visits for a type of
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1 home health service described in sub2 section (a)(2).

3 ‘‘(ii) TREATMENT OF EPISODES SPAN4 NING COST REPORTING PERIODS.—The Sec5 retary shall provide for such rules as the

6 Secretary considers appropriate regarding

7 the treatment of episodes under this para8 graph which begin during a cost reporting

9 period and end in a subsequent cost report10 ing period.

11 ‘‘(E) EXEMPTIONS AND EXCEPTIONS.—The

12 Secretary may provide for exemptions and excep13 tions to the limits established under this para14 graph for a fiscal year as the Secretary deems

15 appropriate, to the extent such exemptions and

16 exceptions do not result in greater payments

17 under this section than the exemptions and ex18 ceptions provided under section 1861(v)(1)(L)(ii)

19 in fiscal year 1994, increased by the home health

20 market basket percentage increase for the fiscal

21 year involved (as defined in subsection (b)(4)).

22 ‘‘(2) RECONCILIATION OF AMOUNTS.—

23 ‘‘(A) OVERPAYMENTS TO HOME HEALTH

24 AGENCIES.—Subject to subparagraph (B), if a

25 home health agency has received aggregate per
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1 visit payments under subsection (a) for a fiscal

2 year in excess of the amount determined under

3 paragraph (1) with respect to such home health

4 agency for such fiscal year, the Secretary shall

5 reduce payments under this section to the home

6 health agency in the following fiscal year in such

7 manner as the Secretary considers appropriate

8 (including on an installment basis) to recapture

9 the amount of such excess.

10 ‘‘(B) EXCEPTION FOR HOME HEALTH SERV11 ICES FURNISHED OVER A PERIOD GREATER THAN

12 165 DAYS.—

13 ‘‘(i) IN GENERAL.—For purposes of

14 subparagraph (A), the amount of aggregate

15 per visit payments determined under sub16 section (a) shall not include payments for

17 home health visits furnished to an individ18 ual on or after a continuous period of more

19 than 165 days after an individual begins

20 an episode described in subsection (c)(1)(D)

21 (if such period is not interrupted by the be22 ginning of a new episode).

23 ‘‘(ii) REQUIREMENT OF CERTIFI24 CATION.—Clause (i) shall not apply if the

25 agency has not obtained a physician’s cer-
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1 tification with respect to the individual re2 quiring such visits that includes a state3 ment that the individual requires such con4 tinued visits, the reason for the need for

5 such visits, and a description of such serv6 ices furnished during such visits.

7 ‘‘(C) SHARE OF SAVINGS.—

8 ‘‘(i) BONUS PAYMENTS.—If a home

9 health agency has received aggregate per

10 visit payments under subsection (a) for a

11 fiscal year in an amount less than the

12 amount determined under paragraph (1)

13 with respect to such home health agency for

14 such fiscal year, the Secretary shall pay

15 such home health agency a bonus payment

16 equal to 50 percent of the difference between

17 such amounts in the following fiscal year,

18 except that the bonus payment may not ex19 ceed 5 percent of the aggregate per visit

20 payments made to the agency for the year.

21 ‘‘(ii) INSTALLMENT BONUS PAY22 MENTS.—The Secretary may make install23 ment payments during a fiscal year to a

24 home health agency based on the estimated

25 bonus payment that the agency would be el-
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1 igible to receive with respect to such fiscal

2 year.

3 ‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary

4 shall implement a medical review process (with a particu5 lar emphasis on fiscal years 1997 and 1998) for the system

6 of payments described in this section that shall provide an

7 assessment of the pattern of care furnished to individuals

8 receiving home health services for which payments are made

9 under this section to ensure that such individuals receive

10 appropriate home health services. Such review process shall

11 focus on low-cost cases described in subsection (e)(3) and

12 cases described in subsection (c)(2)(B) and shall require

13 recertification by intermediaries at 30, 60, 90, 120, and 165

14 days into an episode described in subsection (c)(1)(D).

15 ‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR16 CUMVENTION OF LIMITS.—

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

18 for appropriate adjustments to payments to home

19 health agencies under this section to ensure that agen20 cies do not circumvent the purpose of this section

21 by—

22 ‘‘(A) discharging patients to another home

23 health agency or similar provider;

24 ‘‘(B) altering corporate structure or name

25 to avoid being subject to this section or for the
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1 purpose of increasing payments under this title;

2 or

3 ‘‘(C) undertaking other actions considered

4 unnecessary for effective patient care and in5 tended to achieve maximum payments under this

6 title.

7 ‘‘(2) TRACKING OF PATIENTS THAT SWITCH

8 HOME HEALTH AGENCIES DURING EPISODE.—

9 ‘‘(A) DEVELOPMENT OF SYSTEM.—The Sec10 retary shall develop a system that tracks home

11 health patients that receive home health services

12 described in subsection (a)(2) from more than 1

13 home health agency during an episode described

14 in subsection (c)(1)(D).

15 ‘‘(B) ADJUSTMENT OF PAYMENTS.—The

16 Secretary shall adjust payments under this sec17 tion to each home health agency that furnishes

18 an individual with a type of home health service

19 described in subsection (a)(2) to ensure that ag20 gregate payments on behalf of such individual

21 during such episode do not exceed the amount

22 that would be paid under this section if the indi23 vidual received such services from a single home

24 health agency.
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1 ‘‘(3) LOW-COST CASES.—The Secretary shall de2 velop a system designed to adjust payments to a home

3 health agency for a fiscal year to eliminate any in4 crease in growth of the percentage of low-cost episodes

5 for which home health services are furnished by the

6 agency over such percentage determined for the agen7 cy for the 12-month cost reporting period ending on

8 June 30, 1994. The Secretary shall define a low-cost

9 episode in a manner that provides that a home health

10 agency has an incentive to be cost efficient in deliver11 ing home health services and that the volume of such

12 services does not increase as a result of factors other

13 than patient needs.

14 ‘‘(f) REPORT BY MEDICARE PAYMENT REVIEW COM15 MISSION.—During the first 3 years in which payments are

16 made under this section, the Medicare Payment Review

17 Commission shall annually submit a report to Congress on

18 the effectiveness of the payment methodology established

19 under this section that shall include recommendations re20 garding the following:

21 ‘‘(1) Case-mix and volume increases.

22 ‘‘(2) Quality monitoring of home health agency

23 practices.
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1 ‘‘(3) Whether a capitated payment for home care

2 patients receiving care during a continuous period ex3 ceeding 165 days is warranted.

4 ‘‘(4) Whether public providers of service are ade5 quately reimbursed.

6 ‘‘(5) The adequacy of the exemptions and excep7 tions to the limits provided under subsection

8 (c)(1)(E).

9 ‘‘(6) The appropriateness of the methods pro10 vided under this section to adjust the per episode lim11 its and annual payment updates to reflect changes in

12 the mix of services, number of visits, and assignment

13 to case categories to reflect changing patterns of home

14 health care.

15 ‘‘(7) The geographic areas used to determine the

16 per episode limits.’’.

17 (b) PAYMENT FOR PROSTHETICS AND ORTHOTICS

18 UNDER PART A.—Section 1814(k) (42 U.S.C. 1395f(k)) is

19 amended—

20 (1) by inserting ‘‘and prosthetics and orthotics’’

21 after ‘‘durable medical equipment’’; and

22 (2) by inserting ‘‘and 1834(h), respectively’’ after

23 ‘‘1834(a)(1)’’.

24 (c) CONFORMING AMENDMENTS.—
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1 (1) PAYMENTS UNDER PART A.—Section 1814(b)

2 (42 U.S.C. 1395f(b)), as amended by section 15522(b),

3 is amended in the matter preceding paragraph (1) by

4 striking ‘‘1888 and 1888A’’ and inserting ‘‘1888,

5 1888A, and 1894’’.

6 (2) TREATMENT OF ITEMS AND SERVICES PAID

7 UNDER PART B.—

8 (A) PAYMENTS UNDER PART B.—Section

9 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended—

10 (i) by amending subparagraph (A) to

11 read as follows:

12 ‘‘(A) with respect to home health services—

13 ‘‘(i) that are a type of home health

14 service described in section 1894(a)(2), and

15 which are furnished to an individual who

16 (at the time the item or service is furnished)

17 is under a plan of care of a home health

18 agency, the amount determined under sec19 tion 1894; or

20 ‘‘(ii) that are not described in clause

21 (i) (other than a covered osteoporosis drug)

22 (as defined in section 1861(kk)), the lesser

23 of—
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1 ‘‘(I) the reasonable cost of such

2 services, as determined under section

3 1861(v), or

4 ‘‘(II) the customary charges with

5 respect to such services;’’.

6 (ii) by striking ‘‘and’’ at the end of

7 subparagraph (E);

8 (iii) by adding ‘‘and’’ at the end of

9 subparagraph (F); and

10 (iv) by adding at the end the following

11 new subparagraph:

12 ‘‘(G) with respect to items and services de13 scribed in section 1861(s)(10)(A), the lesser of—

14 ‘‘(i) the reasonable cost of such services,

15 as determined under section 1861(v), or

16 ‘‘(ii) the customary charges with re17 spect to such services,

18 or, if such services are furnished by a public pro19 vider of services, or by another provider which

20 demonstrates to the satisfaction of the Secretary

21 that a significant portion of its patients are low22 income (and requests that payment be made

23 under this provision), free of charge or at nomi24 nal charges to the public, the amount determined

25 in accordance with section 1814(b)(2);’’.
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1 (B) REQUIRING PAYMENT FOR ALL ITEMS

2 AND SERVICES TO BE MADE TO AGENCY.—

3 (i) IN GENERAL.—The first sentence of

4 section 1842(b)(6) (42 U.S.C. 1395u(b)(6)),

5 as amended by section 15525(a)(1), is

6 amended—

7 (I) by striking ‘‘and (E)’’ and in8 serting ‘‘(E)’’; and

9 (II) by striking the period at the

10 end and inserting the following: ‘‘, and

11 (F) in the case of types of home health

12 services described in section 1894(a)(2)

13 furnished to an individual who (at the

14 time the item or service is furnished) is

15 under a plan of care of a home health

16 agency, payment shall be made to the

17 agency (without regard to whether or

18 not the item or service was furnished

19 by the agency, by others under ar20 rangement with them made by the

21 agency, or otherwise).’’.

22 (ii) CONFORMING AMENDMENT.—Sec23 tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)), as

24 amended by section 15525(a)(3), is amend25 ed by striking ‘‘section 1842(b)(6)(E);’’ and
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1 inserting ‘‘subparagraphs (E) and (F) of

2 section 1842(b)(6);’’.

3 (C) EXCLUSIONS FROM COVERAGE.—Section

4 1862(a) (42 U.S.C. 1395y(a)), as amended by

5 section 15525(a)(2), is amended—

6 (i) by striking ‘‘or’’ at the end of para7 graph (15);

8 (ii) by striking the period at the end of

9 paragraph (16) and inserting ‘‘; or’’; and

10 (iii) by adding at the end the following

11 new paragraph:

12 ‘‘(17) where such expenses are for home health

13 services furnished to an individual who is under a

14 plan of care of the home health agency if the claim

15 for payment for such services is not submitted by the

16 agency.’’.

17 (3) SUNSET OF REASONABLE COST LIMITA18 TIONS.—Section 1861(v)(1)(L) (42 U.S.C.

19 1395x(v)(1)(L)) is amended by adding at the end the

20 following new clause:

21 ‘‘(iv) This subparagraph shall apply only to services

22 furnished by home health agencies during cost reporting pe23 riods ending on or before September 30, 1996.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to cost reporting periods beginning on

3 or after October 1, 1996.

4 SEC. 15702. MAINTAINING SAVINGS RESULTING FROM TEM5 PORARY FREEZE ON PAYMENT INCREASES

6 FOR HOME HEALTH SERVICES.

7 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

8 LIMITS FOR FISCAL YEAR 1993.—Section

9 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

10 amended by adding at the end the following sentence: ‘‘In

11 establishing limits under this subparagraph, the Secretary

12 may not take into account any changes in the costs of the

13 provision of services furnished by home health agencies with

14 respect to cost reporting periods which began on or after

15 July 1, 1994, and before July 1, 1996.’’.

16 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND17 MENT.—The Secretary of Health and Human Services shall

18 not consider the amendment made by subsection (a) in mak19 ing any exemptions and exceptions pursuant to section

20 1861(v)(1)(L)(ii) of the Social Security Act.

21 SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF

22 LACK OF KNOWLEDGE OF EXCLUSION FROM

23 COVERAGE FOR HOME HEALTH AGENCIES.

24 Section 9305(g)(3) of OBRA–1986, as amended by sec25 tion 426(d) of the Medicare Catastrophic Coverage Act of
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1 1988 and section 4207(b)(3) of OBRA–1990 (as renumbered

2 by section 160(d)(4) of the Social Security Act Amendments

3 of 1994), is amended by striking ‘‘December 31, 1995’’ and

4 inserting ‘‘September 30, 1996’’.

5 SEC. 15704. STUDY OF COVERAGE OF SERVICES OF CHRIS6 TIAN SCIENCE PROVIDERS.

7 (a) STUDY.—The Secretary of Health and Human

8 Services shall conduct a study of the feasibility and desir9 ability of providing for coverage under the medicare pro10 gram of home health services furnished by Christian Science

11 providers who meet applicable requirements of the First

12 Church of Christ, Scientist, Boston, Massachusetts.

13 (b) REPORT.—Not later than July 1, 1996, the Sec14 retary shall submit a report to Congress on the study con15 ducted under subsection (a), and (to the extent the report

16 includes recommendations for coverage under the medicare

17 program of home health services furnished by Christian

18 Science providers) shall include in the report recommenda19 tions regarding appropriate criteria for the certification of

20 such providers and an appropriate methodology for making

21 payments under the medicare program for such services.
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1 PART 2—MEDICARE SECONDARY PAYER

2 IMPROVEMENTS

3 SEC. 15711. EXTENSION AND EXPANSION OF EXISTING RE4 QUIREMENTS.

5 (a) DATA MATCH.—

6 (1) Section 1862(b)(5)(C) (42 U.S.C.

7 1395y(b)(5)(C)) is amended by striking clause (iii).

8 (2) Section 6103(l)(12) of the Internal Revenue

9 Code of 1986 is amended by striking subparagraph

10 (F).

11 (b) APPLICATION TO DISABLED INDIVIDUALS IN

12 LARGE GROUP HEALTH PLANS.—

13 (1) IN GENERAL.—Section 1862(b)(1)(B) (42

14 U.S.C. 1395y(b)(1)(B)) is amended—

15 (A) in clause (i), by striking ‘‘clause (iv)’’

16 and inserting ‘‘clause (iii)’’,

17 (B) by striking clause (iii), and

18 (C) by redesignating clause (iv) as clause

19 (iii).

20 (2) CONFORMING AMENDMENTS.—Paragraphs

21 (1) through (3) of section 1837(i) (42 U.S.C.

22 1395p(i)) and the second sentence of section 1839(b)

23 (42 U.S.C. 1395r(b)) are each amended by striking

24 ‘‘1862(b)(1)(B)(iv)’’ each place it appears and insert25 ing ‘‘1862(b)(1)(B)(iii)’’.
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1 (c) EXPANSION OF PERIOD OF APPLICATION TO INDI2 VIDUALS WITH END STAGE RENAL DISEASE.—Section

3 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—

4 (1) in the first sentence, by striking ‘‘12-month’’

5 each place it appears and inserting ‘‘24-month’’, and

6 (2) by striking the second sentence.

7 SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

8 (a) PERMITTING RECOVERY AGAINST THIRD PARTY

9 ADMINISTRATORS OF PRIMARY PLANS.—Section

10 1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is amend11 ed—

12 (1) by striking ‘‘under this subsection to pay’’

13 and inserting ‘‘(directly, as a third-party adminis14 trator, or otherwise) to make payment’’, and

15 (2) by adding at the end the following: ‘‘The

16 United States may not recover from a third-party ad17 ministrator under this clause in cases where the

18 third-party administrator would not be able to re19 cover the amount at issue from the employer or group

20 health plan for whom it provides administrative serv21 ices due to the insolvency or bankruptcy of the em22 ployer or plan.’’.

23 (b) EXTENSION OF CLAIMS FILING PERIOD.—Section

24 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by

25 adding at the end the following new clause:
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1 ‘‘(v) CLAIMS-FILING PERIOD.—Not2 withstanding any other time limits that

3 may exist for filing a claim under an em4 ployer group health plan, the United States

5 may seek to recover conditional payments

6 in accordance with this subparagraph where

7 the request for payment is submitted to the

8 entity required or responsible under this

9 subsection to pay with respect to the item or

10 service (or any portion thereof) under a pri11 mary plan within the 3-year period begin12 ning on the date on which the item or serv13 ice was furnished.’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to items and services furnished on or

16 after the date of the enactment of this Act.

17 SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF

18 POLICY REGARDING ESRD BENEFICIARIES

19 ENROLLED IN PRIMARY PLANS.

20 For purposes of carrying out section 1862(b)(1)(C) of

21 the Social Security Act, the Secretary of Health and

22 Human Services shall apply the policy directive issued by

23 the Administrator of the Health Care Financing Adminis24 tration on April 24, 1995, only with respect to items and

25 services furnished on or after such date.
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1 PART 3—FAILSAFE

2 SEC. 15721. FAILSAFE BUDGET MECHANISM.

3 (a) IN GENERAL.—Title XVIII, as amended by sec4 tions 15106(a) and 15701(a), is amended by adding at the

5 end the following new section:

6 ‘‘FAILSAFE BUDGET MECHANISM

7 ‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT ADJUST8 MENTS TO ACHIEVE MEDICARE BUDGET TARGETS.—If the

9 Secretary determines under subsection (e)(3)(C) before a fis10 cal year (beginning with fiscal year 1998) that—

11 ‘‘(1) the fee-for-service expenditures (as defined

12 in subsection (f)) for a sector of medicare services (as

13 defined in subsection (b)) for the fiscal year, will

14 exceed

15 ‘‘(2) the allotment specified under subsection

16 (c)(2) for such fiscal year (taking into account any

17 adjustment in the allotment under subsection (h) for

18 that fiscal year),

19 then, notwithstanding any other provision of this title, there

20 shall be an adjustment (consistent with subsection (d)) in

21 applicable payment rates or payments for items and serv22 ices included in the sector in the fiscal year so that such

23 expenditures for the sector for the year will be reduced by

1331 24 ⁄3 percent of the amount of such excess.

25 ‘‘(b) SECTORS OF MEDICARE SERVICES DESCRIBED.—
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1 ‘‘(1) IN GENERAL.—For purposes of this section,

2 items and services included under each of the follow3 ing subparagraphs shall be considered to be a sepa4 rate ‘sector’ of medicare services:

5 ‘‘(A) Inpatient hospital services.

6 ‘‘(B) Home health services.

7 ‘‘(C) Extended care services (for inpatients

8 of skilled nursing facilities).

9 ‘‘(D) Hospice care.

10 ‘‘(E) Physicians’ services (including services

11 and supplies described in section 1861(s)(2)(A))

12 and services of other health care professionals

13 (including certified registered nurse anesthetists,

14 nurse practitioners, physician assistants, and

15 clinical psychologists) for which separate pay16 ment is made under this title.

17 ‘‘(F) Outpatient hospital services and am18 bulatory facility services.

19 ‘‘(G) Durable medical equipment and sup20 plies, including prosthetic devices and orthotics.

21 ‘‘(H) Diagnostic tests (including clinical

22 laboratory services and x-ray services).

23 ‘‘(I) Other items and services.

24 ‘‘(2) CLASSIFICATION OF ITEMS AND SERV25 ICES.—The Secretary shall classify each type of items
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1 and services covered and paid for separately under

2 this title into one of the sectors specified in paragraph

3 (1). After publication of such classification under sub4 section (e)(1), the Secretary is not authorized to make

5 substantive changes in such classification.

6 ‘‘(c) ALLOTMENT.—

7 ‘‘(1) ALLOTMENTS FOR EACH SECTOR.—For pur8 poses of this section, subject to subsection (h)(1), the

9 allotment for a sector of medicare services for a fiscal

10 year is equal to the product of—

11 ‘‘(A) the total allotment for the fiscal year

12 established under paragraph (2), and

13 ‘‘(B) the allotment proportion (specified

14 under paragraph (3)) for the sector and fiscal

15 year involved.

16 ‘‘(2) TOTAL ALLOTMENT.—

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

18 section, the total allotment for a fiscal year is

19 equal to—

20 ‘‘(i) the medicare benefit budget for the

21 fiscal year (as specified under subparagraph

22 (B)), reduced by

23 ‘‘(ii) the amount of payments the Sec24 retary estimates will be made in the fiscal
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1 year under the MedicarePlus program

2 under part C.

3 In making the estimate under clause (ii), the

4 Secretary shall take into account estimated en5 rollment and demographic profile of individuals

6 electing MedicarePlus products.

7 ‘‘(B) MEDICARE BENEFIT BUDGET.—For

8 purposes of this subsection, subject to subpara9 graph (C), the ‘medicare benefit budget’—

10 ‘‘(i) for fiscal year 1997 is $203.1 bil11 lion;

12 ‘‘(ii) for fiscal year 1998 is $214.3 bil13 lion;

14 ‘‘(iii) for fiscal year 1999 is $227.2 bil15 lion;

16 ‘‘(iv) for fiscal year 2000 is $241.0 bil17 lion;

18 ‘‘(v) for fiscal year 2001 is $259.1 bil19 lion;

20 ‘‘(vi) for fiscal year 2002 is $280.0 bil21 lion; and

22 ‘‘(vii) for a subsequent fiscal year is

23 equal to the medicare benefit budget under

24 this subparagraph for the preceding fiscal

25 year increased by the product of (I) 1.05,
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1 and (II) 1 plus the annual percentage in2 crease in the average number of medicare

3 beneficiaries from the previous fiscal year to

4 the fiscal year involved.

5 ‘‘(3) MEDICARE ALLOTMENT PROPORTION DE6 FINED.—

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

8 section and with respect to a sector of medicare

9 services for a fiscal year, the term ‘medicare al10 lotment proportion’ means the ratio of—

11 ‘‘(i) the baseline-projected medicare ex12 penditures (as determined under subpara13 graph (B)) for the sector for the fiscal year,

14 to

15 ‘‘(ii) the sum of such baseline expendi16 tures for all such sectors for the fiscal year.

17 ‘‘(B) BASELINE-PROJECTED MEDICARE EX18 PENDITURES.—In this paragraph, the ‘baseline,

19 projected medicare expenditures’ for a sector of

20 medicare services—

21 ‘‘(i) for fiscal year 1996 is equal to fee22 for-service expenditures for such sector dur23 ing fiscal year 1995, increased by the base24 line annual growth rate for such sector of
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1 medicare services for fiscal year 1996 (as

2 specified in table in subparagraph (C)); and

3 ‘‘(ii) for a subsequent fiscal year is

4 equal to the baseline-projected medicare ex5 penditures under this subparagraph for the

6 sector for the previous fiscal year increased

7 by the baseline annual growth rate for such

8 sector for the fiscal year involved (as speci9 fied in such table).

10 ‘‘(C) BASELINE ANNUAL GROWTH RATES.—

11 The following table specifies the baseline annual

12 growth rates for each of the sectors for different

13 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%

14 ‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—

15 ‘‘(1) IN GENERAL.—Subject to the succeeding

16 provisions of this subsection, the Secretary shall

17 apply a payment reduction for a sector for a fiscal

18 year in such a manner as to—
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1 ‘‘(A) make a change in payment rates (to

2 the maximum extent practicable) at the time

3 payment rates are otherwise changed or subject

4 to change for that fiscal year; and

5 ‘‘(B) provide for the full appropriate adjust6 ment so that the fee-for-service expenditures for

7 the sector for the fiscal year will approximate

8 (and not exceed) the allotment for the sector for

9 the fiscal year.

10 ‘‘(2) TAKING INTO ACCOUNT VOLUME AND CASH

11 FLOW.—In providing for an adjustment in payments

12 under this subsection for a sector for a fiscal year, the

13 Secretary shall take into account (in a manner con14 sistent with actuarial projections)—

15 ‘‘(A) the impact of such an adjustment on

16 the volume or type of services provided in such

17 sector (and other sectors), and

18 ‘‘(B) the fact that an adjustment may apply

19 to items and services furnished in a fiscal year

20 (payment for which may occur in a subsequent

21 fiscal year),

22 in a manner that is consistent with assuring that

23 total fee-for-services expenditures for each sector for

24 the fiscal year will not exceed the allotment under

25 subsection (c)(1) for such sector for such year.
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1 ‘‘(3) PROPORTIONALITY OF REDUCTIONS WITHIN

2 A SECTOR.—In making adjustments under this sub3 section in payment for items and services included

4 within a sector of medicare services for a fiscal year,

5 the Secretary shall provide for such an adjustment

6 that results (to the maximum extent feasible) in the

7 same percentage reductions in aggregate Federal pay8 ments under parts A and B for the different classes

9 of items and services included within the sector for

10 the fiscal year.

11 ‘‘(4) APPLICATION TO PAYMENTS MADE BASED

12 ON PROSPECTIVE PAYMENT RATES DETERMINED ON A

13 FISCAL YEAR BASIS.—

14 ‘‘(A) IN GENERAL.—In applying subsection

15 (a) with respect to items and services for which

16 payment is made under part A or B on the basis

17 of rates that are established on a prospective

18 basis for (and in advance of) a fiscal year, the

19 Secretary shall provide for the payment adjust20 ment under such subsection through an appro21 priate reduction in such rates established for

22 items and services furnished (or, in the case of

23 payment for operating costs of inpatient hospital

24 services of subsection (d) hospitals and subsection

25 (d) Puerto Rico hospitals (as defined in para-
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1 graphs (1)(B) and (9)(A) of section 1886(d)),

2 discharges occurring) during such year.

3 ‘‘(B) DESCRIPTION OF APPLICATION TO

4 SPECIFIC SERVICES.—The payment adjustment

5 described in subparagraph (A) applies for a fis6 cal year to at least the following:

7 ‘‘(i) UPDATE FACTOR FOR PAYMENT

8 FOR OPERATING COSTS OF INPATIENT HOS9 PITAL SERVICES OF PPS HOSPITALS.—To

10 the computation of the applicable percent11 age increase specified in section

12 1886(d)(3)(B)(i) for discharges occurring in

13 the fiscal year.

14 ‘‘(ii) HOME HEALTH SERVICES.—To

15 the extent payment amounts for home health

16 services are based on per visit payment

17 rates under section 1894, to the computa18 tion of the increase in the national per visit

19 payment rates established for the year

20 under section 1894(b)(2)(B).

21 ‘‘(iii) HOSPICE CARE.—To the update

22 of payment rates for hospice care under sec23 tion 1814(i) for services furnished during

24 the fiscal year.
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1 ‘‘(iv) UPDATE FACTOR FOR PAYMENT

2 OF OPERATING COSTS OF INPATIENT HOS3 PITAL SERVICES OF PPS-EXEMPT HOS4 PITALS.—To the computation of the target

5 amount under section 1886(b)(3) for dis6 charges occurring during the fiscal year.

7 ‘‘(v) COVERED NON-ROUTINE SERVICES

8 OF SKILLED NURSING FACILITIES.—To the

9 computation of the facility per stay limits

10 for the year under section 1888A(d) for cov11 ered non-routine services of a skilled nurs12 ing facility (as described in such section).

13 ‘‘(5) APPLICATION TO PAYMENTS MADE BASED

14 ON PROSPECTIVE PAYMENT RATES DETERMINED ON A

15 CALENDAR YEAR BASIS.—

16 ‘‘(A) IN GENERAL.—In applying subsection

17 (a) for a fiscal year with respect to items and

18 services for which payment is made under part

19 A or B on the basis of rates that are established

20 on a prospective basis for (and in advance of) a

21 calendar year, the Secretary shall provide for the

22 payment adjustment under such subsection

23 through an appropriate reduction in such rates

24 established for items and services furnished at

25 any time during such calendar year as follows:
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1 ‘‘(i) For fiscal year 1997, the reduction

2 shall be made for payment rates during cal3 endar year 1997 in a manner so as to

4 achieve the necessary payment reductions

5 for such fiscal year for items and services

6 furnished during the first 3 quarters of cal7 endar year 1997.

8 ‘‘(ii) For a subsequent fiscal year, the

9 reduction shall be made for payment rates

10 during the calendar year in which the fiscal

11 year ends in a manner so as to achieve the

12 necessary payment reductions for such fiscal

13 year for items and services furnished during

14 the first 3 quarters of the calendar year, but

15 also taking into account the payment reduc16 tions made in the first quarter of the fiscal

17 year resulting from payment reductions

18 made under this paragraph for the previous

19 calendar year.

20 ‘‘(iii) Payment rate reductions effected

21 under this subparagraph for a calendar

22 year and applicable to the last 3 quarters of

23 the fiscal year in which the calendar year

24 ends shall continue to apply during the first

25 quarter of the succeeding fiscal year.
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1 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

2 The payment adjustment described in subpara3 graph (A) applies for a fiscal year to at least the

4 following:

5 ‘‘(i) UPDATE IN CONVERSION FACTOR

6 FOR PHYSICIANS’ SERVICES.—To the com7 putation of the conversion factor under sub8 section (d) of section 1848 used in the fee

9 schedule established under subsection (b) of

10 such section, for items and services fur11 nished during the calendar year in which

12 the fiscal year ends.

13 ‘‘(ii) PAYMENT RATES FOR OTHER

14 HEALTH CARE PROFESSIONALS.—To the

15 computation of payments for professional

16 services of certified registered nurse anes17 thetists under section 1833(l), nurse mid18 wives, physician assistants, nurse practi19 tioners and clinical nurse specialists under

20 section 1833(r), clinical psychologists, clini21 cal social workers, physical or occupational

22 therapists, and any other health profes23 sionals for which payment rates are based

24 (in whole or in part) on payments for phy25 sicians’ services, for services furnished dur-
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1 ing the calendar year in which the fiscal

2 year ends.

3 ‘‘(iii) UPDATE IN LAB FEE SCHED4 ULE.—To the computation of the fee sched5 ule amount under section 1833(h)(2) for

6 clinical diagnostic laboratory services fur7 nished during the calendar year in which

8 the fiscal year ends.

9 ‘‘(iv) UPDATE IN REASONABLE

10 CHARGES FOR VACCINES.—To the computa11 tion of the reasonable charge for vaccines

12 described in section 1861(s)(10) for vaccines

13 furnished during the calendar year in

14 which the fiscal year ends.

15 ‘‘(v) DURABLE MEDICAL EQUIPMENT16 RELATED ITEMS.—To the computation of

17 the payment basis under section

18 1834(a)(1)(B) for covered items described in

19 section 1834(a)(13), for items furnished

20 during the calendar year in which the fiscal

21 year ends.

22 ‘‘(vi) RADIOLOGIST SERVICES.—To the

23 computation of conversion factors for radi24 ologist services under section 1834(b), for
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1 services furnished during the calendar year

2 in which the fiscal year ends.

3 ‘‘(vii) SCREENING MAMMOGRAPHY.—To

4 the computation of payment rates for

5 screening mammography under section

6 1834(c)(1)(C)(ii), for screening mammog7 raphy performed during the calendar year

8 in which the fiscal year ends.

9 ‘‘(viii) PROSTHETICS AND

10 ORTHOTICS.—To the computation of the

11 amount to be recognized under section

12 1834(h) for payment for prosthetic devices

13 and orthotics and prosthetics, for items fur14 nished during the calendar year in which

15 the fiscal year ends.

16 ‘‘(ix) SURGICAL DRESSINGS.—To the

17 computation of the payment amount re18 ferred to in section 1834(i)(1)(B) for sur19 gical dressings, for items furnished during

20 the calendar year in which the fiscal year

21 ends.

22 ‘‘(x) PARENTERAL AND ENTERAL NU23 TRITION.—To the computation of reasonable

24 charge screens for payment for parenteral

25 and enteral nutrition under section 1834(h),
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1 for nutrients furnished during the calendar

2 year in which the fiscal year ends.

3 ‘‘(xi) AMBULANCE SERVICES.—To the

4 computation of limits on reasonable charges

5 for ambulance services, for services fur6 nished during the calendar year in which

7 the fiscal year ends.

8 ‘‘(6) APPLICATION TO PAYMENTS MADE BASED

9 ON COSTS DURING A COST REPORTING PERIOD.—

10 ‘‘(A) IN GENERAL.—In applying subsection

11 (a) for a fiscal year with respect to items and

12 services for which payment is made under part

13 A or B on the basis of costs incurred for items

14 and services in a cost reporting period, the Sec15 retary shall provide for the payment adjustment

16 under such subsection for a fiscal year through

17 a appropriate proportional reduction in the pay18 ment for costs for such items and services in19 curred at any time during each cost reporting

20 period any part of which occurs during the fiscal

21 year involved, but only (for each such cost re22 porting period) in the same proportion as the

23 fraction of the cost reporting period that occurs

24 during the fiscal year involved.
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1 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

2 The payment adjustment described in subpara3 graph (A) applies for a fiscal year to at least the

4 following:

5 ‘‘(i) CAPITAL-RELATED COSTS OF HOS6 PITAL SERVICES.—To the computation of

7 payment amounts for inpatient and out8 patient hospital services under sections

9 1886(g) and 1861(v) for portions of cost re10 porting periods occurring during the fiscal

11 year.

12 ‘‘(ii) OPERATING COSTS FOR PPS-EX13 EMPT HOSPITALS.—To the computation of

14 payment amounts under section 1886(b) for

15 operating costs of inpatient hospital services

16 of PPS-exempt hospitals for portions of cost

17 reporting periods occurring during the fis18 cal year.

19 ‘‘(iii) DIRECT GRADUATE MEDICAL

20 EDUCATION.—To the computation of pay21 ment amounts under section 1886(h) for

22 reasonable costs of direct graduate medical

23 education costs for portions of cost reporting

24 periods occurring during the fiscal year.
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1 ‘‘(iv) INPATIENT RURAL PRIMARY CARE

2 HOSPITAL SERVICES.—To the computation

3 of payment amounts under section 1814(j)

4 for inpatient rural primary care hospital

5 services for portions of cost reporting peri6 ods occurring during the fiscal year.

7 ‘‘(v) EXTENDED CARE SERVICES OF A

8 SKILLED NURSING FACILITY.—To the com9 putation of payment amounts under section

10 1861(v) for post-hospital extended care serv11 ices of a skilled nursing facility (other than

12 covered non-routine services subject to sec13 tion 1888A) for portions of cost reporting

14 periods occurring during the fiscal year.

15 ‘‘(vi) REASONABLE COST CON16 TRACTS.—To the computation of payment

17 amounts under section 1833(a)(1)(A) for or18 ganizations 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 basis

4 not described in a previous paragraph of this sub5 section, the Secretary shall provide for the payment

6 adjustment under such subsection through a appro7 priate proportional reduction in the payments (or

8 payment bases for items and services furnished) dur9 ing 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.—Except

19 as the Secretary may provide, any reference in this

20 title (other than this section) to a payment rate is

21 deemed a reference to such a rate as adjusted under

22 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 Presi14 dent shall include in the budget submitted under

15 section 1105 of title 31, United States Code, in16 formation on—

17 ‘‘(i) the fee-for-service expenditures,

18 within each sector, for the second previous

19 fiscal year, and how such expenditures com20 pare to the adjusted sector allotment for

21 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 rates

8 under subsection (c)(3)(C). Such recommenda9 tions shall take into account medically appro10 priate 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 fis25 cal year 1998), the Secretary shall publish in the
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1 Federal Register a notice containing the Sec2 retary’s preliminary determination, for each sec3 tor of medicare services, concerning the follow4 ing:

5 ‘‘(i) The projected allotment under sub6 section (c) for such sector for the fiscal year.

7 ‘‘(ii) Whether there will be a payment

8 adjustment for items and services included

9 in such sector for the fiscal year under sub10 section (a).

11 ‘‘(iii) If there will be such an adjust12 ment, the size of such adjustment and the

13 methodology to be used in making such a

14 payment adjustment for classes of items and

15 services included in such sector.

16 ‘‘(iv) Beginning with fiscal year 1999,

17 the fee-for-service expenditures for such sec18 tor for the second preceding fiscal year.

19 Such notice shall include an explanation of the

20 basis for such determination. Determinations

21 under this subparagraph and subparagraph (C)

22 shall be based on the best data available at the

23 time of such determinations.

24 ‘‘(C) FINAL DETERMINATION.—Not later

25 than September 1 preceding the beginning of
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1 each fiscal year (beginning with fiscal year

2 1998), the Secretary shall publish in the Federal

3 Register a final determination, for each sector of

4 medicare services, concerning the matters de5 scribed in subparagraph (B) and an explanation

6 of the reasons for any differences between such

7 determination and the preliminary determina8 tion for such fiscal year published under sub9 paragraph (B).

10 ‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI11 CIAL REVIEW.—There shall be no administrative or

12 judicial review under section 1878 or otherwise of—

13 ‘‘(A) the classification of items and services

14 among the sectors of medicare services under sub15 section (b),

16 ‘‘(B) the determination of the amounts of

17 allotments for the different sectors of medicare

18 services under subsection (c),

19 ‘‘(C) the determination of the amount (or

20 method of application) of any payment adjust21 ment under subsection (d), or

22 ‘‘(D) any adjustment in an allotment ef23 fected under subsection (h).

24 ‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—In

25 this section, the term ‘fee-for-service expenditures’, for items
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1 and services within a sector of medicare services in a fiscal

2 year, means amounts payable for such items and services

3 which are furnished during the fiscal year, and—

4 ‘‘(1) includes types of expenses otherwise reim5 bursable under parts A and B (including administra6 tive costs incurred by organizations described in sec7 tions 1816 and 1842) with respect to such items and

8 services, and

9 ‘‘(2) does not include amounts paid under part

10 C.

11 ‘‘(g) EXPEDITED PROCESS FOR ADJUSTMENT OF SEC12 TOR GROWTH RATES.—

13 ‘‘(1) OPTIONAL INCLUSION OF LEGISLATIVE PRO14 POSAL.—The President may include in recommenda15 tions under subsection (e)(2)(B) submitted with re16 spect to a fiscal year a specific legislative proposal

17 that provides only for the substitution of percentages

18 specified in the proposal for one or more of the base19 line annual growth rates (specified in the table in

20 subsection (c)(3)(C) or in a previous legislative pro21 posal under this subsection) for that fiscal year or

22 any subsequent fiscal year.

23 ‘‘(2) CONGRESSIONAL CONSIDERATION.—

24 ‘‘(A) IN GENERAL.—The percentages con25 tained in a legislative proposal submitted under
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1 paragraph (1) shall apply under this section if

2 a joint resolution (described in subparagraph

3 (B)) approving such proposal is enacted, in ac4 cordance with the provisions of subparagraph

5 (C), before the end of the 60-day period begin6 ning on the date on which such proposal was

7 submitted. For purposes of applying the preced8 ing sentence and subparagraphs (B) and (C), the

9 days on which either House of Congress is not in

10 session because of an adjournment of more than

11 three days to a day certain shall be excluded in

12 the computation of a period.

13 ‘‘(B) JOINT RESOLUTION OF APPROVAL.—A

14 joint resolution described in this subparagraph

15 means only a joint resolution which is intro16 duced within the 10-day period beginning on the

17 date on which the President submits a proposal

18 under paragraph (1) and—

19 ‘‘(i) which does not have a preamble;

20 ‘‘(ii) the matter after the resolving

21 clause of which is as follows: ‘That Congress

22 approves the proposal of the President pro23 viding for substitution of percentages for

24 certain baseline annual growth rates under

25 section 1895 of the Social Security Act, as
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1 submitted by the President on

2 lllllll.’, the blank space being

3 filled in with the appropriate date; and

4 ‘‘(iii) the title of which is as follows:

5 ‘Joint resolution approving Presidential

6 proposal to substitute certain specified per7 centages for baseline annual growth rates

8 under section 1895 of the Social Security

9 Act, as submitted by the President on

10 lllllll.’, the blank space being

11 filled in with the appropriate date.

12 ‘‘(C) PROCEDURES FOR CONSIDERATION OF

13 RESOLUTION OF APPROVAL.—Subject to subpara14 graph (D), the provisions of section 2908 (other

15 than subsection (a)) of the Defense Base Closure

16 and Realignment Act of 1990 shall apply to the

17 consideration of a joint resolution described in

18 subparagraph (B) in the same manner as such

19 provisions apply to a joint resolution described

20 in section 2908(a) of such Act.

21 ‘‘(D) SPECIAL RULES.—For purposes of ap22 plying subparagraph (C) with respect to such

23 provisions—

24 ‘‘(i) any reference to the Committee on

25 Armed Services of the House of Representa-
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1 tives shall be deemed a reference to an ap2 propriate Committee of the House of Rep3 resentatives (specified by the Speaker of the

4 House of Representatives at the time of sub5 mission of a legislative proposal under

6 paragraph (1)) and any reference to the

7 Committee on Armed Services of the Senate

8 shall be deemed a reference to the Committee

9 on Finance of the Senate; and

10 ‘‘(ii) any reference to the date on

11 which the President transmits a report shall

12 be deemed a reference to the date on which

13 the President submits the legislative pro14 posal under paragraph (1).

15 ‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO

16 REFLECT ACTUAL EXPENDITURES.—

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

18 under subsection (e)(3)(B) with respect to a particu19 lar fiscal year (beginning with fiscal year 1999) that

20 the fee-for-service expenditures for a sector of medicare

21 services for the second preceding fiscal year—

22 ‘‘(A) exceeded the adjusted allotment for

23 such sector for such year (as defined in para24 graph (2)), then the allotment for the sector for
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1 the particular fiscal year shall be reduced by

1331 2 ⁄3 percent of the amount of such excess, or

3 ‘‘(B) was less than the adjusted allotment

4 for such sector for such year, then the allotment

5 for the sector for the particular fiscal year shall

6 be increased by the amount of such deficit.

7 ‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al8 lotment under this paragraph for a sector for a fiscal

9 year is—

10 ‘‘(A) the amount that would be computed as

11 the allotment under subsection (c) for the sector

12 for the fiscal year if the actual amount of pay13 ments made in the fiscal year under the

14 MedicarePlus program under part C in the fiscal

15 year were substituted for the amount described

16 in subsection (c)(2)(A)(ii) for that fiscal year,

17 ‘‘(B) adjusted to take into account the

18 amount of any adjustment under paragraph (1)

19 for that fiscal year (based on expenditures in the

20 second previous fiscal year).

21 ‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN NA22 TIONAL COVERAGE DETERMINATIONS.—In the case of a na23 tional coverage determination that the Secretary projects

24 will result in significant additional expenditures under this

25 title (taking into account any substitution for existing pro-
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1 cedures or technologies), such determination shall not be2 come effective before the beginning of the fiscal year that

3 begins after the date of such determination and shall apply

4 to contracts under part C entered into (or renewed) after

5 the date of such determination.’’.

6 (b) REPORT OF TRUSTEES ON GROWTH RATE IN PART

7 A EXPENDITURES.—Section 1817 (42 U.S.C. 1395i) is

8 amended by adding at the end the following new subsection:

9 ‘‘(k) Each annual report provided in subsection (b)(2)

10 shall include information regarding the annual rate of

11 growth in program expenditures that would be required to

12 maintain the financial solvency of the Trust Fund and the

13 extent to which the provisions of section 1895 restrain the

14 rate of growth of expenditures under this part in order to

15 achieve such solvency.’’.

16 PART 4—ADMINISTRATIVE SIMPLIFICATION

17 SEC. 15731. STANDARDS FOR MEDICARE INFORMATION

18 TRANSACTIONS AND DATA ELEMENTS.

19 Title XVIII, as amended by section 15031, is amended

20 by inserting after section 1806 the following new section:

21 ‘‘STANDARDS FOR MEDICARE INFORMATION TRANSACTIONS

22 AND DATA ELEMENTS

23 ‘‘SEC. 1807. (a) ADOPTION OF STANDARDS FOR DATA

24 ELEMENTS.—

25 ‘‘(1) IN GENERAL.—Pursuant to subsection (b),

26 the Secretary shall adopt standards for information
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1 transactions and data elements of medicare informa2 tion and modifications to the standards under this

3 section that are—

4 ‘‘(A) consistent with the objective of reduc5 ing the administrative costs of providing and

6 paying for health care; and

7 ‘‘(B) developed or modified by a standard

8 setting organization (as defined in subsection

9 (h)(8)).

10 ‘‘(2) SPECIAL RULE RELATING TO DATA ELE11 MENTS.—The Secretary may adopt or modify a

12 standard relating to data elements that is different

13 from the standard developed by a standard setting or14 ganization, if—

15 ‘‘(A) the different standard or modification

16 will substantially reduce administrative costs to

17 health care providers and health plans compared

18 to the alternative; and

19 ‘‘(B) the standard or modification is pro20 mulgated in accordance with the rulemaking

21 procedures of subchapter III of chapter 5 of title

22 5, United States Code.

23 ‘‘(3) SECURITY STANDARDS FOR HEALTH INFOR24 MATION NETWORK.—
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1 ‘‘(A) IN GENERAL.—Each person, who

2 maintains or transmits medicare information or

3 data elements of medicare information and is

4 subject to this section, shall maintain reasonable

5 and appropriate administrative, technical, and

6 physical safeguards—

7 ‘‘(i) to ensure the integrity and con8 fidentiality of the information;

9 ‘‘(ii) to protect against any reasonably

10 anticipated—

11 ‘‘(I) threats or hazards to the se12 curity or integrity of the information;

13 and

14 ‘‘(II) unauthorized uses or disclo15 sures of the information; and

16 ‘‘(iii) to otherwise ensure compliance

17 with this section by the officers and employ18 ees of such person.

19 ‘‘(B) SECURITY STANDARDS.—The Sec20 retary shall establish security standards and

21 modifications to such standards with respect to

22 medicare information network services, health

23 plans, and health care providers that—

24 ‘‘(i) take into account—
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1 ‘‘(I) the technical capabilities of

2 record systems used to maintain medi3 care information;

4 ‘‘(II) the costs of security meas5 ures;

6 ‘‘(III) the need for training per7 sons who have access to medicare infor8 mation; and

9 ‘‘(IV) the value of audit trails in

10 computerized record systems; and

11 ‘‘(ii) ensure that a medicare informa12 tion network service, if it is part of a larger

13 organization, has policies and security pro14 cedures which isolate the activities of such

15 service with respect to processing informa16 tion in a manner that prevents unauthor17 ized access to such information by such

18 larger organization.

19 The security standards established by the Sec20 retary shall be based on the standards developed

21 or modified by standard setting organizations. If

22 such standards do not exist, the Secretary shall

23 rely on the recommendations of the Medicare In24 formation Advisory Committee (established

25 under subsection (g)) and shall consult with ap-
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1 propriate government agencies and private orga2 nizations in accordance with paragraph (5).

3 ‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The

4 Secretary shall establish specifications for implement5 ing each of the standards and the modifications to the

6 standards adopted pursuant to paragraph (1) or (3).

7 ‘‘(5) ASSISTANCE TO THE SECRETARY.—In com8 plying with the requirements of this section, the Sec9 retary shall rely on recommendations of the Medicare

10 Information Advisory Committee established under

11 subsection (g) and shall consult with appropriate

12 Federal and State agencies and private organizations.

13 The Secretary shall publish in the Federal Register

14 the recommendations of the Medicare Information Ad15 visory Committee regarding the adoption of a stand16 ard under this section.

17 ‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS

18 AND DATA ELEMENTS.—

19 ‘‘(1) IN GENERAL.—The Secretary shall adopt

20 standards for transactions and data elements to make

21 medicare information uniformly available to be ex22 changed electronically, that is—

23 ‘‘(A) appropriate for the following financial

24 and administrative transactions: claims (includ25 ing coordination of benefits) or equivalent en-
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1 counter information, enrollment and

2 disenrollment, eligibility, premium payments,

3 and referral certification and authorization; and

4 ‘‘(B) related to other financial and admin5 istrative transactions determined appropriate by

6 the Secretary consistent with the goals of im7 proving the operation of the health care system

8 and reducing administrative costs.

9 ‘‘(2) UNIQUE HEALTH IDENTIFIERS.—

10 ‘‘(A) ADOPTION OF STANDARDS.—The Sec11 retary shall adopt standards providing for a

12 standard unique health identifier for each indi13 vidual, employer, health plan, and health care

14 provider for use in the medicare information sys15 tem. In developing unique health identifiers for

16 each health plan and health care provider, the

17 Secretary shall take into account multiple uses

18 for identifiers and multiple locations and spe19 cialty classifications for health care providers.

20 ‘‘(B) PENALTY FOR IMPROPER DISCLO21 SURE.—A person who knowingly uses or causes

22 to be used a unique health identifier under sub23 paragraph (A) for a purpose that is not author24 ized by the Secretary shall—
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1 ‘‘(i) be fined not more than $50,000,

2 imprisoned not more than 1 year, or both;

3 or

4 ‘‘(ii) if the offense is committed under

5 false pretenses, be fined not more than

6 $100,000, imprisoned not more than 5

7 years, or both.

8 ‘‘(3) CODE SETS.—

9 ‘‘(A) IN GENERAL.—The Secretary, in con10 sultation with the Medicare Information Advi11 sory Committee, experts from the private sector,

12 and Federal and State agencies, shall—

13 ‘‘(i) select code sets for appropriate

14 data elements from among the code sets that

15 have been developed by private and public

16 entities; or

17 ‘‘(ii) establish code sets for such data

18 elements if no code sets for the data ele19 ments have been developed.

20 ‘‘(B) DISTRIBUTION.—The Secretary shall

21 establish efficient and low-cost procedures for

22 distribution (including electronic distribution) of

23 code sets and modifications made to such code

24 sets under subsection (c)(2).

25 ‘‘(4) ELECTRONIC SIGNATURE.—
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1 ‘‘(A) IN GENERAL.—The Secretary, after

2 consultation with the Medicare Information Ad3 visory Committee, shall promulgate regulations

4 specifying procedures for the electronic trans5 mission and authentication of signatures, com6 pliance with which will be deemed to satisfy

7 Federal and State statutory requirements for

8 written signatures with respect to information

9 transactions required by this section and written

10 signatures on enrollment and disenrollment

11 forms.

12 ‘‘(B) PAYMENTS FOR SERVICES AND PRE13 MIUMS.—Nothing in this section shall be con14 strued to prohibit the payment of health care

15 services or health plan premiums by debit, cred16 it, payment card or numbers, or other electronic

17 means.

18 ‘‘(5) TRANSFER OF INFORMATION BETWEEN

19 HEALTH PLANS.—The Secretary shall develop rules

20 and procedures—

21 ‘‘(A) for determining the financial liability

22 of health plans when health care benefits are

23 payable under two or more health plans; and

24 ‘‘(B) for transferring among health plans

25 appropriate standard data elements needed for
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1 the coordination of benefits, the sequential proc2 essing of claims, and other data elements for in3 dividuals who have more than one health plan.

4 ‘‘(6) COORDINATION OF BENEFITS.—If, at the

5 end of the 5-year period beginning on the date of the

6 enactment of this section, the Secretary determines

7 that additional transaction standards for coordinat8 ing benefits are necessary to reduce administrative

9 costs or duplicative (or inappropriate) payment of

10 claims, the Secretary shall establish further trans11 action standards for the coordination of benefits be12 tween health plans.

13 ‘‘(7) PROTECTION OF TRADE SECRETS.—Except

14 as otherwise required by law, the standards adopted

15 under this section shall not require disclosure of trade

16 secrets or confidential commercial information by an

17 entity operating a medicare information network.

18 ‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—

19 ‘‘(1) INITIAL STANDARDS.—Not later than 18

20 months after the date of the enactment of this section,

21 the Secretary shall adopt standards relating to the in22 formation transactions, data elements of medicare in23 formation and security described in subsections (a)

24 and (b).
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1 ‘‘(2) ADDITIONS AND MODIFICATIONS TO STAND2 ARDS.—

3 ‘‘(A) IN GENERAL.—The Secretary shall re4 view the standards adopted under this section

5 and shall adopt additional or modified stand6 ards, that have been developed or modified by a

7 standard setting organization, as determined ap8 propriate, but not more frequently than once

9 every 12 months. Any addition or modification

10 to such standards shall be completed in a man11 ner which minimizes the disruption and cost of

12 compliance.

13 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

14 CODE SETS.—

15 ‘‘(i) IN GENERAL.—The Secretary shall

16 ensure that procedures exist for the routine

17 maintenance, testing, enhancement, and ex18 pansion of code sets.

19 ‘‘(ii) ADDITIONAL RULES.—If a code

20 set is modified under this paragraph, the

21 modified code set shall include instructions

22 on how data elements of medicare informa23 tion that were encoded prior to the modi24 fication may be converted or translated so

25 as to preserve the informational value of the
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1 data elements that existed before the modi2 fication. Any modification to a code set

3 under this paragraph shall be implemented

4 in a manner that minimizes the disruption

5 and cost of complying with such modifica6 tion.

7 ‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—

8 ‘‘(1) IN GENERAL.—If a person desires to con9 duct any of the information transactions described in

10 subsection (b)(1) with a health plan as a standard

11 transaction, the health plan shall conduct such stand12 ard transaction in a timely manner and the informa13 tion transmitted or received in connection with such

14 transaction shall be in the form of standard data ele15 ments of medicare information.

16 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

17 health plan may satisfy the requirement imposed on

18 such plan under paragraph (1) by directly transmit19 ting standard data elements of medicare information

20 or submitting nonstandard data elements to a medi21 care information network service for processing into

22 standard data elements and transmission.

23 ‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE24 QUIREMENTS.—Not later than 24 months after the

25 date on which standards are adopted under sub-
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1 sections (a) and (b) with respect to any type of infor2 mation transaction or data element of medicare infor3 mation or with respect to security, a health plan shall

4 comply with the requirements of this section with re5 spect to such transaction or data element.

6 ‘‘(4) COMPLIANCE WITH MODIFIED STAND7 ARDS.—If the Secretary adopts a modified standard

8 under subsection (a) or (b), a health plan shall be re9 quired to comply with the modified standard at such

10 time as the Secretary determines appropriate taking

11 into account the time needed to comply due to the na12 ture and extent of the modification. However, the time

13 determined appropriate under the preceding sentence

14 shall be not earlier than the last day of the 180-day

15 period beginning on the date such modified standard

16 is adopted. The Secretary may extend the time for

17 compliance for small health plans, if the Secretary de18 termines such extension is appropriate.

19 ‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY

20 WITH REQUIREMENTS AND STANDARDS.—

21 ‘‘(1) GENERAL PENALTY.—

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

23 paragraph (2), the Secretary shall impose on

24 any person that violates a requirement or stand25 ard—
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1 ‘‘(i) with respect to medicare informa2 tion transactions, data elements of medicare

3 information, or security imposed under sub4 section (a) or (b); or

5 ‘‘(ii) with respect to health plans im6 posed under subsection (d);

7 a penalty of not more than $100 for each such

8 violation of a specific standard or requirement,

9 but the total amount imposed for all such viola10 tions of a specific standard or requirement dur11 ing the calendar year shall not exceed $25,000.

12 ‘‘(B) PROCEDURES.—The provisions of sec13 tion 1128A (other than subsections (a) and (b)

14 and the second sentence of subsection (f)) shall

15 apply to the imposition of a civil money penalty

16 under this paragraph in the same manner as

17 such provisions apply to the imposition of a pen18 alty under such section 1128A.

19 ‘‘(C) DENIAL OF PAYMENT.—Except as pro20 vided in paragraph (2), the Secretary may deny

21 payment under this title for an item or service

22 furnished by a person if the person fails to com23 ply with an applicable requirement or standard

24 for medicare information relating to that item or

25 service.
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1 ‘‘(2) LIMITATIONS.—

2 ‘‘(A) NONCOMPLIANCE NOT DISCOVERED.—

3 A penalty may not be imposed under paragraph

4 (1) if it is established to the satisfaction of the

5 Secretary that the person liable for the penalty

6 did not know, and by exercising reasonable dili7 gence would not have known, that such person

8 failed to comply with the requirement or stand9 ard described in paragraph (1).

10 ‘‘(B) FAILURES DUE TO REASONABLE

11 CAUSE.—

12 ‘‘(i) IN GENERAL.—Except as provided

13 in clause (ii), a penalty may not be im14 posed under paragraph (1) if—

15 ‘‘(I) the failure to comply was due

16 to reasonable cause and not to willful

17 neglect; and

18 ‘‘(II) the failure to comply is cor19 rected during the 30-day period begin20 ning on the first date the person liable

21 for the penalty knew, or by exercising

22 reasonable diligence would have known,

23 that the failure to comply occurred.

24 ‘‘(ii) EXTENSION OF PERIOD.—
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1 ‘‘(I) NO PENALTY.—The period re2 ferred to in clause (i)(II) may be ex3 tended as determined appropriate by

4 the Secretary based on the nature and

5 extent of the failure to comply.

6 ‘‘(II) ASSISTANCE.—If the Sec7 retary determines that a health plan

8 failed to comply because such plan was

9 unable to comply, the Secretary may

10 provide technical assistance to such

11 plan during the period described in

12 clause (i)(II). Such assistance shall be

13 provided in any manner determined

14 appropriate by the Secretary.

15 ‘‘(C) REDUCTION.—In the case of a failure

16 to comply which is due to reasonable cause and

17 not to willful neglect, any penalty under para18 graph (1) that is not entirely waived under sub19 paragraph (B) may be waived to the extent that

20 the payment of such penalty would be excessive

21 relative to the compliance failure involved.

22 ‘‘(f) EFFECT ON STATE LAW.—

23 ‘‘(1) GENERAL EFFECT.—

24 ‘‘(A) GENERAL RULE.—Except as provided

25 in subparagraph (B), a provision, requirement,
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1 or standard under this section shall supersede

2 any contrary provision of State law, including a

3 provision of State law that requires medical or

4 health plan records (including billing informa5 tion) to be maintained or transmitted in written

6 rather than electronic form.

7 ‘‘(B) EXCEPTIONS.—A provision, require8 ment, or standard under this section shall not

9 supersede a contrary provision of State law if

10 the Secretary determines that the provision of

11 State law should be continued for any reason,

12 including for reasons relating to prevention of

13 fraud and abuse or regulation of controlled sub14 stances.

15 ‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in

16 this section shall be construed to invalidate or limit

17 the authority, power, or procedures established under

18 any law providing for the reporting of disease or in19 jury, child abuse, birth, or death, public health sur20 veillance, or public health investigation or interven21 tion.

22 ‘‘(g) MEDICARE INFORMATION ADVISORY COMMIT23 TEE.—

24 ‘‘(1) ESTABLISHMENT.—There is established a

25 committee to be known as the Medicare Information
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1 Advisory Committee (in this subsection referred to as

2 the ‘committee’).

3 ‘‘(2) DUTIES.—The committee shall—

4 ‘‘(A) advise the Secretary in the develop5 ment of standards under this section; and

6 ‘‘(B) be generally responsible for advising

7 the Secretary and the Congress on the status and

8 the future of the medicare information network.

9 ‘‘(3) MEMBERSHIP.—

10 ‘‘(A) IN GENERAL.—The committee shall

11 consist of 9 members of whom—

12 ‘‘(i) 3 shall be appointed by the Presi13 dent;

14 ‘‘(ii) 3 shall be appointed by the

15 Speaker of the House of Representatives

16 after consultation with the minority leader

17 of the House of Representatives; and

18 ‘‘(iii) 3 shall be appointed by the

19 President pro tempore of the Senate after

20 consultation with the minority leader of the

21 Senate.

22 The appointments of the members shall be made

23 not later than 60 days after the date of the en24 actment of this section. The President shall des25 ignate 1 member as the Chair.
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1 ‘‘(B) EXPERTISE.—The membership of the

2 committee shall consist of individuals who are of

3 recognized standing and distinction in the areas

4 of information systems, information networking

5 and integration, consumer health, or health care

6 financial management, and who possess the dem7 onstrated capacity to discharge the duties im8 posed on the committee.

9 ‘‘(C) TERMS.—Each member of the commit10 tee shall be appointed for a term of 5 years, ex11 cept that the members first appointed shall serve

12 staggered terms such that the terms of not more

13 than 3 members expire at one time.

14 ‘‘(D) INITIAL MEETING.—Not later than 30

15 days after the date on which a majority of the

16 members have been appointed, the committee

17 shall hold its first meeting.

18 ‘‘(4) REPORTS.—Not later than 1 year after the

19 date of the enactment of this section, and annually

20 thereafter, the committee shall submit to Congress and

21 the Secretary a report regarding—

22 ‘‘(A) the extent to which entities using the

23 medicare information network are meeting the

24 standards adopted under this section and work-
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1 ing together to form an integrated network that

2 meets the needs of its users;

3 ‘‘(B) the extent to which such entities are

4 meeting the security standards established pursu5 ant to this section and the types of penalties as6 sessed for noncompliance with such standards;

7 ‘‘(C) any problems that exist with respect to

8 implementation of the medicare information net9 work; and

10 ‘‘(D) the extent to which timetables under

11 this section are being met.

12 Reports made under this subsection shall be made

13 available to health care providers, health plans, and

14 other entities that use the medicare information net15 work to exchange medicare information.

16 ‘‘(h) DEFINITIONS.—For purposes of this section:

17 ‘‘(1) CODE SET.—The term ‘code set’ means any

18 set of codes used for encoding data elements, such as

19 tables of terms, enrollment information, and encoun20 ter data.

21 ‘‘(2) COORDINATION OF BENEFITS.—The term

22 ‘coordination of benefits’ means determining and co23 ordinating the financial obligations of health plans

24 when health care benefits are payable under such a
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1 plan and under this title (including under a

2 MedicarePlus product).

3 ‘‘(3) MEDICARE INFORMATION.—The term ‘medi4 care information’ means any information that relates

5 to the enrollment of individuals under this title (in6 cluding information relating to elections of

7 MedicarePlus products under section 1805) and the

8 provision of health benefits (including benefits pro9 vided under such products) under this title.

10 ‘‘(4) MEDICARE INFORMATION NETWORK.—The

11 term ‘medicare information network’ means the medi12 care information system that is formed through the

13 application of the requirements and standards estab14 lished under this section.

15 ‘‘(5) MEDICARE INFORMATION NETWORK SERV16 ICE.—The term ‘medicare information network serv17 ice’ means a public or private entity that—

18 ‘‘(A) processes or facilitates the processing

19 of nonstandard data elements of medicare infor20 mation into standard data elements;

21 ‘‘(B) provides the means by which persons

22 may meet the requirements of this section; or

23 ‘‘(C) provides specific information process24 ing services.
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1 ‘‘(6) HEALTH PLAN.—The term ‘health plan’

2 means a plan which provides, or pays the cost of,

3 health benefits. Such term includes the following, or

4 any combination thereof:

5 ‘‘(A) Part A or part B of this title, and in6 cludes a MedicarePlus product.

7 ‘‘(B) The medicaid program under title XIX

8 and the MediGrant program under title XXI.

9 ‘‘(C) A medicare supplemental policy (as

10 defined in section 1882(g)(1)).

11 ‘‘(D) Worker’s compensation or similar in12 surance.

13 ‘‘(E) Automobile or automobile medical14 payment insurance.

15 ‘‘(F) A long-term care policy, other than a

16 fixed indemnity policy.

17 ‘‘(G) The Federal Employees Health Benefit

18 Plan under chapter 89 of title 5, United States

19 Code.

20 ‘‘(H) An employee welfare benefit plan, as

21 defined in section 3(1) of the Employee Retire22 ment Income Security Act of 1974 (29 U.S.C.

23 1002(1)), but only to the extent the plan is estab24 lished or maintained for the purpose of provid25 ing health benefits.
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1 ‘‘(7) INDIVIDUALLY IDENTIFIABLE MEDICARE IN2 FORMATION.—The term ‘individually identifiable

3 medicare information’ means medicare enrollment in4 formation, including demographic information col5 lected from an individual, that—

6 ‘‘(A) is created or received by a health care

7 provider, health plan, employer, or medicare in8 formation network service, and

9 ‘‘(B) identifies an individual.

10 ‘‘(8) STANDARD SETTING ORGANIZATION.—The

11 term ‘standard setting organization’ means a stand12 ard setting organization accredited by the American

13 National Standards Institute.

14 ‘‘(9) STANDARD TRANSACTION.—The term

15 ‘standard transaction’ means, when referring to an

16 information transaction or to data elements of medi17 care information, any transaction that meets the re18 quirements and implementation specifications adopt19 ed by the Secretary under subsections (a) and (b).’’.
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1 PART 5—OTHER PROVISIONS RELATING TO

2 PARTS A AND B

3 SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF

4 ITEMS AND SERVICES ASSOCIATED WITH CER5 TAIN MEDICAL DEVICES APPROVED FOR IN6 VESTIGATIONAL USE.

7 (a) COVERAGE.—Nothing in title XVIII of the Social

8 Security Act may be construed to prohibit coverage under

9 part A or part B of the medicare program of items and

10 services associated with the use of a medical device in the

11 furnishing of inpatient or outpatient hospital services (in12 cluding outpatient diagnostic imaging services) for which

13 payment may be made under the program solely on the

14 grounds that the device is not an approved device, if—

15 (1) the device is an investigational device; and

16 (2) the device is used instead of either an ap17 proved device or a covered procedure.

18 (b) CLARIFICATION OF PAYMENT AMOUNT.—Notwith19 standing any other provision of title XVIII of the Social

20 Security Act, the amount of payment made under the medi21 care program for any item or service associated with the

22 use of an investigational device in the furnishing of inpa23 tient or outpatient hospital services (including outpatient

24 diagnostic imaging services) for which payment may be

25 made under the program may not exceed the amount of the

26 payment which would have been made under the program
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1 for the item or service if the item or service were associated

2 with the use of an approved device or a covered procedure.

3 (c) DEFINITIONS.—In this section—

4 (1) the term ‘‘approved device’’ means a medical

5 device (or devices) which has been approved for mar6 keting under pre-market approval under the Federal

7 Food, Drug, and Cosmetic Act or cleared for market8 ing under a 510(k) notice under such Act; and

9 (2) the term ‘‘investigational device’’ means—

10 (A) a medical device or devices (other than

11 a device described in paragraph (1)) approved

12 for investigational use under section 520(g) of

13 the Federal Food, Drug, and Cosmetic Act, or

14 (B) a product authorized for use under sec15 tion 505(i) of the Federal Food, Drug, and Cos16 metic Act which includes the use of a medical de17 vice (or devices) or an investigational combina18 tion product under section 503(g) of such Act

19 which includes a device (or devices) authorized

20 for use under section 505(i) of such Act.

21 SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.

22 (a) IN GENERAL.—Section 1862(a) (42 U.S.C.

23 1395y(a)), as amended by section 15525(a)(2) and section

24 15701(c)(2)(C), is amended—
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1 (1) by striking ‘‘or’’ at the end of paragraph

2 (16),

3 (2) by striking the period at the end of para4 graph (17) and inserting ‘‘; or’’, and

5 (3) by inserting after paragraph (17) the follow6 ing new paragraph:

7 ‘‘(18) where such expenses are for items or serv8 ices, or to assist in the purchase, in whole or in part,

9 of health benefit coverage that includes items or serv10 ices, for the purpose of causing, or assisting in caus11 ing, the death, suicide, euthanasia, or mercy killing

12 of a person.’’.

13 (b) EFFECTIVE DATE.—The amendments made by sub14 section (a) shall apply to payment for items and services

15 furnished on or after the date of the enactment of this Act.

16 Subtitle I—Clinical Laboratories

17 SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA18 TORIES.

19 Section 353(d) of the Public Health Service Act (42

20 U.S.C. 263a(d)) is amended—

21 (1) by redesignating paragraphs (2), (3), and (4)

22 as paragraphs (3), (4), and (5) and by adding after

23 paragraph (1) the following:

24 ‘‘(2) EXEMPTION OF PHYSICIAN OFFICE LABORA25 TORIES.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), a clinical laboratory in a

3 physician’s office (including an office of a group

4 of physicians) which is directed by a physician

5 and in which examinations and procedures are

6 either performed by a physician or by individ7 uals supervised by a physician solely as an ad8 junct to other services provided by the physi9 cian’s office is exempt from this section.

10 ‘‘(B) EXCEPTION.—A clinical laboratory de11 scribed in subparagraph (A) is not exempt from

12 this section when it performs a pap smear (Pa13 panicolaou Smear) analysis.

14 ‘‘(C) DEFINITION.—For purposes of sub15 paragraph (A), the term ‘physician’ has the

16 same meaning as is prescribed for such term by

17 section 1861(r) of the Social Security Act (42

18 U.S.C. 1395x(r)).’’;

19 (2) in paragraph (3) (as so redesignated) by

20 striking ‘‘(3)’’ and inserting ‘‘(4)’’; and

21 (3) in paragraphs (4) and (5) (as so redesig22 nated) by striking ‘‘(2)’’ and inserting ‘‘(3)’’.
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1 Subtitle J—Lock-Box Provisions for

2 Medicare Part B Savings from

3 Growth Reductions

4 SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH RE5 DUCTION TRUST FUND FOR PART B SAVINGS.

6 Part B of title XVIII is amended by inserting after

7 section 1841 the following new section:

8 ‘‘MEDICARE GROWTH REDUCTION TRUST FUND

9 ‘‘SEC. 1841A. (a)(1) There is hereby created on the

10 books of the Treasury of the United States a trust fund to

11 be known as the ‘Federal Medicare Growth Reduction Trust

12 Fund’ (in this section referred to as the ‘Trust Fund’). The

13 Trust Fund shall consist of such gifts and bequests as may

14 be made as provided in section 201(i)(1) and amounts ap15 propriated under paragraph (2).

16 ‘‘(2) There are hereby appropriated to the Trust Fund

17 amounts equivalent to 100 percent of the Secretary’s esti18 mate of the reductions in expenditures under this part that

19 are attributable to the Medicare Preservation Act of 1995.

20 The amounts appropriated by the preceding sentence shall

21 be transferred from time to time (not less frequently than

22 monthly) from the general fund in the Treasury to the Trust

23 Fund.

24 ‘‘(3)(A) Subject to subparagraph (B), with respect to

25 monies transferred to the Trust Fund, no transfers, author-
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1 izations of appropriations, or appropriations are per2 mitted.

3 ‘‘(B) Beginning with fiscal year 2003, the Secretary

4 may expend funds in the Trust Fund to carry out this title,

5 but only to the extent provided by Congress in advance

6 through a specific amendment to this section.

7 ‘‘(b) The provisions of subsections (b) through (e) of

8 section 1841 shall apply to the Trust Fund in the same

9 manner as they apply to the Federal Supplementary Medi10 cal Insurance Trust Fund, except that the Board of Trustees

11 and Managing Trustee of the Trust Fund shall be composed

12 of the members of the Board of Trustees and the Managing

13 Trustee, respectively, of the Federal Supplementary Medical

14 Insurance Trust Fund.’’.

15 SECTION 1. PURPOSE.

16 The purpose of this Act is to reform the

17 medicare program, in order to preserve and

18 protect the financial stability of the program.

19 TITLE XV—MEDICARE

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

21 REFERENCES TO OBRA; TABLE OF CONTENTS

22 OF TITLE.

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

24 as the ‘‘Medicare Preservation Act of 1995’’.
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1 (b) AMENDMENTS TO SOCIAL SECURITY

2 ACT.—Except as otherwise specifically pro3 vided, whenever in this title an amendment is

4 expressed in terms of an amendment to or re5 peal of a section or other provision, the ref6 erence shall be considered to be made to that

7 section or other provision of the Social Secu8 rity Act.

9 (c) REFERENCES TO OBRA.—In this title,

10 the terms ‘‘OBRA–1986’’, ‘‘OBRA–1987’’,

11 ‘‘OBRA–1989’’, ‘‘OBRA–1990’’, and ‘‘OBRA–

12 1993’’ refer to the Omnibus Budget Reconcili13 ation Act of 1986 (Public Law 99–509), the Om14 nibus Budget Reconciliation Act of 1987 (Pub15 lic Law 100–203), the Omnibus Budget Rec16 onciliation Act of 1989 (Public Law 101–239),

17 the Omnibus Budget Reconciliation Act of

18 1990 (Public Law 101–508), and the Omnibus

19 Budget Reconciliation Act of 1993 (Public Law

20 103–66), respectively.

21 (d) TABLE OF CONTENTS OF TITLE.—The

22 table of contents of this title is as follows:

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

OBRA; table of contents of title.

Subtitle A—MedicarePlus Program

PART 1—INCREASING CHOICE UNDER THE MEDICARE PROGRAM

Sec. 15001. Increasing choice under medicare.
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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. National Health Care Anti-Fraud Task Force.

Sec. 15110. Study of adequacy of private quality assurance programs.
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Sec. 15111. Penalty for false certification for home health services.

Sec. 15112. Ineligibility for part B benefits of individuals convicted of medicare fraud.

Sec. 15113. Pilot projects.

Subtitle C—Regulatory Relief

PART 1—PHYSICIAN OWNERSHIP REFERRAL REFORM

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

Sec. 15202. Revision of designated health services subject to

prohibition.

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

Sec. 15204. Exceptions to prohibition.

Sec. 15205. Repeal of reporting requirements.

Sec. 15206. Preemption of State law.

Sec. 15207. Effective date.

PART 2—OTHER MEDICARE REGULATORY RELIEF

Sec. 15211. Repeal of Medicare and Medicaid Coverage Data

Bank.

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

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

managed care arrangements.

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

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

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

PART 3—PROMOTING PHYSICIAN SELF-POLICING

Sec. 15221. Exemption from antitrust laws for certain activities

of medical self-regulatory 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
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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.

‘‘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 hospital-specific 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
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‘‘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.

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

Sec. 15605. Extension of reductions in payments for costs of

hospital outpatient services.

Sec. 15606. Freeze in payments for ambulatory surgical center

services.

Sec. 15607. Rural emergency access care hospitals.

Sec. 15608. Ensuring payment for physician and nurse for

jointly furnished anesthesia services.

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

PART 2—PART B PREMIUM

Sec. 15611. Extension of part B premium.

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

PART 3—BILLING AND ADMINISTRATION OF LABORATORY SERVICES

Sec. 15621. Restrictions on direct billing for laboratory services.

Sec. 15622. Administrative simplification.

PART 4—QUALITY STANDARDS FOR DURABLE MEDICAL EQUIPMENT

Sec. 15631. Recommendations for quality standards for durable medicare equipment.

Subtitle H—Provisions Relating to Medicare Parts A and B

PART 1—HOME HEALTH SERVICES

Sec. 15701. Payment for home health services.

Sec. 15702. Maintaining savings resulting from temporary

freeze on payment increases for home health

services.

Sec. 15703. Extension of waiver of presumption of lack of

knowledge of exclusion from coverage for home

health agencies.

Sec. 15704. Study of coverage of services of Christian Science

providers.

PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS

Sec. 15711. Extension and expansion of existing requirements.

Sec. 15712. Improvements in recovery of payments.

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

plans.

PART 3—FAILSAFE

Sec. 15721. Failsafe budget mechanism.

PART 4—ADMINISTRATIVE SIMPLIFICATION

Sec. 15731. Standards for medicare information transactions

and data elements.
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PART 5—OTHER PROVISIONS RELATING TO PARTS A AND B

Sec. 15741. Clarification of medicare coverage of items and

services associated with certain medical devices

approved for investigational use.

Sec. 15742. Additional exclusion from coverage.

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

Subtitle I—Clinical Laboratories

Sec. 15801. Exemption of physician office laboratories.

Subtitle J—Lock-Box Provisions for Medicare Part B Savings

from Growth Reductions

Sec. 15901. Establishment of Medicare Growth Reduction Trust

Fund for Part B savings.

1 Subtitle A—MedicarePlus Program

2 PART 1—INCREASING CHOICE UNDER THE

3 MEDICARE PROGRAM

4 SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

5 (a) IN GENERAL.—Title XVIII is amended

6 by inserting after section 1804 the following

7 new section:

8 ‘‘PROVIDING FOR CHOICE OF COVERAGE

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

10 ‘‘(1) IN GENERAL.—Subject to the provi11 sions of this section, every individual

12 who is entitled to benefits under part A

13 and enrolled under part B shall elect to

14 receive benefits under this title through

15 one of the following:

16 ‘‘(A) THROUGH FEE-FOR-SERVICE

17 SYSTEM.—Through the provisions of

18 parts A and B.
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1 ‘‘(B) THROUGH A MEDICAREPLUS

2 PRODUCT.—Through a MedicarePlus

3 product (as defined in paragraph (2)),

4 which may be—

5 ‘‘(i) a high deductible/

6 medisave product (and a con7 tribution into a MedicarePlus

8 medical savings account (MSA)),

9 ‘‘(ii) a product offered by a

10 provider-sponsored organization,

11 ‘‘(iii) a product offered by an

12 organization that is a Taft-Hart13 ley plan or association, or

14 ‘‘(iv) a product providing for

15 benefits on a fee-for-service or

16 other basis.

17 ‘‘(2) MEDICAREPLUS PRODUCT DE18 FINED.—For purposes of this section and

19 part C, the term ‘MedicarePlus product’

20 means health benefits coverage offered

21 under a policy, contract, or plan by a

22 MedicarePlus organization (as defined in

23 section 1851(a)) pursuant to and in ac24 cordance with a contract under section

25 1857.
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1 ‘‘(3) TERMINOLOGY RELATING TO OP2 TIONS.—For purposes of this section and

3 part C—

4 ‘‘(A) NON-MEDICARE-PLUS OPTION.—

5 An individual who has made the elec6 tion described in paragraph (1)(A) is

7 considered to have elected the ‘Non8 MedicarePlus option’.

9 ‘‘(B) MEDICAREPLUS OPTION.—An

10 individual who has made the election

11 described in paragraph (1)(B) to ob12 tain coverage through a

13 MedicarePlus product is considered

14 to have elected the ‘MedicarePlus op15 tion’ for that product.

16 ‘‘(b) SPECIAL RULES.—

17 ‘‘(1) RESIDENCE REQUIREMENT.—Except

18 as the Secretary may otherwise provide,

19 an individual is eligible to elect a

20 MedicarePlus product offered by a

21 MedicarePlus organization only if the or22 ganization in relation to the product

23 serves the geographic area in which the

24 individual resides.
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1 ‘‘(2) AFFILIATION REQUIREMENTS FOR

2 CERTAIN PRODUCTS.—

3 ‘‘(A) IN GENERAL.—Subject to sub4 paragraph (B), an individual is eligi5 ble to elect a MedicarePlus product

6 offered by a limited enrollment

7 MedicarePlus organization (as de8 fined in section 1852(c)(4)(D)) only

9 if—

10 ‘‘(i) the individual is eligible

11 under section 1852(c)(4) to make

12 such election, and

13 ‘‘(ii) in the case of a

14 MedicarePlus organization that is

15 a Taft-Hartley sponsor (as defined

16 in section 1852(c)(4)), the individ17 ual elected under this section a

18 MedicarePlus product offered by

19 the sponsor during the first en20 rollment period in which the indi21 vidual was eligible to make such

22 election with respect to such

23 sponsor.

24 ‘‘(B) NO REELECTION AFTER

25 DISENROLLMENT FOR CERTAIN PROD-
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1 UCTS.—An individual is not eligible to

2 elect a MedicarePlus product offered

3 by a MedicarePlus organization that

4 is a Taft-Hartley sponsor if the indi5 vidual previously had elected a

6 MedicarePlus product offered by the

7 organization and had subsequently

8 discontinued to elect such a product

9 offered by the organization.

10 ‘‘(3) SPECIAL RULE FOR CERTAIN ANNU11 ITANTS.—An individual is not eligible to

12 elect a high deductible/medisave product

13 if the individual is entitled to benefits

14 under chapter 89 of title 5, United States

15 Code, as an annuitant or spouse of an an16 nuitant.

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

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

19 establish a process through which elec20 tions described in subsection (a) are

21 made and changed, including the form

22 and manner in which such elections are

23 made and changed. Such elections shall

24 be made or changed only during coverage

25 election periods specified under sub-
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1 section (e) and shall become effective as

2 provided in subsection (f).

3 ‘‘(2) EXPEDITED IMPLEMENTATION.—The

4 Secretary shall establish the process of

5 electing coverage under this section dur6 ing the transition period (as defined in

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

8 manner as will permit such an election

9 for MedicarePlus products in an area as

10 soon as such products become available

11 in that area.

12 ‘‘(3) COORDINATION THROUGH MEDICARE13 PLUS ORGANIZATIONS.—

14 ‘‘(A) ENROLLMENT.—Such process

15 shall permit an individual who wish16 es to elect a MedicarePlus product of17 fered by a MedicarePlus organization

18 to make such election through the fil19 ing of an appropriate election form

20 with the organization.

21 ‘‘(B) DISENROLLMENT.—Such proc22 ess shall permit an individual, who

23 has elected a MedicarePlus product

24 offered by a MedicarePlus organiza25 tion and who wishes to terminate
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1 such election, to terminate such elec2 tion through the filing of an appro3 priate election form with the organi4 zation.

5 ‘‘(4) DEFAULT.—

6 ‘‘(A) INITIAL ELECTION.—

7 ‘‘(i) IN GENERAL.—Subject to

8 clause (ii), an individual who fails

9 to make an election during an ini10 tial election period under sub11 section (e)(1) is deemed to have

12 chosen the Non-MedicarePlus op13 tion.

14 ‘‘(ii) SEAMLESS CONTINUATION

15 OF COVERAGE.—The Secretary

16 shall establish procedures under

17 which individuals who are en18 rolled with a MedicarePlus orga19 nization at the time of the initial

20 election period and who fail to

21 elect to receive coverage other

22 than through the organization are

23 deemed to have elected an appro24 priate MedicarePlus product of25 fered by the organization.
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1 ‘‘(B) CONTINUING PERIODS.—An in2 dividual who has made (or deemed to

3 have made) an election under this

4 section is considered to have contin5 ued to make such election until such

6 time as—

7 ‘‘(i) the individual changes the

8 election under this section, or

9 ‘‘(ii) a MedicarePlus product

10 is discontinued, if the individual

11 had elected such product at the

12 time of the discontinuation.

13 ‘‘(5) AGREEMENTS WITH COMMISSIONER

14 OF SOCIAL SECURITY TO PROMOTE EFFICIENT

15 ADMINISTRATION.—In order to promote the

16 efficient administration of this section

17 and the MedicarePlus program under

18 part C, the Secretary may enter into an

19 agreement with the Commissioner of So20 cial Security under which the Commis21 sioner performs administrative respon22 sibilities relating to enrollment and

23 disenrollment in MedicarePlus products

24 under this section.
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1 ‘‘(d) PROVISION OF BENEFICIARY INFORMA2 TION TO PROMOTE INFORMED CHOICE.—

3 ‘‘(1) IN GENERAL.—The Secretary shall

4 provide for activities under this sub5 section to disseminate broadly informa6 tion to medicare beneficiaries (and pro7 spective medicare beneficiaries) on the

8 coverage options provided under this sec9 tion in order to promote an active, in10 formed selection among such options.

11 Such information shall be made available

12 on such a timely basis (such as 6 months

13 before the date an individual would first

14 attain eligibility for medicare on the

15 basis of age) as to permit individuals to

16 elect the MedicarePlus option during the

17 initial election period described in sub18 section (e)(1).

19 ‘‘(2) USE OF NONFEDERAL ENTITIES.—

20 The Secretary shall, to the maximum ex21 tent feasible, enter into contracts with

22 appropriate non-Federal entities to carry

23 out activities under this subsection.

24 ‘‘(3) SPECIFIC ACTIVITIES.—In carrying

25 out this subsection, the Secretary shall
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1 provide for at least the following activi2 ties in all areas in which MedicarePlus

3 products are offered:

4 ‘‘(A) INFORMATION BOOKLET.—

5 ‘‘(i) IN GENERAL.—The Sec6 retary shall publish an informa7 tion booklet and disseminate the

8 booklet to all individuals eligible

9 to elect the MedicarePlus option

10 under this section during cov11 erage election periods.

12 ‘‘(ii) INFORMATION INCLUDED.—

13 The booklet shall include infor14 mation presented in plain English

15 and in a standardized format re16 garding—

17 ‘‘(I) the benefits (including

18 cost-sharing) and premiums

19 for the various MedicarePlus

20 products in the areas in21 volved;

22 ‘‘(II) the quality of such

23 products, including consumer

24 satisfaction information; and
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1 ‘‘(III) rights and respon2 sibilities of medicare bene3 ficiaries under such products.

4 ‘‘(iii) PERIODIC UPDATING.—The

5 booklet shall be updated on a reg6 ular basis (not less often than

7 once every 12 months) to reflect

8 changes in the availability of

9 MedicarePlus products and the

10 benefits and premiums for such

11 products.

12 ‘‘(B) TOLL-FREE NUMBER.—The Sec13 retary shall maintain a toll-free num14 ber for inquiries regarding

15 MedicarePlus options and the oper16 ation of part C.

17 ‘‘(C) GENERAL INFORMATION IN MED18 ICARE HANDBOOK.—The Secretary shall

19 include information about the

20 MedicarePlus option provided under

21 this section in the annual notice of

22 medicare benefits under section 1804.

23 ‘‘(e) COVERAGE ELECTION PERIODS.—

24 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY

25 TO MAKE ELECTION.—
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1 ‘‘(A) IN GENERAL.—In the case of

2 an individual who first becomes enti3 tled to benefits under part A and en4 rolled under part B after the begin5 ning of the transition period (as de6 fined in subparagraph (B)), the indi7 vidual shall make the election under

8 this section during a period (of a du9 ration and beginning at a time speci10 fied by the Secretary) at the first time

11 the individual both is entitled to ben12 efits under part A and enrolled under

13 part B. Such period shall be specified

14 in a manner so that, in the case of an

15 individual who elects a MedicarePlus

16 product during the period, coverage

17 under the product becomes effective

18 as of the first date on which the indi19 vidual may receive such coverage.

20 ‘‘(B) TRANSITION PERIOD DEFINED.—

21 In this subsection, the term ‘transi22 tion period’ means, with respect to an

23 individual in an area, the period be24 ginning on the first day of the first

25 month in which a MedicarePlus prod-
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1 uct is first made available to individ2 uals in the area and ending with the

3 month preceding the beginning of the

4 first annual, coordinated election pe5 riod under paragraph (3).

6 ‘‘(2) DURING TRANSITION PERIOD.—Sub7 ject to paragraph (6)—

8 ‘‘(A) CONTINUOUS OPEN ENROLL9 MENT INTO A MEDICARE-PLUS OPTION.—

10 During the transition period, an indi11 vidual who is eligible to make an

12 election under this section and who

13 has elected the non-MedicarePlus op14 tion may change such election to a

15 MedicarePlus option at any time.

16 ‘‘(B) OPEN DISENROLLMENT BEFORE

17 END OF TRANSITION PERIOD.—

18 ‘‘(i) IN GENERAL.—During the

19 transition period, an individual

20 who has elected a MedicarePlus

21 option for a MedicarePlus prod22 uct may change such election to

23 another MedicarePlus product or

24 to the non-MedicarePlus option.
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1 ‘‘(ii) SPECIAL RULE.—During

2 the transition period, an individ3 ual who has elected a high de4 ductible/medisave product may

5 not change such election to a

6 MedicarePlus product that is not

7 a high deductible/medisave prod8 uct unless the individual has had

9 such election in effect for 12

10 months.

11 ‘‘(3) ANNUAL, COORDINATED ELECTION

12 PERIOD.—

13 ‘‘(A) IN GENERAL.—Subject to para14 graph (5), each individual who is eli15 gible to make an election under this

16 section may change such election

17 during annual, coordinated election

18 periods.

19 ‘‘(B) ANNUAL, COORDINATED ELEC20 TION PERIOD.—For purposes of this

21 section, the term ‘annual, coordinated

22 election period’ means, with respect

23 to a calendar year (beginning with

24 1998), the month of October before

25 such year.
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1 ‘‘(C) MEDICAREPLUS HEALTH FAIR

2 DURING OCTOBER, 1996.—In the month

3 of October, 1996, the Secretary shall

4 provide for a nationally coordinated

5 educational and publicity campaign

6 to inform individuals, who are eligi7 ble to elect MedicarePlus products,

8 about such products and the election

9 process provided under this section

10 (including the annual, coordinated

11 election periods that occur in subse12 quent years).

13 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OP14 TION.—

15 ‘‘(A) IN GENERAL.—In the case of

16 the first time an individual elects a

17 MedicarePlus option (other than a

18 high deductible/medisave product)

19 under this section, the individual

20 may discontinue such election

21 through the filing of an appropriate

22 notice during the 90-day period be23 ginning on the first day on which the

24 individual’s coverage under the
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1 MedicarePlus product under such op2 tion becomes effective.

3 ‘‘(B) EFFECT OF DISCONTINUATION

4 OF ELECTION.—An individual who dis5 continues an election under this

6 paragraph shall be deemed at the

7 time of such discontinuation to have

8 elected the Non-MedicarePlus option.

9 ‘‘(5) SPECIAL ELECTION PERIODS.—An

10 individual may discontinue an election of

11 a MedicarePlus product offered by a

12 MedicarePlus organization other than

13 during an annual, coordinated election

14 period and make a new election under

15 this section if—

16 ‘‘(A) the organization’s or prod17 uct’s certification under part C has

18 been terminated or the organization

19 has terminated or otherwise discon20 tinued providing the product;

21 ‘‘(B) in the case of an individual

22 who has elected a MedicarePlus prod23 uct offered by a MedicarePlus organi24 zation, the individual is no longer eli25 gible to elect the product because of a
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1 change in the individual’s place of

2 residence or other change in cir3 cumstances (specified by the Sec4 retary, but not including termination

5 of membership in a qualified associa6 tion in the case of a product offered

7 by a qualified association or termi8 nation of the individual’s enrollment

9 on the basis described in clause (i) or

10 (ii) section 1852(c)(3)(B));

11 ‘‘(C) the individual demonstrates

12 (in accordance with guidelines estab13 lished by the Secretary) that—

14 ‘‘(i) the organization offering

15 the product substantially violated

16 a material provision of the orga17 nization’s contract under part C

18 in relation to the individual and

19 the product; or

20 ‘‘(ii) the organization (or an

21 agent or other entity acting on

22 the organization’s behalf) materi23 ally misrepresented the product’s

24 provisions in marketing the prod25 uct to the individual; or
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1 ‘‘(D) the individual meets such

2 other conditions as the Secretary may

3 provide.

4 ‘‘(6) SPECIAL RULE FOR HIGH DEDUCT5 IBLE/MEDISAVE PRODUCTS.—Notwithstand6 ing the previous provisions of this sub7 section, an individual may elect a high

8 deductible/medisave product only during

9 an annual, coordinated election period

10 described in paragraph (3)(B) or during

11 the month of October, 1996.

12 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—

13 ‘‘(1) DURING INITIAL COVERAGE ELEC14 TION PERIOD.—An election of coverage

15 made during the initial coverage election

16 period under subsection (e)(1)(A) shall

17 take effect upon the date the individual

18 becomes entitled to benefits under part A

19 and enrolled under part B, except as the

20 Secretary may provide (consistent with

21 section 1838) in order to prevent retro22 active coverage.

23 ‘‘(2) DURING TRANSITION; 90-DAY

24 DISENROLLMENT OPTION.—An election of

25 coverage made under subsection (e)(2)
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1 and an election to discontinue a

2 MedicarePlus option under subsection

3 (e)(4) at any time shall take effect with

4 the first calendar month following the

5 date on which the election is made.

6 ‘‘(3) ANNUAL, COORDINATED ELECTION

7 PERIOD AND MEDISAVE ELECTION.—An elec8 tion of coverage made during an annual,

9 coordinated election period (as defined in

10 subsection (e)(3)(B)) in a year or for a

11 high deductible/medisave product shall

12 take effect as of the first day of the fol13 lowing year.

14 ‘‘(4) OTHER PERIODS.—An election of

15 coverage made during any other period

16 under subsection (e)(5) shall take effect

17 in such manner as the Secretary provides

18 in a manner consistent (to the extent

19 practicable) with protecting continuity of

20 health benefit coverage.

21 ‘‘(g) EFFECT OF ELECTION OF MEDICAREPLUS

22 OPTION.—Subject to the provisions of section

23 1855(f), payments under a contract with a

24 MedicarePlus organization under section

25 1857(a) with respect to an individual electing
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1 a MedicarePlus product offered by the organi2 zation shall be instead of the amounts which

3 (in the absence of the contract) would other4 wise be payable under parts A and B for items

5 and services furnished to the individual.

6 ‘‘(h) ADMINISTRATION.—

7 ‘‘(1) IN GENERAL.—This part and sec8 tions 1805 and 1876 shall be administered

9 through an operating division (A) that is

10 established or identified by the Secretary

11 in the Department of Health and Human

12 Services, (B) that is separate from the

13 Health Care Financing Administration,

14 and (C) the primary function of which is

15 the administration of this part and such

16 sections. The director of such division

17 shall be of equal pay and rank to that of

18 the individual responsible for overall ad19 ministration of parts A and B.

20 ‘‘(2) TRANSFER AUTHORITY.—The Sec21 retary shall transfer such personnel, ad22 ministrative support systems, assets,

23 records, funds, and other resources in the

24 Health Care Financing Administration to

25 the operating division referred to in
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1 paragraph (1) as are used in the adminis2 tration of section 1876 and as may be re3 quired to implement the provisions re4 ferred to in such paragraph promptly

5 and efficiently.’’.

6 SEC. 15002. MEDICAREPLUS PROGRAM.

7 (a) IN GENERAL.—Title XVIII is amended

8 by redesignating part C as part D and by in9 serting after part B the following new part:

10 ‘‘PART C—PROVISIONS RELATING TO

11 MEDICAREPLUS

12 ‘‘REQUIREMENTS FOR MEDICAREPLUS ORGANIZA13 TIONS; HIGH DEDUCTIBLE/MEDISAVE PROD14 UCTS

15 ‘‘SEC. 1851. (a) MEDICAREPLUS ORGANIZA16 TION DEFINED.—In this part, subject to the suc17 ceeding provisions of this section, the term

18 ‘MedicarePlus organization’ means a public or

19 private entity that is certified under section

20 1857 as meeting the requirements and stand21 ards of this part for such an organization.

22 ‘‘(b) ORGANIZED AND LICENSED UNDER

23 STATE LAW.—

24 ‘‘(1) IN GENERAL.—A MedicarePlus or25 ganization shall be organized and li-
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1 censed under State law to offer health in2 surance or health benefits coverage in

3 each State in which it offers a

4 MedicarePlus product.

5 ‘‘(2) EXCEPTION FOR TAFT-HARTLEY

6 SPONSORS.—Paragraph (1) shall not apply

7 to an MedicarePlus organization that is a

8 Taft-Hartley sponsor (as defined in sec9 tion 1852(c)(4)).

10 ‘‘(3) EXCEPTION FOR PROVIDER-SPON11 SORED ORGANIZATIONS.—Paragraph (1)

12 shall not apply to a MedicarePlus organi13 zation that is a provider-sponsored orga14 nization (as defined in section 1854(a))

15 except to the extent provided under sec16 tion 1857(c).

17 ‘‘(4) EXCEPTION FOR QUALIFIED ASSOCIA18 TIONS.—Paragraph (1) shall not apply to a

19 MedicarePlus organization that is a

20 qualified association (as defined in sec21 tion 1852(c)(4)(B)).

22 ‘‘(c) PREPAID PAYMENT.—A MedicarePlus

23 organization shall be compensated (except for

24 deductibles, coinsurance, and copayments)

25 for the provision of health care services to en-
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1 rolled members by a payment which is paid

2 on a periodic basis without regard to the date

3 the health care services are provided and

4 which is fixed without regard to the fre5 quency, extent, or kind of health care service

6 actually provided to a member.

7 ‘‘(d) ASSUMPTION OF FULL FINANCIAL

8 RISK.—The MedicarePlus organization shall

9 assume full financial risk on a prospective

10 basis for the provision of the health care serv11 ices (other than hospice care) for which bene12 fits are required to be provided under section

13 1852(a)(1), except that the organization—

14 ‘‘(1) may obtain insurance or make

15 other arrangements for the cost of pro16 viding to any enrolled member such serv17 ices the aggregate value of which exceeds

18 $5,000 in any year,

19 ‘‘(2) may obtain insurance or make

20 other arrangements for the cost of such

21 services provided to its enrolled members

22 other than through the organization be23 cause medical necessity required their

24 provision before they could be secured

25 through the organization,
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1 ‘‘(3) may obtain insurance or make

2 other arrangements for not more than 90

3 percent of the amount by which its costs

4 for any of its fiscal years exceed 115 per5 cent of its income for such fiscal year,

6 and

7 ‘‘(4) may make arrangements with

8 physicians or other health professionals,

9 health care institutions, or any combina10 tion of such individuals or institutions to

11 assume all or part of the financial risk on

12 a prospective basis for the provision of

13 basic health services by the physicians or

14 other health professionals or through the

15 institutions.

16 In the case of a MedicarePlus organization

17 that is a Taft-Hartley sponsor (as defined in

18 section 1852(c)(4)(A)) or a qualified associa19 tion (as defined in section 1852(c)(4)(B)), this

20 subsection shall not apply with respect to

21 MedicarePlus products offered by such orga22 nization and issued by an organization to

23 which subsection (b)(1) applies or by a pro24 vider-sponsored organization (as defined in

25 section 1854(a)).
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1 ‘‘(e) PROVISION AGAINST RISK OF INSOL2 VENCY.—

3 ‘‘(1) IN GENERAL.—Each MedicarePlus

4 organization shall meet standards under

5 section 1856 relating to the financial sol6 vency and capital adequacy of the organi7 zation. Such standards shall take into ac8 count the nature and type of

9 MedicarePlus products offered by the or10 ganization.

11 ‘‘(2) TREATMENT OF TAFT-HARTLEY SPON12 SORS.—An entity that is a Taft-Hartley

13 sponsor is deemed to meet the require14 ment of paragraph (1).

15 ‘‘(3) TREATMENT OF CERTAIN QUALIFIED

16 ASSOCIATIONS.—An entity that is a quali17 fied association is deemed to meet the re18 quirement of paragraph (1) with respect

19 to MedicarePlus products offered by such

20 association and issued by an organization

21 to which subsection (b)(1) applies or by a

22 provider-sponsored organization.

23 ‘‘(f) HIGH DEDUCTIBLE/MEDISAVE PRODUCT

24 DEFINED.—
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1 ‘‘(1) IN GENERAL.—In this part, the

2 term ‘high deductible/medisave product’

3 means a MedicarePlus product that—

4 ‘‘(A) provides reimbursement for

5 at least the items and services de6 scribed in section 1852(a)(1) in a year

7 but only after the enrollee incurs

8 countable expenses (as specified

9 under the product) equal to the

10 amount of a deductible (described in

11 paragraph (2));

12 ‘‘(B) counts as such expenses (for

13 purposes of such deductible) at least

14 all amounts that would have been

15 payable under parts A and B or by

16 the enrollee if the enrollee had elect17 ed to receive benefits through the

18 provisions of such parts; and

19 ‘‘(C) provides, after such deduct20 ible is met for a year and for all sub21 sequent expenses for benefits re22 ferred to in subparagraph (A) in the

23 year, for a level of reimbursement

24 that is not less than—
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1 ‘‘(i) 100 percent of such ex2 penses, or

3 ‘‘(ii) 100 percent of the

4 amounts that would have been

5 paid (without regard to any

6 deductibles or coinsurance)

7 under parts A and B with respect

8 to such expenses,

9 whichever is less. Such term does not

10 include the MedicarePlus MSA itself

11 or any contribution into such ac12 count.

13 ‘‘(2) DEDUCTIBLE.—The amount of de14 ductible under a high deductible/

15 medisave product—

16 ‘‘(A) for contract year 1997 shall

17 be not more than $10,000; and

18 ‘‘(B) for a subsequent contract

19 year shall be not more than the maxi20 mum amount of such deductible for

21 the previous contract year under this

22 paragraph increased by the national

23 average per capita growth rate under

24 section 1855(c)(3) for the year.
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1 If the amount of the deductible under

2 subparagraph (B) is not a multiple of $50,

3 the amount shall be rounded to the near4 est multiple of $50.

5 ‘‘(g) ORGANIZATIONS TREATED AS

6 MEDICAREPLUS ORGANIZATIONS DURING TRANSI7 TION.—Any of the following organizations

8 shall be considered to qualify as a

9 MedicarePlus organization for contract years

10 beginning before January 1, 1998:

11 ‘‘(1) HEALTH MAINTENANCE ORGANIZA12 TIONS.—An organization that is organized

13 under the laws of any State and that is a

14 qualified health maintenance organiza15 tion (as defined in section 1310(d) of the

16 Public Health Service Act), an organiza17 tion recognized under State law as a

18 health maintenance organization, or a

19 similar organization regulated under

20 State law for solvency in the same man21 ner and to the same extent as such a

22 health maintenance organization.

23 ‘‘(2) LICENSED INSURERS.—An organiza24 tion that is organized under the laws of

25 any State and—
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1 ‘‘(A) is licensed by a State agency

2 as an insurer for the offering of

3 health benefit coverage, or

4 ‘‘(B) is licensed by a State agency

5 as a service benefit plan,

6 but only for individuals residing in an

7 area in which the organization is li8 censed to offer health insurance cov9 erage.

10 ‘‘(3) CURRENT RISK-CONTRACTORS.—An

11 organization that is an eligible organiza12 tion (as defined in section 1876(b)) and

13 that has a risk-sharing contract in effect

14 under section 1876 as of the date of the

15 enactment of this section.

16 ‘‘REQUIREMENTS RELATING TO BENEFITS, PROVI17 SION OF SERVICES, ENROLLMENT, AND PRE18 MIUMS

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

20 ‘‘(1) IN GENERAL.—Except as provided

21 in section 1851(f)(1) with respect to high

22 deductible/medisave products, each

23 MedicarePlus product offered under this

24 part shall provide benefits for at least the

25 items and services for which benefits are

26 available under parts A and B consistent
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1 with the standards for coverage of such

2 items and services applicable under this

3 title.

4 ‘‘(2) ORGANIZATION AS SECONDARY

5 PAYER.—Notwithstanding any other provi6 sion of law, a MedicarePlus organization

7 may (in the case of the provision of items

8 and services to an individual under this

9 part under circumstances in which pay10 ment under this title is made secondary

11 pursuant to section 1862(b)(2)) charge or

12 authorize the provider of such services to

13 charge, in accordance with the charges

14 allowed under such law or policy—

15 ‘‘(A) the insurance carrier, em16 ployer, or other entity which under

17 such law, plan, or policy is to pay for

18 the provision of such services, or

19 ‘‘(B) such individual to the extent

20 that the individual has been paid

21 under such law, plan, or policy for

22 such services.

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

24 MedicarePlus product (other than a high

25 deductible/medisave product) offered by
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1 a MedicarePlus organization satisfies

2 paragraph (1) with respect to benefits for

3 items and services if the following re4 quirements are met:

5 ‘‘(A) FEE FOR SERVICE PROVIDERS.—

6 In the case of benefits furnished

7 through a provider that does not

8 have a contract with the organiza9 tion, the product provides for at least

10 the dollar amount of payment for

11 such items and services as would oth12 erwise be provided under parts A and

13 B.

14 ‘‘(B) PARTICIPATING PROVIDERS.—In

15 the case of benefits furnished

16 through a provider that has such a

17 contract, the individual’s liability for

18 payment for such items and services

19 does not exceed (after taking into ac20 count any deductible, which does not

21 exceed any deductible under parts A

22 and B) the lesser of the following:

23 ‘‘(i) NON-MEDICAREPLUS LIABIL24 ITY.—The amount of the liability

25 that the individual would have
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1 had (based on the provider being

2 a participating provider) if the in3 dividual had elected the non4 MedicarePlus option.

5 ‘‘(ii) MEDICARE COINSURANCE

6 APPLIED TO PRODUCT PAYMENT

7 RATES.—The applicable coinsur8 ance or copayment rate (that

9 would have applied under the

10 non-MedicarePlus option) of the

11 payment rate provided under the

12 contract.

13 ‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus

14 organization may not deny, limit, or condition

15 the coverage or provision of benefits under

16 this part based on the health status, claims

17 experience, receipt of health care, medical

18 history, or lack of evidence of insurability, of

19 an individual.

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

21 ‘‘(1) IN GENERAL.—Except as provided

22 in this subsection, a MedicarePlus orga23 nization shall provide that at any time

24 during which elections are accepted

25 under section 1805 with respect to a
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1 MedicarePlus product offered by the or2 ganization, the organization will accept

3 without restrictions individuals who are

4 eligible to make such election.

5 ‘‘(2) PRIORITY.—If the Secretary deter6 mines that a MedicarePlus organization,

7 in relation to a MedicarePlus product it

8 offers, has a capacity limit and the num9 ber of eligible individuals who elect the

10 product under section 1805 exceeds the

11 capacity limit, the organization may limit

12 the election of individuals of the product

13 under such section but only if priority in

14 election is provided—

15 ‘‘(A) first to such individuals as

16 have elected the product at the time

17 of the determination, and

18 ‘‘(B) then to other such individ19 uals in such a manner that does not

20 discriminate among the individuals

21 (who seek to elect the product) on a

22 basis described in subsection (b).

23 ‘‘(3) LIMITATION ON TERMINATION OF

24 ELECTION.—
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1 ‘‘(A) IN GENERAL.—Subject to sub2 paragraph (B), a MedicarePlus orga3 nization may not for any reason ter4 minate the election of any individual

5 under section 1805 for a

6 MedicarePlus product it offers.

7 ‘‘(B) BASIS FOR TERMINATION OF

8 ELECTION.—A MedicarePlus organiza9 tion may terminate an individual’s

10 election under section 1805 with re11 spect to a MedicarePlus product it of12 fers if—

13 ‘‘(i) any premiums required

14 with respect to such product are

15 not paid on a timely basis (con16 sistent with standards under sec17 tion 1856 that provide for a grace

18 period for late payment of pre19 miums),

20 ‘‘(ii) the individual has en21 gaged in disruptive behavior (as

22 specified in such standards), or

23 ‘‘(iii) the product is termi24 nated with respect to all individ25 uals under this part.
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1 Any individual whose election is so

2 terminated is deemed to have elected

3 the Non-MedicarePlus option (as de4 fined in section 1805(a)(3)(A)).

5 ‘‘(C) ORGANIZATION OBLIGATION

6 WITH RESPECT TO ELECTION FORMS.—

7 Pursuant to a contract under section

8 1858, each MedicarePlus organization

9 receiving an election form under sec10 tion 1805(c)(2) shall transmit to the

11 Secretary (at such time and in such

12 manner as the Secretary may specify)

13 a copy of such form or such other in14 formation respecting the election as

15 the Secretary may specify.

16 ‘‘(4) SPECIAL RULES FOR LIMITED EN17 ROLLMENT MEDICAREPLUS ORGANIZATIONS.—

18 ‘‘(A) TAFT-HARTLEY SPONSORS.—

19 ‘‘(i) IN GENERAL.—Subject to

20 subparagraph (C), a MedicarePlus

21 organization that is a Taft-Hart22 ley sponsor (as defined in clause

23 (ii)) shall limit eligibility of en24 rollees under this part for

25 MedicarePlus products it offers to
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1 individuals who are entitled to

2 obtain benefits through such

3 products under the terms of an

4 applicable collective bargaining

5 agreement.

6 ‘‘(ii) TAFT-HARTLEY SPONSOR.—

7 In this part and section 1805, the

8 term ‘Taft-Hartley sponsor’

9 means, in relation to a group

10 health plan that is established or

11 maintained by two or more em12 ployers or jointly by one or more

13 employers and one or more em14 ployee organizations, the associa15 tion, committee, joint board of

16 trustees, or other similar group of

17 representatives of parties who es18 tablish or maintain the plan.

19 ‘‘(B) QUALIFIED ASSOCIATIONS.—

20 ‘‘(i) IN GENERAL.—Subject to

21 subparagraph (C), a MedicarePlus

22 organization that is a qualified

23 association (as defined in clause

24 (iii)) shall limit eligibility of indi25 viduals under this part for prod-
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1 ucts it offers to individuals who

2 are members of the association

3 (or who are spouses of such indi4 viduals).

5 ‘‘(ii) LIMITATION ON TERMI6 NATION OF COVERAGE.—Such a

7 qualifying association offering a

8 MedicarePlus product to an indi9 vidual may not terminate cov10 erage of the individual on the

11 basis that the individual is no

12 longer a member of the associa13 tion except pursuant to a change

14 of election during an open elec15 tion period occurring on or after

16 the date of the termination of

17 membership.

18 ‘‘(iii) QUALIFIED ASSOCIATION.—

19 In this part and section 1805, the

20 term ‘qualified association’ means

21 an association, religious fraternal

22 organization, or other organiza23 tion (which may be a trade, indus24 try, or professional association, a

25 chamber of commerce, or a public
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1 entity association) that the Sec2 retary finds—

3 ‘‘(I) has been formed for

4 purposes other than the sale

5 of any health insurance and

6 does not restrict membership

7 based on the health status,

8 claims experience, receipt of

9 health care, medical history,

10 or lack of evidence of insur11 ability, of an individual,

12 ‘‘(II) does not exist solely

13 or principally for the purpose

14 of selling insurance, and

15 ‘‘(III) has at least 1,000 in16 dividual members or 200 em17 ployer members.

18 Such term includes a subsidiary

19 or corporation that is wholly

20 owned by one or more qualified

21 organizations.

22 ‘‘(C) LIMITATION.—Rules of eligi23 bility to carry out the previous sub24 paragraphs of this paragraph shall

25 not have the effect of denying eligi-
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1 bility to individuals on the basis of

2 health status, claims experience, re3 ceipt of health care, medical history,

4 or lack of evidence of insurability.

5 ‘‘(D) LIMITED ENROLLMENT

6 MEDICAREPLUS ORGANIZATION.—In this

7 part and section 1805, the term ‘lim8 ited enrollment MedicarePlus organi9 zation’ means a MedicarePlus organi10 zation that is a Taft-Hartley sponsor

11 or a qualified association.

12 ‘‘(E) EMPLOYER, ETC.—In this para13 graph, the terms ‘employer’, ‘em14 ployee organization’, and ‘group

15 health plan’ have the meanings given

16 such terms for purposes of part 6 of

17 subtitle B of title I of the Employee

18 Retirement Income Security Act of

19 1974.

20 ‘‘(d) SUBMISSION AND CHARGING OF PRE21 MIUMS.—

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

23 organization shall file with the Secretary

24 each year, in a form and manner and at

25 a time specified by the Secretary—
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1 ‘‘(A) the amount of the monthly

2 premiums for coverage under each

3 MedicarePlus product it offers under

4 this part in each payment area (as de5 termined for purposes of section

6 1855) in which the product is being

7 offered; and

8 ‘‘(B) the enrollment capacity in re9 lation to the product in each such

10 area.

11 ‘‘(2) AMOUNTS OF PREMIUMS CHARGED.—

12 The amount of the monthly premium

13 charged by a MedicarePlus organization

14 for a MedicarePlus product offered in a

15 payment area to an individual under this

16 part shall be equal to the amount (if any)

17 by which—

18 ‘‘(A) the amount of the monthly

19 premium for the product for the pe20 riod involved, as established under

21 paragraph (3) and submitted under

22 paragraph (1), exceeds

‘‘(B)(i) 1 23 ⁄12 of the annual

24 MedicarePlus capitation rate speci25 fied in section 1855(b)(2) for the area
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1 and period involved, or (ii) in the

2 case of a high deductible/medisave

3 product, the monthly adjusted

4 MedicarePlus capitation rate speci5 fied in section 1855(b)(1) for the indi6 vidual and period involved.

7 ‘‘(3) UNIFORM PREMIUM.—

8 ‘‘(A) IN GENERAL.—Except as pro9 vided in subparagraph (B), the pre10 miums charged by a Medi11 carePlus organization under this part

12 may not vary among individuals who

13 reside in the same payment area.

14 ‘‘(B) EXCEPTION FOR HIGH DEDUCT15 IBLE/MEDISAVE PRODUCTS.—A

16 MedicarePlus organization shall es17 tablish premiums for any high de18 ductible/medisave product it offers in

19 a payment area based on each of the

20 risk adjustment categories estab21 lished for purposes of determining

22 the amount of the payment to

23 MedicarePlus organizations under

24 section 1855(b)(1) and using the iden25 tical demographic and other adjust-
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1 ments among such categories as are

2 used for such purposes.

3 ‘‘(4) TERMS AND CONDITIONS OF IMPOS4 ING PREMIUMS.—Each MedicarePlus orga5 nization shall permit the payment of

6 monthly premiums on a monthly basis

7 and may terminate election of individuals

8 for a MedicarePlus product for failure to

9 make premium payments only in accord10 ance with subsection (c)(3)(B).

11 ‘‘(5) RELATION OF PREMIUMS AND COST12 SHARING TO BENEFITS.—In no case may the

13 portion of a MedicarePlus organization’s

14 premium rate and the actuarial value of

15 its deductibles, coinsurance, and

16 copayments charged (to the extent attrib17 utable to the minimum benefits described

18 in subsection (a)(1) and not counting any

19 amount attributable to balance billing) to

20 individuals who are enrolled under this

21 part with the organization exceed the ac22 tuarial value of the coinsurance and

23 deductibles that would be applicable on

24 the average to individuals enrolled under

25 this part with the organization (or, if the
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1 Secretary finds that adequate data are

2 not available to determine that actuarial

3 value, the actuarial value of the coinsur4 ance and deductibles applicable on the

5 average to individuals in the area, in the

6 State, or in the United States, eligible to

7 enroll under this part with the organiza8 tion, or other appropriate data) and enti9 tled to benefits under part A and enrolled

10 under part B if they were not members of

11 a MedicarePlus organization.

12 ‘‘(e) REQUIREMENT FOR ADDITIONAL BENE13 FITS, PART B PREMIUM DISCOUNT REBATES, OR

14 BOTH.—

15 ‘‘(1) REQUIREMENT.—

16 ‘‘(A) IN GENERAL.—Each Medi17 carePlus organization (in relation to

18 a MedicarePlus product it offers)

19 shall provide that if there is an excess

20 amount (as defined in subparagraph

21 (B)) for the product for a contract

22 year, subject to the succeeding provi23 sions of this subsection, the organiza24 tion shall provide to individuals such

25 additional benefits (as the organiza-
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1 tion may specify), a monetary rebate

2 (paid on a monthly basis) of the part

3 B monthly premium, or a combina4 tion thereof, in an total value which

5 is at least equal to the adjusted ex6 cess amount (as defined in subpara7 graph (C)).

8 ‘‘(B) EXCESS AMOUNT.—For pur9 poses of this paragraph, the ‘excess

10 amount’, for an organization for a

11 product, is the amount (if any) by

12 which—

13 ‘‘(i) the average of the capita14 tion payments made to the orga15 nization under this part for the

16 product at the beginning of con17 tract year, exceeds

18 ‘‘(ii) the actuarial value of the

19 minimum benefits described in

20 subsection (a)(1) under the prod21 uct for individuals under this

22 part, as determined based upon

23 an adjusted community rate de24 scribed in paragraph (5) (as re25 duced for the actuarial value of
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1 the coinsurance and deductibles

2 under parts A and B).

3 ‘‘(C) ADJUSTED EXCESS AMOUNT.—

4 For purposes of this paragraph, the

5 ‘adjusted excess amount’, for an orga6 nization for a product, is the excess

7 amount reduced to reflect any

8 amount withheld and reserved for the

9 organization for the year under para10 graph (3).

11 ‘‘(D) NO APPLICATION TO HIGH DE12 DUCTIBLE/MEDISAVE PRODUCT.—Sub13 paragraph (A) shall not apply to a

14 high deductible/medisave product.

15 ‘‘(E) UNIFORM APPLICATION.—This

16 paragraph shall be applied uniformly

17 for all enrollees for a product in a

18 service area.

19 ‘‘(F) CONSTRUCTION.—Nothing in

20 this subsection shall be construed as

21 preventing a MedicarePlus organiza22 tion from providing health care bene23 fits that are in addition to the bene24 fits otherwise required to be provided

25 under this paragraph and from im-
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1 posing a premium for such additional

2 benefits.

3 ‘‘(2) LIMITATION ON AMOUNT OF PART B

4 PREMIUM DISCOUNT REBATE.—In no case

5 shall the amount of a part B premium

6 discount rebate under paragraph (1)(A)

7 exceed, with respect to a month, the

8 amount of premiums imposed under part

9 B (not taking into account section 1839(b)

10 (relating to penalty for late enrollment)

11 or 1839(h) (relating to affluence testing)),

12 for the individual for the month. Except

13 as provided in the previous sentence, a

14 MedicarePlus organization is not author15 ized to provide for cash or other mone16 tary rebates as an inducement for enroll17 ment or otherwise.

18 ‘‘(3) STABILIZATION FUND.—A Medi19 carePlus organization may provide that a

20 part of the value of an excess actuarial

21 amount described in paragraph (1) be

22 withheld and reserved in the Federal

23 Hospital Insurance Trust Fund and in the

24 Federal Supplementary Medical Insur25 ance Trust Fund (in such proportions as
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1 the Secretary determines to be appro2 priate) by the Secretary for subsequent

3 annual contract periods, to the extent re4 quired to stabilize and prevent undue

5 fluctuations in the additional benefits

6 and rebates offered in those subsequent

7 periods by the organization in accord8 ance with such paragraph. Any of such

9 value of amount reserved which is not

10 provided as additional benefits described

11 in paragraph (1)(A) to individuals elect12 ing the MedicarePlus product in accord13 ance with such paragraph prior to the

14 end of such periods, shall revert for the

15 use of such trust funds.

16 ‘‘(4) DETERMINATION BASED ON INSUFFI17 CIENT DATA.—For purposes of this sub18 section, if the Secretary finds that there

19 is insufficient enrollment experience (in20 cluding no enrollment experience in the

21 case of a provider-sponsored organiza22 tion) to determine an average of the capi23 tation payments to be made under this

24 part at the beginning of a contract pe25 riod, the Secretary may determine such
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1 an average based on the enrollment expe2 rience of other contracts entered into

3 under this part.

4 ‘‘(5) ADJUSTED COMMUNITY RATE.—

5 ‘‘(A) IN GENERAL.—For purposes of

6 this subsection, subject to subpara7 graph (B), the term ‘adjusted commu8 nity rate’ for a service or services

9 means, at the election of a

10 MedicarePlus organization, either—

11 ‘‘(i) the rate of payment for

12 that service or services which the

13 Secretary annually determines

14 would apply to an individual

15 electing a MedicarePlus product

16 under this part if the rate of pay17 ment were determined under a

18 ‘community rating system’ (as de19 fined in section 1302(8) of the

20 Public Health Service Act, other

21 than subparagraph (C)), or

22 ‘‘(ii) such portion of the

23 weighted aggregate premium,

24 which the Secretary annually es25 timates would apply to such an
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1 individual, as the Secretary annu2 ally estimates is attributable to

3 that service or services,

4 but adjusted for differences between

5 the utilization characteristics of the

6 individuals electing coverage under

7 this part and the utilization charac8 teristics of the other enrollees with

9 the organization (or, if the Secretary

10 finds that adequate data are not

11 available to adjust for those dif12 ferences, the differences between the

13 utilization characteristics of individ14 uals selecting other MedicarePlus

15 coverage, or individuals in the area,

16 in the State, or in the United States,

17 eligible to elect MedicarePlus cov18 erage under this part and the utiliza19 tion characteristics of the rest of the

20 population in the area, in the State,

21 or in the United States, respectively).

22 ‘‘(B) SPECIAL RULE FOR PROVIDER23 SPONSORED ORGANIZATIONS.—In the

24 case of a MedicarePlus organization

25 that is a provider-sponsored organi-
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1 zation, the adjusted community rate

2 under subparagraph (A) for a

3 MedicarePlus product may be com4 puted (in a manner specified by the

5 Secretary) using data in the general

6 commercial marketplace or (during a

7 transition period) based on the costs

8 incurred by the organization in pro9 viding such a product.

10 ‘‘(f) RULES REGARDING PHYSICIAN PARTICI11 PATION.—

12 ‘‘(1) PROCEDURES.—Each MedicarePlus

13 organization shall establish reasonable

14 procedures relating to the participation

15 (under an agreement between a physi16 cian and the organization) of physicians

17 under MedicarePlus products offered by

18 the organization under this part. Such

19 procedures shall include—

20 ‘‘(A) providing notice of the rules

21 regarding participation,

22 ‘‘(B) providing written notice of

23 participation decisions that are ad24 verse to physicians, and
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1 ‘‘(C) providing a process within

2 the organization for appealing ad3 verse decisions, including the presen4 tation of information and views of the

5 physician regarding such decision.

6 ‘‘(2) CONSULTATION IN MEDICAL POLI7 CIES.—A MedicarePlus organization shall

8 consult with physicians who have en9 tered into participation agreements with

10 the organization regarding the organiza11 tion’s medical policy, quality, and medi12 cal management procedures.

13 ‘‘(3) LIMITATIONS ON PHYSICIAN INCEN14 TIVE PLANS.—

15 ‘‘(A) IN GENERAL.—Each Medi16 carePlus organization may not oper17 ate any physician incentive plan (as

18 defined in subparagraph (B)) unless

19 the following requirements are met:

20 ‘‘(i) No specific payment is

21 made directly or indirectly under

22 the plan to a physician or physi23 cian group as an inducement to

24 reduce or limit medically nec25 essary services provided with re-
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1 spect to a specific individual en2 rolled with the organization.

3 ‘‘(ii) If the plan places a physi4 cian or physician group at sub5 stantial financial risk (as deter6 mined by the Secretary) for serv7 ices not provided by the physi8 cian or physician group, the orga9 nization—

10 ‘‘(I) provides stop-loss pro11 tection for the physician or

12 group that is adequate and

13 appropriate, based on stand14 ards developed by the Sec15 retary that take into account

16 the number of physicians

17 placed at such substantial fi18 nancial risk in the group or

19 under the plan and the num20 ber of individuals enrolled

21 with the organization who re22 ceive services from the physi23 cian or the physician group,

24 and
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1 ‘‘(II) conducts periodic

2 surveys of both individuals

3 enrolled and individuals pre4 viously enrolled with the or5 ganization to determine the

6 degree of access of such indi7 viduals to services provided

8 by the organization and satis9 faction with the quality of

10 such services.

11 ‘‘(iii) The organization pro12 vides the Secretary with descrip13 tive information regarding the

14 plan, sufficient to permit the Sec15 retary to determine whether the

16 plan is in compliance with the re17 quirements of this subparagraph.

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

20 ‘physician incentive plan’ means any

21 compensation arrangement between

22 a MedicarePlus organization and a

23 physician or physician group that

24 may directly or indirectly have the ef25 fect of reducing or limiting services
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1 provided with respect to individuals

2 enrolled with the organization under

3 this part.

4 ‘‘(4) LIMITATION ON PROVIDER INDEM5 NIFICATION.—A MedicarePlus organization

6 may not provide (directly or indirectly)

7 for a provider (or group of providers) to

8 indemnify the organization against any

9 liability resulting from a civil action

10 brought by or on behalf of an enrollee

11 under this part for any damage caused to

12 the enrollee by the organization’s denial

13 of medically necessary care.

14 ‘‘(5) EXCEPTION FOR CERTAIN FEE-FOR15 SERVICE PLANS.—The previous provisions

16 of this subsection shall not apply in the

17 case of a MedicarePlus organization in

18 relation to a MedicarePlus product if the

19 organization does not have agreements

20 between physicians and the organization

21 for the provision of benefits under the

22 product.

23 ‘‘(g) APPROPRIATE RANGE OF SERVICES.—A

24 MedicarePlus organization shall not deny any

25 health care professionals, based solely on the
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1 license or certification as applicable under

2 State law, the ability to participate in provid3 ing covered health care services, or be reim4 bursed or indemnified by a network plan for

5 providing such services under this part.

6 ‘‘(h) PROVISION OF INFORMATION.—A

7 MedicarePlus organization shall provide the

8 Secretary with such information on the orga9 nization and each MedicarePlus product it of10 fers as may be required for the preparation of

11 the information booklet described in section

12 1805(d)(3)(A).

13 ‘‘(i) COORDINATED ACUTE AND LONG-TERM

14 CARE BENEFITS UNDER A MEDICAREPLUS PROD15 UCT.—Nothing in this part shall be construed

16 as preventing a State from coordinating bene17 fits under its MediGrant program under title

18 XXI with those provided under a

19 MedicarePlus product in a manner that

20 assures continuity of a full-range of acute

21 care and long-term care services to poor el22 derly or disabled individuals eligible for bene23 fits under this title and under such program.

24 ‘‘(j) TRANSITIONAL FILE AND USE FOR CER25 TAIN REQUIREMENTS.—
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1 ‘‘(1) IN GENERAL.—In the case of a

2 MedicarePlus product proposed to be of3 fered before the end of the transition pe4 riod (as defined in section 1805(e)(1)(B)),

5 by a MedicarePlus organization de6 scribed in section 1851(g)(3) or by a

7 MedicarePlus organization with a con8 tract in effect under section 1858, if the

9 organization submits complete informa10 tion to the Secretary regarding the prod11 uct demonstrating that the product meets

12 the requirements and standards under

13 subsections (a), (d), and (e) (relating to

14 benefits and premiums), the product shall

15 be deemed as meeting such requirements

16 and standards under such subsections

17 unless the Secretary disapproves the

18 product within 60 days after the date of

19 submission of the complete information.

20 ‘‘(2) CONSTRUCTION.—Nothing in para21 graph (1) shall be construed as waiving

22 the requirement of a contract under sec23 tion 1858 or waiving requirements and

24 standards not referred to in paragraph

25 (1).
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1 ‘‘PATIENT PROTECTION STANDARDS

2 ‘‘SEC. 1853. (a) DISCLOSURE TO ENROLL3 EES.—A MedicarePlus organization shall dis4 close in clear, accurate, and standardized

5 form, information regarding all of the follow6 ing for each MedicarePlus product it offers:

7 ‘‘(1) Benefits under the MedicarePlus

8 product offered, including exclusions

9 from coverage and, if it is a high deduct10 ible/medisave product, a comparison of

11 benefits under such a product with bene12 fits under other MedicarePlus products.

13 ‘‘(2) Rules regarding prior authoriza14 tion or other review requirements that

15 could result in nonpayment.

16 ‘‘(3) Potential liability for cost-sharing

17 for out-of-network services.

18 ‘‘(4) The number, mix, and distribu19 tion of participating providers.

20 ‘‘(5) The financial obligations of the

21 enrollee, including premiums,

22 deductibles, co-payments, and maximum

23 limits on out-of-pocket losses for items

24 and services (both in and out of net25 work).
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1 ‘‘(6) Statistics on enrollee satisfaction

2 with the product and organization, in3 cluding rates of reenrollment.

4 ‘‘(7) Enrollee rights and responsibil5 ities, including the grievance process pro6 vided under subsection (f).

7 ‘‘(8) A statement that the use of the

8 911 emergency telephone number is ap9 propriate in emergency situations and an

10 explanation of what constitutes an emer11 gency situation.

12 ‘‘(9) A description of the organiza13 tion’s quality assurance program under

14 subsection (d).

15 Such information shall be disclosed to each

16 enrollee under this part at the time of enroll17 ment and at least annually thereafter.

18 ‘‘(b) ACCESS TO SERVICES.—

19 ‘‘(1) IN GENERAL.—A MedicarePlus or20 ganization offering a MedicarePlus prod21 uct may restrict the providers from

22 whom the benefits under the product are

23 provided so long as—

24 ‘‘(A) the organization makes such

25 benefits available and accessible to
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1 each individual electing the product

2 within the product service area with

3 reasonable promptness and in a man4 ner which assures continuity in the

5 provision of benefits;

6 ‘‘(B) when medically necessary

7 the organization makes such benefits

8 available and accessible 24 hours a

9 day and 7 days a week;

10 ‘‘(C) the product provides for re11 imbursement with respect to services

12 which are covered under subpara13 graphs (A) and (B) and which are pro14 vided to such an individual other

15 than through the organization, if—

16 ‘‘(i) the services were medi17 cally necessary and immediately

18 required because of an unfore19 seen illness, injury, or condition,

20 and

21 ‘‘(ii) it was not reasonable

22 given the circumstances to obtain

23 the services through the organi24 zation; and
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1 ‘‘(D) coverage is provided for

2 emergency services (as defined in

3 paragraph (5)) without regard to

4 prior authorization or the emergency

5 care provider’s contractual relation6 ship with the organization.

7 ‘‘(2) MINIMUM PAYMENT LEVELS WHERE

8 PROVIDING POINT-OF-SERVICE COVERAGE.—If

9 a MedicarePlus product provides benefits

10 for items and services (not described in

11 paragraph (1)(C)) through a network of

12 providers and also permits payment to be

13 made under the product for such items

14 and services not provided through such a

15 network, the payment level under the

16 product with respect to such items and

17 services furnished outside the network

18 shall be at least 70 percent (or, if the ef19 fective cost-sharing rate is 50 percent, at

20 least 35 percent) of the lesser of—

21 ‘‘(A) the payment basis (deter22 mined without regard to deductibles

23 and cost-sharing) that would have ap24 plied for such items and services

25 under parts A and B, or
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1 ‘‘(B) the amount charged by the

2 entity furnishing such items and serv3 ices.

4 ‘‘(3) PROTECTION OF ENROLLEES FOR

5 CERTAIN EMERGENCY SERVICES.—

6 ‘‘(A) PARTICIPATING PROVIDERS.—In

7 the case of emergency services de8 scribed in subparagraph (C) which

9 are furnished by a participating phy10 sician or provider of services to an in11 dividual enrolled with a

12 MedicarePlus organization under this

13 section, the applicable participation

14 agreement is deemed to provide that

15 the physician or provider of services

16 will accept as payment in full from

17 the organization for such emergency

18 services described in subparagraph

19 (C) the amount that would be payable

20 to the physician or provider of serv21 ices under part B and from the indi22 vidual under such part, if the individ23 ual were not enrolled with such an

24 organization under this part.
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1 ‘‘(B) NONPARTICIPATING PROVID2 ERS.—In the case of emergency serv3 ices described in subparagraph (C)

4 which are furnished by a

5 nonparticipating physician, the limi6 tations on actual charges for such

7 services otherwise applicable under

8 part B (to services furnished by indi9 viduals not enrolled with a

10 MedicarePlus organization under this

11 section) shall apply in the same man12 ner as such limitations apply to serv13 ices furnished to individuals not en14 rolled with such an organization.

15 ‘‘(C) EMERGENCY SERVICES DE16 SCRIBED.—The emergency services de17 scribed in this subparagraph are

18 emergency services which which are

19 furnished to an enrollee of a

20 MedicarePlus organization under this

21 part by a physician or provider of

22 services that is not under a contract

23 with the organization.

24 ‘‘(4) TIMELY AUTHORIZATION FOR

25 PROMPTLY NEEDED CARE IDENTIFIED AS A
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1 RESULT OF REQUIRED SCREENING EVALUA2 TION.—

3 ‘‘(A) ACCESS TO PROCESS.—A

4 MedicarePlus organization shall pro5 vide access 24 hours a day, 7 days a

6 week to such persons as may be au7 thorized to make any prior authoriza8 tions required by the organization for

9 coverage of items and services (other

10 than emergency services) that a treat11 ing physician or other emergency de12 partment personnel identify, pursu13 ant to a screening evaluation re14 quired under section 1867, as being

15 needed promptly by an individual en16 rolled with the organization under

17 this part.

18 ‘‘(B) DEEMED APPROVAL.—A

19 MedicarePlus organization is deemed

20 to have approved a request for such

21 promptly needed items and services if

22 the physician or other emergency de23 partment personnel involved—

24 ‘‘(i) has made a reasonable ef25 fort to contact such a person for
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1 authorization to provide an ap2 propriate referral for such items

3 and services or to provide the

4 items and services to the individ5 ual and access to the person has

6 not been provided (as required in

7 subparagraph (A)), or

8 ‘‘(ii) has requested such au9 thorization from the person and

10 the person has not denied the au11 thorization within 30 minutes

12 after the time the request is

13 made.

14 ‘‘(C) EFFECT OF APPROVAL.—Ap15 proval of a request for a prior author16 ization determination (including a

17 deemed approval under subpara18 graph (B)) shall be treated as ap19 proval of a request for any items and

20 services that are required to treat the

21 medical condition identified pursuant

22 to the required screening evaluation.

23 ‘‘(5) DEFINITION OF EMERGENCY SERV24 ICES.—In this subsection, the term ‘emer25 gency services’ means—
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1 ‘‘(A) health care items and serv2 ices furnished in the emergency de3 partment of a hospital (including a

4 trauma center), and

5 ‘‘(B) ancillary services routinely

6 available to such department,

7 to the extent they are required to evalu8 ate and treat an emergency medical con9 dition (as defined in paragraph (6)) until

10 the condition is stabilized.

11 ‘‘(6) EMERGENCY MEDICAL CONDITION.—

12 In paragraph (5), the term ‘emergency

13 medical condition’ means a medical con14 dition, the onset of which is sudden, that

15 manifests itself by symptoms of sufficient

16 severity, including severe pain, that a

17 prudent layperson, who possesses an av18 erage knowledge of health and medicine,

19 could reasonably expect the absence of

20 immediate medical attention to result

21 in—

22 ‘‘(A) placing the person’s health in

23 serious jeopardy,

24 ‘‘(B) serious impairment to bodily

25 functions, or
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1 ‘‘(C) serious dysfunction of any

2 bodily organ or part.

3 ‘‘(c) CONFIDENTIALITY AND ACCURACY OF EN4 ROLLEE RECORDS.—Each MedicarePlus organi5 zation shall establish procedures—

6 ‘‘(1) to safeguard the privacy of indi7 vidually identifiable enrollee informa8 tion, and

9 ‘‘(2) to maintain accurate and timely

10 medical records for enrollees.

11 ‘‘(d) QUALITY ASSURANCE PROGRAM.—

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

13 organization must have arrangements, es14 tablished in accordance with regulations

15 of the Secretary, for an ongoing quality

16 assurance program for health care serv17 ices it provides to such individuals.

18 ‘‘(2) ELEMENTS OF PROGRAM.—The

19 quality assurance program shall—

20 ‘‘(A) stress health outcomes;

21 ‘‘(B) provide for the establishment

22 of written protocols for utilization re23 view, based on current standards of

24 medical practice;
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1 ‘‘(C) provide review by physicians

2 and other health care professionals of

3 the process followed in the provision

4 of such health care services;

5 ‘‘(D) monitors and evaluates high

6 volume and high risk services and the

7 care of acute and chronic conditions;

8 ‘‘(E) evaluates the continuity and

9 coordination of care that enrollees re10 ceive;

11 ‘‘(F) has mechanisms to detect

12 both underutilization and

13 overutilization of services;

14 ‘‘(G) after identifying areas for

15 improvement, establishes or alters

16 practice parameters;

17 ‘‘(H) takes action to improve qual18 ity and assesses the effectiveness of

19 such action through systematic fol20 low-up;

21 ‘‘(I) makes available information

22 on quality and outcomes measures to

23 facilitate beneficiary comparison and

24 choice of health coverage options (in

25 such form and on such quality and
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1 outcomes measures as the Secretary

2 determines to be appropriate);

3 ‘‘(J) is evaluated on an ongoing

4 basis as to its effectiveness; and

5 ‘‘(K) provide for external accredi6 tation or review, by a utilization and

7 quality control peer review organiza8 tion under part B of title XI or other

9 qualified independent review organi10 zation, of the quality of services fur11 nished by the organization meets pro12 fessionally recognized standards of

13 health care (including providing ade14 quate access of enrollees to services).

15 ‘‘(3) EXCEPTION FOR CERTAIN FEE-FOR16 SERVICE PLANS.—Paragraph (1) and sub17 section (c)(2) shall not apply in the case

18 of a MedicarePlus organization in rela19 tion to a MedicarePlus product to the ex20 tent the organization provides for cov21 erage of benefits without restrictions re22 lating to utilization and without regard

23 to whether the provider has a contract or

24 other arrangement with the plan for the

25 provision of such benefits.
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1 ‘‘(4) TREATMENT OF ACCREDITATION.—

2 The Secretary shall provide that a

3 MedicarePlus organization is deemed to

4 meet the requirements of paragraphs (1)

5 and (2) of this subsection and subsection

6 (c) if the organization is accredited (and

7 periodically reaccredited) by a private

8 organization under a process that the

9 Secretary has determined assures that

10 the organization meets standards that

11 are no less stringent than the standards

12 established under section 1856 to carry

13 out this subsection and subsection (c).

14 ‘‘(e) COVERAGE DETERMINATIONS.—

15 ‘‘(1) DECISIONS ON NONEMERGENCY

16 CARE.—A MedicarePlus organization shall

17 make determinations regarding author18 ization requests for nonemergency care

19 on a timely basis, depending on the ur20 gency of the situation.

21 ‘‘(2) DETERMINATIONS OF MEDICAL NE22 CESSITY BY PHYSICIANS.—A MedicarePlus

23 organization shall provide for all deter24 minations denying coverage based on a
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1 lack of medical necessity to be made only

2 by a physician.

3 ‘‘(3) APPEALS.—

4 ‘‘(A) IN GENERAL.—Appeals from a

5 determination of an organization de6 nying coverage shall be decided with7 in 30 days of the date of receipt of

8 medical information, but not later

9 than 60 days after the date of the de10 cision.

11 ‘‘(B) PHYSICIAN DECISION ON CER12 TAIN APPEALS.—Appeal decisions relat13 ing to a determination to deny cov14 erage based on a lack of medical ne15 cessity shall be made only by a physi16 cian.

17 ‘‘(C) EMERGENCY CASES.—Appeals

18 from such a determination involving

19 a life-threatening or emergency situa20 tion shall be decided on an expedited

21 basis.

22 ‘‘(f) GRIEVANCES AND APPEALS.—

23 ‘‘(1) GRIEVANCE MECHANISM.—Each

24 MedicarePlus organization must provide

25 meaningful procedures for hearing and
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1 resolving grievances between the organi2 zation (including any entity or individual

3 through which the organization provides

4 health care services) and enrollees under

5 this part.

6 ‘‘(2) APPEALS.—An enrollee with an or7 ganization under this part who is dissat8 isfied by reason of the enrollee’s failure

9 to receive any health service to which the

10 enrollee believes the enrollee is entitled

11 and at no greater charge than the en12 rollee believes the enrollee is required to

13 pay is entitled, if the amount in con14 troversy is $100 or more, to a hearing be15 fore the Secretary to the same extent as

16 is provided in section 205(b), and in any

17 such hearing the Secretary shall make

18 the organization a party. If the amount in

19 controversy is $1,000 or more, the indi20 vidual or organization shall, upon notify21 ing the other party, be entitled to judicial

22 review of the Secretary’s final decision as

23 provided in section 205(g), and both the

24 individual and the organization shall be

25 entitled to be parties to that judicial re-
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1 view. In applying sections 205(b) and

2 205(g) as provided in this subparagraph,

3 and in applying section 205(l) thereto,

4 any reference therein to the Commis5 sioner of Social Security or the Social Se6 curity Administration shall be considered

7 a reference to the Secretary or the De8 partment of Health and Human Services,

9 respectively.

10 ‘‘(3) COORDINATION WITH SECRETARY OF

11 LABOR.—The Secretary shall consult with

12 the Secretary of Labor so as to ensure

13 that the requirements of this subsection,

14 as they apply in the case of grievances re15 ferred to in paragraph (1) to which sec16 tion 503 of the Employee Retirement In17 come Security Act of 1974 applies, are ap18 plied in a manner consistent with the re19 quirements of such section 503.

20 ‘‘(g) INFORMATION ON ADVANCE DIREC21 TIVES.—Each MedicarePlus organization shall

22 meet the requirement of section 1866(f) (relat23 ing to maintaining written policies and proce24 dures respecting advance directives).

25 ‘‘(h) APPROVAL OF MARKETING MATERIALS.—
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1 ‘‘(1) SUBMISSION.—Each MedicarePlus

2 organization may not distribute market3 ing materials unless—

4 ‘‘(A) at least 45 days before the

5 date of distribution the organization

6 has submitted the material to the Sec7 retary for review, and

8 ‘‘(B) the Secretary has not dis9 approved the distribution of such ma10 terial.

11 ‘‘(2) REVIEW.—The standards estab12 lished under section 1856 shall include

13 guidelines for the review of all such ma14 terial submitted and under such guide15 lines the Secretary shall disapprove such

16 material if the material is materially in17 accurate or misleading or otherwise

18 makes a material misrepresentation.

19 ‘‘(3) DEEMED APPROVAL (1-STOP SHOP20 PING).—In the case of material that is sub21 mitted under paragraph (1)(A) to the Sec22 retary or a regional office of the Depart23 ment of Health and Human Services and

24 the Secretary or the office has not dis25 approved the distribution of marketing
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1 materials under paragraph (1)(B) with re2 spect to a MedicarePlus product in an

3 area, the Secretary is deemed not to have

4 disapproved such distribution in all other

5 areas covered by the product and organi6 zation.

7 ‘‘(4) PROHIBITION OF CERTAIN MARKET8 ING PRACTICES.—Each MedicarePlus orga9 nization shall conform to fair marketing

10 standards in relation to MedicarePlus

11 products offered under this part, in12 cluded in the standards established

13 under section 1856. Such standards shall

14 include a prohibition against an organi15 zation (or agent of such an organization)

16 completing any portion of any election

17 form under section 1805 on behalf of any

18 individual.

19 ‘‘PROVIDER-SPONSORED ORGANIZATIONS

20 ‘‘SEC. 1854. (a) PROVIDER-SPONSORED ORGA21 NIZATION DEFINED.—

22 ‘‘(1) IN GENERAL.—In this part, the

23 term ‘provider-sponsored organization’

24 means a public or private entity that (in

25 accordance with standards established

26 under subsection (b)) is a provider, or
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1 group of affiliated providers, that pro2 vides a substantial proportion (as defined

3 by the Secretary under such standards)

4 of the health care items and services

5 under the contract under this part di6 rectly through the provider or affiliated

7 group of providers.

8 ‘‘(2) SUBSTANTIAL PROPORTION.—In de9 fining what is a ‘substantial proportion’

10 for purposes of paragraph (1), the Sec11 retary—

12 ‘‘(A) shall take into account the

13 need for such an organization to as14 sume responsibility for a substantial

15 proportion of services in order to as16 sure financial stability and the prac17 tical difficulties in such an organiza18 tion integrating a very wide range of

19 service providers; and

20 ‘‘(B) may vary such proportion

21 based upon relevant differences

22 among organizations, such as their lo23 cation in an urban or rural area.

24 ‘‘(3) AFFILIATION.—For purposes of

25 this subsection, a provider is ‘affiliated’
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1 with another provider if, through con2 tract, ownership, or otherwise—

3 ‘‘(A) one provider, directly or indi4 rectly, controls, is controlled by, or is

5 under common control with the

6 other,

7 ‘‘(B) each provider is a partici8 pant in a lawful combination under

9 which each provider shares, directly

10 or indirectly, substantial financial

11 risk in connection with their oper12 ations,

13 ‘‘(C) both providers are part of a

14 controlled group of corporations

15 under section 1563 of the Internal

16 Revenue Code of 1986, or

17 ‘‘(D) both providers are part of an

18 affiliated service group under section

19 414 of such Code.

20 ‘‘(4) CONTROL.—For purposes of para21 graph (3), control is presumed to exist if

22 one party, directly or indirectly, owns,

23 controls, or holds the power to vote, or

24 proxies for, not less than 51 percent of
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1 the voting rights or governance rights of

2 another.

3 ‘‘(b) PROCESS FOR ESTABLISHING STANDARDS

4 FOR PROVIDER-SPONSORED ORGANIZATIONS.—

5 For process of establishing of standards for

6 provider-sponsored organizations, see section

7 1856(c).

8 ‘‘(c) PROCESS FOR STATE CERTIFICATION OF

9 PROVIDER-SPONSORED ORGANIZATIONS.—For

10 process of State certification of provider11 sponsored organizations, see section 1857(c).

12 ‘‘(d) PREEMPTION OF STATE INSURANCE LI13 CENSING REQUIREMENTS.—

14 ‘‘(1) IN GENERAL.—This section super15 sedes any State law which—

16 ‘‘(A) requires that a provider17 sponsored organization meet require18 ments for insurers of health services

19 or health maintenance organizations

20 doing business in the State with re21 spect to initial capitalization and es22 tablishment of financial reserves

23 against insolvency, or

24 ‘‘(B) imposes requirements that

25 would have the effect of prohibiting
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1 the organization from complying with

2 the applicable requirements of this

3 part,

4 insofar as such the law applies to individ5 uals enrolled with the organization under

6 this part.

7 ‘‘(2) EXCEPTION.—Paragraph (1) shall

8 not apply with respect to any State law to

9 the extent that such law provides stand10 ards or requirements, or provides for en11 forcement thereof, so as to meet the re12 quirements of section 1857(c)(2) with re13 spect to approval by the Secretary of

14 State certification requirements there15 under.

16 ‘‘(3) CONSTRUCTION.—Nothing in this

17 subsection shall be construed as affecting

18 the operation of section 514 of the Em19 ployee Retirement Income Security Act of

20 1974.

21 ‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS

22 ‘‘SEC. 1855. (a) PAYMENTS.—

23 ‘‘(1) IN GENERAL.—Under a contract

24 under section 1858 the Secretary shall

25 pay to each MedicarePlus organization,

26 with respect to coverage of an individual
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1 under this part in a payment area for a

2 month, an amount equal to the monthly

3 adjusted MedicarePlus capitation rate (as

4 provided under subsection (b)) with re5 spect to that individual for that area.

6 ‘‘(2) ANNUAL ANNOUNCEMENT.—The Sec7 retary shall annually determine, and

8 shall announce (in a manner intended to

9 provide notice to interested parties) not

10 later than September 7 before the cal11 endar year concerned—

12 ‘‘(A) the annual MedicarePlus

13 capitation rate for each payment area

14 for the year, and

15 ‘‘(B) the factors to be used in ad16 justing such rates under subsection

17 (b) for payments for months in that

18 year.

19 ‘‘(3) ADVANCE NOTICE OF METHODOLOGI20 CAL CHANGES.—At least 45 days before

21 making the announcement under para22 graph (2) for a year, the Secretary shall

23 provide for notice to MedicarePlus orga24 nizations of proposed changes to be made

25 in the methodology or benefit coverage
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1 assumptions from the methodology and

2 assumptions used in the previous an3 nouncement and shall provide such orga4 nizations an opportunity to comment on

5 such proposed changes.

6 ‘‘(4) EXPLANATION OF ASSUMPTIONS.—In

7 each announcement made under para8 graph (2) for a year, the Secretary shall

9 include an explanation of the assump10 tions (including any benefit coverage as11 sumptions) and changes in methodology

12 used in the announcement in sufficient

13 detail so that MedicarePlus organizations

14 can compute monthly adjusted

15 MedicarePlus capitation rates for classes

16 of individuals located in each payment

17 area which is in whole or in part within

18 the service area of such an organization.

19 ‘‘(b) MONTHLY ADJUSTED MEDICAREPLUS

20 CAPITATION RATE.—

21 ‘‘(1) IN GENERAL.—For purposes of this

22 section, the ‘monthly adjusted

23 MedicarePlus capitation rate’ under this

24 subsection, for a month in a year for an

25 individual in a payment area (specified
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1 under paragraph (3)) and in a class (established under paragraph (4)), is 1 2 ⁄12 of

3 the annual MedicarePlus capitation rate

4 specified in paragraph (2) for that area

5 for the year, adjusted to reflect the actu6 arial value of benefits under this title

7 with respect to individuals in such class

8 compared to the national average for in9 dividuals in all classes.

10 ‘‘(2) ANNUAL MEDICAREPLUS CAPITATION

11 RATES.—For purposes of this section, the

12 annual MedicarePlus capitation rate for

13 a payment area for a year is equal to the

14 annual MedicarePlus capitation rate for

15 the area for the previous year (or, in the

16 case of 1996, the average annual per cap17 ita rate of payment described in section

18 1876(a)(1)(C) for the area for 1995) in19 creased by the per capita growth rate for

20 that area and year (as determined under

21 subsection (c)).

22 ‘‘(3) PAYMENT AREA DEFINED.—In this

23 section, the term ‘payment area’ means a

24 county (or equivalent area specified by

25 the Secretary), except that in the case of
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1 the population group described in para2 graph (5)(C), the payment area shall be

3 each State.

4 ‘‘(4) CLASSES.—

5 ‘‘(A) IN GENERAL.—For purposes of

6 this section, the Secretary shall de7 fine appropriate classes of enrollees,

8 consistent with paragraph (5), based

9 on age, gender, welfare status, insti10 tutionalization, and such other fac11 tors as the Secretary determines to be

12 appropriate, so as to ensure actuarial

13 equivalence. The Secretary may add

14 to, modify, or substitute for such

15 classes, if such changes will improve

16 the determination of actuarial

17 equivalence.

18 ‘‘(B) RESEARCH.—The Secretary

19 shall conduct such research as may

20 be necessary to provide for greater

21 accuracy in the adjustment of capita22 tion rates under this subsection. Such

23 research may include research into

24 the addition or modification of class25 es under subparagraph (A). The Sec-
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1 retary shall submit to Congress a re2 port on such research by not later

3 than January 1, 1997.

4 ‘‘(5) DIVISION OF MEDICARE POPU5 LATION.—In carrying out paragraph (4)

6 and this section, the Secretary shall rec7 ognize the following separate population

8 groups:

9 ‘‘(A) AGED.—Individuals 65 years

10 of age or older who are not described

11 in subparagraph (C).

12 ‘‘(B) DISABLED.—Disabled individ13 uals who are under 65 years of age

14 and not described in subparagraph

15 (C).

16 ‘‘(C) INDIVIDUALS WITH END STAGE

17 RENAL DISEASE.—Individuals who are

18 determined to have end stage renal

19 disease.

20 ‘‘(c) PER CAPITA GROWTH RATES.—

21 ‘‘(1) FOR 1996.—

22 ‘‘(A) IN GENERAL.—For purposes of

23 this section and subject to subpara24 graph (B), the per capita growth rates

25 for 1996, for a payment area assigned
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1 to a service utilization cohort under

2 subsection (d), shall be the following:

3 ‘‘(i) LOWEST SERVICE UTILIZA4 TION COHORT.—For areas assigned

5 to the lowest service utilization

6 cohort, 9.7 percent.

7 ‘‘(ii) LOWER SERVICE UTILIZA8 TION COHORT.—For areas assigned

9 to the lower service utilization co10 hort, 8.0 percent.

11 ‘‘(iii) MEDIAN SERVICE UTILIZA12 TION COHORT.—For areas assigned

13 to the median service utilization

14 cohort, 5.3 percent.

15 ‘‘(iv) HIGHER SERVICE UTILIZA16 TION COHORT.—For areas assigned

17 to the higher service utilization

18 cohort, 4.7 percent.

19 ‘‘(v) HIGHEST SERVICE UTILIZA20 TION COHORT.—For areas assigned

21 to the highest service utilization

22 cohort, 4.0 percent.

23 ‘‘(B) BUDGET NEUTRAL ADJUST24 MENT.—The Secretary shall adjust the

25 per capita growth rates specified in
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1 subparagraph (A) for all the areas by

2 such uniform factor as may be nec3 essary to assure that the total capita4 tion payments under this section dur5 ing 1996 are the same as the amount

6 such payments would have been if

7 the per capita growth rate for all

8 such areas for 1996 were equal to the

9 national average per capita growth

10 rate, specified in paragraph (3) for

11 1996.

12 ‘‘(2) FOR SUBSEQUENT YEARS.—

13 ‘‘(A) IN GENERAL.—For purposes of

14 this section and subject to subpara15 graph (B), the Secretary shall com16 pute a per capita growth rate for

17 each year after 1996, for each pay18 ment area as assigned to a service

19 utilization cohort under subsection

20 (d), consistent with the following

21 rules:

22 ‘‘(i) MEDIAN SERVICE UTILIZA23 TION COHORT SET AT NATIONAL AV24 ERAGE PER CAPITA GROWTH RATE.—

25 The per capita growth rate for
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1 areas assigned to the median

2 service utilization cohort for the

3 year shall be the national average

4 per capita growth rate for the

5 year (as specified under para6 graph (3)).

7 ‘‘(ii) HIGHEST SERVICE UTILIZA8 TION COHORT SET AT 75 PERCENT OF

9 NATIONAL AVERAGE PER CAPITA

10 GROWTH RATE.—The per capita

11 growth rate for areas assigned to

12 the highest service utilization co13 hort for the year shall be 75 per14 cent of the national average per

15 capita growth rate for the year.

16 ‘‘(iii) LOWEST SERVICE UTILIZA17 TION COHORT SET AT 187.5 PERCENT

18 OF NATIONAL AVERAGE PER CAPITA

19 GROWTH RATE.—The per capita

20 growth rate for areas assigned to

21 the lowest service utilization co22 hort for the year shall be 187.5

23 percent of the national average

24 per capita growth rate for the

25 year.
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1 ‘‘(iv) LOWER SERVICE UTILIZA2 TION COHORT SET AT 150 PERCENT OF

3 NATIONAL AVERAGE PER CAPITA

4 GROWTH RATE.—

5 ‘‘(I) IN GENERAL.—Subject

6 to subclause (II), the per cap7 ita growth rate for areas as8 signed to the lower service

9 utilization cohort for the year

10 shall be 150 percent of the na11 tional average per capita

12 growth rate for the year.

13 ‘‘(II) ADJUSTMENT.—If the

14 Secretary has established

15 under clause (v) the per cap16 ita growth rate for areas as17 signed to the higher service

18 utilization cohort for the year

19 at 75 percent of the national

20 average per capita growth

21 rate, the Secretary may pro22 vide for a reduced per capita

23 growth rate under subclause

24 (I) to the extent necessary to
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1 comply with subparagraph

2 (B).

3 ‘‘(v) HIGHER SERVICE UTILIZA4 TION COHORT.—The per capita

5 growth rate for areas assigned to

6 the higher service utilization co7 hort for the year shall be such

8 percent (not less than 75 percent)

9 of the national average per capita

10 growth rate, as the Secretary may

11 determine consistent with sub12 paragraph (B).

13 ‘‘(B) AVERAGE PER CAPITA GROWTH

14 RATE AT NATIONAL AVERAGE TO ASSURE

15 BUDGET NEUTRALITY.—The Secretary

16 shall compute per capita growth

17 rates for a year under subparagraph

18 (A) in a manner so that the weighted

19 average per capita growth rate for all

20 areas for the year (weighted to reflect

21 the number of medicare beneficiaries

22 in each area) is equal to the national

23 average per capita growth rate under

24 paragraph (3) for the year.
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1 ‘‘(3) NATIONAL AVERAGE PER CAPITA

2 GROWTH RATES.—In this subsection, the

3 ‘national average per capita growth rate’

4 for—

5 ‘‘(A) 1996 is 5.3 percent,

6 ‘‘(B) 1997 is 3.8 percent,

7 ‘‘(C) 1998 is 4.6 percent,

8 ‘‘(D) 1999 is 4.3 percent,

9 ‘‘(E) 2000 is 3.8 percent,

10 ‘‘(F) 2001 is 5.5 percent,

11 ‘‘(G) 2002 is 5.6 percent, and

12 ‘‘(H) each subsequent year is 5.0

13 percent.

14 ‘‘(d) ASSIGNMENT OF PAYMENT AREAS TO

15 SERVICE UTILIZATION COHORTS.—

16 ‘‘(1) IN GENERAL.—For purposes of de17 termining per capita growth rates under

18 subsection (c) for areas for a year, the

19 Secretary shall assign each payment area

20 to a service utilization cohort (based on

21 the service utilization index value for

22 that area determined under paragraph

23 (2)) as follows:

24 ‘‘(A) LOWEST SERVICE UTILIZATION

25 COHORT.—Areas with a service utiliza-
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1 tion index value of less than .80 shall

2 be assigned to the lowest service uti3 lization cohort.

4 ‘‘(B) LOWER SERVICE UTILIZATION

5 COHORT.—Areas with a service utiliza6 tion index value of at least .80 but

7 less than .90 shall be assigned to the

8 lower service utilization cohort.

9 ‘‘(C) MEDIAN SERVICE UTILIZATION

10 COHORT.—Areas with a service utiliza11 tion index value of at least .90 but

12 less than 1.10 shall be assigned to the

13 median service utilization cohort.

14 ‘‘(D) HIGHER SERVICE UTILIZATION

15 COHORT.—Areas with a service utiliza16 tion index value of at least 1.10 but

17 less than 1.20 shall be assigned to the

18 higher service utilization cohort.

19 ‘‘(E) HIGHEST SERVICE UTILIZATION

20 COHORT.—Areas with a service utiliza21 tion index value of at least 1.20 shall

22 be assigned to the highest service uti23 lization cohort.

24 ‘‘(2) DETERMINATION OF SERVICE UTILI25 ZATION INDEX VALUES.—In order to deter-
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1 mine the per capita growth rate for a

2 payment area for each year (beginning

3 with 1996), the Secretary shall determine

4 for such area and year a service utiliza5 tion index value, which is equal to—

6 ‘‘(A) the annual MedicarePlus

7 capitation rate under this section for

8 the area for the year in which the de9 termination is made (or, in the case

10 of 1996, the average annual per capita

11 rate of payment (described in section

12 1876(a)(1)(C)) for the area for 1995);

13 divided by

14 ‘‘(B) the input-price-adjusted an15 nual national MedicarePlus capita16 tion rate (as determined under para17 graph (3)) for that area for the year

18 in which the determination is made.

19 ‘‘(3) DETERMINATION OF INPUT-PRICE20 ADJUSTED RATES.—

21 ‘‘(A) IN GENERAL.—For purposes of

22 paragraph (2), the ‘input-price-ad23 justed annual national MedicarePlus

24 capitation rate’ for a payment area

25 for a year is equal to the sum, for all
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1 the types of medicare services (as

2 classified by the Secretary), of the

3 product (for each such type) of—

4 ‘‘(i) the national standardized

5 MedicarePlus capitation rate (de6 termined under subparagraph

7 (B)) for the year,

8 ‘‘(ii) the proportion of such

9 rate for the year which is attrib10 utable to such type of services,

11 and

12 ‘‘(iii) an index that reflects

13 (for that year and that type of

14 services) the relative input price

15 of such services in the area com16 pared to the national average

17 input price of such services.

18 In applying clause (iii), the Secretary

19 shall, subject to subparagraph (C),

20 apply those indices under this title

21 that are used in applying (or updat22 ing) national payment rates for spe23 cific areas and localities.

24 ‘‘(B) NATIONAL STANDARDIZED

25 MEDICAREPLUS CAPITATION RATE.—In
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1 this paragraph, the ‘national stand2 ardized MedicarePlus capitation rate’

3 for a year is equal to—

4 ‘‘(i) the sum (for all payment

5 areas) of the product of (I) the an6 nual MedicarePlus capitation rate

7 for that year for the area under

8 subsection (b)(2), and (II) the av9 erage number of medicare bene10 ficiaries residing in that area in

11 the year; divided by

12 ‘‘(ii) the total average number

13 of medicare beneficiaries residing

14 in all the payment areas for that

15 year.

16 ‘‘(C) SPECIAL RULES FOR 1996.—In

17 applying this paragraph for 1996—

18 ‘‘(i) medicare services shall be

19 divided into 2 types of services:

20 part A services and part B serv21 ices;

22 ‘‘(ii) the proportions described

23 in subparagraph (A)(ii) for such

24 types of services shall be—
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1 ‘‘(I) for part A services,

2 the ratio (expressed as a per3 centage) of the average an4 nual per capita rate of pay5 ment for the area for part A

6 for 1995 to the total average

7 annual per capita rate of pay8 ment for the area for parts A

9 and B for 1995, and

10 ‘‘(II) for part B services,

11 100 percent minus the ratio

12 described in subclause (I);

13 ‘‘(iii) for the part A services,

14 70 percent of payments attrib15 utable to such services shall be

16 adjusted by the index used under

17 section 1886(d)(3)(E) to adjust

18 payment rates for relative hos19 pital wage levels for hospitals lo20 cated in the payment area in21 volved;

22 ‘‘(iv) for part B services—

23 ‘‘(I) 66 percent of pay24 ments attributable to such

25 services shall be adjusted by
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1 the index of the geographic

2 area factors under section

3 1848(e) used to adjust pay4 ment rates for physicians’

5 services furnished in the pay6 ment area, and

7 ‘‘(II) of the remaining 34

8 percent of the amount of such

9 payments, 70 percent shall be

10 adjusted by the index de11 scribed in clause (iii);

12 ‘‘(v) the index values shall be

13 computed based only on the bene14 ficiary population described in

15 subsection (b)(5)(A).

16 The Secretary may continue to apply

17 the rules described in this subpara18 graph (or similar rules) for 1997.

19 ‘‘(e) PAYMENT PROCESS.—

20 ‘‘(1) IN GENERAL.—Subject to sub21 section (f), the Secretary shall make

22 monthly payments under this section in

23 advance and in accordance with the rate

24 determined under subsection (a) to the

25 plan for each individual enrolled with a
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1 MedicarePlus organization under this

2 part.

3 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER

4 OF ENROLLEES.—

5 ‘‘(A) IN GENERAL.—The amount of

6 payment under this subsection may

7 be retroactively adjusted to take into

8 account any difference between the

9 actual number of individuals enrolled

10 with an organization under this part

11 and the number of such individuals

12 estimated to be so enrolled in deter13 mining the amount of the advance

14 payment.

15 ‘‘(B) SPECIAL RULE FOR CERTAIN EN16 ROLLEES.—

17 ‘‘(i) IN GENERAL.—Subject to

18 clause (ii), the Secretary may

19 make retroactive adjustments

20 under subparagraph (A) to take

21 into account individuals enrolled

22 during the period beginning on

23 the date on which the individual

24 enrolls with a MedicarePlus orga25 nization under a product oper-
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1 ated, sponsored, or contributed to

2 by the individual’s employer or

3 former employer (or the employer

4 or former employer of the individ5 ual’s spouse) and ending on the

6 date on which the individual is

7 enrolled in the organization

8 under this part, except that for

9 purposes of making such retro10 active adjustments under this

11 subparagraph, such period may

12 not exceed 90 days.

13 ‘‘(ii) EXCEPTION.—No adjust14 ment may be made under clause

15 (i) with respect to any individual

16 who does not certify that the or17 ganization provided the individ18 ual with the disclosure statement

19 described in section 1853(a) at the

20 time the individual enrolled with

21 the organization.

22 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECT23 ING HIGH DEDUCTIBLE/MEDISAVE PRODUCT.—

24 ‘‘(1) IN GENERAL.—In the case of an in25 dividual who has elected a high deduct-
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1 ible/medisave product, notwithstanding

2 the preceding provisions of this section—

3 ‘‘(A) the amount of the payment to

4 the MedicarePlus organization offer5 ing the high deductible/medisave

6 product shall not exceed the premium

7 for the product, and

8 ‘‘(B) subject to paragraph (2), the

9 difference between the amount of

10 payment that would otherwise be

11 made and the amount of payment to

12 such organization shall be made di13 rectly into a MedicarePlus MSA es14 tablished (and, if applicable, des15 ignated) by the individual under

16 paragraph (2).

17 ‘‘(2) ESTABLISHMENT AND DESIGNATION

18 OF MEDICAREPLUS MEDICAL SAVINGS AC19 COUNT AS REQUIREMENT FOR PAYMENT OF

20 CONTRIBUTION.—In the case of an individ21 ual who has elected coverage under a

22 high deductible/medisave product, no

23 payment shall be made under paragraph

24 (1)(B) on behalf of an individual for a

25 month unless the individual—
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1 ‘‘(A) has established before the be2 ginning of the month (or by such

3 other deadline as the Secretary may

4 specify) a MedicarePlus MSA (as de5 fined in section 137(b) of the Internal

6 Revenue Code of 1986), and

7 ‘‘(B) if the individual has estab8 lished more than one MedicarePlus

9 MSA, has designated one of such ac10 counts as the individual’s

11 MedicarePlus MSA for purposes of

12 this part.

13 Under rules under this section, such an

14 individual may change the designation of

15 such account under subparagraph (B) for

16 purposes of this part.

17 ‘‘(3) LUMP SUM DEPOSIT OF MEDICAL

18 SAVINGS ACCOUNT CONTRIBUTION.—In the

19 case of an individual electing a high de20 ductible/medisave product effective be21 ginning with a month in a year, the

22 amount of the contribution to the

23 MedicarePlus MSA on behalf of the indi24 vidual for that month and all successive

25 months in the year shall be deposited
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1 during that first month. In the case of a

2 termination of such an election as of a

3 month before the end of a year, the Sec4 retary shall provide for a procedure for

5 the recovery of deposits attributable to

6 the remaining months in the year.

7 ‘‘(g) PAYMENTS FROM TRUST FUND.—The

8 payment to a MedicarePlus organization

9 under this section for individuals enrolled

10 under this part with the organization, and

11 payments to a MedicarePlus MSA under sub12 section (f)(1)(B), shall be made from the Fed13 eral Hospital Insurance Trust Fund and the

14 Federal Supplementary Medical Insurance

15 Trust Fund in such proportion as the Sec16 retary determines reflects the relative weight

17 that benefits under part A and under part B

18 represents of the actuarial value of the total

19 benefits under this title.

20 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT

21 HOSPITAL STAYS.—In the case of an individual

22 who is receiving inpatient hospital services

23 from a subsection (d) hospital (as defined in

24 section 1886(d)(1)(B)) as of the effective date

25 of the individual’s—
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1 ‘‘(1) election under this part of a

2 MedicarePlus product offered by a

3 MedicarePlus organization—

4 ‘‘(A) payment for such services

5 until the date of the individual’s dis6 charge shall be made under this title

7 through the MedicarePlus product or

8 Non-MedicarePlus option (as the case

9 may be) elected before the election

10 with such organization,

11 ‘‘(B) the elected organization shall

12 not be financially responsible for pay13 ment for such services until the date

14 after the date of the individual’s dis15 charge, and

16 ‘‘(C) the organization shall none17 theless be paid the full amount other18 wise payable to the organization

19 under this part; or

20 ‘‘(2) termination of election with re21 spect to a MedicarePlus organization

22 under this part—

23 ‘‘(A) the organization shall be fi24 nancially responsible for payment for

25 such services after such date and
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1 until the date of the individual’s dis2 charge,

3 ‘‘(B) payment for such services

4 during the stay shall not be made

5 under section 1886(d) or by any suc6 ceeding MedicarePlus organization,

7 and

8 ‘‘(C) the terminated organization

9 shall not receive any payment with

10 respect to the individual under this

11 part during the period the individual

12 is not enrolled.

13 ‘‘ESTABLISHMENT OF STANDARDS FOR MEDICARE14 PLUS ORGANIZATIONS AND PRODUCTS

15 ‘‘SEC. 1856. (a) STANDARDS APPLICABLE TO

16 STATE-REGULATED ORGANIZATIONS AND PROD17 UCTS.—

18 ‘‘(1) RECOMMENDATIONS OF NAIC.—The

19 Secretary shall request the National As20 sociation of Insurance Commissioners to

21 develop and submit to the Secretary, not

22 later than 12 months after the date of the

23 enactment of the Medicare Preservation

24 Act of 1995, proposed standards consist25 ent with the requirements of this part for

26 MedicarePlus organizations (other than
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1 Taft-Hartley sponsors and provider-spon2 sored organizations) and MedicarePlus

3 products offered by such organizations,

4 except that such proposed standards may

5 relate to MedicarePlus organizations that

6 are qualified associations only with re7 spect to MedicarePlus products offered

8 by them and only if such products are is9 sued by organizations to which section

10 1851(b)(1) applies.

11 ‘‘(2) REVIEW.—If the Association sub12 mits such standards on a timely basis, the

13 Secretary shall review such standards to

14 determine if the standards meet the re15 quirements of the part. The Secretary

16 shall complete the review of the stand17 ards not later than 90 days after the date

18 of their submission. The Secretary shall

19 promulgate such proposed standards to

20 apply to organizations and products de21 scribed in paragraph (1) except to the ex22 tent that the Secretary modifies such pro23 posed standards because they do not

24 meet such requirements.
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1 ‘‘(3) FAILURE TO SUBMIT.—If the Asso2 ciation does not submit such standards

3 on a timely basis, the Secretary shall pro4 mulgate such standards by not later than

5 the date the Secretary would otherwise

6 have been required to promulgate stand7 ards under paragraph (2).

8 ‘‘(4) USE OF INTERIM RULES.—For the

9 period in which this part is in effect and

10 standards are being developed and estab11 lished under the preceding provisions of

12 this subsection, the Secretary shall pro13 vide by not later than June 1, 1996, for

14 the application of such interim standards

15 (without regard to any requirements for

16 notice and public comment) as may be

17 appropriate to provide for the expedited

18 implementation of this part. Such interim

19 standards shall not apply after the date

20 standards are established under the pre21 ceding provisions of this subsection.

22 ‘‘(b) TAFT-HARTLEY SPONSORS, QUALIFIED

23 ASSOCIATIONS, AND PRODUCTS.—

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

25 develop and promulgate by regulation
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1 standards consistent with the require2 ments of this part for Taft-Hartley spon3 sors, for qualified associations, and for

4 MedicarePlus products offered by such

5 organizations (other than MedicarePlus

6 products offered by qualified associations

7 that are issued by organizations to which

8 section 1851(b)(1) applies).

9 ‘‘(2) CONSULTATION WITH LABOR.—The

10 Secretary shall consult with the Sec11 retary of Labor with respect to such

12 standards for such sponsors and prod13 ucts.

14 ‘‘(3) TIMING.—Standards under this

15 subsection shall be promulgated at or

16 about the time standards are promul17 gated under subsection (a).

18 ‘‘(c) ESTABLISHMENT OF STANDARDS FOR

19 PROVIDER-SPONSORED ORGANIZATIONS.—

20 ‘‘(1) IN GENERAL.—The Secretary shall

21 establish, on an expedited basis and

22 using a negotiated rulemaking process

23 under subchapter 3 of chapter 5 of title 5,

24 United States Code, standards that enti-
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1 ties must meet to qualify as provider2 sponsored organizations under this part.

3 ‘‘(2) PUBLICATION OF NOTICE.—In carry4 ing out the rulemaking process under

5 this subsection, the Secretary, after con6 sultation with the National Association of

7 Insurance Commissioners, the American

8 Academy of Actuaries, organizations rep9 resentative of medicare beneficiaries,

10 and other interested parties, shall pub11 lish the notice provided for under section

12 564(a) of title 5, United States Code, by

13 not later than 45 days after the date of

14 the enactment of Medicare Preservation

15 Act of 1995.

16 ‘‘(3) TARGET DATE FOR PUBLICATION OF

17 RULE.—As part of the notice under para18 graph (2), and for purposes of this sub19 section, the ‘target date for publication’

20 (referred to in section 564(a)(5) of such

21 title) shall be September 1, 1996.

22 ‘‘(4) ABBREVIATED PERIOD FOR SUBMIS23 SION OF COMMENTS.—In applying section

24 564(c) of such title under this subsection,

25 ‘15 days’ shall be substituted for ‘30 days’.
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1 ‘‘(5) APPOINTMENT OF NEGOTIATED

2 RULEMAKING COMMITTEE AND FACILI3 TATOR.—The Secretary shall provide for—

4 ‘‘(A) the appointment of a nego5 tiated rulemaking committee under

6 section 565(a) of such title by not

7 later than 30 days after the end of the

8 comment period provided for under

9 section 564(c) of such title (as short10 ened under paragraph (4)), and

11 ‘‘(B) the nomination of a

12 facilitator under section 566(c) of

13 such title by not later than 10 days

14 after the date of appointment of the

15 committee.

16 ‘‘(6) PRELIMINARY COMMITTEE RE17 PORT.—The negotiated rulemaking com18 mittee appointed under paragraph (5)

19 shall report to the Secretary, by not later

20 than June 1, 1996, regarding the commit21 tee’s progress on achieving a concensus

22 with regard to the rulemaking proceed23 ing and whether such consensus is likely

24 to occur before one month before the tar25 get date for publication of the rule. If the
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1 committee reports that the committee

2 has failed to make significant progress

3 towards such consensus or is unlikely to

4 reach such consensus by the target date,

5 the Secretary may terminate such proc6 ess and provide for the publication of a

7 rule under this subsection through such

8 other methods as the Secretary may pro9 vide.

10 ‘‘(7) FINAL COMMITTEE REPORT.—If the

11 committee is not terminated under para12 graph (6), the rulemaking committee

13 shall submit a report containing a pro14 posed rule by not later than one month

15 before the target publication date.

16 ‘‘(8) INTERIM, FINAL EFFECT.—The Sec17 retary shall publish a rule under this sub18 section in the Federal Register by not

19 later than the target publication date.

20 Such rule shall be effective and final im21 mediately on an interim basis, but is sub22 ject to change and revision after public

23 notice and opportunity for a period (of

24 not less than 60 days) for public com25 ment. In connection with such rule, the
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1 Secretary shall specify the process for

2 the timely review and approval of appli3 cations of entities to be certified as pro4 vider-sponsored organizations pursuant

5 to such rules and consistent with this

6 subsection.

7 ‘‘(9) PUBLICATION OF RULE AFTER PUB8 LIC COMMENT.—The Secretary shall pro9 vide for consideration of such comments

10 and republication of such rule by not

11 later than 1 year after the target publica12 tion date.

13 ‘‘(10) PROCESS FOR APPROVAL OF APPLI14 CATIONS FOR CERTIFICATION.—

15 ‘‘(A) IN GENERAL.—The Secretary

16 shall establish a process for the re17 ceipt and approval of applications of

18 entities for certification as provider19 sponsored organizations under this

20 part. Under such process, the Sec21 retary shall act upon a complete ap22 plication submitted within 60 days

23 after the date it is received.

24 ‘‘(B) CIRCULATION OF PROPOSED AP25 PLICATION FORM.—By March 1, 1996,
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1 the Secretary, after consultation with

2 the negotiated rulemaking commit3 tee, shall circulate a proposed appli4 cation form that could be used by en5 tities considering becoming certified

6 as a provider-sponsored organization

7 under this part.

8 ‘‘(d) COORDINATION AMONG FINAL STAND9 ARDS.—In establishing standards (other than

10 on an interim basis) under the previous provi11 sions of this section, the Secretary shall seek

12 to provide for consistency (as appropriate)

13 across the different types of MedicarePlus or14 ganizations, in order to promote equitable

15 treatment of different types of organizations

16 and consistent protection for individuals who

17 elect products offered by the different types

18 of MedicarePlus organizations.

19 ‘‘(e) USE OF CURRENT STANDARDS FOR IN20 TERIM STANDARDS.—To the extent practicable

21 and consistent with the requirements of this

22 part, standards established on an interim

23 basis to carry out requirements of this part

24 may be based on currently applicable stand25 ards, such as the rules established under sec-
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1 tion 1876 (as in effect as of the date of the en2 actment of this section) to carry out analo3 gous provisions of such section or standards

4 established or developed for application in

5 the private health insurance market.

6 ‘‘(f) APPLICATION OF NEW STANDARDS TO EN7 TITIES WITH A CONTRACT.—In the case of a

8 MedicarePlus organization with a contract in

9 effect under this part at the time standards

10 applicable to the organization under this sec11 tion are changed, the organization may elect

12 not to have such changes apply to the organi13 zation until the end of the current contract

14 year (or, if there is less than 6 months remain15 ing in the contract year, until 1 year after the

16 end of the current contract year).

17 ‘‘(g) RELATION TO STATE LAWS.—The stand18 ards established under this section shall su19 persede any State law or regulation with re20 spect to MedicarePlus products which are of21 fered by MedicarePlus organizations and are

22 issued by organizations to which section

23 1851(b)(1) applies, to the extent such law or

24 regulation is inconsistent with such stand25 ards.
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1 ‘‘MEDICARE-PLUS CERTIFICATION

2 ‘‘SEC. 1857. (a) STATE CERTIFICATION PROC3 ESS FOR STATE-REGULATED ORGANIZATIONS.—

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

5 Secretary shall approve a MedicarePlus

6 certification and enforcement program

7 established by a State for applying the

8 standards established under section 1856

9 to MedicarePlus organizations (other

10 than Taft-Hartley sponsors and provider11 sponsored organizations) and

12 MedicarePlus products offered by such

13 organizations if the Secretary determines

14 that the program effectively provides for

15 the application and enforcement of such

16 standards in the State with respect to

17 such organizations and products. Such

18 program shall provide for certification of

19 compliance of MedicarePlus organiza20 tions and products with the applicable

21 requirements of this part not less often

22 than once every 3 years.

23 ‘‘(2) EFFECT OF CERTIFICATION UNDER

24 STATE PROCESS.—A MedicarePlus organi25 zation and MedicarePlus product offered
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1 by such an organization that is certified

2 under such program is considered to

3 have been certified under this subsection

4 with respect to the offering of the prod5 uct to individuals residing in the State.

6 ‘‘(3) USER FEES.—The State may im7 pose user fees on organizations seeking

8 certification under this subsection in

9 such amounts as the State deems suffi10 cient to finance the costs of such certifi11 cation. Nothing in this paragraph shall be

12 construed as restricting a State’s author13 ity to impose premium taxes, other taxes,

14 or other levies.

15 ‘‘(4) REVIEW.—The Secretary periodi16 cally shall review State programs ap17 proved under paragraph (1) to determine

18 if they continue to provide for certifi19 cation and enforcement described in such

20 paragraph. If the Secretary finds that a

21 State program no longer so provides, be22 fore making a final determination, the

23 Secretary shall provide the State an op24 portunity to adopt such a plan of correc25 tion as would permit the State program
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1 to meet the requirements of paragraph

2 (1). If the Secretary makes a final deter3 mination that the State program, after

4 such an opportunity, fails to meet such

5 requirements, the provisions of sub6 section (b) shall apply to MedicarePlus

7 organizations and products in the State.

8 ‘‘(5) EFFECT OF NO STATE PROGRAM.—

9 Beginning on the date standards are es10 tablished under section 1856, in the case

11 of organizations and products in States

12 in which a certification program has not

13 been approved and in operation under

14 paragraph (1), the Secretary shall estab15 lish a process for the certification of

16 MedicarePlus organizations (other than

17 Taft-Hartley sponsors and provider-spon18 sored organizations) and products of

19 such organizations as meeting such

20 standards.

21 ‘‘(6) PUBLICATION OF LIST OF APPROVED

22 STATE PROGRAMS.—The Secretary shall

23 publish (and periodically update) a list of

24 those State programs which are approved

25 for purposes of this subsection.
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1 ‘‘(b) FEDERAL CERTIFICATION PROCESS FOR

2 TAFT-HARTLEY SPONSORS AND PROVIDER-SPON3 SORED ORGANIZATIONS.—

4 ‘‘(1) ESTABLISHMENT.—The Secretary

5 shall establish a process for the certifi6 cation of Taft-Hartley sponsors and pro7 vider-sponsored organizations and

8 MedicarePlus products offered by such

9 sponsors and organizations as meeting

10 the applicable standards established

11 under section 1856.

12 ‘‘(2) INVOLVEMENT OF SECRETARY OF

13 LABOR.—Such process shall be established

14 and operated in cooperation with the

15 Secretary of Labor with respect to Taft16 Hartley sponsors.

17 ‘‘(3) USE OF STATE LICENSING AND PRI18 VATE ACCREDITATION PROCESSES.—

19 ‘‘(A) IN GENERAL.—The process

20 under this subsection shall, to the

21 maximum extent practicable, provide

22 that MedicarePlus organizations and

23 products that are licensed or certified

24 through a qualified private accredita25 tion process that the Secretary finds
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1 applies standards that are no less

2 stringent than the requirements of

3 this part are deemed to meet the cor4 responding requirements of this part

5 for such an organization or product.

6 ‘‘(B) PERIODIC ACCREDITATION.—

7 The use of an accreditation under

8 subparagraph (A) shall be valid only

9 for such period as the Secretary

10 specifies.

11 ‘‘(4) USER FEES.—The Secretary may

12 impose user fees on entities seeking cer13 tification under this subsection in such

14 amounts as the Secretary deems suffi15 cient to finance the costs of such certifi16 cation.

17 ‘‘(c) CERTIFICATION OF PROVIDER-SPON18 SORED ORGANIZATIONS BY STATES.—

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

20 establish a process under which a State

21 may propose to provide for certification

22 of entities as meeting the requirements of

23 this part to be provider-sponsored orga24 nizations.
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1 ‘‘(2) CONDITIONS FOR APPROVAL.—The

2 Secretary may not approve a State pro3 gram for certification under paragraph

4 (1) unless the Secretary determines that

5 the certification program applies stand6 ards and requirements that are identical

7 to the standards and requirements of this

8 part and the applicable provisions for en9 forcement of such standards and require10 ments do not result in a lower level or

11 quality of enforcement than that which is

12 otherwise applicable under this title.

13 ‘‘(d) NOTICE TO ENROLLEES IN CASE OF DE14 CERTIFICATION.—If a MedicarePlus organiza15 tion or product is decertified under this sec16 tion, the organization shall notify each en17 rollee with the organization and product

18 under this part of such decertification.

19 ‘‘(e) QUALIFIED ASSOCIATIONS.—In the case

20 of MedicarePlus products offered by a

21 MedicarePlus organization that is a qualified

22 association (as defined in section

23 1854(c)(4)(C)) and issued by an organization

24 to which section 1851(b)(1) applies or by a

25 provider-sponsored organization (as defined
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1 in section 1854(a)), nothing in this section

2 shall be construed as limiting the authority of

3 States to regulate such products.

4 ‘‘CONTRACTS WITH MEDICAREPLUS

5 ORGANIZATIONS

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

7 shall not permit the election under section

8 1805 of a MedicarePlus product offered by a

9 MedicarePlus organization under this part,

10 and no payment shall be made under section

11 1856 to an organization, unless the Secretary

12 has entered into a contract under this section

13 with an organization with respect to the offer14 ing of such product. Such a contract with an

15 organization may cover more than one

16 MedicarePlus product. Such contract shall

17 provide that the organization agrees to com18 ply with the applicable requirements and

19 standards of this part and the terms and con20 ditions of payment as provided for in this

21 part.

22 ‘‘(b) MINIMUM ENROLLMENT REQUIRE23 MENTS.—

24 ‘‘(1) IN GENERAL.—Subject to para25 graphs (1) and (2), the Secretary may not

26 enter into a contract under this section
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1 with a MedicarePlus organization (other

2 than a Taft-Hartley sponsor) unless the

3 organization has at least 5,000 individ4 uals (or 1,500 individuals in the case of

5 an organization that is a provider-spon6 sored organization) who are receiving

7 health benefits through the organization,

8 except that the standards under section

9 1856 may permit the organization to have

10 a lesser number of beneficiaries (but not

11 less than 500 in the case of an organiza12 tion that is a provider-sponsored organi13 zation) if the organization primarily

14 serves individuals residing outside of ur15 banized areas.

16 ‘‘(2) EXCEPTION FOR HIGH DEDUCTIBLE/

17 MEDISAVE PRODUCT.—Paragraph (1) shall

18 not apply with respect to a contract that

19 relates only to a high deductible/

20 medisave product.

21 ‘‘(3) ALLOWING TRANSITION.—The Sec22 retary may waive the requirement of

23 paragraph (1) during the first 3 contract

24 years with respect to an organization.
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1 ‘‘(c) CONTRACT PERIOD AND EFFECTIVE2 NESS.—

3 ‘‘(1) PERIOD.—Each contract under

4 this section shall be for a term of at least

5 one year, as determined by the Secretary,

6 and may be made automatically renew7 able from term to term in the absence of

8 notice by either party of intention to ter9 minate at the end of the current term.

10 ‘‘(2) TERMINATION AUTHORITY.—In ac11 cordance with procedures established

12 under subsection (h), the Secretary may

13 at any time terminate any such contract

14 or may impose the intermediate sanc15 tions described in an applicable para16 graph of subsection (g) on the

17 MedicarePlus organization if the Sec18 retary determines that the organization—

19 ‘‘(A) has failed substantially to

20 carry out the contract;

21 ‘‘(B) is carrying out the contract

22 in a manner inconsistent with the ef23 ficient and effective administration of

24 this part;
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1 ‘‘(C) is operating in a manner that

2 is not in the best interests of the indi3 viduals covered under the contract;

4 or

5 ‘‘(D) no longer substantially meets

6 the applicable conditions of this part.

7 ‘‘(3) EFFECTIVE DATE OF CONTRACTS.—

8 The effective date of any contract exe9 cuted pursuant to this section shall be

10 specified in the contract, except that in

11 no case shall a contract under this sec12 tion which provides for coverage under a

13 high deductible/medisave account be ef14 fective before January 1997 with respect

15 to such coverage.

16 ‘‘(4) PREVIOUS TERMINATIONS.—The

17 Secretary may not enter into a contract

18 with a MedicarePlus organization if a

19 previous contract with that organization

20 under this section was terminated at the

21 request of the organization within the

22 preceding five-year period, except in cir23 cumstances which warrant special con24 sideration, as determined by the Sec25 retary.
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1 ‘‘(5) NO CONTRACTING AUTHORITY.—The

2 authority vested in the Secretary by this

3 part may be performed without regard to

4 such provisions of law or regulations re5 lating to the making, performance,

6 amendment, or modification of contracts

7 of the United States as the Secretary may

8 determine to be inconsistent with the fur9 therance of the purpose of this title.

10 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BEN11 EFICIARY PROTECTIONS.—

12 ‘‘(1) INSPECTION AND AUDIT.—Each con13 tract under this section shall provide

14 that the Secretary, or any person or orga15 nization designated by the Secretary—

16 ‘‘(A) shall have the right to in17 spect or otherwise evaluate (i) the

18 quality, appropriateness, and timeli19 ness of services performed under the

20 contract and (ii) the facilities of the

21 organization when there is reason22 able evidence of some need for such

23 inspection, and

24 ‘‘(B) shall have the right to audit

25 and inspect any books and records of
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1 the MedicarePlus organization that

2 pertain (i) to the ability of the organi3 zation to bear the risk of potential fi4 nancial losses, or (ii) to services per5 formed or determinations of amounts

6 payable under the contract.

7 ‘‘(2) ENROLLEE NOTICE AT TIME OF TER8 MINATION.—Each contract under this sec9 tion shall require the organization to pro10 vide (and pay for) written notice in ad11 vance of the contract’s termination, as

12 well as a description of alternatives for

13 obtaining benefits under this title, to

14 each individual enrolled with the organi15 zation under this part.

16 ‘‘(3) DISCLOSURE.—

17 ‘‘(A) IN GENERAL.—Each

18 MedicarePlus organization shall, in

19 accordance with regulations of the

20 Secretary, report to the Secretary fi21 nancial information which shall in22 clude the following:

23 ‘‘(i) Such information as the

24 Secretary may require dem-
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1 onstrating that the organization

2 has a fiscally sound operation.

3 ‘‘(ii) A copy of the report, if

4 any, filed with the Health Care Fi5 nancing Administration contain6 ing the information required to

7 be reported under section 1124 by

8 disclosing entities.

9 ‘‘(iii) A description of trans10 actions, as specified by the Sec11 retary, between the organization

12 and a party in interest. Such

13 transactions shall include—

14 ‘‘(I) any sale or exchange,

15 or leasing of any property be16 tween the organization and a

17 party in interest;

18 ‘‘(II) any furnishing for

19 consideration of goods, serv20 ices (including management

21 services), or facilities between

22 the organization and a party

23 in interest, but not including

24 salaries paid to employees for

25 services provided in the nor-
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1 mal course of their employ2 ment and health services pro3 vided to members by hospitals

4 and other providers and by

5 staff, medical group (or

6 groups), individual practice

7 association (or associations),

8 or any combination thereof;

9 and

10 ‘‘(III) any lending of

11 money or other extension of

12 credit between an organiza13 tion and a party in interest.

14 The Secretary may require that infor15 mation reported respecting an orga16 nization which controls, is controlled

17 by, or is under common control with,

18 another entity be in the form of a

19 consolidated financial statement for

20 the organization and such entity.

21 ‘‘(B) PARTY IN INTEREST DEFINED.—

22 For the purposes of this paragraph,

23 the term ‘party in interest’ means—

24 ‘‘(i) any director, officer, part25 ner, or employee responsible for
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1 management or administration of

2 a MedicarePlus organization, any

3 person who is directly or indi4 rectly the beneficial owner of

5 more than 5 percent of the equity

6 of the organization, any person

7 who is the beneficial owner of a

8 mortgage, deed of trust, note, or

9 other interest secured by, and

10 valuing more than 5 percent of

11 the organization, and, in the case

12 of a MedicarePlus organization

13 organized as a nonprofit corpora14 tion, an incorporator or member

15 of such corporation under appli16 cable State corporation law;

17 ‘‘(ii) any entity in which a per18 son described in clause (i)—

19 ‘‘(I) is an officer or direc20 tor;

21 ‘‘(II) is a partner (if such

22 entity is organized as a part23 nership);

24 ‘‘(III) has directly or indi25 rectly a beneficial interest of
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1 more than 5 percent of the eq2 uity; or

3 ‘‘(IV) has a mortgage, deed

4 of trust, note, or other inter5 est valuing more than 5 per6 cent of the assets of such en7 tity;

8 ‘‘(iii) any person directly or

9 indirectly controlling, controlled

10 by, or under common control with

11 an organization; and

12 ‘‘(iv) any spouse, child, or par13 ent of an individual described in

14 clause (i).

15 ‘‘(C) ACCESS TO INFORMATION.—

16 Each MedicarePlus organization shall

17 make the information reported pur18 suant to subparagraph (A) available

19 to its enrollees upon reasonable re20 quest.

21 ‘‘(4) LOAN INFORMATION.—The contract

22 shall require the organization to notify

23 the Secretary of loans and other special

24 financial arrangements which are made

25 between the organization and sub-
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1 contractors, affiliates, and related par2 ties.

3 ‘‘(f) ADDITIONAL CONTRACT TERMS.—The

4 contract shall contain such other terms and

5 conditions not inconsistent with this part (in6 cluding requiring the organization to provide

7 the Secretary with such information) as the

8 Secretary may find necessary and appro9 priate.

10 ‘‘(g) INTERMEDIATE SANCTIONS.—

11 ‘‘(1) IN GENERAL.—If the Secretary de12 termines that a MedicarePlus organiza13 tion with a contract under this section—

14 ‘‘(A) fails substantially to provide

15 medically necessary items and serv16 ices that are required (under law or

17 under the contract) to be provided to

18 an individual covered under the con19 tract, if the failure has adversely af20 fected (or has substantial likelihood

21 of adversely affecting) the individual;

22 ‘‘(B) imposes premiums on indi23 viduals enrolled under this part in

24 excess of the premiums permitted;
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1 ‘‘(C) acts to expel or to refuse to

2 re-enroll an individual in violation of

3 the provisions of this part;

4 ‘‘(D) engages in any practice that

5 would reasonably be expected to have

6 the effect of denying or discouraging

7 enrollment (except as permitted by

8 this part) by eligible individuals with

9 the organization whose medical con10 dition or history indicates a need for

11 substantial future medical services;

12 ‘‘(E) misrepresents or falsifies in13 formation that is furnished—

14 ‘‘(i) to the Secretary under

15 this part, or

16 ‘‘(ii) to an individual or to any

17 other entity under this part;

18 ‘‘(F) fails to comply with the re19 quirements of section 1852(f)(3); or

20 ‘‘(G) employs or contracts with

21 any individual or entity that is ex22 cluded from participation under this

23 title under section 1128 or 1128A for

24 the provision of health care, utiliza25 tion review, medical social work, or
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1 administrative services or employs or

2 contracts with any entity for the pro3 vision (directly or indirectly) through

4 such an excluded individual or entity

5 of such services;

6 the Secretary may provide, in addition to

7 any other remedies authorized by law,

8 for any of the remedies described in

9 paragraph (2).

10 ‘‘(2) REMEDIES.—The remedies de11 scribed in this paragraph are—

12 ‘‘(A) civil money penalties of not

13 more than $25,000 for each deter14 mination under paragraph (1) or,

15 with respect to a determination

16 under subparagraph (D) or (E)(i) of

17 such paragraph, of not more than

18 $100,000 for each such determination,

19 plus, with respect to a determination

20 under paragraph (1)(B), double the

21 excess amount charged in violation of

22 such paragraph (and the excess

23 amount charged shall be deducted

24 from the penalty and returned to the

25 individual concerned), and plus, with
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1 respect to a determination under

2 paragraph (1)(D), $15,000 for each in3 dividual not enrolled as a result of

4 the practice involved,

5 ‘‘(B) suspension of enrollment of

6 individuals under this part after the

7 date the Secretary notifies the orga8 nization of a determination under

9 paragraph (1) and until the Secretary

10 is satisfied that the basis for such de11 termination has been corrected and is

12 not likely to recur, or

13 ‘‘(C) suspension of payment to the

14 organization under this part for indi15 viduals enrolled after the date the

16 Secretary notifies the organization of

17 a determination under paragraph (1)

18 and until the Secretary is satisfied

19 that the basis for such determination

20 has been corrected and is not likely

21 to recur.

22 ‘‘(3) OTHER INTERMEDIATE SANCTIONS.—

23 In the case of a MedicarePlus organiza24 tion for which the Secretary makes a de25 termination under subsection (c)(2) the
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1 basis of which is not described in para2 graph (1), the Secretary may apply the

3 following intermediate sanctions:

4 ‘‘(A) civil money penalties of not

5 more than $25,000 for each deter6 mination under subsection (c)(2) if

7 the deficiency that is the basis of the

8 determination has directly adversely

9 affected (or has the substantial likeli10 hood of adversely affecting) an indi11 vidual covered under the organiza12 tion’s contract;

13 ‘‘(B) civil money penalties of not

14 more than $10,000 for each week be15 ginning after the initiation of proce16 dures by the Secretary under sub17 section (h) during which the defi18 ciency that is the basis of a deter19 mination under subsection (c)(2) ex20 ists; and

21 ‘‘(C) suspension of enrollment of

22 individuals under this part after the

23 date the Secretary notifies the orga24 nization of a determination under

25 subsection (c)(2) and until the Sec-
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1 retary is satisfied that the deficiency

2 that is the basis for the determination

3 has been corrected and is not likely

4 to recur.

5 ‘‘(4) PROCEDURES FOR IMPOSING SANC6 TIONS.—The provisions of section 1128A

7 (other than subsections (a) and (b)) shall

8 apply to a civil money penalty under

9 paragraph (1) or (2) in the same manner

10 as they apply to a civil money penalty or

11 proceeding under section 1128A(a).

12 ‘‘(h) PROCEDURES FOR IMPOSING SANC13 TIONS.—The Secretary may terminate a con14 tract with a MedicarePlus organization under

15 this section or may impose the intermediate

16 sanctions described in subsection (g) on the

17 organization in accordance with formal inves18 tigation and compliance procedures estab19 lished by the Secretary under which—

20 ‘‘(1) the Secretary provides the orga21 nization with the opportunity to develop

22 and implement a corrective action plan

23 to correct the deficiencies that were the

24 basis of the Secretary’s determination

25 under subsection (c)(2);
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1 ‘‘(2) the Secretary shall impose more

2 severe sanctions on organizations that

3 have a history of deficiencies or that

4 have not taken steps to correct defi5 ciencies the Secretary has brought to

6 their attention;

7 ‘‘(3) there are no unreasonable or un8 necessary delays between the finding of a

9 deficiency and the imposition of sanc10 tions; and

11 ‘‘(4) the Secretary provides the orga12 nization with reasonable notice and op13 portunity for hearing (including the right

14 to appeal an initial decision) before im15 posing any sanction or terminating the

16 contract.’’.

17 (b) CONFORMING REFERENCES TO PREVIOUS

18 PART C.—Any reference in law (in effect be19 fore the date of the enactment of this Act) to

20 part C of title XVIII of the Social Security Act

21 is deemed a reference to part D of such title

22 (as in effect after such date).

23 (c) USE OF INTERIM, FINAL REGULATIONS.—

24 In order to carry out the amendment made by

25 subsection (a) in a timely manner, the Sec-
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1 retary of Health and Human Services may

2 promulgate regulations that take effect on an

3 interim basis, after notice and pending oppor4 tunity for public comment.

5 (d) ADVANCE DIRECTIVES.—Section

6 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is amended—

7 (1) in paragraph (1)—

8 (A) by inserting ‘‘1853(g),’’ after

9 ‘‘1833(s),’’, and

10 (B) by inserting ‘‘, MedicarePlus

11 organization,’’ after ‘‘provider of serv12 ices’’, and

13 (2) by adding at the end the following

14 new paragraph:

15 ‘‘(4) Nothing in this subsection shall be

16 construed to require the provision of informa17 tion regarding assisted suicide, euthanasia, or

18 mercy killing.’’.

19 (e) CONFORMING AMENDMENT.—Section

20 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is

21 amended by inserting before the semicolon at

22 the end the following: ‘‘and in the case of hos23 pitals to accept as payment in full for inpa24 tient hospital services that are emergency

25 services (as defined in section 1853(b)(4)) that
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1 are covered under this title and are furnished

2 to any individual enrolled under part C with

3 a MedicarePlus organization which does not

4 have a contract establishing payment

5 amounts for services furnished to members of

6 the organization the amounts that would be

7 made as a payment in full under this title if

8 the individuals were not so enrolled’’.

9 SEC. 15003. DUPLICATION AND COORDINATION OF MEDI10 CARE-RELATED PRODUCTS.

11 (a) TREATMENT OF CERTAIN HEALTH INSUR12 ANCE POLICIES AS NONDUPLICATIVE.—

13 (1) IN GENERAL.—Effective as if in14 cluded in the enactment of section 4354

15 of the Omnibus Budget Reconciliation

16 Act of 1990, section 1882(d)(3)(A) (42

17 U.S.C. 1395ss(d)(3)(A)) is amended—

18 (A) by amending clause (i) to read

19 as follows:

20 ‘‘(i) It is unlawful for a person to sell or

21 issue to an individual entitled to benefits

22 under part A or enrolled under part B of this

23 title or electing a MedicarePlus product

24 under section 1805—
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1 ‘‘(I) a health insurance policy (other

2 than a medicare supplemental policy)

3 with knowledge that the policy dupli4 cates health benefits to which the indi5 vidual is otherwise entitled under this

6 title or title XIX,

7 ‘‘(II) in the case of an individual not

8 electing a MedicarePlus product, a medi9 care supplemental policy with knowledge

10 that the individual is entitled to benefits

11 under another medicare supplemental

12 policy, or

13 ‘‘(III) in the case of an individual

14 electing a MedicarePlus product, a medi15 care supplemental policy with knowledge

16 that the policy duplicates health benefits

17 to which the individual is otherwise enti18 tled under this title or under another

19 medicare supplemental policy.’’;

20 (B) in clause (iii), by striking

21 ‘‘clause (i)’’ and inserting ‘‘clause

22 (i)(II)’’; and

23 (C) by adding at the end the fol24 lowing new clauses:
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1 ‘‘(iv) For purposes of this subparagraph a

2 health insurance policy shall be considered to

3 ‘duplicate’ benefits under this title only when,

4 under its terms, the policy provides specific

5 reimbursement for identical items and serv6 ices to the extent paid for under this title, and

7 a health insurance policy providing for bene8 fits which are payable to or on behalf of an

9 individual without regard to other health

10 benefit coverage of such individual is not con11 sidered to ‘duplicate’ any health benefits

12 under this title.

13 ‘‘(v) For purposes of this subparagraph, a

14 health insurance policy (or a rider to an in15 surance contract which is not a health insur16 ance policy), including a policy (such as a

17 long-term care insurance contract described

18 in section 7702B(b) of the Internal Revenue

19 Code of 1986, as added by the Contract with

20 America Tax Relief Act of 1995 (H.R. 1215))

21 providing benefits for long-term care, nursing

22 home care, home health care, or community23 based care, that coordinates against or ex24 cludes items and services available or paid for

25 under this title and (for policies sold or issued
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1 after January 1, 1996) that discloses such co2 ordination or exclusion in the policy’s outline

3 of coverage, is not considered to ‘duplicate’

4 health benefits under this title. For purposes

5 of this clause, the terms ‘coordinates’ and ‘co6 ordination’ mean, with respect to a policy in

7 relation to health benefits under this title,

8 that the policy under its terms is secondary

9 to, or excludes from payment, items and serv10 ices to the extent available or paid for under

11 this title.

12 ‘‘(vi) Notwithstanding any other provision

13 of law, no criminal or civil penalty may be im14 posed at any time under this subparagraph

15 and no legal action may be brought or contin16 ued at any time in any Federal or State court

17 if the penalty or action is based on an act or

18 omission that occurred after November 5,

19 1991, and before the date of the enactment of

20 this clause, and relates to the sale, issuance,

21 or renewal of any health insurance policy

22 during such period, if such policy meets the

23 requirements of clause (iv) or (v).

24 ‘‘(vii) A State may not impose, with re25 spect to the sale or issuance of a policy (or
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1 rider) that meets the requirements of this title

2 pursuant to clause (iv) or (v) to an individual

3 entitled to benefits under part A or enrolled

4 under part B or enrolled under a

5 MedicarePlus product under part C, any re6 quirement based on the premise that such a

7 policy or rider duplicates health benefits to

8 which the individual is otherwise entitled

9 under this title.’’.

10 (2) CONFORMING AMENDMENTS.—Sec11 tion 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is

12 amended—

13 (A) in subparagraph (B), by in14 serting ‘‘(including any MedicarePlus

15 product)’’ after ‘‘health insurance

16 policies’’;

17 (B) in subparagraph (C)—

18 (i) by striking ‘‘with respect to

19 (i)’’ and inserting ‘‘with respect

20 to’’, and

21 (ii) by striking ‘‘, (ii) the sale’’

22 and all that follows up to the pe23 riod at the end; and

24 (C) by striking subparagraph (D).
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1 (3) MEDICAREPLUS PRODUCTS NOT

2 TREATED AS MEDICARE SUPPLEMENTARY

3 POLICIES.—Section 1882(g) (42 U.S.C.

4 1395ss(g)) is amended by inserting ‘‘a

5 MedicarePlus product or’’ after ‘‘and does

6 not include’’

7 (4) REPORT ON DUPLICATION AND CO8 ORDINATION OF HEALTH INSURANCE POLICIES

9 THAT ARE NOT MEDICARE SUPPLEMENTAL

10 POLICIES.—Not later than 3 years after the

11 date of the enactment of this Act, the Sec12 retary of Health and Human Services

13 shall prepare and submit to Congress a

14 report on the advisability and feasibility

15 of restricting the sale to medicare bene16 ficiaries of health insurance policies that

17 duplicate (within the meaning of section

18 1882(d)(3)(A) of the Social Security Act)

19 other health insurance policies that such

20 a beneficiary may have. In preparing

21 such report, the Secretary shall seek the

22 advice of the National Association of In23 surance Commissioners and shall take

24 into account the standards established

25 under section 1807 of the Social Security
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1 Act for the electronic coordination of

2 benefits.

3 (b) ADDITIONAL RULES RELATING TO INDI4 VIDUALS ENROLLED IN MEDICAREPLUS PROD5 UCTS.—Section 1882 (42 U.S.C. 1395ss) is fur6 ther amended by adding at the end the follow7 ing new subsection:

8 ‘‘(u)(1) Notwithstanding the previous pro9 visions of this section, the following provi10 sions shall not apply to a health insurance

11 policy (other than a medicare supplemental

12 policy) provided to an individual who has

13 elected the MedicarePlus option under sec14 tion 1805:

15 ‘‘(A) Subsections (o)(1), (o)(2),

16 (p)(1)(A)(i), (p)(2), (p)(3), (p)(8), and (p)(9)

17 (insofar as they relate to limitations on

18 benefits or groups of benefits that may be

19 offered).

20 ‘‘(B) Subsection (r) (relating to loss21 ratios).

22 ‘‘(2)(A) It is unlawful for a person to sell

23 or issue a policy described in subparagraph

24 (B) to an individual with knowledge that the

25 individual has in effect under section 1805 an
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1 election of a high deductible/medisave prod2 uct.

3 ‘‘(B) A policy described in this subpara4 graph is a health insurance policy that pro5 vides for coverage of expenses that are other6 wise required to be counted toward meeting

7 the annual deductible amount provided under

8 the high deductible/medisave product.’’.

9 SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDI10 CARE HMO PROGRAM.

11 (a) TRANSITION FROM CURRENT CON12 TRACTS.—

13 (1) LIMITATION ON NEW CONTRACTS.—

14 (A) NO NEW RISK-SHARING CON15 TRACTS AFTER NEW STANDARDS ESTAB16 LISHED.—The Secretary of Health and

17 Human Services (in this section re18 ferred to as the ‘‘Secretary’’) shall not

19 enter into any risk-sharing contract

20 under section 1876 of the Social Secu21 rity Act with an eligible organization

22 for any contract year beginning on or

23 after the date standards for

24 MedicarePlus organizations and

25 products are first established under
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1 section 1856(a) of such Act with re2 spect to MedicarePlus organizations

3 that are insurers or health mainte4 nance organizations unless such a

5 contract had been in effect under sec6 tion 1876 of such Act for the organiza7 tion for the previous contract year.

8 (B) NO NEW COST REIMBURSEMENT

9 CONTRACTS.—The Secretary shall not

10 enter into any cost reimbursement

11 contract under section 1876 of the So12 cial Security Act beginning for any

13 contract year beginning on or after

14 the date of the enactment of this Act.

15 (2) TERMINATION OF CURRENT CON16 TRACTS.—

17 (A) RISK-SHARING CONTRACTS.—

18 Notwithstanding any other provision

19 of law, the Secretary shall not extend

20 or continue any risk-sharing contract

21 with an eligible organization under

22 section 1876 of the Social Security Act

23 (for which a contract was entered

24 into consistent with paragraph (1)(A))

25 for any contract year beginning on or
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1 after 1 year after the date standards

2 described in paragraph (1)(A) are es3 tablished.

4 (B) COST REIMBURSEMENT CON5 TRACTS.—The Secretary shall not ex6 tend or continue any reasonable cost

7 reimbursement contract with an eligi8 ble organization under section 1876

9 of the Social Security Act for any con10 tract year beginning on or after Janu11 ary 1, 1998.

12 (b) CONFORMING PAYMENT RATES.—

13 (1) RISK-SHARING CONTRACTS.—Not14 withstanding any other provision of law,

15 the Secretary shall provide that payment

16 amounts under risk-sharing contracts

17 under section 1876(a) of the Social Secu18 rity Act for months in a year (beginning

19 with January 1996) shall be computed—

20 (A) with respect to individuals en21 titled to benefits under both parts A

22 and B of title XVIII of such Act, by

23 substituting payment rates under sec24 tion 1855(a) of such Act for the pay-
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1 ment rates otherwise established

2 under section 1876(a) of such Act, and

3 (B) with respect to individuals

4 only entitled to benefits under part B

5 of such title, by substituting an ap6 propriate proportion of such rates

7 (reflecting the relative proportion of

8 payments under such title attrib9 utable to such part) for the payment

10 rates otherwise established under

11 section 1876(a) of such Act.

12 For purposes of carrying out this para13 graph for payment for months in 1996,

14 the Secretary shall compute, announce,

15 and apply the payment rates under sec16 tion 1855(a) of such Act (notwithstanding

17 any deadlines specified in such section)

18 in as timely a manner as possible and

19 may (to the extent necessary) provide for

20 retroactive adjustment in payments made

21 not in accordance with such rates.

22 (2) COST CONTRACTS.—Notwithstand23 ing any other provision of law, the Sec24 retary shall provide that payment

25 amounts under cost reimbursement con-
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1 tracts under section 1876(a) of the Social

2 Security Act shall take into account ad3 justments in payment amounts made in

4 parts A and B of title XVIII of such Act

5 pursuant to the amendments made by

6 this title.

7 (c) ELIMINATION OF 50:50 RULE.—

8 (1) IN GENERAL.—Section 1876 (42

9 U.S.C. 1395mm) is amended by striking

10 subsection (f).

11 (2) CONFORMING AMENDMENTS.—Sec12 tion 1876 is further amended—

13 (A) in subsection (c)(3)(A)(i), by

14 striking ‘‘would result in failure to

15 meet the requirements of subsection

16 (f)’’, and

17 (B) in subsection (i)(1)(C), by

18 striking ‘‘(e), and (f)’’ and inserting

19 ‘‘and (e)’’.

20 (3) EFFECTIVE DATE.—The amendments

21 made by this section shall apply to con22 tract years beginning on or after January

23 1, 1996.
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1 PART 2—SPECIAL RULES FOR MEDICAREPLUS

2 MEDICAL SAVINGS ACCOUNTS

3 SEC. 15011. MEDICAREPLUS MSA’S.

4 (a) IN GENERAL.—Part III of subchapter B

5 of chapter 1 of the Internal Revenue Code of

6 1986 (relating to amounts specifically ex7 cluded from gross income) is amended by re8 designating section 137 as section 138 and by

9 inserting after section 136 the following new

10 section:

11 ‘‘SEC. 137. MEDICAREPLUS MSA’S.

12 ‘‘(a) EXCLUSION.—Gross income shall not

13 include any payment to the MedicarePlus

14 MSA of an individual by the Secretary of

15 Health and Human Services under section

16 1855(f)(1)(B) of the Social Security Act.

17 ‘‘(b) MEDICAREPLUS MSA.—For purposes of

18 this section—

19 ‘‘(1) MEDICAREPLUS MSA.—The term

20 ‘MedicarePlus MSA’ means a trust cre21 ated or organized in the United States ex22 clusively for the purpose of paying the

23 qualified medical expenses of the account

24 holder, but only if the written governing

25 instrument creating the trust meets the

26 following requirements:
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1 ‘‘(A) Except in the case of a trust2 ee-to-trustee transfer described in

3 subsection (d)(4), no contribution will

4 be accepted unless it is made by the

5 Secretary of Health and Human Serv6 ices under section 1855(f)(1)(B) of the

7 Social Security Act.

8 ‘‘(B) The trustee is a bank (as de9 fined in section 408(n)), an insurance

10 company (as defined in section 816),

11 or another person who demonstrates

12 to the satisfaction of the Secretary

13 that the manner in which such per14 son will administer the trust will be

15 consistent with the requirements of

16 this section.

17 ‘‘(C) No part of the trust assets

18 will be invested in life insurance con19 tracts.

20 ‘‘(D) The assets of the trust will

21 not be commingled with other prop22 erty except in a common trust fund

23 or common investment fund.
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1 ‘‘(E) The interest of an individual

2 in the balance in his account is non3 forfeitable.

4 ‘‘(F) Trustee-to-trustee transfers

5 described in subsection (d)(4) may be

6 made to and from the trust.

7 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

8 ‘‘(A) IN GENERAL.—The term ‘quali9 fied medical expenses’ means, with

10 respect to an account holder,

11 amounts paid by such holder—

12 ‘‘(i) for medical care (as de13 fined in section 213(d)) for the ac14 count holder, but only to the ex15 tent such amounts are not com16 pensated for by insurance or oth17 erwise, or

18 ‘‘(ii) for long-term care insur19 ance for the account holder.

20 ‘‘(B) HEALTH INSURANCE MAY NOT

21 BE PURCHASED FROM ACCOUNT.—Sub22 paragraph (A)(i) shall not apply to

23 any payment for insurance.

24 ‘‘(3) ACCOUNT HOLDER.—The term ‘ac25 count holder’ means the individual on
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1 whose behalf the MedicarePlus MSA is

2 maintained.

3 ‘‘(4) CERTAIN RULES TO APPLY.—Rules

4 similar to the rules of subsections (g) and

5 (h) of section 408 shall apply for purposes

6 of this section.

7 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

8 ‘‘(1) IN GENERAL.—A MedicarePlus

9 MSA is exempt from taxation under this

10 subtitle unless such MSA has ceased to be

11 a MedicarePlus MSA by reason of para12 graph (2). Notwithstanding the preceding

13 sentence, any such MSA is subject to the

14 taxes imposed by section 511 (relating to

15 imposition of tax on unrelated business

16 income of charitable, etc. organizations).

17 ‘‘(2) ACCOUNT ASSETS TREATED AS DIS18 TRIBUTED IN THE CASE OF PROHIBITED

19 TRANSACTIONS OR ACCOUNT PLEDGED AS SE20 CURITY FOR LOAN.—Rules similar to the

21 rules of paragraphs (2) and (4) of section

22 408(e) shall apply to MedicarePlus MSA’s,

23 and any amount treated as distributed

24 under such rules shall be treated as not

25 used to pay qualified medical expenses.
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1 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

2 ‘‘(1) INCLUSION OF AMOUNTS NOT USED

3 FOR QUALIFIED MEDICAL EXPENSES.—No

4 amount shall be included in the gross in5 come of the account holder by reason of

6 a payment or distribution from a

7 MedicarePlus MSA which is used exclu8 sively to pay the qualified medical ex9 penses of the account holder. Any

10 amount paid or distributed from a

11 MedicarePlus MSA which is not so used

12 shall be included in the gross income of

13 such holder.

14 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT

15 USED FOR QUALIFIED MEDICAL EXPENSES IF

16 MINIMUM BALANCE NOT MAINTAINED.—

17 ‘‘(A) IN GENERAL.—The tax im18 posed by this chapter for any taxable

19 year in which there is a payment or

20 distribution from a MedicarePlus

21 MSA which is not used exclusively to

22 pay the qualified medical expenses of

23 the account holder shall be increased

24 by 50 percent of the excess (if any)

25 of—
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1 ‘‘(i) the amount of such pay2 ment or distribution, over

3 ‘‘(ii) the excess (if any) of—

4 ‘‘(I) the fair market value

5 of the assets in the

6 MedicarePlus MSA as of the

7 close of the calendar year pre8 ceding the calendar year in

9 which the taxable year be10 gins, over

11 ‘‘(II) an amount equal to

12 60 percent of the deductible

13 under the catastrophic health

14 plan covering the account

15 holder as of January 1 of the

16 calendar year in which the

17 taxable year begins.

18 ‘‘(B) EXCEPTIONS.—Subparagraph

19 (A) shall not apply if the payment or

20 distribution is made on or after the

21 date the account holder—

22 ‘‘(i) becomes disabled within

23 the meaning of section 72(m)(7),

24 or

25 ‘‘(ii) dies.
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1 ‘‘(C) SPECIAL RULES.—For purposes

2 of subparagraph (A)—

3 ‘‘(i) all MedicarePlus MSA’s of

4 the account holder shall be treat5 ed as 1 account,

6 ‘‘(ii) all payments and dis7 tributions not used exclusively to

8 pay the qualified medical ex9 penses of the account holder dur10 ing any taxable year shall be

11 treated as 1 distribution, and

12 ‘‘(iii) any distribution of prop13 erty shall be taken into account

14 at its fair market value on the

15 date of the distribution.

16 ‘‘(3) WITHDRAWAL OF ERRONEOUS CON17 TRIBUTIONS.—Paragraphs (1) and (2) shall

18 not apply to any payment or distribution

19 from a MedicarePlus MSA to the Sec20 retary of Health and Human Services of

21 an erroneous contribution to such MSA

22 and of the net income attributable to

23 such contribution.

24 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—

25 Paragraphs (1) and (2) shall not apply to
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1 any trustee-to-trustee transfer from a

2 MedicarePlus MSA of an account holder

3 to another MedicarePlus MSA of such ac4 count holder.

5 ‘‘(5) COORDINATION WITH MEDICAL EX6 PENSE DEDUCTION.—For purposes of sec7 tion 213, any payment or distribution out

8 of a MedicarePlus MSA for qualified med9 ical expenses shall not be treated as an

10 expense paid for medical care.

11 ‘‘(e) TREATMENT OF ACCOUNT AFTER DEATH

12 OF ACCOUNT HOLDER.—

13 ‘‘(1) TREATMENT IF DESIGNATED BENE14 FICIARY IS SPOUSE.—

15 ‘‘(A) IN GENERAL.—In the case of

16 an account holder’s interest in a

17 MedicarePlus MSA which is payable

18 to (or for the benefit of) such holder’s

19 spouse upon the death of such holder,

20 such MedicarePlus MSA shall be

21 treated as a MedicarePlus MSA of

22 such spouse as of the date of such

23 death.

24 ‘‘(B) SPECIAL RULES IF SPOUSE NOT

25 MEDICARE ELIGIBLE.—If, as of the date
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1 of such death, such spouse is not enti2 tled to benefits under title XVIII of

3 the Social Security Act, then after the

4 date of such death—

5 ‘‘(i) the Secretary of Health

6 and Human Services may not

7 make any payments to such

8 MedicarePlus MSA, other than

9 payments attributable to periods

10 before such date,

11 ‘‘(ii) in applying subsection

12 (b)(2) with respect to such

13 MedicarePlus MSA, references to

14 the account holder shall be treat15 ed as including references to any

16 dependent (as defined in section

17 152) of such spouse and any sub18 sequent spouse of such spouse,

19 and

20 ‘‘(iii) in lieu of applying sub21 section (d)(2), the rules of section

22 220(f)(2) shall apply.

23 ‘‘(2) TREATMENT IF DESIGNATED BENE24 FICIARY IS NOT SPOUSE.—In the case of an

25 account holder’s interest in a
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1 MedicarePlus MSA which is payable to

2 (or for the benefit of) any person other

3 than such holder’s spouse upon the death

4 of such holder—

5 ‘‘(A) such account shall cease to

6 be a MedicarePlus MSA as of the date

7 of death, and

8 ‘‘(B) an amount equal to the fair

9 market value of the assets in such ac10 count on such date shall be includ11 ible—

12 ‘‘(i) if such person is not the

13 estate of such holder, in such per14 son’s gross income for the taxable

15 year which includes such date, or

16 ‘‘(ii) if such person is the es17 tate of such holder, in such hold18 er’s gross income for last taxable

19 year of such holder.

20 ‘‘(f) REPORTS.—

21 ‘‘(1) IN GENERAL.—The trustee of a

22 MedicarePlus MSA shall make such re23 ports regarding such account to the Sec24 retary and to the account holder with re25 spect to—
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1 ‘‘(A) the fair market value of the

2 assets in such MedicarePlus MSA as

3 of the close of each calendar year,

4 and

5 ‘‘(B) contributions, distributions,

6 and other matters,

7 as the Secretary may require by regula8 tions.

9 ‘‘(2) TIME AND MANNER OF REPORTS.—

10 The reports required by this subsection—

11 ‘‘(A) shall be filed at such time

12 and in such manner as the Secretary

13 prescribes in such regulations, and

14 ‘‘(B) shall be furnished to the ac15 count holder—

16 ‘‘(i) not later than January 31

17 of the calendar year following the

18 calendar year to which such re19 ports relate, and

20 ‘‘(ii) in such manner as the

21 Secretary prescribes in such reg22 ulations.’’

23 (b) EXCLUSION OF MEDICAREPLUS MSA’S

24 FROM ESTATE TAX.—Part IV of subchapter A of
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1 chapter 11 of such Code is amended by adding

2 at the end the following new section:

3 ‘‘SEC. 2057. MEDICAREPLUS MSA’S.

4 ‘‘For purposes of the tax imposed by sec5 tion 2001, the value of the taxable estate shall

6 be determined by deducting from the value of

7 the gross estate an amount equal to the value

8 of any MedicarePlus MSA (as defined in sec9 tion 137(b)) included in the gross estate.’’

10 (c) TAX ON PROHIBITED TRANSACTIONS.—

11 (1) Section 4975 of such Code (relat12 ing to tax on prohibited transactions) is

13 amended by adding at the end of sub14 section (c) the following new paragraph:

15 ‘‘(5) SPECIAL RULE FOR MEDICAREPLUS

16 MSA’S.—An individual for whose benefit a

17 MedicarePlus MSA (within the meaning

18 of section 137(b)) is established shall be

19 exempt from the tax imposed by this sec20 tion with respect to any transaction con21 cerning such account (which would oth22 erwise be taxable under this section) if,

23 with respect to such transaction, the ac24 count ceases to be a MedicarePlus MSA
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1 by reason of the application of section

2 137(c)(2) to such account.’’

3 (2) Paragraph (1) of section 4975(e) of

4 such Code is amended to read as follows:

5 ‘‘(1) PLAN.—For purposes of this sec6 tion, the term ‘plan’ means—

7 ‘‘(A) a trust described in section

8 401(a) which forms a part of a plan,

9 or a plan described in section 403(a),

10 which trust or plan is exempt from

11 tax under section 501(a),

12 ‘‘(B) an individual retirement ac13 count described in section 408(a),

14 ‘‘(C) an individual retirement an15 nuity described in section 408(b),

16 ‘‘(D) a medical savings account

17 described in section 220(d),

18 ‘‘(E) a MedicarePlus MSA de19 scribed in section 137(b), or

20 ‘‘(F) a trust, plan, account, or an21 nuity which, at any time, has been de22 termined by the Secretary to be de23 scribed in any preceding subpara24 graph of this paragraph.’’
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1 (d) FAILURE TO PROVIDE REPORTS ON

2 MEDICAREPLUS MSA’S.—

3 (1) Subsection (a) of section 6693 of

4 such Code (relating to failure to provide

5 reports on individual retirement ac6 counts or annuities) is amended to read

7 as follows:

8 ‘‘(a) REPORTS.—

9 ‘‘(1) IN GENERAL.—If a person required

10 to file a report under a provision referred

11 to in paragraph (2) fails to file such re12 port at the time and in the manner re13 quired by such provision, such person

14 shall pay a penalty of $50 for each failure

15 unless it is shown that such failure is due

16 to reasonable cause.

17 ‘‘(2) PROVISIONS.—The provisions re18 ferred to in this paragraph are—

19 ‘‘(A) subsections (i) and (l) of sec20 tion 408 (relating to individual retire21 ment plans),

22 ‘‘(B) section 220(h) (relating to

23 medical savings accounts), and

24 ‘‘(C) section 137(f) (relating to

25 MedicarePlus MSA’s).’’
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1 (2) The section heading for section

2 6693 of such Code is amended to read as

3 follows:

4 ‘‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RE5 TIREMENT PLANS AND CERTAIN OTHER TAX6 FAVORED ACCOUNTS; PENALTIES RELATING

7 TO DESIGNATED NONDEDUCTIBLE CON8 TRIBUTIONS.’’

9 (e) CLERICAL AMENDMENTS.—

10 (1) The table of sections for part III of

11 subchapter B of chapter 1 of such Code is

12 amended by striking the last item and in13 serting the following:

‘‘Sec. 137. MedicarePlus MSA’s.

‘‘Sec. 138. Cross references to other Acts.’’

14 (2) The table of sections for sub15 chapter B of chapter 68 of such Code is

16 amended by striking the item relating to

17 section 6693 and inserting the following

18 new item:

‘‘Sec. 6693. Failure to file reports on individual retirement plans and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’’

19 (3) The table of sections for part IV of

20 subchapter A of chapter 11 of such Code
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1 is amended by adding at the end the fol2 lowing new item:

‘‘Sec. 2057. MedicarePlus MSA’s.’’

3 (f) EFFECTIVE DATE.—The amendments

4 made by this section shall apply to taxable

5 years beginning after December 31, 1996.

6 SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS IN7 COME.

8 (a) IN GENERAL.—Section 105 of the Inter9 nal Revenue Code of 1986 (relating to

10 amounts received under accident and health

11 plans) is amended by adding at the end the

12 following new subsection:

13 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECU14 RITY ACT.—Gross income does not include any

15 rebate received under section 1852(e)(1)(A) of

16 the Social Security Act during the taxable

17 year.’’

18 (b) EFFECTIVE DATE.—The amendment

19 made by subsection (a) shall apply to amounts

20 received after the date of the enactment of

21 this Act.
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1 PART 3—SPECIAL ANTITRUST RULE FOR

2 PROVIDER SERVICE NETWORKS

3 SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON

4 TO PROVIDER SERVICE NETWORKS.

5 (a) RULE OF REASON STANDARD.—In any ac6 tion under the antitrust laws, or under any

7 State law similar to the antitrust laws—

8 (1) the conduct of a provider service

9 network in negotiating, making, or per10 forming a contract (including the estab11 lishment and modification of a fee sched12 ule and the development of a panel of

13 physicians), to the extent such contract is

14 for the purpose of providing health care

15 services to individuals under the terms of

16 a MedicarePlus PSO product, and

17 (2) the conduct of any member of

18 such network for the purpose of provid19 ing such health care services under such

20 contract to such extent,

21 shall not be deemed illegal per se. Such con22 duct shall be judged on the basis of its reason23 ableness, taking into account all relevant fac24 tors affecting competition, including the ef25 fects on competition in properly defined mar26 kets.
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1 (b) DEFINITIONS.—For purposes of sub2 section (a):

3 (1) ANTITRUST LAWS.—The term ‘‘anti4 trust laws’’ has the meaning given it in

5 subsection (a) of the first section of the

6 Clayton Act (15 U.S.C. 12), except that

7 such term includes section 5 of the Fed8 eral Trade Commission Act (15 U.S.C. 45)

9 to the extent that such section 5 applies

10 to unfair methods of competition.

11 (2) HEALTH CARE PROVIDER.—The term

12 ‘‘health care provider’’ means any indi13 vidual or entity that is engaged in the de14 livery of health care services in a State

15 and that is required by State law or regu16 lation to be licensed or certified by the

17 State to engage in the delivery of such

18 services in the State.

19 (3) HEALTH CARE SERVICE.—The term

20 ‘‘health care service’’ means any service

21 for which payment may be made under a

22 MedicarePlus PSO product including

23 services related to the delivery or admin24 istration of such service.
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1 (4) MEDICAREPLUS PROGRAM.—The

2 term ‘‘MedicarePlus program’’ means the

3 program under part C of title XVIII of the

4 Social Security Act.

5 (5) MEDICAREPLUS PSO PRODUCT.—The

6 term ‘‘MedicarePlus PSO product’’ means

7 a MedicarePlus product offered by a pro8 vider-sponsored organization under part

9 C of title XVIII of the Social Security Act.

10 (6) PROVIDER SERVICE NETWORK.—The

11 term ‘‘provider service network’’ means

12 an organization that—

13 (A) is organized by, operated by,

14 and composed of members who are

15 health care providers and for pur16 poses that include providing health

17 care services,

18 (B) is funded in part by capital

19 contributions made by the members

20 of such organization,

21 (C) with respect to each contract

22 made by such organization for the

23 purpose of providing a type of health

24 care service to individuals under the
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1 terms of a MedicarePlus PSO prod2 uct—

3 (i) requires all members of

4 such organization who engage in

5 providing such type of health

6 care service to agree to provide

7 health care services of such type

8 under such contract,

9 (ii) receives the compensation

10 paid for the health care services

11 of such type provided under such

12 contract by such members, and

13 (iii) provides for the distribu14 tion of such compensation,

15 (D) has established, consistent

16 with the requirements of the

17 MedicarePlus program for provider18 sponsored organizations, a program

19 to review, pursuant to written guide20 lines, the quality, efficiency, and ap21 propriateness of treatment methods

22 and setting of services for all health

23 care providers and all patients par24 ticipating in such product, along with

25 internal procedures to correct identi-
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1 fied deficiencies relating to such

2 methods and such services,

3 (E) has established, consistent

4 with the requirements of the

5 MedicarePlus program for provider6 sponsored organizations, a program

7 to monitor and control utilization of

8 health care services provided under

9 such product, for the purpose of im10 proving efficient, appropriate care

11 and eliminating the provision of un12 necessary health care services,

13 (F) has established a management

14 program to coordinate the delivery of

15 health care services for all health

16 care providers and all patients par17 ticipating in such product, for the

18 purpose of achieving efficiencies and

19 enhancing the quality of health care

20 services provided, and

21 (G) has established, consistent

22 with the requirements of the

23 MedicarePlus program for provider24 sponsored organizations, a grievance

25 and appeal process for such organiza-
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1 tion designed to review and promptly

2 resolve beneficiary or patient griev3 ances and complaints.

4 Such term may include a provider-spon5 sored organization.

6 (7) PROVIDER-SPONSORED ORGANIZA7 TION.—The term ‘‘provider-sponsored or8 ganization’’ means a MedicarePlus orga9 nization under the MedicarePlus pro10 gram that is a provider-sponsored organi11 zation (as defined in section ll of the

12 Social Security Act).

13 (8) STATE.—The term ‘‘State’’ has the

14 meaning given it in section 4G(2) of the

15 Clayton Act (15 U.S.C. 15g(2)).

16 (c) ISSUANCE OF GUIDELINES.—Not later

17 than 120 days after the date of the enactment

18 of this Act, the Attorney General and the Fed19 eral Trade Commission shall issue jointly

20 guidelines specifying the enforcement poli21 cies and analytical principles that will be ap22 plied by the Department of Justice and the

23 Commission with respect to the operation of

24 subsection (a).
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1 PART 4—COMMISSIONS

2 SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

3 (a) IN GENERAL.—Title XVIII, as amended

4 by section 15001(a), is amended by inserting

5 after section 1805 the following new section:

6 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

7 ‘‘SEC. 1806. (a) ESTABLISHMENT.—There is

8 hereby established the Medicare Payment Re9 view Commission (in this section referred to

10 as the ‘Commission’).

11 ‘‘(b) DUTIES.—

12 ‘‘(1) GENERAL DUTIES AND REPORTS.—

13 The Commission shall review, and make

14 recommendations to Congress concern15 ing, payment policies under this title. By

16 not later than June 1 of each year, the

17 Commission shall submit a report to Con18 gress containing an examination of issues

19 affecting the medicare program, includ20 ing the implications of changes in health

21 care delivery in the United States and in

22 the market for health care services on

23 the medicare program. The Commission

24 may submit to Congress from time to

25 time such other reports as the Commis26 sion deems appropriate. The Secretary
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1 shall respond to recommendations of the

2 Commission in notices of rulemaking pro3 ceedings under this title.

4 ‘‘(2) SPECIFIC DUTIES RELATING TO

5 MEDICAREPLUS PROGRAM.—Specifically, the

6 Commission shall review, with respect to

7 the MedicarePlus program under part

8 C—

9 ‘‘(A) the appropriateness of the

10 methodology for making payment to

11 plans under such program, including

12 the making of differential payments

13 and the distribution of differential

14 updates among different payment

15 areas,

16 ‘‘(B) the appropriateness of the

17 mechanisms used to adjust payments

18 for risk and the need to adjust such

19 mechanisms to take into account

20 health status of beneficiaries,

21 ‘‘(C) the implications of risk selec22 tion both among MedicarePlus orga23 nizations and between the

24 MedicarePlus option and the non25 MedicarePlus option,
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1 ‘‘(D) in relation to payment under

2 part C, the development and imple3 mentation of mechanisms to assure

4 the quality of care for those enrolled

5 with MedicarePlus organizations,

6 ‘‘(F) the impact of the

7 MedicarePlus program on access to

8 care for medicare beneficiaries, and

9 ‘‘(G) other major issues in imple10 mentation and further development

11 of the MedicarePlus program.

12 ‘‘(3) SPECIFIC DUTIES RELATING TO THE

13 FAILSAFE BUDGET MECHANISM.—Specifi14 cally, the Commission shall review, with

15 respect to the failsafe budget mechanism

16 described in section 1895—

17 ‘‘(A) the appropriateness of the

18 expenditure projections by the Sec19 retary under section 1895(c) for each

20 medicare sector;

21 ‘‘(B) the appropriateness of the

22 growth factors for each sector and

23 the ability to take into account sub24 stitution across sectors;
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1 ‘‘(C) the appropriateness of the

2 mechanisms for implementing reduc3 tions in payment amounts for dif4 ferent sectors, including any adjust5 ments to reflect changes in volume or

6 intensity resulting for any payment

7 reductions;

8 ‘‘(D) the impact of the mechanism

9 on provider participation in parts A

10 and B and in the MedicarePlus pro11 gram; and

12 ‘‘(E) the appropriateness of the

13 medicare benefit budget (under sec14 tion 1895(c)(2)(C) of the Social Secu15 rity Act), particularly for fiscal years

16 after fiscal year 2002.

17 ‘‘(4) SPECIFIC DUTIES RELATING TO THE

18 FEE-FOR-SERVICE SYSTEM.—Specifically, the

19 Commission shall review payment poli20 cies under parts A and B, including—

21 ‘‘(A) the factors affecting expendi22 tures for services in different sectors,

23 including the process for updating

24 hospital, physician, and other fees,

25 ‘‘(B) payment methodologies; and
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1 ‘‘(C) the impact of payment poli2 cies on access and quality of care for

3 medicare beneficiaries.

4 ‘‘(5) SPECIFIC DUTIES RELATING TO

5 INTERACTION OF PAYMENT POLICIES WITH

6 HEALTH CARE DELIVERY GENERALLY.—Spe7 cifically the Commission shall review the

8 effect of payment policies under this title

9 on the delivery of health care services

10 under this title and assess the implica11 tions of changes in the health services

12 market on the medicare program.

13 ‘‘(c) MEMBERSHIP.—

14 ‘‘(1) NUMBER AND APPOINTMENT.—The

15 Commission shall be composed of 15

16 members appointed by the Comptroller

17 General.

18 ‘‘(2) QUALIFICATIONS.—The member19 ship of the Commission shall include in20 dividuals with national recognition for

21 their expertise in health finance and eco22 nomics, actuarial science, health facility

23 management, health plans and integrated

24 delivery systems, reimbursement of

25 health facilities, physicians, and other
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1 providers of services, and other related

2 fields, who provide a mix of different pro3 fessionals, broad geographic representa4 tion, and a balance between urban and

5 rural representatives, including physi6 cians and other health professionals, em7 ployers, third party payors, individuals

8 skilled in the conduct and interpretation

9 of biomedical, health services, and health

10 economics research and expertise in out11 comes and effectiveness research and

12 technology assessment. Such membership

13 shall also include representatives of con14 sumers and the elderly.

15 ‘‘(3) CONSIDERATIONS IN INITIAL AP16 POINTMENT.—To the extent possible, in

17 first appointing members to the Commis18 sion the Comptroller General shall con19 sider appointing individuals who (as of

20 the date of the enactment of this section)

21 were serving on the Prospective Payment

22 Assessment Commission or the Physician

23 Payment Review Commission.

24 ‘‘(4) TERMS.—
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1 ‘‘(A) IN GENERAL.—The terms of

2 members of the Commission shall be

3 for 3 years except that the Comptrol4 ler General shall designate staggered

5 terms for the members first ap6 pointed.

7 ‘‘(B) VACANCIES.—Any member ap8 pointed to fill a vacancy occurring be9 fore the expiration of the term for

10 which the member’s predecessor was

11 appointed shall be appointed only for

12 the remainder of that term. A mem13 ber may serve after the expiration of

14 that member’s term until a successor

15 has taken office. A vacancy in the

16 Commission shall be filled in the

17 manner in which the original ap18 pointment was made.

19 ‘‘(5) COMPENSATION.—While serving on

20 the business of the Commission (includ21 ing traveltime), a member of the Commis22 sion shall be entitled to compensation at

23 the per diem equivalent of the rate pro24 vided for level IV of the Executive Sched25 ule under section 5315 of title 5, United
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1 States Code; and while so serving away

2 from home and member’s regular place of

3 business, a member may be allowed trav4 el expenses, as authorized by the Chair5 man of the Commission. Physicians serv6 ing as personnel of the Commission may

7 be provided a physician comparability al8 lowance by the Commission in the same

9 manner as Government physicians may

10 be provided such an allowance by an

11 agency under section 5948 of title 5, Unit12 ed States Code, and for such purpose sub13 section (i) of such section shall apply to

14 the Commission in the same manner as it

15 applies to the Tennessee Valley Author16 ity. For purposes of pay (other than pay

17 of members of the Commission) and em18 ployment benefits, rights, and privileges,

19 all personnel of the Commission shall be

20 treated as if they were employees of the

21 United States Senate.

22 ‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The

23 Comptroller General shall designate a

24 member of the Commission, at the time of

25 appointment of the member, as Chairman
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1 and a member as Vice Chairman for that

2 term of appointment.

3 ‘‘(7) MEETINGS.—The Commission shall

4 meet at the call of the Chairman.

5 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND

6 CONSULTANTS.—Subject to such review as the

7 Comptroller General deems necessary to as8 sure the efficient administration of the Com9 mission, the Commission may—

10 ‘‘(1) employ and fix the compensation

11 of an Executive Director (subject to the

12 approval of the Comptroller General) and

13 such other personnel as may be nec14 essary to carry out its duties (without re15 gard to the provisions of title 5, United

16 States Code, governing appointments in

17 the competitive service);

18 ‘‘(2) seek such assistance and support

19 as may be required in the performance of

20 its duties from appropriate Federal de21 partments and agencies;

22 ‘‘(3) enter into contracts or make

23 other arrangements, as may be necessary

24 for the conduct of the work of the Com-
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1 mission (without regard to section 3709

2 of the Revised Statutes (41 U.S.C. 5));

3 ‘‘(4) make advance, progress, and

4 other payments which relate to the work

5 of the Commission;

6 ‘‘(5) provide transportation and sub7 sistence for persons serving without com8 pensation; and

9 ‘‘(6) prescribe such rules and regula10 tions as it deems necessary with respect

11 to the internal organization and oper12 ation of the Commission.

13 ‘‘(e) POWERS.—

14 ‘‘(1) OBTAINING OFFICIAL DATA.—The

15 Commission may secure directly from

16 any department or agency of the United

17 States information necessary to enable it

18 to carry out this section. Upon request of

19 the Chairman, the head of that depart20 ment or agency shall furnish that infor21 mation to the Commission on an agreed

22 upon schedule.

23 ‘‘(2) DATA COLLECTION.—In order to

24 carry out its functions, the Commission

25 shall collect and assess information.
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1 ‘‘(A) utilize existing information,

2 both published and unpublished,

3 where possible, collected and as4 sessed either by its own staff or

5 under other arrangements made in

6 accordance with this section,

7 ‘‘(B) carry out, or award grants or

8 contracts for, original research and

9 experimentation, where existing in10 formation is inadequate, and

11 ‘‘(C) adopt procedures allowing

12 any interested party to submit infor13 mation for the Commission’s use in

14 making reports and recommenda15 tions.

16 ‘‘(3) ACCESS OF GAO TO INFORMATION.—

17 The Comptroller General shall have unre18 stricted access to all deliberations,

19 records, and data of the Commission, im20 mediately upon request.

21 ‘‘(4) PERIODIC AUDIT.—The Commission

22 shall be subject to periodic audit by the

23 General Accounting Office.

24 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—
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1 ‘‘(1) REQUEST FOR APPROPRIATIONS.—

2 The Commission shall submit requests

3 for appropriations in the same manner as

4 the Comptroller General submits re5 quests for appropriations, but amounts

6 appropriated for the Commission shall be

7 separate from amounts appropriated for

8 the Comptroller General.

9 ‘‘(2) AUTHORIZATION.—There are au10 thorized to be appropriated such sums as

11 may be necessary to carry out the provi12 sions of this section. 60 percent of such

13 appropriation shall be payable from the

14 Federal Hospital Insurance Trust Fund,

15 and 40 percent of such appropriation

16 shall be payable from the Federal Supple17 mentary Medical Insurance Trust Fund.’’.

18 (b) ABOLITION OF PROPAC AND PPRC.—

19 (1) PROPAC.—

20 (A) IN GENERAL.—Section 1886(e)

21 (42 U.S.C. 1395ww(e)) is amended—

22 (i) by striking paragraphs (2)

23 and (6); and
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1 (ii) in paragraph (3), by strik2 ing ‘‘(A) The Commission’’ and all

3 that follows through ‘‘(B)’’.

4 (B) CONFORMING AMENDMENT.—

5 Section 1862 (42 U.S.C. 1395y) is

6 amended by striking ‘‘Prospective

7 Payment Assessment Commission’’

8 each place it appears in subsection

9 (a)(1)(D) and subsection (i) and in10 serting ‘‘Medicare Payment Review

11 Commission’’.

12 (2) PPRC.—

13 (A) IN GENERAL.—Title XVIII is

14 amended by striking section 1845 (42

15 U.S.C. 1395w–1).

16 (B) CONFORMING AMENDMENTS.—

17 (i) Section 1834(b)(2) (42

18 U.S.C. 1395m(b)(2)) is amended by

19 striking ‘‘Physician Payment Re20 view Commission’’ and inserting

21 ‘‘Medicare Payment Review Com22 mission’’.

23 (ii) Section 1842(b) (42 U.S.C.

24 1395u(b)) is amended by striking

25 ‘‘Physician Payment Review Com-
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1 mission’’ each place it appears in

2 paragraphs (2)(C), (9)(D), and

3 (14)(C)(i) and inserting ‘‘Medicare

4 Payment Review Commission’’.

5 (iii) Section 1848 (42 U.S.C.

6 1395w–4) is amended by striking

7 ‘‘Physician Payment Review Com8 mission’’ and inserting ‘‘Medicare

9 Payment Review Commission’’

10 each place it appears in para11 graph (2)(A)(ii), (2)(B)(iii), and (5)

12 of subsection (c), subsection

13 (d)(2)(F), paragraphs (1)(B), (3),

14 and (4)(A) of subsection (f), and

15 paragraphs (6)(C) and (7)(C) of

16 subsection (g).

17 (c) EFFECTIVE DATE; TRANSITION.—

18 (1) IN GENERAL.—The Comptroller

19 General shall first provide for appoint20 ment of members to the Medicare Pay21 ment Review Commission (in this sub22 section referred to as ‘‘MPRC’’) by not

23 later than March 31, 1996.

24 (2) TRANSITION.—Effective on a date

25 (not later than 30 days after the date a
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1 majority of members of the MPRC have

2 first been appointed, the Prospective

3 Payment Assessment Commission (in this

4 subsection referred to as ‘‘ProPAC’’) and

5 the Physician Payment Review Commis6 sion (in this subsection referred to as

7 ‘‘PPRC’’), and amendments made by sub8 section (b), are terminated. The Comp9 troller General, to the maximum extent

10 feasible, shall provide for the transfer to

11 the MPRC of assets and staff of ProPAC

12 and PPRC, without any loss of benefits or

13 seniority by virtue of such transfers.

14 Fund balances available to the ProPAC

15 or PPRC for any period shall be available

16 to the MPRC for such period for like pur17 poses.

18 (3) CONTINUING RESPONSIBILITY FOR RE19 PORTS.—The MPRC shall be responsible

20 for the preparation and submission of re21 ports required by law to be submitted

22 (and which have not been submitted by

23 the date of establishment of the MPRC)

24 by the ProPAC and PPRC, and, for this

25 purpose, any reference in law to either
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1 such Commission is deemed, after the ap2 pointment of the MPRC, to refer to the

3 MPRC.

4 SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY

5 BOOM GENERATION ON THE MEDICARE PRO6 GRAM.

7 (a) ESTABLISHMENT.—There is established

8 a commission to be known as the Commission

9 on the Effect of the Baby Boom Generation on

10 the Medicare Program (in this section re11 ferred to as the ‘‘Commission’’).

12 (b) DUTIES.—

13 (1) IN GENERAL.—The Commission

14 shall—

15 (A) examine the financial impact

16 on the medicare program of the sig17 nificant increase in the number of

18 medicare eligible individuals which

19 will occur beginning approximately

20 during 2010 and lasting for approxi21 mately 25 years, and

22 (B) make specific recommenda23 tions to the Congress respecting a

24 comprehensive approach to preserve

25 the medicare program for the period
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1 during which such individuals are el2 igible for medicare.

3 (2) CONSIDERATIONS IN MAKING REC4 OMMENDATIONS.—In making its rec5 ommendations, the Commission shall con6 sider the following:

7 (A) The amount and sources of

8 Federal funds to finance the medi9 care program, including the potential

10 use of innovative financing methods.

11 (B) The most efficient and effec12 tive manner of administering the pro13 gram, including the appropriateness

14 of continuing the application of the

15 failsafe budget mechanism under sec16 tion 1895 of the Social Security Act

17 for fiscal years after fiscal year 2002

18 and the appropriate long-term

19 growth rates for contributions elect20 ing coverage under MedicarePlus

21 under part C of title XVIII of such

22 Act.

23 (C) Methods used by other na24 tions to respond to comparable demo25 graphic patterns in eligibility for
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1 health care benefits for elderly and

2 disabled individuals.

3 (D) Modifying age-based eligi4 bility to correspond to changes in

5 age-based eligibility under the OASDI

6 program.

7 (E) Trends in employment-related

8 health care for retirees, including the

9 use of medical savings accounts and

10 similar financing devices.

11 (c) MEMBERSHIP.—

12 (1) APPOINTMENT.—The Commission

13 shall be composed of 15 members ap14 pointed as follows:

15 (A) The President shall appoint 3

16 members.

17 (B) The Majority Leader of the

18 Senate shall appoint, after consulta19 tion with the minority leader of the

20 Senate, 6 members, of whom not more

21 than 4 may be of the same political

22 party.

23 (C) The Speaker of the House of

24 Representatives shall appoint, after

25 consultation with the minority leader
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1 of the House of Representatives, 6

2 members, of whom not more than 4

3 may be of the same political party.

4 (2) CHAIRMAN AND VICE CHAIRMAN.—

5 The Commission shall elect a Chairman

6 and Vice Chairman from among its mem7 bers.

8 (3) VACANCIES.—Any vacancy in the

9 membership of the Commission shall be

10 filled in the manner in which the original

11 appointment was made and shall not af12 fect the power of the remaining members

13 to execute the duties of the Commission.

14 (4) QUORUM.—A quorum shall consist

15 of 8 members of the Commission, except

16 that 4 members may conduct a hearing

17 under subsection (e).

18 (5) MEETINGS.—The Commission shall

19 meet at the call of its Chairman or a ma20 jority of its members.

21 (6) COMPENSATION AND REIMBURSEMENT

22 OF EXPENSES.—Members of the Commis23 sion are not entitled to receive compensa24 tion for service on the Commission. Mem25 bers may be reimbursed for travel, sub-
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1 sistence, and other necessary expenses

2 incurred in carrying out the duties of the

3 Commission.

4 (d) STAFF AND CONSULTANTS.—

5 (1) STAFF.—The Commission may ap6 point and determine the compensation of

7 such staff as may be necessary to carry

8 out the duties of the Commission. Such

9 appointments and compensation may be

10 made without regard to the provisions of

11 title 5, United States Code, that govern

12 appointments in the competitive services,

13 and the provisions of chapter 51 and sub14 chapter III of chapter 53 of such title that

15 relate to classifications and the General

16 Schedule pay rates.

17 (2) CONSULTANTS.—The Commission

18 may procure such temporary and inter19 mittent services of consultants under sec20 tion 3109(b) of title 5, United States Code,

21 as the Commission determines to be nec22 essary to carry out the duties of the Com23 mission.

24 (e) POWERS.—
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1 (1) HEARINGS AND OTHER ACTIVITIES.—

2 For the purpose of carrying out its du3 ties, the Commission may hold such hear4 ings and undertake such other activities

5 as the Commission determines to be nec6 essary to carry out its duties.

7 (2) STUDIES BY GAO.—Upon the request

8 of the Commission, the Comptroller Gen9 eral shall conduct such studies or inves10 tigations as the Commission determines

11 to be necessary to carry out its duties.

12 (3) COST ESTIMATES BY CONGRESSIONAL

13 BUDGET OFFICE.—

14 (A) Upon the request of the Com15 mission, the Director of the Congres16 sional Budget Office shall provide to

17 the Commission such cost estimates

18 as the Commission determines to be

19 necessary to carry out its duties.

20 (B) The Commission shall reim21 burse the Director of the Congres22 sional Budget Office for expenses re23 lating to the employment in the office

24 of the Director of such additional

25 staff as may be necessary for the Di-
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1 rector to comply with requests by the

2 Commission under subparagraph (A).

3 (4) DETAIL OF FEDERAL EMPLOYEES.—

4 Upon the request of the Commission, the

5 head of any Federal agency is authorized

6 to detail, without reimbursement, any of

7 the personnel of such agency to the Com8 mission to assist the Commission in car9 rying out its duties. Any such detail shall

10 not interrupt or otherwise affect the civil

11 service status or privileges of the Federal

12 employee.

13 (5) TECHNICAL ASSISTANCE.—Upon the

14 request of the Commission, the head of a

15 Federal agency shall provide such tech16 nical assistance to the Commission as the

17 Commission determines to be necessary

18 to carry out its duties.

19 (6) USE OF MAILS.—The Commission

20 may use the United States mails in the

21 same manner and under the same condi22 tions as Federal agencies and shall, for

23 purposes of the frank, be considered a

24 commission of Congress as described in
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1 section 3215 of title 39, United States

2 Code.

3 (7) OBTAINING INFORMATION.—The

4 Commission may secure directly from

5 any Federal agency information nec6 essary to enable it to carry out its duties,

7 if the information may be disclosed under

8 section 552 of title 5, United States Code.

9 Upon request of the Chairman of the

10 Commission, the head of such agency

11 shall furnish such information to the

12 Commission.

13 (8) ADMINISTRATIVE SUPPORT SERV14 ICES.—Upon the request of the Commis15 sion, the Administrator of General Serv16 ices shall provide to the Commission on a

17 reimbursable basis such administrative

18 support services as the Commission may

19 request.

20 (9) ACCEPTANCE OF DONATIONS.—The

21 Commission may accept, use, and dispose

22 of gifts or donations of services or prop23 erty.

24 (10) PRINTING.—For purposes of costs

25 relating to printing and binding, includ-
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1 ing the cost of personnel detailed from

2 the Government Printing Office, the Com3 mission shall be deemed to be a commit4 tee of the Congress.

5 (f) REPORT.—Not later than May 1, 1997,

6 the Commission shall submit to Congress a re7 port containing its findings and recommenda8 tions regarding how to protect and preserve

9 the medicare program in a financially solvent

10 manner until 2030 (or, if later, throughout the

11 period of projected solvency of the Federal

12 Old-Age and Survivors Insurance Trust

13 Fund). The report shall include detailed rec14 ommendations for appropriate legislative ini15 tiatives respecting how to accomplish this ob16 jective.

17 (g) TERMINATION.—The Commission shall

18 terminate 60 days after the date of submission

19 of the report required in subsection (f).

20 (h) AUTHORIZATION OF APPROPRIATIONS.—

21 There are authorized to be appropriated

22 $1,500,000 to carry out this section. Amounts

23 appropriated to carry out this section shall

24 remain available until expended.
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1 SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR

2 OF HCFA.

3 (a) IN GENERAL.—Section 1117 (42 U.S.C.

4 1317) is amended by striking ‘‘President by

5 and with the advice and consent of the Sen6 ate’’ and inserting ‘‘Secretary of Health and

7 Human Services’’.

8 (b) EFFECTIVE DATE.—The amendment

9 made by subsection (a) shall take effect on the

10 date of the enactment of this Act and shall

11 apply to Administrators appointed on or after

12 the date of the enactment of this Act.

13 Subtitle B—Preventing Fraud and

14 Abuse

15 SEC. 15101. INCREASING AWARENESS OF FRAUD AND

16 ABUSE.

17 (a) BENEFICIARY OUTREACH EFFORTS.—The

18 Secretary of Health and Human Services (act19 ing through the Administrator of the Health

20 Care Financing Administration and the In21 spector General of the Department of Health

22 and Human Services) shall make ongoing ef23 forts (through public service announcements,

24 publications, and other appropriate methods)

25 to alert individuals entitled to benefits under

26 the medicare program of the existence of
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1 fraud and abuse committed against the pro2 gram and the costs to the program of such

3 fraud and abuse, and of the existence of the

4 toll-free telephone line operated by the Sec5 retary to receive information on fraud and

6 abuse committed against the program.

7 (b) CLARIFICATION OF REQUIREMENT TO

8 PROVIDE EXPLANATION OF MEDICARE BENE9 FITS.—The Secretary shall provide an expla10 nation of benefits under the medicare pro11 gram with respect to each item or service for

12 which payment may be made under the pro13 gram which is furnished to an individual,

14 without regard to whether or not a deductible

15 or coinsurance may be imposed against the

16 individual with respect to the item or service.

17 (c) PROVIDER OUTREACH EFFORTS; PUBLICA18 TION OF FRAUD ALERTS.—

19 (1) SPECIAL FRAUD ALERTS.—

20 (A) IN GENERAL.—

21 (i) REQUEST FOR SPECIAL FRAUD

22 ALERTS.—Any person may present,

23 at any time, a request to the Sec24 retary to issue and publish a spe25 cial fraud alert.
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1 (ii) SPECIAL FRAUD ALERT DE2 FINED.—In this section, a ‘‘special

3 fraud alert’’ is a notice which in4 forms the public of practices

5 which the Secretary considers to

6 be suspect or of particular con7 cern under the medicare program

8 or a State health care program

9 (as defined in section 1128(h) of

10 the Social Security Act).

11 (B) ISSUANCE AND PUBLICATION OF

12 SPECIAL FRAUD ALERTS.—

13 (i) INVESTIGATION.—Upon re14 ceipt of a request for a special

15 fraud alert under subparagraph

16 (A), the Secretary shall inves17 tigate the subject matter of the

18 request to determine whether a

19 special fraud alert should be is20 sued. If appropriate, the Sec21 retary (in consultation with the

22 Attorney General) shall issue a

23 special fraud alert in response to

24 the request. All special fraud

25 alerts issued pursuant to this sub-
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1 paragraph shall be published in

2 the Federal Register.

3 (ii) CRITERIA FOR ISSUANCE.—In

4 determining whether to issue a

5 special fraud alert upon a request

6 under subparagraph (A), the Sec7 retary may consider—

8 (I) whether and to what

9 extent the practices that

10 would be identified in the spe11 cial fraud alert may result in

12 any of the consequences de13 scribed in 15214(b); and

14 (II) the extent and fre15 quency of the conduct that

16 would be identified in the spe17 cial fraud alert.

18 (2) PUBLICATION OF ALL HCFA FRAUD

19 ALERTS IN FEDERAL REGISTER.—Each notice

20 issued by the Health Care Financing Ad21 ministration which informs the public of

22 practices which the Secretary considers

23 to be suspect or of particular concern

24 under the medicare program or a State

25 health care program (as defined in sec-
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1 tion 1128(h) of the Social Security Act)

2 shall be published in the Federal Reg3 ister, without regard to whether or not

4 the notice is issued by a regional office of

5 the Health Care Financing Administra6 tion.

7 SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.

8 (a) PROGRAM TO COLLECT INFORMATION ON

9 FRAUD AND ABUSE.—

10 (1) ESTABLISHMENT OF PROGRAM.—Not

11 later than 3 months after the date of the

12 enactment of this Act, the Secretary of

13 Health and Human Services (hereinafter

14 in this subtitle referred to as the ‘‘Sec15 retary’’) shall establish a program under

16 which the Secretary shall encourage indi17 viduals to report to the Secretary infor18 mation on individuals and entities who

19 are engaging or who have engaged in

20 acts or omissions which constitute

21 grounds for the imposition of a sanction

22 under section 1128, section 1128A, or sec23 tion 1128B of the Social Security Act, or

24 who have otherwise engaged in fraud

25 and abuse against the medicare program
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1 for which there is a sanction provided

2 under law. The program shall discourage

3 provision of, and not consider, informa4 tion which is frivolous or otherwise not

5 relevant or material to the imposition of

6 such a sanction.

7 (2) PAYMENT OF PORTION OF AMOUNTS

8 COLLECTED.—If an individual reports in9 formation to the Secretary under the pro10 gram established under paragraph (1)

11 which serves as the basis for the collec12 tion by the Secretary or the Attorney

13 General of any amount of at least $100

14 (other than any amount paid as a penalty

15 under section 1128B of the Social Secu16 rity Act), the Secretary may pay a portion

17 of the amount collected to the individual

18 (under procedures similar to those appli19 cable under section 7623 of the Internal

20 Revenue Code of 1986 to payments to in21 dividuals providing information on viola22 tions of such Code).

23 (b) PROGRAM TO COLLECT INFORMATION ON

24 PROGRAM EFFICIENCY.—
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1 (1) ESTABLISHMENT OF PROGRAM.—Not

2 later than 3 months after the date of the

3 enactment of this Act, the Secretary shall

4 establish a program under which the Sec5 retary shall encourage individuals to sub6 mit to the Secretary suggestions on meth7 ods to improve the efficiency of the medi8 care program.

9 (2) PAYMENT OF PORTION OF PROGRAM

10 SAVINGS.—If an individual submits a sug11 gestion to the Secretary under the pro12 gram established under paragraph (1)

13 which is adopted by the Secretary and

14 which results in savings to the program,

15 the Secretary may make a payment to the

16 individual of such amount as the Sec17 retary considers appropriate.

18 SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE

19 HEALTH MAINTENANCE ORGANIZATIONS.

20 (a) APPLICATION OF INTERMEDIATE SANC21 TIONS FOR ANY PROGRAM VIOLATIONS.—

22 (1) IN GENERAL.—Section 1876(i)(1) (42

23 U.S.C. 1395mm(i)(1)) is amended by strik24 ing ‘‘the Secretary may terminate’’ and all

25 that follows and inserting the following:
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1 ‘‘in accordance with procedures estab2 lished under paragraph (9), the Secretary

3 may at any time terminate any such con4 tract or may impose the intermediate

5 sanctions described in paragraph (6)(B)

6 or (6)(C) (whichever is applicable) on the

7 eligible organization if the Secretary de8 termines that the organization—

9 ‘‘(A) has failed substantially to carry

10 out the contract;

11 ‘‘(B) is carrying out the contract in a

12 manner inconsistent with the efficient

13 and effective administration of this sec14 tion;

15 ‘‘(C) is operating in a manner that is

16 not in the best interests of the individ17 uals covered under the contract; or

18 ‘‘(D) no longer substantially meets the

19 applicable conditions of subsections (b),

20 (c), (e), and (f).’’.

21 (2) OTHER INTERMEDIATE SANCTIONS

22 FOR MISCELLANEOUS PROGRAM VIOLA23 TIONS.—Section 1876(i)(6) (42 U.S.C.

24 1395mm(i)(6)) is amended by adding at

25 the end the following new subparagraph:
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1 ‘‘(C) In the case of an eligible organization

2 for which the Secretary makes a determina3 tion under paragraph (1) the basis of which

4 is not described in subparagraph (A), the Sec5 retary may apply the following intermediate

6 sanctions:

7 ‘‘(i) civil money penalties of not more

8 than $25,000 for each determination

9 under paragraph (1) if the deficiency that

10 is the basis of the determination has di11 rectly adversely affected (or has the sub12 stantial likelihood of adversely affecting)

13 an individual covered under the organi14 zation’s contract;

15 ‘‘(ii) civil money penalties of not more

16 than $10,000 for each week beginning

17 after the initiation of procedures by the

18 Secretary under paragraph (9) during

19 which the deficiency that is the basis of

20 a determination under paragraph (1) ex21 ists; and

22 ‘‘(iii) suspension of enrollment of indi23 viduals under this section after the date

24 the Secretary notifies the organization of

25 a determination under paragraph (1) and
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1 until the Secretary is satisfied that the

2 deficiency that is the basis for the deter3 mination has been corrected and is not

4 likely to recur.’’.

5 (3) PROCEDURES FOR IMPOSING SANC6 TIONS.—Section 1876(i) (42 U.S.C.

7 1395mm(i)) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(9) The Secretary may terminate a con10 tract with an eligible organization under this

11 section or may impose the intermediate sanc12 tions described in paragraph (6) on the orga13 nization in accordance with formal investiga14 tion and compliance procedures established

15 by the Secretary under which—

16 ‘‘(A) the Secretary provides the orga17 nization with the opportunity to develop

18 and implement a corrective action plan

19 to correct the deficiencies that were the

20 basis of the Secretary’s determination

21 under paragraph (1);

22 ‘‘(B) the Secretary shall impose more

23 severe sanctions on organizations that

24 have a history of deficiencies or that

25 have not taken steps to correct defi-
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1 ciencies the Secretary has brought to

2 their attention;

3 ‘‘(C) there are no unreasonable or un4 necessary delays between the finding of a

5 deficiency and the imposition of sanc6 tions; and

7 ‘‘(D) the Secretary provides the orga8 nization with reasonable notice and op9 portunity for hearing (including the right

10 to appeal an initial decision) before im11 posing any sanction or terminating the

12 contract.’’.

13 (4) CONFORMING AMENDMENTS.—(A)

14 Section 1876(i)(6)(B) (42 U.S.C.

15 1395mm(i)(6)(B)) is amended by striking

16 the second sentence.

17 (B) Section 1876(i)(6) (42 U.S.C.

18 1395mm(i)(6)) is further amended by add19 ing at the end the following new subpara20 graph:

21 ‘‘(D) The provisions of section 1128A

22 (other than subsections (a) and (b)) shall

23 apply to a civil money penalty under subpara24 graph (A) or (B) in the same manner as they
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1 apply to a civil money penalty or proceeding

2 under section 1128A(a).’’.

3 (b) EFFECTIVE DATE.—The amendments

4 made by this section shall apply with respect

5 to contract years beginning on or after Janu6 ary 1, 1996.

7 SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.

8 Title XI (42 U.S.C. 1301 et seq.) is amended

9 by inserting after section 1128B the following

10 new section:

11 ‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS

12 ‘‘SEC. 1129. (a) ESTABLISHMENT OF VOL13 UNTARY DISCLOSURE PROGRAM.—Not later than

14 3 months after the date of the enactment of

15 this section, the Secretary shall establish a

16 program to encourage individuals and enti17 ties to voluntarily disclose to the Secretary in18 formation on acts or omissions of the individ19 ual or entity which constitute grounds for the

20 imposition of a sanction described in section

21 1128, 1128A, or 1128B.

22 ‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If

23 an individual or entity voluntarily discloses

24 information with respect to an act or omis25 sion to the Secretary under subsection (a), the

26 following rules shall apply:
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1 ‘‘(1) The Secretary may waive, reduce,

2 or otherwise mitigate any sanction which

3 would otherwise be applicable to the in4 dividual or entity under section 1128,

5 1128A, or 1128B as a result of the act or

6 omission involved.

7 ‘‘(2) No qui tam action may be

8 brought pursuant to chapter 37 of title

9 31, United States Code, against the indi10 vidual or entity with respect to the act or

11 omission involved.’’.

12 SEC. 15105. REVISIONS TO CURRENT SANCTIONS.

13 (a) DOUBLING THE AMOUNT OF CIVIL MONE14 TARY PENALTIES.—The maximum amount of

15 civil monetary penalties specified in section

16 1128A of the Social Security Act or under title

17 XVIII of such Act (as in effect on the day be18 fore the date of the enactment of this Act)

19 shall, effective for violations occurring after

20 the date of the enactment of this Act, be dou21 ble the amount otherwise provided as of such

22 date.

23 (b) ESTABLISHMENT OF MINIMUM PERIOD OF

24 EXCLUSION FOR CERTAIN INDIVIDUALS AND ENTI25 TIES SUBJECT TO PERMISSIVE EXCLUSION.—Sec-
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1 tion 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is

2 amended by adding at the end the following

3 new subparagraphs:

4 ‘‘(D) In the case of an exclusion of an indi5 vidual or entity under paragraph (1), (2), or

6 (3) of subsection (b), the period of the exclu7 sion shall be 3 years, unless the Secretary de8 termines in accordance with regulations that

9 a shorter period is appropriate because of

10 mitigating circumstances or that a longer pe11 riod is appropriate because of aggravating

12 circumstances.

13 ‘‘(E) In the case of an exclusion of an indi14 vidual or entity under subsection (b)(4) or

15 (b)(5), the period of the exclusion shall not be

16 less than the period during which the individ17 ual’s or entity’s license to provide health care

18 is revoked, suspended, or surrendered, or the

19 individual or the entity is excluded or sus20 pended from a Federal or State health care

21 program.

22 ‘‘(F) In the case of an exclusion of an indi23 vidual or entity under subsection (b)(6)(B),

24 the period of the exclusion shall be not less

25 than 1 year.’’.
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1 (c) EFFECTIVE DATE.—The amendments

2 made by this section shall apply with respect

3 to acts or omissions occurring on or after Jan4 uary 1, 1996.

5 SEC. 15106. CONSOLIDATED FUNDING FOR ANTI-FRAUD

6 AND ABUSE ACTIVITIES UNDER MEDICARE

7 INTEGRITY PROGRAM.

8 (a) ESTABLISHMENT OF MEDICARE INTEGRITY

9 PROGRAM.—Title XVIII is amended by adding

10 at the end the following new section:

11 ‘‘MEDICARE INTEGRITY PROGRAM

12 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PRO13 GRAM.—There is hereby established the Medi14 care Integrity Program (hereafter in this sec15 tion referred to as the ‘Program’) under which

16 the Secretary shall promote the integrity of

17 the medicare program by entering into con18 tracts in accordance with this section with el19 igible private entities to carry out the activi20 ties described in subsection (b).

21 ‘‘(b) ACTIVITIES DESCRIBED.—The activities

22 described in this subsection are as follows:

23 ‘‘(1) Review of activities of providers

24 of services or other individuals and enti25 ties furnishing items and services for

26 which payment may be made under this
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1 title (including skilled nursing facilities

2 and home health agencies), including

3 medical and utilization review and fraud

4 review (employing similar standards,

5 processes, and technologies used by pri6 vate health plans, including equipment

7 and software technologies which surpass

8 the capability of the equipment and tech9 nologies used in the review of claims

10 under this title as of the date of the en11 actment of this section).

12 ‘‘(2) Audit of cost reports.

13 ‘‘(3) Determinations as to whether

14 payment should not be, or should not

15 have been, made under this title by rea16 son of section 1862(b), and recovery of

17 payments that should not have been

18 made.

19 ‘‘(4) Education of providers of serv20 ices, beneficiaries, and other persons

21 with respect to payment integrity and

22 benefit quality assurance issues.

23 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is

24 eligible to enter into a contract under the Pro-
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1 gram to carry out any of the activities de2 scribed in subsection (b) if—

3 ‘‘(1) the entity has demonstrated ca4 pability to carry out such activities;

5 ‘‘(2) in carrying out such activities,

6 the entity agrees to cooperate with the

7 Inspector General of the Department of

8 Health and Human Services, the Attorney

9 General of the United States, and other

10 law enforcement agencies, as appro11 priate, in the investigation and deter12 rence of fraud and abuse in relation to

13 this title and in other cases arising out of

14 such activities;

15 ‘‘(3) the entity’s financial holdings, in16 terests, or relationships will not interfere

17 with its ability to perform the functions

18 to be required by the contract in an effec19 tive and impartial manner; and

20 ‘‘(4) the entity meets such other re21 quirements as the Secretary may impose.

22 ‘‘(d) PROCESS FOR ENTERING INTO CON23 TRACTS.—The Secretary shall enter into con24 tracts under the Program in accordance with

25 such procedures as the Secretary may by reg-
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1 ulation establish, except that such procedures

2 shall include the following:

3 ‘‘(1) The Secretary shall determine

4 the appropriate number of separate con5 tracts which are necessary to carry out

6 the Program and the appropriate times

7 at which the Secretary shall enter into

8 such contracts.

9 ‘‘(2) The provisions of section

10 1153(e)(1) shall apply to contracts and

11 contracting authority under this section,

12 except that competitive procedures must

13 be used when entering into new con14 tracts under this section, or at any other

15 time considered appropriate by the Sec16 retary.

17 ‘‘(3) A contract under this section may

18 be renewed without regard to any provi19 sion of law requiring competition if the

20 contractor has met or exceeded the per21 formance requirements established in the

22 current contract.

23 ‘‘(e) LIMITATION ON CONTRACTOR LIABIL24 ITY.—The Secretary shall by regulation pro25 vide for the limitation of a contractor’s liabil-
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1 ity for actions taken to carry out a contract

2 under the Program, and such regulation shall,

3 to the extent the Secretary finds appropriate,

4 employ the same or comparable standards

5 and other substantive and procedural provi6 sions as are contained in section 1157.

7 ‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE

8 ANTI-FRAUD AND ABUSE TRUST FUND.—For each

9 fiscal year, the Secretary shall transfer from

10 the Federal Hospital Insurance Trust Fund

11 and the Federal Supplementary Medical In12 surance Trust Fund to the Medicare Anti13 Fraud and Abuse Trust Fund under sub14 section (g) such amounts as are necessary to

15 carry out the activities described in sub16 section (b). Such transfer shall be in an alloca17 tion as reasonably reflects the proportion of

18 such expenditures associated with part A and

19 part B.

20 ‘‘(g) MEDICARE ANTI-FRAUD AND ABUSE

21 TRUST FUND.—

22 ‘‘(1) ESTABLISHMENT.—

23 ‘‘(A) IN GENERAL.—There is hereby

24 established in the Treasury of the

25 United States the Anti-Fraud and
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1 Abuse Trust Fund (hereafter in this

2 subsection referred to as the ‘Trust

3 Fund’). The Trust Fund shall consist

4 of such gifts and bequests as may be

5 made as provided in subparagraph

6 (B) and such amounts as may be de7 posited in the Trust Fund as provided

8 in subsection (f), paragraph (3), and

9 title XI.

10 ‘‘(B) AUTHORIZATION TO ACCEPT

11 GIFTS AND BEQUESTS.—The Trust Fund

12 is authorized to accept on behalf of

13 the United States money gifts and be14 quests made unconditionally to the

15 Trust Fund, for the benefit of the

16 Trust Fund or any activity financed

17 through the Trust Fund.

18 ‘‘(2) INVESTMENT.—

19 ‘‘(A) IN GENERAL.—The Secretary

20 of the Treasury shall invest such

21 amounts of the Fund as such Sec22 retary determines are not required to

23 meet current withdrawals from the

24 Fund in government account serial

25 securities.
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1 ‘‘(B) USE OF INCOME.—Any interest

2 derived from investments under sub3 paragraph (A) shall be credited to the

4 Fund.

5 ‘‘(3) AMOUNTS DEPOSITED INTO TRUST

6 FUND.—In addition to amounts trans7 ferred under subsection (f), there shall be

8 deposited in the Trust Fund—

9 ‘‘(A) that portion of amounts re10 covered in relation to section 1128A

11 arising out of a claim under title

12 XVIII as remains after application of

13 subsection (f)(2) (relating to repay14 ment of the Federal Hospital Insur15 ance Trust Fund or the Federal Sup16 plementary Medical Insurance Trust

17 Fund) of that section, as may be ap18 plicable,

19 ‘‘(B) fines imposed under section

20 1128B arising out of a claim under

21 this title, and

22 ‘‘(C) penalties and damages im23 posed (other than funds awarded to a

24 relator or for restitution) under sec25 tions 3729 through 3732 of title 31,
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1 United States Code (pertaining to

2 false claims) in cases involving claims

3 relating to programs under title

4 XVIII, XIX, or XXI.

5 ‘‘(4) DIRECT APPROPRIATION OF FUNDS

6 TO CARRY OUT PROGRAM.—

7 ‘‘(A) IN GENERAL.—There are ap8 propriated from the Trust Fund for

9 each fiscal year such amounts as are

10 necessary to carry out the Medicare

11 Integrity Program under this section,

12 subject to subparagraph (B).

13 ‘‘(B) AMOUNTS SPECIFIED.—The

14 amount appropriated under subpara15 graph (A) for a fiscal year is as fol16 lows:

17 ‘‘(i) For fiscal year 1996, such

18 amount shall be not less than

19 $430,000,000 and not more than

20 $440,000,000.

21 ‘‘(ii) For fiscal year 1997, such

22 amount shall be not less than

23 $490,000,000 and not more than

24 $500,000,000.
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1 ‘‘(iii) For fiscal year 1998, such

2 amount shall be not less than

3 $550,000,000 and not more than

4 $560,000,000.

5 ‘‘(iv) For fiscal year 1999, such

6 amount shall be not less than

7 $620,000,000 and not more than

8 $630,000,000.

9 ‘‘(v) For fiscal year 2000, such

10 amount shall be not less than

11 $670,000,000 and not more than

12 $680,000,000.

13 ‘‘(vi) For fiscal year 2001, such

14 amount shall be not less than

15 $690,000,000 and not more than

16 $700,000,000.

17 ‘‘(vii) For fiscal year 2002,

18 such amount shall be not less

19 than $710,000,000 and not more

20 than $720,000,000.

21 ‘‘(5) ANNUAL REPORT.—The Secretary

22 shall submit an annual report to Con23 gress on the amount of revenue which is

24 generated and disbursed by the Trust

25 Fund in each fiscal year.’’.
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1 (b) ELIMINATION OF FI AND CARRIER RE2 SPONSIBILITY FOR CARRYING OUT ACTIVITIES

3 SUBJECT TO PROGRAM.—

4 (1) RESPONSIBILITIES OF FISCAL

5 INTERMEDIARIES UNDER PART A.—Section

6 1816 (42 U.S.C. 1395h) is amended by add7 ing at the end the following new sub8 section:

9 ‘‘(l) No agency or organization may carry

10 out (or receive payment for carrying out) any

11 activity pursuant to an agreement under this

12 section to the extent that the activity is car13 ried out pursuant to a contract under the

14 Medicare Integrity Program under section

15 1893.’’.

16 (2) RESPONSIBILITIES OF CARRIERS

17 UNDER PART B.—Section 1842(c) (42 U.S.C.

18 1395u(c)) is amended by adding at the

19 end the following new paragraph:

20 ‘‘(6) No carrier may carry out (or receive

21 payment for carrying out) any activity pursu22 ant to a contract under this subsection to the

23 extent that the activity is carried out pursu24 ant to a contract under the Medicare Integ25 rity Program under section 1893.’’.
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1 (c) CONFORMING AMENDMENT.—Section

2 1128A(f)(3) (42 U.S.C. 1320a–7a(f)(3)) is amend3 ed by striking ‘‘as miscellaneous receipts of

4 the Treasury of the United States’’ and insert5 ing ‘‘in the Anti-Fraud and Abuse Trust Fund

6 established under section 1893(g)’’.

7 SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR

8 AUTHORIZATION FOR CERTAIN ITEMS OF DU9 RABLE MEDICAL EQUIPMENT.

10 (a) IN GENERAL.—Section 1834(a)(15) (42

11 U.S.C. 1395m(a)(15)), as amended by section

12 135(b) of the Social Security Act Amendments

13 of 1994, is amended by adding at the end the

14 following new subparagraphs:

15 ‘‘(D) APPLICATION BY CARRIERS.—A

16 carrier may develop (and periodically

17 update) a list of items under subpara18 graph (A) and a list of suppliers

19 under subparagraph (B) in the same

20 manner as the Secretary may develop

21 (and periodically update) such lists.

22 ‘‘(E) WAIVER OF PUBLICATION RE23 QUIREMENT.—A carrier may make an

24 advance determination under sub25 paragraph (C) with respect to an item
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1 or supplier on a list developed by the

2 Secretary or the carrier without re3 gard to whether or not the Secretary

4 has promulgated a regulation with re5 spect to the list, except that the car6 rier may not make such an advance

7 determination with respect to an item

8 or supplier on a list until the expira9 tion of the 30-day period beginning

10 on the date the Secretary or the car11 rier places the item or supplier on

12 the list.’’.

13 (b) EFFECTIVE DATE.—The amendment

14 made by subsection (a) shall take effect as if

15 included in the enactment of the Social Secu16 rity Act Amendments of 1994.

17 SEC. 15108. ESTABLISHMENT OF HEALTH CARE ANTI18 FRAUD TASK FORCE.

19 (a) IN GENERAL.—Not later than 120 days

20 after the date of the enactment of this Act, the

21 Attorney General shall establish (in consulta22 tion with the Advisory Group described in

23 subsection (c)) within the Department of Jus24 tice a task force (similar to the Organized

25 Crime Drug Enforcement Task Force) to be
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1 known as the ‘‘Health Care Anti-Fraud Task

2 Force’’ (hereafter in this section referred to as

3 the ‘‘Task Force’’) to prosecute health care

4 fraud offenses. Nothing in this section may be

5 construed as affecting the powers of the At6 torney General or any other individual.

7 (b) OPERATIONS OF TASK FORCE.—The At8 torney General shall establish and operate

9 the Task Force in a manner such that—

10 (1) at least one fully staffed oper11 ational segment of the Task Force (in12 cluding at least one Federal representa13 tive engaged in Task Force activities on a

14 full-time basis) shall operate in each judi15 cial district of the United States; and

16 (2) the Task Force maintains separate

17 accounting of its finances, personnel,

18 case load, and resolution of claims and

19 actions.

20 (c) ADVISORY GROUP DESCRIBED.—The Ad21 visory Group described in this subsection is

22 a group consisting of the following individ23 uals (or their designees):

24 (1) The Secretary of Health and

25 Human Services.
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1 (2) The Secretary of the Treasury.

2 (3) The Secretary of Veterans Affairs.

3 (4) The Chair of the Board of Gov4 ernors of the United States Postal Serv5 ice.

6 SEC. 15109. NATIONAL HEALTH CARE ANTI-FRAUD TASK

7 FORCE.

8 (a) ESTABLISHMENT.—The Secretary of

9 Health and Human Services, in consultation

10 with the Attorney General, shall establish a

11 national health care anti-fraud task force (in

12 this section referred to as the ‘‘task force’’).

13 The Secretary shall establish the task force

14 within 120 days after the date of the enact15 ment of this Act.

16 (b) COMPOSITION.—The task force shall in17 clude representatives of Federal agencies in18 volved in the investigation and prosecution of

19 persons violating laws relating to health care

20 fraud and abuse, including at least one rep21 resentative from each of the following agen22 cies:

23 (1) The Department of Justice and the

24 Federal Bureau of Investigation.
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1 (2) The Department of Health and

2 Human Services and the Office of the In3 spector General within the Department.

4 (3) The office in the Department of

5 Defense responsible for administration of

6 the CHAMPUS program.

7 (4) The Department of Veterans Af8 fairs.

9 (5) The United States Postal Inspec10 tion Service.

11 (6) The Internal Revenue Service.

12 The Secretary (or the Secretary’s designee)

13 shall serve as chair of the task force.

14 (c) DUTIES.—The task force shall assist in

15 coordinating Federal law enforcement activi16 ties relating to health care fraud and abuse in

17 order to better control fraud and abuse in the

18 delivery of health care in the United States.

19 Specifically, the task force shall assist in co20 ordinating activities—

21 (1) in order to assure the effective

22 targeting and investigation of persons

23 who organize, direct, finance, or other24 wise knowingly engage in health care

25 fraud, and
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1 (2) in order to promote full and effec2 tive coordination between Federal and

3 State agencies involved in health care

4 fraud investigations.

5 (d) STAFF.—Each member of the task force

6 who represents an agency shall be respon7 sible for providing for the detail (from the

8 agency) of at least one full-time staff person

9 to staff the task force. Such detail shall be

10 without change in salary, compensation, ben11 efits, and other employment-related matters.

12 SEC. 15110. STUDY OF ADEQUACY OF PRIVATE QUALITY AS13 SURANCE PROGRAMS.

14 (a) IN GENERAL.—The Administrator of the

15 Health Care Financing Administration (acting

16 through the Director of the Office of Research

17 and Demonstrations) shall enter into an

18 agreement with a private entity to conduct a

19 study during the 5-year period beginning on

20 the date of the enactment of this Act of the

21 adequacy of the quality assurance programs

22 and consumer protections used by the

23 MedicarePlus program under part C of title

24 XVIII of the Social Security Act (as inserted

25 by section 15002(a)), and shall include in the
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1 study an analysis of the effectiveness of such

2 programs in protecting plan enrollees against

3 the risk of insufficient provision of benefits

4 which may result from utilization controls.

5 (b) REPORT.—Not later than 6 months after

6 the conclusion of the 5-year period described

7 in subsection (a), the Administrator shall sub8 mit a report to Congress on the study con9 ducted under subsection (a).

10 SEC. 15111. PENALTY FOR FALSE CERTIFICATION FOR

11 HOME HEALTH SERVICES.

12 (a) IN GENERAL.—Section 1128A(b) (42

13 U.S.C. 1320a–7a(b)) is amended by adding at

14 the end the following new paragraph:

15 ‘‘(3)(A) Any physician who executes a doc16 ument described in subparagraph (B) with re17 spect to an individual knowing that all of the

18 requirements referred to in such subpara19 graph are not met with respect to the individ20 ual shall be subject to a civil monetary pen21 alty of not more than the greater of—

22 ‘‘(i) $5,000, or

23 ‘‘(ii) three times the amount of the

24 payments under title XVIII for home
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1 health services which are made pursuant

2 to such certification.

3 ‘‘(B) A document described in this sub4 paragraph is any document that certifies, for

5 purposes of title XVIII, that an individual

6 meets the requirements of section

7 1814(a)(2)(C) or 1835(a)(2)(A) in the case of

8 home health services furnished to the individ9 ual.’’.

10 (b) EFFECTIVE DATE.—The amendment

11 made by subsection (a) shall apply to certifi12 cations made on or after the date of the enact13 ment of this Act.

14 SEC. 15112. INELIGIBILITY FOR PART B BENEFITS OF INDI15 VIDUALS CONVICTED OF MEDICARE FRAUD.

16 (a) IN GENERAL.—Section 1838 (42 U.S.C.

17 1395q) is amended by adding at the end the

18 following new subsection:

19 ‘‘(f) In no case shall a coverage period for

20 an individual include, if the individual has

21 been convicted of a felony relating to the pro22 gram under this title, any month after the

23 month in which such conviction becomes

24 final.’’.
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1 (b) EFFECTIVE DATE.—The amendment

2 made by subsection (a) shall apply to convic3 tions occurring on or after the date of the en4 actment of this Act.

5 SEC. 15113. PILOT PROJECTS.

6 The Secretary of Health and Human Serv7 ices shall establish and operate 5 pilot

8 projects (in various geographic regions of the

9 United States) under which the Secretary

10 shall implement innovative approaches to

11 monitor payment claims under the medicare

12 program to detect those claims that are

13 wasteful or fraudulent.

14 Subtitle C—Regulatory Relief

15 PART 1—PHYSICIAN OWNERSHIP REFERRAL

16 REFORM

17 SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM18 PENSATION ARRANGEMENTS.

19 (a) IN GENERAL.—Section 1877(a)(2) (42

20 U.S.C. 1395nn(a)(2)) is amended by striking

21 ‘‘is—’’ and all that follows through ‘‘equity,’’

22 and inserting the following: ‘‘is (except as pro23 vided in subsection (c)) an ownership or in24 vestment interest in the entity through eq25 uity,’’.
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1 (b) CONFORMING AMENDMENTS.—Section

2 1877 (42 U.S.C. 1395nn) is amended as follows:

3 (1) In subsection (b)—

4 (A) in the heading, by striking ‘‘TO

5 BOTH OWNERSHIP AND COMPENSATION

6 ARRANGEMENT PROVISIONS’’ and insert7 ing ‘‘WHERE FINANCIAL RELATIONSHIP

8 EXISTS’’; and

9 (B) by redesignating paragraph

10 (4) as paragraph (7).

11 (2) In subsection (c)—

12 (A) by amending the heading to

13 read as follows: ‘‘EXCEPTION FOR OWN14 ERSHIP OR INVESTMENT INTEREST IN

15 PUBLICLY TRADED SECURITIES AND MU16 TUAL FUNDS’’; and

17 (B) in the matter preceding para18 graph (1), by striking ‘‘subsection

19 (a)(2)(A)’’ and inserting ‘‘subsection

20 (a)(2)’’.

21 (3) In subsection (d)—

22 (A) by striking the matter preced23 ing paragraph (1);
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1 (B) in paragraph (3), by striking

2 ‘‘paragraph (1)’’ and inserting ‘‘para3 graph (4)’’; and

4 (C) by redesignating paragraphs

5 (1), (2), and (3) as paragraphs (4), (5),

6 and (6), and by transferring and in7 serting such paragraphs after para8 graph (3) of subsection (b).

9 (4) By striking subsection (e).

10 (5) In subsection (f)(2), as amended by

11 section 152(a) of the Social Security Act

12 Amendments of 1994—

13 (A) in the matter preceding para14 graph (1), by striking ‘‘ownership, in15 vestment, and compensation’’ and in16 serting ‘‘ownership and investment’’;

17 (B) in paragraph (2), by striking

18 ‘‘subsection (a)(2)(A)’’ and all that fol19 lows through ‘‘subsection (a)(2)(B)),’’

20 and inserting ‘‘subsection (a)(2),’’; and

21 (C) in paragraph (2), by striking

22 ‘‘or who have such a compensation re23 lationship with the entity’’.

24 (6) In subsection (h)—
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1 (A) by striking paragraphs (1), (2),

2 and (3);

3 (B) in paragraph (4)(A), by strik4 ing clauses (iv) and (vi);

5 (C) in paragraph (4)(B), by strik6 ing ‘‘RULES.—’’ and all that follows

7 through ‘‘(ii) FACULTY’’ and inserting

8 ‘‘RULES FOR FACULTY; and

9 (D) by adding at the end of para10 graph (4) the following new subpara11 graph:

12 ‘‘(C) MEMBER OF A GROUP.—A phy13 sician is a ‘member’ of a group if the

14 physician is an owner or a bona fide

15 employee, or both, of the group.’’.

16 SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES

17 SUBJECT TO PROHIBITION.

18 (a) IN GENERAL.—Section 1877(h)(6) (42

19 U.S.C. 1395nn(h)(6)) is amended by striking

20 subparagraphs (B) through (K) and inserting

21 the following:

22 ‘‘(B) Parenteral and enteral nutri23 ents, equipment, and supplies.
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1 ‘‘(C) Magnetic resonance imaging

2 and computerized tomography serv3 ices.

4 ‘‘(D) Outpatient physical or occu5 pational therapy services.’’.

6 (b) CONFORMING AMENDMENTS.—

7 (1) Section 1877(b)(2) (42 U.S.C.

8 1395nn(b)(2)) is amended in the matter

9 preceding subparagraph (A) by striking

10 ‘‘services’’ and all that follows through

11 ‘‘supplies)—’’ and inserting ‘‘services—’’.

12 (2) Section 1877(h)(5)(C) (42 U.S.C.

13 1395nn(h)(5)(C)) is amended—

14 (A) by striking ‘‘, a request by a

15 radiologist for diagnostic radiology

16 services, and a request by a radiation

17 oncologist for radiation therapy,’’ and

18 inserting ‘‘and a request by a radiolo19 gist for magnetic resonance imaging

20 or for computerized tomography’’,

21 and

22 (B) by striking ‘‘radiologist, or ra23 diation oncologist’’ and inserting ‘‘or

24 radiologist’’.
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1 SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMUL2 GATION OF REGULATIONS.

3 (a) IN GENERAL.—Section 13562(b) of

4 OBRA–1993 (42 U.S.C. 1395nn note) is amend5 ed—

6 (1) in paragraph (1), by striking

7 ‘‘paragraph (2)’’ and inserting ‘‘para8 graphs (2) and (3)’’; and

9 (2) by adding at the end the following

10 new paragraph:

11 ‘‘(3) PROMULGATION OF REGULATIONS.—

12 Notwithstanding paragraphs (1) and (2),

13 the amendments made by this section

14 shall not apply to any referrals made be15 fore the effective date of final regulations

16 promulgated by the Secretary of Health

17 and Human Services to carry out such

18 amendments.’’.

19 (b) EFFECTIVE DATE.—The amendments

20 made by subsection (a) shall take effect as if

21 included in the enactment of OBRA–1993.

22 SEC. 15204. EXCEPTIONS TO PROHIBITION.

23 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE

24 ANCILLARY SERVICES.—
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1 (1) REPEAL OF SITE-OF-SERVICE RE2 QUIREMENT.—Section 1877 (42 U.S.C.

3 1395nn) is amended—

4 (A) by amending subparagraph

5 (A) of subsection (b)(2) to read as fol6 lows:

7 ‘‘(A) that are furnished personally

8 by the referring physician, personally

9 by a physician who is a member of

10 the same group practice as the refer11 ring physician, or personally by indi12 viduals who are under the general su13 pervision of the physician or of an14 other physician in the group practice,

15 and’’, and

16 (B) by adding at the end of sub17 section (h) the following new para18 graph:

19 ‘‘(7) GENERAL SUPERVISION.—An indi20 vidual is considered to be under the ‘gen21 eral supervision’ of a physician if the

22 physician (or group practice of which the

23 physician is a member) is legally respon24 sible for the services performed by the in25 dividual and for ensuring that the indi-
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1 vidual meets licensure and certification

2 requirements, if any, applicable under

3 other provisions of law, regardless of

4 whether or not the physician is phys5 ically present when the individual fur6 nishes an item or service.’’.

7 (2) CLARIFICATION OF TREATMENT OF

8 PHYSICIAN OWNERS OF GROUP PRACTICE.—

9 Section 1877(b)(2)(B) (42 U.S.C.

10 1395nn(b)(2)(B)) is amended by striking

11 ‘‘physician or such group practice’’ and

12 inserting ‘‘physician, such group practice,

13 or the physician owners of such group

14 practice’’.

15 (3) CONFORMING AMENDMENT.—Section

16 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is

17 amended by amending the heading to

18 read as follows: ‘‘ANCILLARY SERVICES FUR19 NISHED PERSONALLY OR THROUGH GROUP

20 PRACTICE.—’’.

21 (b) CLARIFICATION OF EXCEPTION FOR SERV22 ICES FURNISHED IN A RURAL AREA.—Paragraph

23 (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as

24 transferred by section 15201(b)(3)(C), is
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1 amended by striking ‘‘substantially all’’ and

2 inserting ‘‘not less than 75 percent’’.

3 (c) REVISION OF EXCEPTION FOR CERTAIN

4 MANAGED CARE ARRANGEMENTS.—Section

5 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amend6 ed—

7 (1) in the heading by inserting ‘‘MAN8 AGED CARE ARRANGEMENTS’’ after ‘‘PREPAID

9 PLANS’’;

10 (2) in the matter preceding subpara11 graph (A), by striking ‘‘organization—’’

12 and inserting ‘‘organization, directly or

13 through contractual arrangements with

14 other entities, to individuals enrolled

15 with the organization—’’;

16 (3) in subparagraph (A), by inserting

17 ‘‘or part C’’ after ‘‘section 1876’’;

18 (4) by striking ‘‘or’’ at the end of sub19 paragraph (C);

20 (5) by striking the period at the end

21 of subparagraph (D) and inserting a

22 comma; and

23 (6) by adding at the end the following

24 new subparagraphs:
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1 ‘‘(E) with a contract with a State

2 to provide services under the State

3 plan under title XIX (in accordance

4 with section 1903(m)) or a State

5 MediGrant plan under title XXI; or

6 ‘‘(F) which is a MedicarePlus or7 ganization under part C or which

8 provides or arranges for the provi9 sion of health care items or services

10 pursuant to a written agreement be11 tween the organization and an indi12 vidual or entity if the written agree13 ment places the individual or entity

14 at substantial financial risk for the

15 cost or utilization of the items or

16 services which the individual or en17 tity is obligated to provide, whether

18 through a withhold, capitation, incen19 tive pool, per diem payment, or any

20 other similar risk arrangement which

21 places the individual or entity at sub22 stantial financial risk.’’.

23 (d) NEW EXCEPTION FOR SHARED FACILITY

24 SERVICES.—
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1 (1) IN GENERAL.—Section 1877(b) (42

2 U.S.C. 1395nn(b)), as amended by section

3 15201(b)(3)(C), is amended—

4 (A) by redesignating paragraphs

5 (4) through (7) as paragraphs (5)

6 through (8); and

7 (B) by inserting after paragraph

8 (3) the following new paragraph:

9 ‘‘(4) SHARED FACILITY SERVICES.—In the

10 case of a designated health service con11 sisting of a shared facility service of a

12 shared facility—

13 ‘‘(A) that is furnished—

14 ‘‘(i) personally by the refer15 ring physician who is a shared fa16 cility physician or personally by

17 an individual directly employed

18 or under the general supervision

19 of such a physician,

20 ‘‘(ii) by a shared facility in a

21 building in which the referring

22 physician furnishes substantially

23 all of the services of the physician

24 that are unrelated to the furnish25 ing of shared facility services, and
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1 ‘‘(iii) to a patient of a shared

2 facility physician; and

3 ‘‘(B) that is billed by the referring

4 physician or a group practice of

5 which the physician is a member.’’.

6 (2) DEFINITIONS.—Section 1877(h) (42

7 U.S.C. 1395nn(h)), as amended by section

8 15201(b)(6), is amended by inserting be9 fore paragraph (4) the following new

10 paragraph:

11 ‘‘(1) SHARED FACILITY RELATED DEFINI12 TIONS.—

13 ‘‘(A) SHARED FACILITY SERVICE.—

14 The term ‘shared facility service’

15 means, with respect to a shared facil16 ity, a designated health service fur17 nished by the facility to patients of

18 shared facility physicians.

19 ‘‘(B) SHARED FACILITY.—The term

20 ‘shared facility’ means an entity that

21 furnishes shared facility services

22 under a shared facility arrangement.

23 ‘‘(C) SHARED FACILITY PHYSICIAN.—

24 The term ‘shared facility physician’

25 means, with respect to a shared facil-
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1 ity, a physician (or a group practice

2 of which the physician is a member)

3 who has a financial relationship

4 under a shared facility arrangement

5 with the facility.

6 ‘‘(D) SHARED FACILITY ARRANGE7 MENT.—The term ‘shared facility ar8 rangement’ means, with respect to

9 the provision of shared facility serv10 ices in a building, a financial ar11 rangement—

12 ‘‘(i) which is only between

13 physicians who are providing

14 services (unrelated to shared fa15 cility services) in the same build16 ing,

17 ‘‘(ii) in which the overhead ex18 penses of the facility are shared,

19 in accordance with methods pre20 viously determined by the physi21 cians in the arrangement, among

22 the physicians in the arrange23 ment, and

24 ‘‘(iii) which, in the case of a

25 corporation, is wholly owned and
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1 controlled by shared facility phy2 sicians.’’.

3 (e) NEW EXCEPTION FOR SERVICES FUR4 NISHED IN COMMUNITIES WITH NO ALTERNATIVE

5 PROVIDERS.—Section 1877(b) (42 U.S.C.

6 1395nn(b)), as amended by section

7 15201(b)(3)(C) and subsection (d)(1), is amend8 ed—

9 (1) by redesignating paragraphs (5)

10 through (8) as paragraphs (6) through (9);

11 and

12 (2) by inserting after paragraph (4)

13 the following new paragraph:

14 ‘‘(5) NO ALTERNATIVE PROVIDERS IN

15 AREA.—In the case of a designated health

16 service furnished in any area with re17 spect to which the Secretary determines

18 that individuals residing in the area do

19 not have reasonable access to such a des20 ignated health service for which sub21 section (a)(1) does not apply.’’.

22 (f) NEW EXCEPTION FOR SERVICES FUR23 NISHED IN AMBULATORY SURGICAL CENTERS.—

24 Section 1877(b) (42 U.S.C. 1395nn(b)), as
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1 amended by section 15201(b)(3)(C), subsection

2 (d)(1), and subsection (e)(1), is amended—

3 (1) by redesignating paragraphs (6)

4 through (9) as paragraphs (7) through

5 (10); and

6 (2) by inserting after paragraph (5)

7 the following new paragraph:

8 ‘‘(6) SERVICES FURNISHED IN AMBULA9 TORY SURGICAL CENTERS.—In the case of a

10 designated health service furnished in an

11 ambulatory surgical center described in

12 section 1832(a)(2)(F)(i).’’.

13 (g) NEW EXCEPTION FOR SERVICES FUR14 NISHED IN RENAL DIALYSIS FACILITIES.—Section

15 1877(b) (42 U.S.C. 1395nn(b)), as amended by

16 section 15201(b)(3)(C), subsection (d)(1), sub17 section (e)(1), and subsection (f), is amended—

18 (1) by redesignating paragraphs (7)

19 through (10) as paragraphs (8) through

20 (11); and

21 (2) by inserting after paragraph (6)

22 the following new paragraph:

23 ‘‘(7) SERVICES FURNISHED IN RENAL DI24 ALYSIS FACILITIES.—In the case of a des25 ignated health service furnished in a
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1 renal dialysis facility under section

2 1881.’’.

3 (h) NEW EXCEPTION FOR SERVICES FUR4 NISHED IN A HOSPICE.—Section 1877(b) (42

5 U.S.C. 1395nn(b)), as amended by section

6 15201(b)(3)(C), subsection (d)(1), subsection

7 (e)(1), subsection (f), and subsection (g), is

8 amended—

9 (1) by redesignating paragraphs (8)

10 through (11) as paragraphs (9) through

11 (12); and

12 (2) by inserting after paragraph (7)

13 the following new paragraph:

14 ‘‘(8) SERVICES FURNISHED BY A HOSPICE

15 PROGRAM.—In the case of a designated

16 health service furnished by a hospice

17 program under section 1861(dd)(2).’’.

18 (i) NEW EXCEPTION FOR SERVICES FUR19 NISHED IN A COMPREHENSIVE OUTPATIENT REHA20 BILITATION FACILITY.—Section 1877(b) (42

21 U.S.C. 1395nn(b)), as amended by section

22 15201(b)(3)(C), subsection (d)(1), subsection

23 (e)(1), subsection (f), subsection (g), and sub24 section (h), is amended—
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1 (1) by redesignating paragraphs (9)

2 through (12) as paragraphs (10) through

3 (13); and

4 (2) by inserting after paragraph (8)

5 the following new paragraph:

6 ‘‘(9) SERVICES FURNISHED IN A COM7 PREHENSIVE OUTPATIENT REHABILITATION

8 FACILITY.—In the case of a designated

9 health service furnished in a comprehen10 sive outpatient rehabilitation facility (as

11 defined in section 1861(cc)(2)).’’.

12 (i) DEFINITION OF REFERRAL.—Section

13 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is

14 amended—

15 (1) by striking ‘‘an item or service’’

16 and inserting ‘‘a designated health serv17 ice’’, and

18 (2) by striking ‘‘the item or service’’

19 and inserting ‘‘the designated health

20 service’’.

21 SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.

22 Section 1877 (42 U.S.C. 1395nn) is amend23 ed—

24 (1) by striking subsection (f); and

25 (2) by striking subsection (g)(5).
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1 SEC. 15206. PREEMPTION OF STATE LAW.

2 Section 1877 (42 U.S.C. 1395nn) is amend3 ed by adding at the end the following new

4 subsection:

5 ‘‘(i) PREEMPTION OF STATE LAW.—This sec6 tion preempts State law to the extent State

7 law is inconsistent with this section.’’.

8 SEC. 15207. EFFECTIVE DATE.

9 Except as provided in section 15203(b),

10 the amendments made by this part shall apply

11 to referrals made on or after August 14, 1995,

12 regardless of whether or not regulations are

13 promulgated to carry out such amendments.

14 PART 2—OTHER MEDICARE REGULATORY

15 RELIEF

16 SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV17 ERAGE DATA BANK.

18 (a) IN GENERAL.—Section 1144 (42 U.S.C.

19 1320b–14), as added by section 13581(a) of

20 OBRA–93, is repealed.

21 (b) CONFORMING AMENDMENTS.—

22 (1) MEDICARE.—Section 1862(b)(5) of

23 such Act (42 U.S.C. 1395y(b)(5)), as

24 amended by section 13581(b)(1) of OBRA–

25 93, is amended—
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1 (A) in subparagraph (B), by strik2 ing the dash and all that follows

3 through the end and inserting ‘‘sub4 paragraph (A) for purposes of carry5 ing out this subsection.’’, and

6 (B) in subparagraph (C)(i), by

7 striking ‘‘subparagraph (B)(i)’’ and in8 serting ‘‘subparagraph (B)’’.

9 (2) MEDICAID.—Section

10 1902(a)(25)(A)(i) of such Act (42 U.S.C.

11 1396a(a)(25)(A)(i)), as amended by section

12 13581(b)(2) of OBRA–93, is amended by

13 striking ‘‘including the use of’’ and all

14 that follows through ‘‘any additional

15 measures’’.

16 (3) ERISA.—Section 101(f) of the Em17 ployee Retirement Income Security Act of

18 1974 (29 U.S.C. 1021(f)) is repealed.

19 (4) DATA MATCHES.—Section

20 552a(a)(8)(B) of title 5, United States

21 Code, as amended by section 13581(c) of

22 OBRA–93, is amended—

23 (A) by adding ‘‘; or’’ at the end of

24 clause (v),
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1 (B) by striking ‘‘or’’ at the end of

2 clause (vi), and

3 (C) by striking clause (vii).

4 SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE5 QUIRED FOR IMPOSITION OF SANCTIONS.

6 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE

7 REQUIRED FOR IMPOSITION OF CIVIL MONETARY

8 PENALTIES.—

9 (1) IN GENERAL.—Section 1128A(a) (42

10 U.S.C. 1320a–7a(a)) is amended—

11 (A) in paragraphs (1) and (2), by

12 inserting ‘‘knowingly’’ before ‘‘pre13 sents’’ each place it appears; and

14 (B) in paragraph (3), by striking

15 ‘‘gives’’ and inserting ‘‘knowingly

16 gives or causes to be given’’.

17 (2) DEFINITION OF STANDARD.—Section

18 1128A(i) (42 U.S.C. 1320a–7a(i)) is amend19 ed by adding at the end the following

20 new paragraph:

21 ‘‘(6) The term ‘should know’ means

22 that a person, with respect to informa23 tion—
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1 ‘‘(A) acts in deliberate ignorance

2 of the truth or falsity of the informa3 tion; or

4 ‘‘(B) acts in reckless disregard of

5 the truth or falsity of the information,

6 and no proof of specific intent to defraud

7 is required.’’.

8 (b) CLARIFICATION OF EFFECT AND APPLICA9 TION OF SAFE HARBOR EXCEPTIONS.—For pur10 poses of section 1128B(b)(3) of the Social Se11 curity Act, the specification of any payment

12 practice in regulations promulgated pursuant

13 to section 14(a) of the Medicare and Medicaid

14 Program and Patient Protection Act of 1987

15 is—

16 (1) solely for the purpose of adding

17 additional exceptions to the types of con18 duct which are not subject to an anti19 kickback penalty under such section and

20 not for the purpose of limiting the scope

21 of such exceptions; and

22 (2) for the purpose of prescribing cri23 teria for qualifying for such an exception

24 notwithstanding the intent of the party

25 involved.
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1 (c) LIMITING IMPOSITION OF ANTI-KICKBACK

2 PENALTIES TO ACTIONS WITH SIGNIFICANT PUR3 POSE TO INDUCE REFERRALS.—Section

4 1128B(b)(2) (42 U.S.C. 1320a–7b(b)(2)) is

5 amended in the matter preceding subpara6 graph (A) by striking ‘‘to induce’’ and insert7 ing ‘‘for the significant purpose of inducing’’.

8 (d) EFFECTIVE DATE.—The amendments

9 made by this section shall apply to acts or

10 omissions occurring on or after January 1,

11 1996.

12 SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK

13 PENALTIES FOR MANAGED CARE ARRANGE14 MENTS.

15 (a) IN GENERAL.—Section 1128B(b)(3) (42

16 U.S.C. 1320a–7b(b)(3)) is amended—

17 (1) by striking ‘‘and’’ at the end of

18 subparagraph (D);

19 (2) by striking the period at the end

20 of subparagraph (E) and inserting ‘‘;

21 and’’; and

22 (3) by adding at the end the following

23 new subparagraph:

24 ‘‘(F) any remuneration between an or25 ganization and an individual or entity
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1 providing services pursuant to a written

2 agreement between the organization and

3 the individual or entity if the organiza4 tion is a MedicarePlus organization

5 under part C of title XVIII or if the writ6 ten agreement places the individual or

7 entity at substantial financial risk for the

8 cost or utilization of the items or services

9 which the individual or entity is obli10 gated to provide, whether through a

11 withhold, capitation, incentive pool, per

12 diem payment, or any other similar risk

13 arrangement which places the individual

14 or entity at substantial financial risk.’’.

15 (b) EFFECTIVE DATE.—The amendment

16 made by subsection (a) shall apply to acts or

17 omissions occurring on or after January 1,

18 1996.

19 SEC. 15214. SOLICITATION AND PUBLICATION OF MODI20 FICATIONS TO EXISTING SAFE HARBORS AND

21 NEW SAFE HARBORS.

22 (a) IN GENERAL.—

23 (1) SOLICITATIONS.—Not later than

24 January 1, 1996, and not less than annu25 ally thereafter, the Secretary of Health
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1 and Human Services shall publish a no2 tice in the Federal Register soliciting

3 proposals, which will be accepted during

4 a 60-day period, for—

5 (A) modifications to existing safe

6 harbors issued pursuant to section

7 14(a) of the Medicare and Medicaid

8 Patient and Program Protection Act

9 of 1987;

10 (B) additional safe harbors speci11 fying payment practices that shall not

12 be treated as a criminal offense under

13 section 1128B(b) of the Social Secu14 rity Act and shall not serve as the

15 basis for an exclusion under section

16 1128(b)(7) of such Act; and

17 (C) special fraud alerts to be is18 sued pursuant to section 15101(c).

19 (2) PUBLICATION OF PROPOSED MODI20 FICATIONS AND PROPOSED ADDITIONAL SAFE

21 HARBORS.—Not later than 120 days after

22 receiving the proposals described in sub23 paragraphs (A) and (B) of paragraph (1),

24 the Secretary, after considering such pro25 posals in consultation with the Attorney
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1 General, shall publish in the Federal Reg2 ister proposed modifications to existing

3 safe harbors and proposed additional

4 safe harbors, if appropriate, with a 60-

5 day comment period. After considering

6 any public comments received during

7 this period, the Secretary shall issue final

8 rules modifying the existing safe harbors

9 and establishing new safe harbors, as ap10 propriate.

11 (3) REPORT.—The Inspector General

12 shall, in an annual report to Congress or

13 as part of the year-end semiannual report

14 required by section 5 of the Inspector

15 General Act of 1978, describe the propos16 als received under subparagraphs (A)

17 and (B) of paragraph (1) and explain

18 which proposals were included in the

19 publication described in paragraph (2),

20 which proposals were not included in

21 that publication, and the reasons for the

22 rejection of the proposals that were not

23 included.

24 (b) CRITERIA FOR MODIFYING AND ESTAB25 LISHING SAFE HARBORS.—In modifying and es-
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1 tablishing safe harbors under subsection

2 (a)(2), the Secretary may consider the extent

3 to which providing a safe harbor for the spec4 ified payment practice may result in any of

5 the following:

6 (1) An increase or decrease in access

7 to health care services.

8 (2) An increase or decrease in the

9 quality of health care services.

10 (3) An increase or decrease in patient

11 freedom of choice among health care pro12 viders.

13 (4) An increase or decrease in com14 petition among health care providers.

15 (5) An increase or decrease in the

16 cost to health care programs of the Fed17 eral Government.

18 (6) An increase or decrease in the po19 tential overutilization of health care serv20 ices.

21 (8) Any other factors the Secretary

22 deems appropriate in the interest of pre23 venting fraud and abuse in health care

24 programs of the Federal Government.
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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

4 seq.), as amended by section 15104(a), is

5 amended by inserting after section 1129 the

6 following new section:

7 ‘‘ADVISORY OPINIONS

8 ‘‘SEC. 1130. (a) ISSUANCE OF ADVISORY OPIN9 IONS.—The Secretary shall issue written advi10 sory opinions as provided in this section.

11 ‘‘(b) MATTERS SUBJECT TO ADVISORY OPIN12 IONS.—The Secretary shall issue advisory

13 opinions as to the following matters:

14 ‘‘(1) What constitutes prohibited re15 muneration within the meaning of sec16 tion 1128B(b).

17 ‘‘(2) Whether an arrangement or pro18 posed arrangement satisfies the criteria

19 set forth in section 1128B(b)(3) for activi20 ties which do not result in prohibited re21 muneration.

22 ‘‘(3) Whether an arrangement or pro23 posed arrangement satisfies the criteria

24 which the Secretary has established, or

25 shall establish by regulation for activities
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1 which do not result in prohibited remu2 neration.

3 ‘‘(4) What constitutes an inducement

4 to reduce or limit services to individuals

5 entitled to benefits under title XVIII or

6 title XIX or title XXI within the meaning

7 of section 1128B(b).

8 ‘‘(5) Whether any activity or proposed

9 activity constitutes grounds for the impo10 sition of a sanction under section 1128,

11 1128A, or 1128B.

12 ‘‘(c) MATTERS NOT SUBJECT TO ADVISORY

13 OPINIONS.—Such advisory opinions shall not

14 address the following matters:

15 ‘‘(1) Whether the fair market value

16 shall be, or was paid or received for any

17 goods, services or property.

18 ‘‘(2) Whether an individual is a bona

19 fide employee within the requirements of

20 section 3121(d)(2) of the Internal Revenue

21 Code of 1986.

22 ‘‘(d) EFFECT OF ADVISORY OPINIONS.—

23 ‘‘(1) BINDING AS TO SECRETARY AND PAR24 TIES INVOLVED.—Each advisory opinion is25 sued by the Secretary shall be binding as
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1 to the Secretary and the party or parties

2 requesting the opinion.

3 ‘‘(2) FAILURE TO SEEK OPINION.—The

4 failure of a party to seek an advisory

5 opinion may not be introduced into evi6 dence to prove that the party intended to

7 violate the provisions of sections 1128,

8 1128A, or 1128B.

9 ‘‘(e) REGULATIONS.—

10 ‘‘(1) IN GENERAL.—Not later than 180

11 days after the date of the enactment of

12 this section, the Secretary shall issue reg13 ulations to carry out this section. Such

14 regulations shall provide for—

15 ‘‘(A) the procedure to be followed

16 by a party applying for an advisory

17 opinion;

18 ‘‘(B) the procedure to be followed

19 by the Secretary in responding to a

20 request for an advisory opinion;

21 ‘‘(C) the interval in which the Sec22 retary shall respond;

23 ‘‘(D) the reasonable fee to be

24 charged to the party requesting an

25 advisory opinion; and
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1 ‘‘(E) the manner in which advi2 sory opinions will be made available

3 to the public.

4 ‘‘(2) SPECIFIC CONTENTS.—Under the

5 regulations promulgated pursuant to

6 paragraph (1)—

7 ‘‘(A) the Secretary shall be re8 quired to respond to a party request9 ing an advisory opinion by not later

10 than 30 days after the request is re11 ceived; and

12 ‘‘(B) the fee charged to the party

13 requesting an advisory opinion shall

14 be equal to the costs incurred by the

15 Secretary in responding to the re16 quest.’’.

17 (b) EFFECTIVE DATE.—The amendment

18 made by subsection (a) shall apply to requests

19 for advisory opinions made on or after Janu20 ary 1, 1996.

21 SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND

22 CLAIMS PROCESSING REQUIREMENTS FOR

23 PHYSICIANS’ SERVICES.

24 Except as may be specifically provided by

25 Congress, the Secretary of Health and Human
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1 Services may not implement any change in

2 the requirements imposed on the billing and

3 processing of claims for payment for physi4 cians’ services under part B of the medicare

5 program unless the Secretary notifies the in6 dividuals furnishing such services of the

7 change not later than 120 days before the ef8 fective date of the change.

9 PART 3—PROMOTING PHYSICIAN SELF-POLICING

10 SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CER11 TAIN ACTIVITIES OF MEDICAL SELF-REGU12 LATORY ENTITIES.

13 (a) EXEMPTION DESCRIBED.—An activity re14 lating to the provision of health care services

15 shall be exempt from the antitrust laws, and

16 any State law similar to the antitrust laws, if

17 the activity is within the safe harbor de18 scribed in subsection (b).

19 (b) SAFE HARBOR FOR ACTIVITIES OF MEDI20 CAL SELF-REGULATORY ENTITIES.—

21 (1) IN GENERAL.—Subject to paragraph

22 (2), any activity of a medical self-regu23 latory entity relating to standard setting

24 or standard enforcement activities that
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1 are designed to promote the quality of

2 health care services provided to patients.

3 (2) EXCEPTION.—No activity of a medi4 cal self-regulatory entity may be deemed

5 to fall under the safe harbor established

6 under paragraph (1) if the activity—

7 (A) is conducted for purposes of

8 financial gain, or

9 (B) interferes with the provision

10 of health care services by any health

11 care provider who is not a member of

12 the specific profession which is sub13 ject to the authority of the medical

14 self-regulatory entity.

15 (c) DEFINITIONS.—For purposes of this sec16 tion:

17 (1) ANTITRUST LAWS.—The term ‘‘anti18 trust laws’’ has the meaning given it in

19 subsection (a) of the first section of the

20 Clayton Act (15 U.S.C. 12(a)), except that

21 such term includes section 5 of the Fed22 eral Trade Commission Act (15 U.S.C. 45)

23 to the extent such section applies to un24 fair methods 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

4 incurred policy or certificate,

5 (B) a hospital or medical service

6 plan contract,

7 (C) a health maintenance sub8 scriber contract,

9 (D) a multiple employer welfare

10 arrangement or employee benefit

11 plan (as defined under the Employee

12 Retirement Income Security Act of

13 1974), or

14 (E) a MedicarePlus product (of15 fered under part C of title XVIII of

16 the Social Security Act),

17 that provides benefits with respect to

18 health care services.

19 (3) HEALTH CARE SERVICE.—the term

20 ‘‘health care service’’ means any service

21 for which payment may be made under a

22 health benefit plan including services re23 lated to the delivery or administration of

24 such service.
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1 (4) MEDICAL SELF-REGULATORY EN2 TITY.—the term ‘‘medical self-regulatory

3 entity’’ means a medical society or asso4 ciation, a specialty board, a recognized

5 accrediting agency, or a hospital medical

6 staff, and includes the members, officers,

7 employees, consultants, and volunteers or

8 committees of such an entity.

9 (5) HEALTH CARE PROVIDER.—The term

10 ‘‘health care provider’’ means any indi11 vidual or entity that is engaged in the de12 livery of health care services in a State

13 and that is required by State law or regu14 lation to be licensed or certified by the

15 State to engage in the delivery of such

16 services in the State.

17 (6) STANDARD SETTING OR STANDARD EN18 FORCEMENT ACTIVITIES.— The term ‘‘stand19 ard setting or standard enforcement ac20 tivities’’ means—

21 (A) accreditation of health care

22 practitioners, health care providers,

23 medical education institutions, or

24 medical education programs,
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1 (B) technology assessment and

2 risk management activities,

3 (C) the development and imple4 mentation of practice guidelines or

5 practice parameters, or

6 (D) official peer review proceed7 ings undertaken by a hospital medi8 cal staff (or committee thereof) or a

9 medical society or association for

10 purposes of evaluating the profes11 sional conduct or quality of health

12 care provided by a medical profes13 sional.

14 Subtitle D—Medical Liability

15 Reform

16 PART 1—GENERAL PROVISIONS

17 SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY

18 ACTIONS.

19 (a) APPLICABILITY.—This subtitle shall

20 apply with respect to any health care liability

21 action brought in any State or Federal court,

22 except that this subtitle shall not apply to an

23 action for damages arising from a vaccine-re24 lated injury or death to the extent that title
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1 XXI of the Public Health Service Act applies

2 to the action.

3 (b) PREEMPTION.—This subtitle shall pre4 empt any State law to the extent such law is

5 inconsistent with the limitations contained in

6 this subtitle. This subtitle shall not preempt

7 any State law that provides for defenses or

8 places limitations on a person’s liability in ad9 dition to those contained in this subtitle or

10 otherwise imposes greater restrictions than

11 those provided in this subtitle.

12 (c) EFFECT ON SOVEREIGN IMMUNITY AND

13 CHOICE OF LAW OR VENUE.—Nothing in sub14 section (b) shall be construed to—

15 (1) waive or affect any defense of sov16 ereign immunity asserted by any State

17 under any provision of law;

18 (2) waive or affect any defense of sov19 ereign immunity asserted by the United

20 States;

21 (3) affect the applicability of any pro22 vision of the Foreign Sovereign Immuni23 ties Act of 1976;

24 (4) preempt State choice-of-law rules

25 with respect to claims brought by a for-
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1 eign nation or a citizen of a foreign na2 tion; or

3 (5) affect the right of any court to

4 transfer venue or to apply the law of a

5 foreign nation or to dismiss a claim of a

6 foreign nation or of a citizen of a foreign

7 nation on the ground of inconvenient

8 forum.

9 (d) AMOUNT IN CONTROVERSY.—In an action

10 to which this subtitle applies and which is

11 brought under section 1332 of title 28, United

12 States Code, the amount of noneconomic dam13 ages or punitive damages, and attorneys’ fees

14 or costs, shall not be included in determining

15 whether the matter in controversy exceeds

16 the sum or value of $50,000.

17 (e) FEDERAL COURT JURISDICTION NOT ES18 TABLISHED ON FEDERAL QUESTION GROUNDS.—

19 Nothing in this subtitle shall be construed to

20 establish any jurisdiction in the district

21 courts of the United States over health care

22 liability actions on the basis of section 1331 or

23 1337 of title 28, United States Code.

24 SEC. 15302. DEFINITIONS.

25 As used in this subtitle:
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1 (1) ACTUAL DAMAGES.—The term ‘‘ac2 tual damages’’ means damages awarded

3 to pay for economic loss.

4 (2) ALTERNATIVE DISPUTE RESOLUTION

5 SYSTEM; ADR.—The term ‘‘alternative dis6 pute resolution system’’ or ‘‘ADR’’ means

7 a system established under Federal or

8 State law that provides for the resolution

9 of health care liability claims in a man10 ner other than through health care liabil11 ity actions.

12 (3) CLAIMANT.—The term ‘‘claimant’’

13 means any person who brings a health

14 care liability action and any person on

15 whose behalf such an action is brought. If

16 such action is brought through or on be17 half of an estate, the term includes the

18 claimant’s decedent. If such action is

19 brought through or on behalf of a minor

20 or incompetent, the term includes the

21 claimant’s legal guardian.

22 (4) CLEAR AND CONVINCING EVIDENCE.—

23 The term ‘‘clear and convincing evidence’’

24 is that measure or degree of proof that

25 will produce in the mind of the trier of
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1 fact a firm belief or conviction as to the

2 truth of the allegations sought to be es3 tablished, except that such measure or

4 degree of proof is more than that re5 quired under preponderance of the evi6 dence but less than that required for

7 proof beyond a reasonable doubt.

8 (5) COLLATERAL SOURCE PAYMENTS.—

9 The term ‘‘collateral source payments’’

10 means any amount paid or reasonably

11 likely to be paid in the future to or on be12 half of a claimant, or any service, prod13 uct, or other benefit provided or reason14 ably likely to be provided in the future to

15 or on behalf of a claimant, as a result of

16 an injury or wrongful death, pursuant

17 to—

18 (A) any State or Federal health,

19 sickness, income-disability, accident

20 or workers’ compensation Act;

21 (B) any health, sickness, income22 disability, or accident insurance that

23 provides health benefits or income24 disability coverage;
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1 (C) any contract or agreement of

2 any group, organization, partnership,

3 or corporation to provide, pay for, or

4 reimburse the cost of medical, hos5 pital, dental, or income disability ben6 efits; and

7 (D) any other publicly or pri8 vately funded program.

9 (6) ECONOMIC LOSS.—The term ‘‘eco10 nomic loss’’ means any pecuniary loss re11 sulting from harm (including the loss of

12 earnings, medical expense loss, replace13 ment services loss, loss due to death, and

14 burial costs), to the extent recovery for

15 such loss is allowed under applicable

16 State law.

17 (7) HARM.—The term ‘‘harm’’ means

18 any legally cognizable wrong or injury

19 for which punitive damages may be im20 posed.

21 (8) HEALTH CARE LIABILITY ACTION.—

22 The term ‘‘health care liability action’’

23 means a civil action brought in a State or

24 Federal court against a health care pro25 vider, an entity which is obligated to pro-
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1 vide or pay for health benefits under any

2 health plan (including any person or en3 tity acting under a contract or arrange4 ment to provide or administer any health

5 benefit), or the manufacturer, distributor,

6 supplier, marketer, promoter, or seller of

7 a medical product, in which the claimant

8 alleges a claim (including third party

9 claims, cross claims, counter claims, or

10 distribution claims) based upon the pro11 vision of (or the failure to provide or pay

12 for) health care services or the use of a

13 medical product, regardless of the theory

14 of liability on which the claim is based or

15 the number of plaintiffs, or defendants or

16 causes of action.

17 (9) HEALTH CARE LIABILITY CLAIM.—The

18 term ‘‘health care liability claim’’ means a

19 claim in which the claimant alleges that

20 injury was caused by the provision of (or

21 the failure to provide) health care serv22 ices.

23 (10) HEALTH CARE PROVIDER.—The

24 term ‘‘health care provider’’ means any

25 individual, organization, or institution
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1 that is engaged in the delivery of health

2 care services in a State and that is re3 quired by the laws or regulations of the

4 State to be licensed or certified by the

5 State to engage in the delivery of such

6 services in the State.

7 (11) NONECONOMIC DAMAGES.—The

8 term ‘‘noneconomic damages’’ means

9 damages paid to an individual for pain

10 and suffering, inconvenience, emotional

11 distress, mental anguish, loss of consor12 tium, injury to reputation, humiliation,

13 and other nonpecuniary losses.

14 (12) PERSON.—The term ‘‘person’’

15 means any individual, corporation, com16 pany, association, firm, partnership, soci17 ety, joint stock company, or any other en18 tity, including any governmental entity.

19 (13) PUNITIVE DAMAGES.—The term

20 ‘‘punitive damages’’ means damages

21 awarded against any person not to com22 pensate for actual injury suffered, but to

23 punish or deter such person or others

24 from engaging in similar behavior in the

25 future.
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1 (14) STATE.—The term ‘‘State’’ means

2 each of the several States, the District of

3 Columbia, the Commonwealth of Puerto

4 Rico, the Virgin Islands, Guam, American

5 Samoa, the Northern Mariana Islands,

6 the Trust Territories of the Pacific Is7 lands, and any other territory or posses8 sion of the United States.

9 SEC. 15303. EFFECTIVE DATE.

10 This subtitle will apply to any health care

11 liability action brought in a Federal or State

12 court and to any health care liability claim

13 subject to an alternative dispute resolution

14 system, that is initiated on or after the date

15 of enactment of this subtitle, except that any

16 health care liability claim or action arising

17 from an injury occurring prior to the date of

18 enactment of this subtitle shall be governed

19 by the applicable statute of limitations provi20 sions in effect at the time the injury occurred.

21 PART 2—UNIFORM STANDARDS FOR HEALTH

22 CARE LIABILITY ACTIONS

23 SEC. 15311. STATUTE OF LIMITATIONS.

24 A health care liability action may not be

25 brought after the expiration of the 2-year pe-
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1 riod that begins on the date on which the al2 leged injury that is the subject of the action

3 was discovered or should reasonably have

4 been discovered, but in no case after the expi5 ration of the 5-year period that begins on the

6 date the alleged injury occurred.

7 SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.

8 (a) TREATMENT OF NONECONOMIC DAM9 AGES.—

10 (1) LIMITATION ON NONECONOMIC DAM11 AGES.—The total amount of noneconomic

12 damages that may be awarded to a claim13 ant for losses resulting from the injury

14 which is the subject of a health care li15 ability action may not exceed $250,000,

16 regardless of the number of parties

17 against whom the action is brought or

18 the number of actions brought with re19 spect to the injury.

20 (2) JOINT AND SEVERAL LIABILITY.—In

21 any health care liability action brought

22 in State or Federal court, a defendant

23 shall be liable only for the amount of

24 noneconomic damages attributable to

25 such defendant in direct proportion to
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1 such defendant’s share of fault or respon2 sibility for the claimant’s actual damages,

3 as determined by the trier of fact. In all

4 such cases, the liability of a defendant for

5 noneconomic damages shall be several

6 and not joint.

7 (b) TREATMENT OF PUNITIVE DAMAGES.—

8 (1) GENERAL RULE.—Punitive damages

9 may, to the extent permitted by applica10 ble State law, be awarded in any health

11 care liability action for harm in any Fed12 eral or State court against a defendant if

13 the claimant establishes by clear and con14 vincing evidence that the harm suffered

15 was result of conduct—

16 (A) specifically intended to cause

17 harm, or

18 (B) conduct manifesting a con19 scious, flagrant indifference to the

20 rights or safety of others.

21 (2) PROPORTIONAL AWARDS.—The

22 amount of punitive damages that may be

23 awarded in any health care liability ac24 tion subject to this subtitle shall not ex25 ceed 3 times the amount of damages
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1 awarded to the claimant for economic

2 loss, or $250,000, whichever is greater.

3 This section shall be applied by the court

4 and shall not be disclosed to the jury.

5 (c) APPLICABILITY.—This section shall

6 apply to any health care liability action

7 brought in any Federal or State court on any

8 theory where punitive damages are sought.

9 This section does not create a cause of action

10 for punitive damages. This section does not

11 preempt or supersede any State or Federal

12 law to the extent that such law would further

13 limit the award of punitive damages.

14 (d) BIFURCATION.—At the request of any

15 party, the trier of fact shall consider in a sepa16 rate proceeding whether punitive damages

17 are to be awarded and the amount of such

18 award. If a separate proceeding is requested,

19 evidence relevant only to the claim of puni20 tive damages, as determined by applicable

21 State law, shall be inadmissible in any pro22 ceeding to determine whether actual damages

23 are to be awarded.

24 (e) DRUGS AND DEVICES.—
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1 (1)(A) Punitive damages shall not be

2 awarded against a manufacturer or prod3 uct seller of a drug (as defined in section

4 201(g)(1) of the Federal Food, Drug, and

5 Cosmetic Act (21 U.S.C. 321(g)(1)) or med6 ical device (as defined in section 201(h) of

7 the Federal Food, Drug, and Cosmetic Act

8 (21 U.S.C. 321(h)) which caused the claim9 ant’s harm where—

10 (i) such drug or device was sub11 ject to premarket approval by the

12 Food and Drug Administration with

13 respect to the safety of the formula14 tion or performance of the aspect of

15 such drug or device which caused the

16 claimant’s harm or the adequacy of

17 the packaging or labeling of such

18 drug or device, and such drug was

19 approved by the Food and Drug Ad20 ministration; or

21 (ii) the drug is generally recog22 nized as safe and effective pursuant

23 to conditions established by the Food

24 and Drug Administration and appli-
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1 cable regulations, including packag2 ing and labeling regulations.

3 (B) Subparagraph (A) shall not apply

4 in any case in which the defendant, be5 fore or after premarket approval of a

6 drug or device—

7 (i) intentionally and wrongfully

8 withheld from or misrepresented to

9 the Food and Drug Administration in10 formation concerning such drug or

11 device required to be submitted

12 under the Federal Food, Drug, and

13 Cosmetic Act (21 U.S.C. 301 et seq.) or

14 section 351 of the Public Health Serv15 ice Act (42 U.S.C. 262) that is material

16 and relevant to the harm suffered by

17 the claimant, or

18 (ii) made an illegal payment to an

19 official or employee of the Food and

20 Drug Administration for the purpose

21 of securing or maintaining approval

22 of such drug or device.

23 (2) PACKAGING.—In a health care li24 ability action for harm which is alleged

25 to relate to the adequacy of the packag-
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1 ing (or labeling relating to such packag2 ing) of a drug which is required to have

3 tamper-resistant packaging under regula4 tions of the Secretary of Health and

5 Human Services (including labeling regu6 lations related to such packaging), the

7 manufacturer of the drug shall not be

8 held liable for punitive damages unless

9 the drug is found by the court by clear

10 and convincing evidence to be substan11 tially out of compliance with such regula12 tions.

13 (f) PERIODIC PAYMENTS FOR FUTURE

14 LOSSES.—

15 (1) GENERAL RULE.—In any health care

16 liability action in which the damages

17 awarded for future economic and non18 economic loss exceeds $50,000, a person

19 shall not be required to pay such dam20 ages in a single, lump-sum payment, but

21 shall be permitted to make such pay22 ments periodically based on when the

23 damages are found likely to occur, as

24 such payments are determined by the

25 court.
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1 (2) FINALITY OF JUDGMENT.—The judg2 ment of the court awarding periodic pay3 ments under this subsection may not, in

4 the absence of fraud, be reopened at any

5 time to contest, amend, or modify the

6 schedule or amount of the payments.

7 (3) LUMP-SUM SETTLEMENTS.—This sub8 section shall not be construed to preclude

9 a settlement providing for a single, lump10 sum payment.

11 (g) TREATMENT OF COLLATERAL SOURCE

12 PAYMENTS.—

13 (1) INTRODUCTION INTO EVIDENCE.—In

14 any health care liability action, any de15 fendant may introduce evidence of collat16 eral source payments. If any defendant

17 elects to introduce such evidence, the

18 claimant may introduce evidence of any

19 amount paid or contributed or reason20 ably likely to be paid or contributed in

21 the future by or on behalf of the claimant

22 to secure the right to such collateral

23 source payments.

24 (2) NO SUBROGATION.—No provider of

25 collateral source payments shall recover
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1 any amount against the claimant or re2 ceive any lien or credit against the claim3 ant’s recovery or be equitably or legally

4 subrogated the right of the claimant in a

5 health care liability action. This sub6 section shall apply to an action that is

7 settled as well as an action that is re8 solved by a fact finder.

9 SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.

10 Any ADR used to resolve a health care li11 ability action or claim shall contain provi12 sions relating to statute of limitations, non13 economic damages, joint and several liability,

14 punitive damages, collateral source rule, and

15 periodic payments which are identical to the

16 provisions relating to such matters in this

17 subtitle.
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1 Subtitle E—Teaching Hospitals and

2 Graduate Medical Education

3 PART 1—TEACHING HOSPITAL AND GRADUATE

4 MEDICAL EDUCATION TRUST FUND

5 SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO

6 TEACHING HOSPITALS.

7 The Social Security Act (42 U.S.C. 300 et

8 seq.) is amended by adding after title XXI the

9 following title:

10 ‘‘TITLE XXII—TEACHING HOSPITAL AND

11 GRADUATE MEDICAL EDUCATION

12 TRUST FUND

13 ‘‘PART A—ESTABLISHMENT OF FUND

14 ‘‘SEC. 2201. ESTABLISHMENT OF FUND.

15 ‘‘(a) IN GENERAL.—There is established in

16 the Treasury of the United States a fund to be

17 known as the Teaching Hospital and Grad18 uate Medical Education Trust Fund (in this

19 title referred to as the ‘Fund’), consisting of

20 amounts appropriated to the Fund in sub21 section (d) and subsection (e)(3), amounts

22 transferred to the Fund under section 1886(j),

23 and such gifts and bequests as may be depos24 ited in the Fund pursuant to subsection (f).
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1 Amounts in the Fund are available until ex2 pended.

3 ‘‘(b) EXPENDITURES FROM FUND.—Amounts

4 in the Fund are available to the Secretary for

5 making payments under section 2211.

6 ‘‘(c) ACCOUNTS IN FUND.—There are estab7 lished within the Fund the following ac8 counts:

9 ‘‘(1) The Indirect-Costs Medical Edu10 cation Account.

11 ‘‘(2) The Medicare Direct-Costs Medi12 cal Education Account.

13 ‘‘(3) The General Direct-Costs Medical

14 Education Account.

15 ‘‘(d) GENERAL TRANSFERS TO FUND.—

16 ‘‘(1) IN GENERAL.—For fiscal year 1997

17 and each subsequent fiscal year, there

18 are appropriated to the Fund (effective

19 on the applicable date under paragraph

20 (2)), out of any money in the Treasury not

21 otherwise appropriated, the following

22 amounts (as applicable to the fiscal year

23 involved):

24 ‘‘(A) For fiscal year 1997,

25 $400,000,000.
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1 ‘‘(B) For fiscal year 1998,

2 $600,000,000.

3 ‘‘(C) For fiscal year 1999,

4 $2,000,000,000.

5 ‘‘(D) For fiscal year 2000,

6 $3,000,000,000.

7 ‘‘(E) For fiscal year 2001,

8 $4,000,000,000.

9 ‘‘(F) For fiscal year 2002,

10 $5,800,000,000.

11 ‘‘(G) For fiscal year 2003 and each

12 subsequent fiscal year, the greater of

13 the amount appropriated for the pre14 ceding fiscal year or an amount equal

15 to the product of—

16 ‘‘(i) the amount appropriated

17 for the preceding fiscal year; and

18 ‘‘(ii) 1 plus the percentage in19 crease in the nominal gross do20 mestic product for the one-year

21 period ending upon July 1 of such

22 preceding fiscal year.

23 ‘‘(2) EFFECTIVE DATE FOR ANNUAL AP24 PROPRIATION.—For purposes of paragraph

25 (1) (and for purposes of section 2221(a)(1),
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1 and subsections (b)(1)(A) and (c)(1)(A) of

2 section 2231)), the applicable date for a

3 fiscal year is the first day of the fiscal

4 year, exclusive of Saturdays, Sundays,

5 and Federal holidays.

6 ‘‘(3) ALLOCATION AMONG CERTAIN AC7 COUNTS.—Of the amount appropriated in

8 paragraph (1) for a fiscal year—

9 ‘‘(A) there shall be allocated to the

10 Indirect-Costs Medical Education Ac11 count the percentage determined

12 under paragraph (4)(B); and

13 ‘‘(B) there shall be allocated to the

14 General Direct-Costs Medical Edu15 cation Account the percentage deter16 mined under paragraph (4)(C).

17 ‘‘(4) DETERMINATION OF PERCENT18 AGES.—The Secretary of Health and

19 Human Services, acting through the Ad20 ministrator of the Health Care Financing

21 Administration, shall determine the fol22 lowing:

23 ‘‘(A) The total amount of pay24 ments that were made under sub-
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1 sections (d)(5)(B) and (h) of section

2 1886 for fiscal year 1994.

3 ‘‘(B) The percentage of such total

4 that was constituted by payments

5 under subsection (d)(5)(B) of such

6 section.

7 ‘‘(C) The percentage of such total

8 that was constituted by payments

9 under subsection (h) of such section.

10 ‘‘(e) INVESTMENT.—

11 ‘‘(1) IN GENERAL.—The Secretary of the

12 Treasury shall invest such amounts of the

13 Fund as such Secretary determines are

14 not required to meet current withdrawals

15 from the Fund. Such investments may be

16 made only in interest-bearing obligations

17 of the United States. For such purpose,

18 such obligations may be acquired on

19 original issue at the issue price, or by

20 purchase of outstanding obligations at

21 the market price.

22 ‘‘(2) SALE OF OBLIGATIONS.—Any obli23 gation acquired by the Fund may be sold

24 by the Secretary of the Treasury at the

25 market price.
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1 ‘‘(3) AVAILABILITY OF INCOME.—Any in2 terest derived from obligations acquired

3 by the Fund, and proceeds from any sale

4 or redemption of such obligations, are

5 hereby appropriated to the Fund.

6 ‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—

7 The Fund may accept on behalf of the United

8 States money gifts and bequests made uncon9 ditionally to the Fund for the benefit of the

10 Fund or any activity financed through the

11 Fund.

12 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

13 ‘‘Subpart 1—Requirement of Payments

14 ‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOS15 PITALS.

16 ‘‘(a) IN GENERAL.—Subject to subsection

17 (d), in the case of each teaching hospital that

18 in accordance with subsection (b) submits to

19 the Secretary a payment document for fiscal

20 year 1997 or any subsequent fiscal year, the

21 Secretary shall make payments for the year to

22 the teaching hospital for the costs of operat23 ing approved medical residency training pro24 grams. Such payments shall be made from the

25 Fund, and the total of the payments to the
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1 hospital for the fiscal year shall equal the sum

2 of the following:

3 ‘‘(1) An amount determined under

4 section 2221 (relating to the indirect

5 costs of graduate medical education).

6 ‘‘(2) An amount determined under

7 section 2231 (relating to the direct costs

8 of graduate medical education).

9 ‘‘(b) PAYMENT DOCUMENT.—For purposes of

10 subsection (a), a payment document is a docu11 ment containing such information as may be

12 necessary for the Secretary to make payments

13 under such subsection to a teaching hospital

14 for a fiscal year. The document is submitted

15 in accordance with this subsection if the doc16 ument is submitted not later than the date

17 specified by the Secretary, and the document

18 is in such form and is made in such manner

19 as the Secretary may require. The Secretary

20 may require that information under this sub21 section be submitted to the Secretary in peri22 odic reports.

23 ‘‘(c) ADMINISTRATOR OF PROGRAMS.—This

24 part, and the subsequent parts of this title,

25 shall be carried out by the Secretary acting
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1 through the Administrator of the Health Care

2 Financing Administration.

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) AUTHORITY REGARDING PAYMENTS

5 TO CONSORTIA OF PROVIDERS.—In the case

6 of payments under subsection (a) that are

7 determined under section 2231:

8 ‘‘(A) The requirement under such

9 subsection to make the payments to

10 teaching hospitals is subject to the

11 authority of the Secretary under sec12 tion 2233(a) to make payments to

13 qualifying consortia.

14 ‘‘(B) If the Secretary authorizes

15 such a consortium for purposes of

16 section 2233(a), subsections (a) and

17 (b) of this section apply to the consor18 tium to the same extent and in the

19 same manner as the subsections

20 apply to teaching hospitals.

21 ‘‘(2) CERTAIN HOSPITALS.—Paragraph

22 (1) of subsection (a) is subject to sections

23 2222 and 2223 of subpart 2. Paragraph (2)

24 of subsection (a) is subject to sections

25 2232 through 2234 of subpart 3.
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1 ‘‘(e) APPROVED MEDICAL RESIDENCY TRAIN2 ING PROGRAM.—For purposes of this title, the

3 term ‘approved medical residency training

4 program’ has the meaning given such term in

5 section 1886(h)(5)(A).

6 ‘‘Subpart 2—Amount Relating to Indirect

7 Costs of Graduate Medical Education

8 ‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN9 DIRECT COSTS.

10 ‘‘(a) IN GENERAL.—For purposes of section

11 2211(a)(1), the amount determined under this

12 section for a teaching hospital for a fiscal

13 year is the product of—

14 ‘‘(1) the amount in the Indirect-Costs

15 Medical Education Account on the appli16 cable date under section 2201(d) (once

17 the appropriation under such section is

18 made); and

19 ‘‘(2) the percentage determined for

20 the hospital under subsection (b).

21 ‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—

22 ‘‘(1) IN GENERAL.—For purposes of sub23 section (a)(2), the percentage determined

24 under this subsection for a teaching hos25 pital is the mean average of the respec-
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1 tive percentages determined under para2 graph (3) for each fiscal year of the appli3 cable period (as defined in paragraph

4 (2)), adjusted by the Secretary (upward

5 or downward, as the case may be) on a

6 pro rata basis to the extent necessary to

7 ensure that the sum of the percentages

8 determined under this paragraph for all

9 teaching hospitals is equal to 100 percent.

10 The preceding sentence is subject to sec11 tions 2222 and 2223.

12 ‘‘(2) APPLICABLE PERIOD REGARDING

13 RELEVANT DATA; FISCAL YEARS 1992 THROUGH

14 1994.—For purposes of this part, the term

15 ‘applicable period’ means the period be16 ginning on the first day of fiscal year

17 1992 and continuing through the end of

18 fiscal year 1994.

19 ‘‘(3) RESPECTIVE DETERMINATIONS FOR

20 FISCAL YEARS OF APPLICABLE PERIOD.—For

21 purposes of paragraph (1), the percentage

22 determined under this paragraph for a

23 teaching hospital for a fiscal year of the

24 applicable period is the percentage con25 stituted by the ratio of—
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1 ‘‘(A) the total amount of payments

2 received by the hospital under sec3 tion 1886(d)(5)(B) for discharges oc4 curring during the fiscal year in5 volved; to

6 ‘‘(B) the sum of the respective

7 amounts determined under subpara8 graph (A) for the fiscal year for all

9 teaching hospitals.

10 ‘‘(c) AVAILABILITY OF DATA.—If a teaching

11 hospital received the payments specified in

12 subsection (b)(3)(A) during the applicable pe13 riod but a complete set of the relevant data

14 is not available to the Secretary for purposes

15 of determining an amount under such sub16 section for the fiscal year involved, the Sec17 retary shall for purposes of such subsection

18 make an estimate on the basis of such data as

19 are available to the Secretary for the applica20 ble period.

21 ‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING

22 DETERMINATION OF HOSPITAL-SPECIFIC

23 PERCENTAGE.

24 ‘‘(a) SPECIAL RULE REGARDING FISCAL

25 YEARS 1995 AND 1996.—
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1 ‘‘(1) IN GENERAL.—In the case of a

2 teaching hospital whose first payments

3 under 1886(d)(5)(B) were for discharges

4 occurring in fiscal year 1995 or in fiscal

5 year 1996 (referred to in this subsection

6 individually as a ‘first payment year’), the

7 percentage determined under paragraph

8 (2) for the hospital is deemed to be the

9 percentage applicable under section

10 2221(b) to the hospital, except that the

11 percentage under paragraph (2) shall be

12 adjusted in accordance with section

13 2221(b)(1) to the extent determined by

14 the Secretary to be necessary with re15 spect to a sum that equals 100 percent.

16 ‘‘(2) DETERMINATION OF PERCENTAGE.—

17 For purposes of paragraph (1), the per18 centage determined under this paragraph

19 for a teaching hospital is the percentage

20 constituted by the ratio of the amount de21 termined under subparagraph (A) to the

22 amount determined under subparagraph

23 (B), as follows:

24 ‘‘(A)(i) If the first payment year

25 for the hospital is fiscal year 1995, the
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1 amount determined under this sub2 paragraph is the total amount of pay3 ments received by the hospital under

4 section 1886(d)(5)(B) for discharges

5 occurring during fiscal year 1995.

6 ‘‘(ii) If the first payment year for

7 the hospital is fiscal year 1996, the

8 amount determined under this sub9 paragraph is an amount equal to an

10 estimate by the Secretary of the total

11 amount of payments that would have

12 been paid to the hospital under sec13 tion 1886(d)(5)(B) for discharges oc14 curring during fiscal year 1995 if

15 such section, as in effect for fiscal

16 year 1996, had applied to the hospital

17 for discharges occurring during fiscal

18 year 1995.

19 ‘‘(B)(i) If the first payment year

20 for the hospital is fiscal year 1995, the

21 amount determined under this sub22 paragraph is the aggregate total of

23 the payments received by teaching

24 hospitals under section 1886(d)(5)(B)
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1 for discharges occurring during fiscal

2 year 1995.

3 ‘‘(ii) If the first payment year for

4 the hospital is fiscal year 1996—

5 ‘‘(I) the Secretary shall make

6 an estimate in accordance with

7 subparagraph (A)(ii) for all teach8 ing hospitals; and

9 ‘‘(II) the amount determined

10 under this subparagraph is the

11 sum of the estimates made by the

12 Secretary under subclause (I).

13 ‘‘(b) NEW TEACHING HOSPITALS.—

14 ‘‘(1) IN GENERAL.—In the case of a

15 teaching hospital that did not receive

16 payments under section 1886(d)(5)(B) for

17 any of the fiscal years 1992 through 1996,

18 the percentage determined under para19 graph (3) for the hospital is deemed to be

20 the percentage applicable under section

21 2221(b) to the hospital, except that the

22 percentage under paragraph (3) shall be

23 adjusted in accordance with section

24 2221(b)(1) to the extent determined by

25 the Secretary to be necessary with re-
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1 spect to a sum that equals 100 percent.

2 This subsection does not apply to a teach3 ing hospital described in the preceding

4 sentence if the hospital is in a State for

5 which a demonstration project under sec6 tion 1814(b)(3) is in effect.

7 ‘‘(2) DESIGNATED FISCAL YEAR REGARD8 ING DATA.—The determination under

9 paragraph (3) of a percentage for a teach10 ing hospital described in paragraph (1)

11 shall be made for the most recent fiscal

12 year for which the Secretary has suffi13 cient data to make the determination (re14 ferred to in this subsection as the ‘des15 ignated fiscal year’).

16 ‘‘(3) DETERMINATION OF PERCENTAGE.—

17 For purposes of paragraph (1), the per18 centage determined under this paragraph

19 for the teaching hospital involved is the

20 percentage constituted by the ratio of the

21 amount determined under subparagraph

22 (A) to the amount determined under sub23 paragraph (B), as follows:

24 ‘‘(A) The amount determined

25 under this subparagraph is an
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1 amount equal to an estimate by the

2 Secretary of the total amount of pay3 ments that would have been paid to

4 the hospital under section

5 1886(d)(5)(B) for the designated fiscal

6 year if such section, as in effect for

7 the first fiscal year for which pay8 ments pursuant to this subsection are

9 to be made to the hospital, had ap10 plied to the hospital for the des11 ignated fiscal year.

12 ‘‘(B) The Secretary shall make an

13 estimate in accordance with subpara14 graph (A) for all teaching hospitals.

15 The amount determined under this

16 subparagraph is the sum of the esti17 mates made by the Secretary under

18 the preceding sentence.

19 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the

20 case of two or more teaching hospitals that

21 have each received payments pursuant to sec22 tion 2221 for one or more fiscal years and that

23 undergo a consolidation or merger, the per24 centage applicable to the resulting teaching

25 hospital for purposes of section 2221(b) is the
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1 sum of the respective percentages that would

2 have applied pursuant to such section if the

3 hospitals had not undergone the consolida4 tion or merger.

5 ‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE6 GARDING TEACHING HOSPITALS IN CERTAIN

7 STATES.

8 ‘‘(a) IN GENERAL.—In the case of a teaching

9 hospital in a State for which a demonstration

10 project under section 1814(b)(3) is in effect,

11 this section applies in lieu of section 2221. For

12 purposes of section 2211(a)(1), the amount de13 termined for a teaching hospital for a fiscal

14 year is the product of—

15 ‘‘(1) the amount in the Indirect-Costs

16 Medical Education Account for the fiscal

17 year pursuant to the allocation under

18 section 2201(d)(3)(A) for the year; and

19 ‘‘(2) the percentage determined under

20 subsection (b) for the hospital.

21 ‘‘(b) DETERMINATION OF PERCENTAGE.—For

22 purposes of subsection (a)(2):

23 ‘‘(1) The Secretary shall make an esti24 mate of the total amount of payments

25 that would have been received under sec-
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1 tion 1886(d)(5)(B) by the hospital in2 volved with respect to each of the fiscal

3 years of the applicable period if such sec4 tion (as in effect for such fiscal years)

5 had applied to the hospital for such

6 years.

7 ‘‘(2) The percentage determined

8 under this subsection for the hospital for

9 a fiscal year is a mean average percent10 age determined for the hospital in ac11 cordance with the methodology of section

12 2221(b)(1), except that the estimate made

13 by the Secretary under paragraph (1) of

14 this subsection for a fiscal year of the ap15 plicable period is deemed to be the

16 amount that applies for purposes of sec17 tion 2221(b)(3)(A) for such year.

18 ‘‘(c) RULE REGARDING PAYMENTS FROM CER19 TAIN AMOUNTS.—In the case of a teaching hos20 pital in a State for which a demonstration

21 project under section 1814(b)(3) is in effect,

22 this section does not provide any payment to

23 the hospital from amounts transferred to the

24 Fund under section 1886(j).
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1 ‘‘(d) ADJUSTMENT REGARDING PAYMENTS TO

2 OTHER HOSPITALS.—In the case of a fiscal year

3 for which payments pursuant to subsection

4 (a) are made to one or more teaching hos5 pitals, the following applies:

6 ‘‘(1) The Secretary shall determine a

7 percentage equal to the sum of the re8 spective percentages determined for the

9 hospitals under subsection (b).

10 ‘‘(2) The Secretary shall determine an

11 amount equal to the product of—

12 ‘‘(A) the percentage determined

13 under paragraph (1); and

14 ‘‘(B) the amount in the Indirect15 Costs Medical Education Account for

16 the fiscal year pursuant to the trans17 fer under section 1886(j)(1).

18 ‘‘(3) The Secretary shall, for each hos19 pital (other than hospitals described in

20 subsection (a)), make payments to the

21 hospital whose sum is equal to the prod22 uct of—

23 ‘‘(A) the amount determined

24 under paragraph (2); and
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1 ‘‘(B) the percentage that applies

2 to the hospital for purposes of section

3 2221(b), except that such percentage

4 shall be adjusted in accordance with

5 the methodology of section 2221(b)(1)

6 to the extent determined by the Sec7 retary to be necessary with respect to

8 a sum that equals 100 percent.

9 ‘‘Subpart 3—Amount Relating to Direct Costs

10 of Graduate Medical Education

11 ‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI12 RECT COSTS.

13 ‘‘(a) IN GENERAL.—For purposes of section

14 2211(a)(2), the amount determined under this

15 section for a teaching hospital for a fiscal

16 year is the sum of—

17 ‘‘(1) the amount determined under

18 subsection (b) (relating to the General Di19 rect-Costs Medical Education Account);

20 and

21 ‘‘(2) the amount determined under

22 subsection (c) (relating to the Medicare

23 Direct-Costs Medical Education Account).

24 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—
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1 ‘‘(1) IN GENERAL.—For purposes of sub2 section (a)(1), the amount determined

3 under this subsection for a teaching hos4 pital for a fiscal year is the product of—

5 ‘‘(A) the amount in the General

6 Direct-Costs Medical Education Ac7 count on the applicable date under

8 section 2201(d) (once the appropria9 tion under such section is made); and

10 ‘‘(B) the percentage determined

11 for the hospital under paragraph (2).

12 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—

13 ‘‘(A) IN GENERAL.—For purposes of

14 paragraph (1)(B), the percentage de15 termined under this paragraph for a

16 teaching hospital is the mean average

17 of the respective percentages deter18 mined under subparagraph (B) for

19 each fiscal year of the applicable pe20 riod (as defined in section 2221(b)(2)),

21 adjusted by the Secretary (upward or

22 downward, as the case may be) on a

23 pro rata basis to the extent necessary

24 to ensure that the sum of the percent25 ages determined under this subpara-
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1 graph for all teaching hospitals is

2 equal to 100 percent. The preceding

3 sentence is subject to sections 2232

4 through 2234.

5 ‘‘(B) RESPECTIVE DETERMINATIONS

6 FOR FISCAL YEARS OF APPLICABLE PE7 RIOD.—For purposes of subparagraph

8 (A), the percentage determined under

9 this subparagraph for a teaching hos10 pital for a fiscal year of the applica11 ble period is the percentage con12 stituted by the ratio of—

13 ‘‘(i) the total amount of pay14 ments received by the hospital

15 under section 1886(h) for cost re16 porting periods beginning during

17 the fiscal year involved; to

18 ‘‘(ii) the sum of the respective

19 amounts determined under clause

20 (i) for the fiscal year for all teach21 ing hospitals.

22 ‘‘(3) AVAILABILITY OF DATA.—If a teach23 ing hospital received the payments speci24 fied in paragraph (2)(B)(i) during the ap25 plicable period but a complete set of the
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1 relevant data is not available to the Sec2 retary for purposes of determining an

3 amount under such paragraph for the fis4 cal year involved, the Secretary shall for

5 purposes of such paragraph make an esti6 mate on the basis of such data as are

7 available to the Secretary for the applica8 ble period.

9 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—

10 ‘‘(1) IN GENERAL.—For purposes of sub11 section (a)(2), the amount determined

12 under this subsection for a teaching hos13 pital for a fiscal year is the product of—

14 ‘‘(A) the amount in the Medicare

15 Direct-Costs Medical Education Ac16 count on the applicable date under

17 section 2201(d) (once the appropria18 tion under such section is made); and

19 ‘‘(B) the percentage determined

20 for the hospital under paragraph (2).

21 ‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—

22 For purposes of paragraph (1)(B), the

23 percentage determined under this sub24 section for a teaching hospital for a fiscal
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1 year is the percentage constituted by the

2 ratio of—

3 ‘‘(A) the estimate made by the

4 Secretary for the hospital for the fis5 cal year under section 1886(j)(2)(B); to

6 ‘‘(B) the sum of the respective es7 timates referred to in subparagraph

8 (A) for all teaching hospitals.

9 ‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING

10 DETERMINATION OF HOSPITAL-SPECIFIC

11 PERCENTAGE.

12 ‘‘(a) SPECIAL RULE REGARDING FISCAL

13 YEARS 1995 AND 1996.—

14 ‘‘(1) IN GENERAL.—In the case of a

15 teaching hospital whose first payments

16 under 1886(h) were for cost reporting pe17 riod beginning in fiscal year 1995 or in

18 fiscal year 1996 (referred to in this sub19 section individually as a ‘first payment

20 year’), the percentage determined under

21 paragraph (2) for the hospital is deemed

22 to be the percentage applicable under

23 section 2231(b)(2) to the hospital, except

24 that the percentage under paragraph (2)

25 shall be adjusted in accordance with sec-
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1 tion 2231(b)(2)(A) to the extent deter2 mined by the Secretary to be necessary

3 with respect to a sum that equals 100 per4 cent.

5 ‘‘(2) DETERMINATION OF PERCENTAGE.—

6 For purposes of paragraph (1), the per7 centage determined under this paragraph

8 for a teaching hospital is the percentage

9 constituted by the ratio of the amount de10 termined under subparagraph (A) to the

11 amount determined under subparagraph

12 (B), as follows:

13 ‘‘(A)(i) If the first payment year

14 for the hospital is fiscal year 1995, the

15 amount determined under this sub16 paragraph is the total amount of pay17 ments received by the hospital under

18 section 1886(h) for cost reporting pe19 riods beginning in fiscal year 1995.

20 ‘‘(ii) If the first payment year for

21 the hospital is fiscal year 1996, the

22 amount determined under this sub23 paragraph is an amount equal to an

24 estimate by the Secretary of the total

25 amount of payments that would have
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1 been paid to the hospital under sec2 tion 1886(h) for cost reporting periods

3 beginning in fiscal year 1995 if such

4 section, as in effect for fiscal year

5 1996, had applied to the hospital for

6 fiscal year 1995.

7 ‘‘(B)(i) If the first payment year

8 for the hospital is fiscal year 1995, the

9 amount determined under this sub10 paragraph is the aggregate total of

11 the payments received by teaching

12 hospitals under section 1886(h) for

13 cost reporting periods beginning in

14 fiscal year 1995.

15 ‘‘(ii) If the first payment year for

16 the hospital is fiscal year 1996—

17 ‘‘(I) the Secretary shall make

18 an estimate in accordance with

19 subparagraph (A)(ii) for all teach20 ing hospitals; and

21 ‘‘(II) the amount determined

22 under this subparagraph is the

23 sum of the estimates made by the

24 Secretary under subclause (I).

25 ‘‘(b) NEW TEACHING HOSPITALS.—
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1 ‘‘(1) IN GENERAL.—In the case of a

2 teaching hospital that did not receive

3 payments under section 1886(h) for any

4 of the fiscal years 1992 through 1996, the

5 percentage determined under paragraph

6 (3) for the hospital is deemed to be the

7 percentage applicable under section

8 2231(b)(2) to the hospital, except that the

9 percentage under paragraph (3) shall be

10 adjusted in accordance with section

11 2231(b)(2)(A) to the extent determined by

12 the Secretary to be necessary with re13 spect to a sum that equals 100 percent.

14 This subsection does not apply to a teach15 ing hospital described in the preceding

16 sentence if the hospital is in a State for

17 which a demonstration project under sec18 tion 1814(b)(3) is in effect.

19 ‘‘(2) DESIGNATED FISCAL YEAR REGARD20 ING DATA.—The determination under

21 paragraph (3) of a percentage for a teach22 ing hospital described in paragraph (1)

23 shall be made for the most recent fiscal

24 year for which the Secretary has suffi25 cient data to make the determination (re-
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1 ferred to in this subsection as the ‘des2 ignated fiscal year’).

3 ‘‘(3) DETERMINATION OF PERCENTAGE.—

4 For purposes of paragraph (1), the per5 centage determined under this paragraph

6 for the teaching hospital involved is the

7 percentage constituted by the ratio of the

8 amount determined under subparagraph

9 (A) to the amount determined under sub10 paragraph (B), as follows:

11 ‘‘(A) The amount determined

12 under this subparagraph is an

13 amount equal to an estimate by the

14 Secretary of the total amount of pay15 ments that would have been paid to

16 the hospital under section 1886(h) for

17 the designated fiscal year if such sec18 tion, as in effect for the first fiscal

19 year for which payments pursuant to

20 this subsection are to be made to the

21 hospital, had applied to the hospital

22 for cost reporting periods beginning

23 in the designated fiscal year.

24 ‘‘(B) The Secretary shall make an

25 estimate in accordance with subpara-
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1 graph (A) for all teaching hospitals.

2 The amount determined under this

3 subparagraph is the sum of the esti4 mates made by the Secretary under

5 the preceding sentence.

6 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the

7 case of two or more teaching hospitals that

8 have each received payments pursuant to sec9 tion 2231 for one or more fiscal years and that

10 undergo a consolidation or merger, the per11 centage applicable to the resulting teaching

12 hospital for purposes of section 2231(b) is the

13 sum of the respective percentages that would

14 have applied pursuant to such section if the

15 hospitals had not undergone the consolida16 tion or merger.

17 ‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO

18 CONSORTIA OF PROVIDERS.

19 ‘‘(a) IN GENERAL.—In lieu of making pay20 ments to teaching hospitals pursuant to sec21 tion 2231, the Secretary may make payments

22 under this section to consortia that meet the

23 requirements of subsection (b).

24 ‘‘(b) QUALIFYING CONSORTIUM.—For pur25 poses of subsection (a), a consortium meets
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1 the requirements of this subsection if the con2 sortium is in compliance with the following:

3 ‘‘(1) The consortium consists of an ap4 proved medical residency training pro5 gram, a teaching hospital, and one or

6 more of the following entities:

7 ‘‘(A) Schools of medicine or osteo8 pathic medicine.

9 ‘‘(B) Other teaching hospitals (or

10 the approved medical residency

11 training programs of the hospitals).

12 ‘‘(C) Community health centers

13 (under section 330 of the Public

14 Health Service Act), migrant health

15 centers (under section 329 of such

16 Act), or facilities described in section

17 340 of such Act.

18 ‘‘(D) Medical group practices.

19 ‘‘(E) Managed care entities.

20 ‘‘(F) Entities furnishing out21 patient services.

22 ‘‘(G) Such other entities as the

23 Secretary determines to be appro24 priate.
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1 ‘‘(2) The members of the consortium

2 have agreed to participate in the pro3 grams of graduate medical education that

4 are operated by the teaching hospitals in

5 the consortium.

6 ‘‘(3) With respect to the receipt by the

7 consortium of payments made pursuant

8 to this section, the members of the con9 sortium have agreed on a method for al10 locating the payments among the mem11 bers.

12 ‘‘(4) The consortium meets such addi13 tional requirements as the Secretary may

14 establish.

15 ‘‘(c) PAYMENTS FROM ACCOUNTS.—

16 ‘‘(1) IN GENERAL.—Subject to sub17 section (d), the total of payments to a

18 qualifying consortium for a fiscal year

19 pursuant to subsection (a) shall be the

20 sum of—

21 ‘‘(1) the aggregate amount determined

22 for the teaching hospitals of the consor23 tium pursuant to paragraph (1) of section

24 2231(a); and
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1 ‘‘(2) an amount determined in accord2 ance with the methodology that applies

3 pursuant to paragraph (2) of such sec4 tion, except that the estimate used for

5 purposes of subsection (c)(2)(A) of such

6 section shall be the estimate made for the

7 consortium under section 1886(j)(2)(C)(ii).

8 ‘‘(d) LIMITATION ON AGGREGATE TOTAL OF

9 PAYMENTS TO CONSORTIA.—The aggregate total

10 of the amounts paid under subsection (c)(2) to

11 qualifying consortia for a fiscal year may not

12 exceed the sum of—

13 ‘‘(1) the aggregate total of the

14 amounts that would have been paid

15 under section 2231(c) for the fiscal year

16 to the teaching hospitals of the consortia

17 if the hospitals had not been participants

18 in the consortia; and

19 ‘‘(2) an amount equal to 1 percent of

20 the amount that applies under paragraph

21 (1)(A) of such section for the fiscal year

22 (relating to the Medicare Direct-Costs

23 Medical Education Account).

24 ‘‘(e) DEFINITION.—For purposes of this

25 title, the term ‘qualifying consortium’ means
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1 a consortium that meets the requirements of

2 subsection (b).

3 ‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE4 GARDING TEACHING HOSPITALS IN CERTAIN

5 STATES.

6 ‘‘(a) IN GENERAL.—In the case of a teaching

7 hospital in a State for which a demonstration

8 project under section 1814(b)(3) is in effect,

9 this section applies in lieu of section 2231. For

10 purposes of section 2211(a)(2), the amount de11 termined for a teaching hospital for a fiscal

12 year is the product of—

13 ‘‘(1) the amount in the General Direct14 Costs Medical Education Account on the

15 applicable date under section 2201(d)

16 (once the appropriation under such sec17 tion is made); and

18 ‘‘(2) the percentage determined under

19 subsection (b) for the hospital.

20 ‘‘(b) DETERMINATION OF PERCENTAGE.—For

21 purposes of subsection (a)(2):

22 ‘‘(1) The Secretary shall make an esti23 mate of the total amount of payments

24 that would have been received under sec25 tion 1886(h) by the hospital involved with
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1 respect to each of the fiscal years of the

2 applicable period if such section (as in ef3 fect for such fiscal years) had applied to

4 the hospital for such years.

5 ‘‘(2) The percentage determined

6 under this subsection for the hospital for

7 a fiscal year is a mean average percent8 age determined for the hospital in ac9 cordance with the methodology of section

10 2231(b)(2)(A), except that the estimate

11 made by the Secretary under paragraph

12 (1) of this subsection for a fiscal year of

13 the applicable period is deemed to be the

14 amount that applies for purposes of sec15 tion 2231(b)(2)(B)(i) for such year.

16 ‘‘(c) RULE REGARDING PAYMENTS FROM CER17 TAIN AMOUNTS.—In the case of a teaching hos18 pital in a State for which a demonstration

19 project under section 1814(b)(3) is in effect,

20 this section does not provide any payment to

21 the hospital from amounts transferred to the

22 Fund under section 1886(j).
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1 ‘‘Subpart 4—General Provisions

2 ‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.

3 ‘‘(a) COLLECTION OF DATA ON ACCURACY OF

4 ESTIMATES.—The Secretary shall collect data

5 on whether the estimates made by the Sec6 retary under section 1886(j) for a fiscal year

7 were substantially accurate.

8 ‘‘(b) ADJUSTMENTS.—If the Secretary deter9 mines under subsection (a) that an estimate

10 for a fiscal year was not substantially accu11 rate, the Secretary shall, for the first fiscal

12 year beginning after the Secretary makes the

13 determination—

14 ‘‘(1) make adjustments accordingly in

15 transfers to the Fund under section

16 1886(j); and

17 ‘‘(2) make adjustments accordingly in

18 the amount of payments to teaching hos19 pitals pursuant to 2231(c) (or, as applica20 ble, to qualifying consortia pursuant to

21 section 2233(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 amend6 ed—

7 (1) in subsection (d)(5)(B), in the mat8 ter preceding clause (i), by striking ‘‘The

9 Secretary shall provide’’ and inserting

10 the following: ‘‘For discharges occurring

11 on or before September 30, 1996, the Sec12 retary shall provide’’;

13 (2) in subsection (h)—

14 (A) in paragraph (1), in the first

15 sentence, by striking ‘‘the Secretary

16 shall provide’’ and inserting ‘‘the Sec17 retary shall, subject to paragraph (6),

18 provide’’; and

19 (B) by adding at the end the fol20 lowing paragraph:

21 ‘‘(6) LIMITATION.—

22 ‘‘(A) IN GENERAL.—The authority

23 to make payments under this sub24 section applies only with respect to

25 cost reporting periods ending on or
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1 before September 30, 1996, except as

2 provided in subparagraph (B).

3 ‘‘(B) RULE REGARDING PORTION OF

4 LAST COST REPORTING PERIOD.—In the

5 case of a cost reporting period that

6 extends beyond September 30, 1996,

7 payments under this subsection shall

8 be made with respect to such portion

9 of the period as has lapsed as of such

10 date.

11 ‘‘(C) RULE OF CONSTRUCTION.—This

12 paragraph may not be construed as

13 authorizing any payment under sec14 tion 1861(v) with respect to graduate

15 medical education.’’; and

16 (3) by adding at the end the following

17 subsection:

18 ‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND

19 GRADUATE MEDICAL EDUCATION TRUST FUND.—

20 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU21 CATION.—

22 ‘‘(A) IN GENERAL.—From the Fed23 eral Hospital Insurance Trust Fund,

24 the Secretary shall, for fiscal year

25 1997 and each subsequent fiscal year,
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1 transfer to the Indirect-Costs Medical

2 Education Account (under section

3 2201) an amount determined by the

4 Secretary in accordance with sub5 paragraph (B).

6 ‘‘(B) DETERMINATION OF

7 AMOUNTS.—The Secretary shall make

8 an estimate for the fiscal year in9 volved of the nationwide total of the

10 amounts that would have been paid

11 under subsection (d)(5)(B) to hos12 pitals during the fiscal year if such

13 payments had not been terminated

14 for discharges occurring after Sep15 tember 30, 1996. For purposes of sub16 paragraph (A), the amount deter17 mined under this subparagraph for

18 the fiscal year is the estimate made

19 by the Secretary under the preceding

20 sentence.

21 ‘‘(2) DIRECT COSTS OF MEDICAL EDU22 CATION.—

23 ‘‘(A) IN GENERAL.—From the Fed24 eral Hospital Insurance Trust Fund

25 and the Federal Supplementary Medi-
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1 cal Insurance Trust Fund, the Sec2 retary shall, for fiscal year 1997 and

3 each subsequent fiscal year, transfer

4 to the Medicare Direct-Costs Medical

5 Education Account (under section

6 2201) the sum of—

7 ‘‘(i) an amount determined by

8 the Secretary in accordance with

9 subparagraph (B); and

10 ‘‘(ii) as applicable, an amount

11 determined by the Secretary in

12 accordance with subparagraph

13 (C)(ii).

14 ‘‘(B) DETERMINATION OF

15 AMOUNTS.—For each hospital (other

16 than a hospital that is a member of a

17 qualifying consortium referred to in

18 subparagraph (C)), the Secretary

19 shall make an estimate for the fiscal

20 year involved of the amount that

21 would have been paid under sub22 section (h) to the hospital during the

23 fiscal year if such payments had not

24 been terminated for cost reporting

25 periods ending on or before Septem-
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1 ber 30, 1996. For purposes of subpara2 graph (A)(i), the amount determined

3 under this subparagraph for the fis4 cal year is the sum of all estimates

5 made by the Secretary under the pre6 ceding sentence.

7 ‘‘(C) ESTIMATES REGARDING QUALI8 FYING CONSORTIA.—If the Secretary

9 elects to authorize one or more quali10 fying consortia for purposes of sec11 tion 2233(a), the Secretary shall carry

12 out the following:

13 ‘‘(i) The Secretary shall estab14 lish a methodology for making

15 payments to qualifying consortia

16 with respect to the reasonable di17 rect costs of such consortia in

18 carrying out programs of grad19 uate medical education. The

20 methodology shall be the meth21 odology established in subsection

22 (h), modified to the extent nec23 essary to take into account the

24 participation in such programs of

25 entities other than hospitals.
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1 ‘‘(ii) For each qualifying con2 sortium, the Secretary shall make

3 an estimate for the fiscal year in4 volved of the amount that would

5 have been paid to the consortium

6 during the fiscal year if, using the

7 methodology under clause (i),

8 payments had been made to the

9 consortium for the fiscal year as

10 reimbursements with respect to

11 cost reporting periods. For pur12 poses of subparagraph (A)(ii), the

13 amount determined under this

14 clause for the fiscal year is the

15 sum of all estimates made by the

16 Secretary under the preceding

17 sentence.

18 ‘‘(D) ALLOCATION BETWEEN

19 FUNDS.—In providing for a transfer

20 under subparagraph (A) for a fiscal

21 year, the Secretary shall provide for

22 an allocation of the amounts involved

23 between part A and part B (and the

24 trust funds established under the re25 spective parts) as reasonably reflects
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1 the proportion of direct graduate

2 medical education costs of hospitals

3 associated with the provision of serv4 ices under each respective part.

5 ‘‘(3) APPLICABILITY OF CERTAIN AMEND6 MENTS.—Amendments made to subsection

7 (d)(5)(B) and subsection (h) that are effec8 tive on or after October 1, 1996, apply

9 only for purposes of estimates under

10 paragraphs (1) and (2) and for purposes

11 of determining the amount of payments

12 under 2211. Such amendments do not re13 quire any adjustment to amounts paid

14 under subsection (d)(5)(B) or (h) with re15 spect to fiscal year 1996 or any prior fis16 cal year.

17 ‘‘(4) RELATIONSHIP TO CERTAIN DEM18 ONSTRATION PROJECTS.—In the case of a

19 State for which a demonstration project

20 under section 1814(b)(3) is in effect, the

21 Secretary, in making determinations of

22 the rates of increase under such section,

23 shall include all amounts transferred

24 under this subsection. Such amounts

25 shall be so included to the same extent
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1 and in the same manner as amounts de2 termined under subsections (d)(5)(B) and

3 (h) were included in such determination

4 under the provisions of this title in effect

5 on September 30, 1996.’’.

6 SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD7 ING GRADUATE MEDICAL EDUCATION.

8 (a) INDIRECT COSTS OF MEDICAL EDUCATION;

9 APPLICABLE PERCENTAGE.—

10 (1) MODIFICATION REGARDING 5.6 PER11 CENT.—Section 1886(d)(5)(B)(ii) (42 U.S.C.

12 1395ww(d)(5)(B)(ii)) is amended—

13 (A) by striking ‘‘on or after Octo14 ber 1, 1988,’’ and inserting ‘‘on or

15 after October 1, 1999,’’; and

16 (B) by striking ‘‘1.89’’ and insert17 ing ‘‘1.38’’.

18 (2) SPECIAL RULE REGARDING FISCAL

19 YEARS 1996 THROUGH 1998; MODIFICATION

20 REGARDING 6 PERCENT.—Section

21 1886(d)(5)(B)(ii), as amended by para22 graph (1), is amended by adding at the

23 end the following: ‘‘In the case of dis24 charges occurring on or after October 1,

25 1995, and before October 1, 1999, the pre-
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1 ceding sentence applies to the same ex2 tent and in the same manner as the sen3 tence applies to discharges occurring on

4 or after October 1, 1999, except that the

5 term ‘1.38’ is deemed to be ‘1.48’.’’.

6 (b) DIRECT COSTS OF MEDICAL EDU7 CATION.—

8 (1) LIMITATION ON NUMBER OF FULL9 TIME-EQUIVALENT RESIDENTS.—Section

10 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is

11 amended by adding at the end the follow12 ing new subparagraph:

13 ‘‘(F) LIMITATION ON NUMBER OF

14 RESIDENTS FOR CERTAIN FISCAL

15 YEARS.—Such rules shall provide that

16 for purposes of a cost reporting pe17 riod beginning on or after October 1,

18 1995, and on or before September 30,

19 2002, the number of full-time-equiva20 lent residents determined under this

21 paragraph with respect to an ap22 proved medical residency training

23 program may not exceed the number

24 of full-time-equivalent residents with

25 respect to the program as of August 1,
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1 1995 (except that this subparagraph

2 does not apply to any nonphysician

3 teaching program that is approved

4 for purposes of section 1861(b)(6) and

5 that, under paragraph (5)(A), is an ap6 proved medical residency training

7 program).’’.

8 (2) EXCLUSION OF RESIDENTS AFTER INI9 TIAL RESIDENCY PERIOD.—Section

10 1886(h)(4)(C) (42 U.S.C. 1395ww(h)(4)(C))

11 is amended to read as follows:

12 ‘‘(C) WEIGHTING FACTORS FOR RESI13 DENTS.—Effective for cost reporting

14 periods beginning on or after October

15 1, 1997, such rules shall provide that,

16 in the calculation of the number of

17 full-time-equivalent residents in an

18 approved residency program, the

19 weighting factor for a resident who is

20 in the initial residency period (as de21 fined in paragraph (5)(F)) is 1.0 and

22 the weighting factor for a resident

23 who has completed such period is 0.0.

24 (In the case of cost reporting periods

25 beginning before October 1, 1997, the
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1 weighting factors that apply in such

2 calculation are the weighting factors

3 that were applicable under this sub4 paragraph on the day before the date

5 of the enactment of the Medicare

6 Preservation Act of 1995.)’’.

7 (3) REDUCTIONS IN PAYMENTS FOR ALIEN

8 RESIDENTS.—Section 1886(h)(4) (42 U.S.C.

9 1395ww(h)(4)), as amended by paragraph

10 (1), is amended by adding at the end the

11 following new subparagraph:

12 ‘‘(G) SPECIAL RULES FOR ALIEN

13 RESIDENTS.—In the case of individuals

14 who are not citizens or nationals of

15 the United States and who are not

16 citizens of Canada, in the calculation

17 of the number of full-time-equivalent

18 residents in an approved medical

19 residency program, the following

20 rules shall apply with respect to such

21 individuals who are residents in the

22 program:

23 ‘‘(i) For a cost reporting pe24 riod beginning during fiscal year

25 1996, for each such individual the
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1 Secretary shall apply a weighting

2 factor of .75.

3 ‘‘(ii) For a cost reporting pe4 riod beginning during fiscal year

5 1997, for each such individual the

6 Secretary shall apply a weighting

7 factor of .50.

8 ‘‘(iii) For a cost reporting pe9 riod beginning during fiscal year

10 1998, for each such individual the

11 Secretary shall apply a weighting

12 factor of .25.

13 ‘‘(iv) For a cost reporting pe14 riod beginning during fiscal year

15 1999 or any subsequent fiscal

16 year, such individuals shall be ex17 cluded from the calculation of the

18 number of full-time-equivalent

19 residents in an approved medical

20 residency program under this

21 paragraph.’’.

22 (4) EFFECTIVE DATE.—Except as pro23 vided otherwise in this subsection (or in

24 the amendments made by this sub25 section), the amendments made by this
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1 subsection apply to hospital cost report2 ing periods beginning on or after October

3 1, 1995.

4 PART 3—REFORM OF FEDERAL POLICIES RE5 GARDING TEACHING HOSPITALS AND GRAD6 UATE MEDICAL EDUCATION

7 SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR

8 RECOMMENDING POLICIES.

9 Title XXII of the Social Security Act, as

10 added by section 15401, is amended by adding

11 at the end the following part:

12 ‘‘PART C—OTHER MATTERS

13 ‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING

14 OF TEACHING HOSPITALS AND GRADUATE

15 MEDICAL EDUCATION.

16 ‘‘(a) ESTABLISHMENT.—The Chair of the

17 Medicare Payment Review Commission under

18 section 1806 shall establish a temporary advi19 sory panel to be known as the Advisory Panel

20 on Financing for Teaching Hospitals and

21 Graduate Medical Education (in this section

22 referred to as the ‘Panel’).

23 ‘‘(b) DUTIES.—The Panel shall develop rec24 ommendations on whether and to what extent

25 Federal policies regarding teaching hospitals
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1 and graduate medical education should be re2 formed, including recommendations regard3 ing the following:

4 ‘‘(1) The financing of graduate medi5 cal education, including consideration of

6 alternative broad-based sources of fund7 ing for such education.

8 ‘‘(2) The financing of teaching hos9 pitals, including consideration of the dif10 ficulties encountered by such hospitals as

11 competition among health care entities

12 increases. Matters considered under this

13 paragraph shall include consideration of

14 the effects on teaching hospitals of the

15 method of financing used for the

16 MedicarePlus program under part C of

17 title XVIII.

18 ‘‘(3) The methodology for making pay19 ments for graduate medical education,

20 and the selection of entities to receive

21 the payments. Matters considered under

22 this paragraph shall include the follow23 ing:

24 ‘‘(A) The methodology under part

25 B for making payments from the
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1 Fund, including the use of data from

2 the fiscal years 1992 through 1994,

3 and including the methodology that

4 applies with respect to consolidations

5 and mergers of participants in the

6 program under such part and with

7 respect to the inclusion of additional

8 participants in the program.

9 ‘‘(B) Issues regarding children’s

10 hospitals, and approved medical resi11 dency training programs in pediat12 rics.

13 ‘‘(C) Whether and to what extent

14 payments are being made (or should

15 be made) for graduate training in the

16 various nonphysician health profes17 sions.

18 ‘‘(4) Federal policies regarding inter19 national medical graduates.

20 ‘‘(5) The dependence of schools of

21 medicine on service-generated income.

22 ‘‘(6) The effects of the amendments

23 made by section 15412 of the Medicare

24 Preservation Act of 1995, including ad25 verse effects on teaching hospitals that
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1 result from modifications in policies re2 garding international medical graduates.

3 ‘‘(7) Whether and to what extent the

4 needs of the United States regarding the

5 supply of physicians will change during

6 the 10-year beginning on October 1, 1995,

7 and whether and to what extent any such

8 changes will have significant financial ef9 fects on teaching hospitals.

10 ‘‘(8) The appropriate number and mix

11 of residents.

12 ‘‘(c) COMPOSITION.—Not later than three

13 months after being designated as the initial

14 chairman of the Medicare Payment Review

15 Commission, the chairman of the Commission

16 shall appoint to the Panel 19 individuals who

17 are not members of the Commission, who are

18 not officers or employees of the United States,

19 and who possess expertise on matters on

20 which the Panel is to make recommendations

21 under subsection (b). Such individuals shall

22 include the following:

23 ‘‘(1) Deans from allopathic and osteo24 pathic schools of medicine.
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1 ‘‘(2) Chief executive officers (or equiv2 alent administrative heads) from aca3 demic health centers, integrated health

4 care systems, and approved medical resi5 dency training programs.

6 ‘‘(3) Chairs of departments or divi7 sions from allopathic and osteopathic

8 schools of medicine, schools of dentistry,

9 and approved medical residency training

10 programs in oral surgery.

11 ‘‘(4) Individuals with leadership expe12 rience from each of the fields of ad13 vanced practice nursing, physician assist14 ants, and podiatric medicine.

15 ‘‘(5) Individuals with substantial ex16 perience in the study of issues regarding

17 the composition of the health care

18 workforce of the United States.

19 ‘‘(6) Individuals with expertise on the

20 financing of health care.

21 ‘‘(7) Representatives from health in22 surance organizations and health plan or23 ganizations.

24 ‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE

25 PAYMENT REVIEW COMMISSION.—From amounts
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1 appropriated under subsection (n), the Medi2 care Payment Review Commission shall pro3 vide for the Panel such staff and administra4 tive support (including quarters for the

5 Panel) as may be necessary for the Panel to

6 carry out the duties under subsection (b).

7 ‘‘(e) CHAIR.—The Panel shall designate a

8 member of the Panel to serve as the Chair of

9 the Panel.

10 ‘‘(f) MEETINGS.—The Panel shall meet at

11 the call of the Chair or a majority of the mem12 bers, except that the first meeting of the

13 Panel shall be held not later than three

14 months after the date on which appointments

15 under subsection (c) are completed.

16 ‘‘(g) TERMS.—The term of a member of the

17 Panel is the duration of the Panel.

18 ‘‘(h) VACANCIES.—

19 ‘‘(1) IN GENERAL.—A vacancy in the

20 membership of the Panel does not affect

21 the power of the remaining members to

22 carry out the duties under subsection (b).

23 A vacancy in the membership of the

24 Panel shall be filled in the manner in
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1 which the original appointment was

2 made.

3 ‘‘(2) INCOMPLETE TERM.—If a member

4 of the Panel does not serve the full term

5 applicable to the member, the individual

6 appointed to fill the resulting vacancy

7 shall be appointed for the remainder of

8 the term of the predecessor of the indi9 vidual.

10 ‘‘(i) COMPENSATION; REIMBURSEMENT OF EX11 PENSES.—

12 ‘‘(1) COMPENSATION.—Members of the

13 Panel shall receive compensation for

14 each day (including traveltime) engaged

15 in carrying out the duties of the Commit16 tee. Such compensation may not be in an

17 amount in excess of the daily equivalent

18 of the annual maximum rate of basic pay

19 payable under the General Schedule

20 (under title 5, United States Code) for po21 sitions above GS–15.

22 ‘‘(2) REIMBURSEMENT.—Members of the

23 Panel may, in accordance with chapter 57

24 of title 5, United States Code, be reim25 bursed for travel, subsistence, and other
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1 necessary expenses incurred in carrying

2 out the duties of the Panel.

3 ‘‘(j) CONSULTANTS.—The Panel may pro4 cure such temporary and intermittent serv5 ices of consultants under section 3109(b) of

6 title 5, United States Code, as the Panel may

7 determine to be useful in carrying out the du8 ties under subsection (b). The Panel may not

9 procure services under this subsection at any

10 rate in excess of the daily equivalent of the

11 maximum annual rate of basic pay payable

12 under the General Schedule for positions

13 above GS–15. Consultants under this sub14 section may, in accordance with chapter 57 of

15 title 5, United States Code, be reimbursed for

16 travel, subsistence, and other necessary ex17 penses incurred for activities carried out on

18 behalf of the Panel pursuant to subsection (b).

19 ‘‘(k) POWERS.—

20 ‘‘(1) IN GENERAL.—For the purpose of

21 carrying out the duties of the Panel

22 under subsection (b), the Panel may hold

23 such hearings, sit and act at such times

24 and places, take such testimony, and re-
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1 ceive such evidence as the Panel consid2 ers appropriate.

3 ‘‘(2) OBTAINING OFFICIAL INFORMA4 TION.—Upon the request of the Panel, the

5 heads of Federal agencies shall furnish

6 directly to the Panel information nec7 essary for the Panel to carry out the du8 ties under subsection (b).≤

9 ‘‘(3) USE OF MAILS.—The Panel may

10 use the United States mails in the same

11 manner and under the same conditions

12 as Federal agencies.

13 ‘‘(l) REPORTS.—

14 ‘‘(1) FIRST INTERIM REPORT.—Not later

15 than one year after the date of the enact16 ment of the Medicare Preservation Act of

17 1995, the Panel shall submit to the Con18 gress a report providing the rec19 ommendations of the Panel regarding the

20 matters specified in paragraphs (1)

21 through (4) of subsection (b).

22 ‘‘(2) SECOND INTERIM REPORT.—Not

23 later than 2 years after the date of enact24 ment specified in paragraph (1), the

25 Panel shall submit to the Congress a re-
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1 port providing the recommendations of

2 the Panel regarding the matters specified

3 in paragraphs (5) and (6) of subsection

4 (b).

5 ‘‘(3) FINAL REPORT.—Not later than 3

6 years after the date of enactment speci7 fied in paragraph (1), the Panel shall sub8 mit to the Congress a final report provid9 ing the recommendations of the Panel

10 under subsection (b).

11 ‘‘(m) DURATION.—The Panel terminates

12 upon the expiration of the 180-day period be13 ginning on the date on which the final report

14 under subsection (l)(3) is submitted to the

15 Congress.

16 ‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—

17 ‘‘(1) IN GENERAL.—Subject to para18 graph (2), for the purpose of carrying out

19 this section, there are authorized to be

20 appropriated such sums as may be nec21 essary for each of the fiscal years 1996

22 through 2000.

23 ‘‘(2) LIMITATION.—The authorization of

24 appropriations established in paragraph

25 (1) is effective only with respect to appro-
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1 priations made from allocations under

2 section 302(b) of the Congressional Budg3 et Act of 1974—

4 ‘‘(A) for the Subcommittee on

5 Labor, Health and Human Services,

6 and Education, Committee on Appro7 priations of the House of Representa8 tives, in the case of any bill, resolu9 tion, or amendment considered in the

10 House; and

11 ‘‘(B) for the Subcommittee on

12 Labor, Health and Human Services,

13 and Education, Committee on Appro14 priations of the Senate, in the case of

15 any bill, resolution, or amendment

16 considered in the Senate.’’.

17 Subtitle F—Provisions Relating to

18 Medicare Part A

19 PART 1—HOSPITALS

20 Subpart A—General Provisions Relating to Hospitals

21 SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS

22 HOSPITALS.

23 Section 1886(b)(3)(B)(i) (42 U.S.C.

24 1395ww(b)(3)(B)(i)) is amended by striking
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1 subclauses (XI), (XII), and (XIII) and inserting

2 the following:

3 ‘‘(XI) for fiscal year 1996, the market

4 basket percentage increase minus 2.5 per5 centage points for hospitals in all areas,

6 ‘‘(XII) for each of the fiscal years 1997

7 through 2002, the market basket percent8 age increase minus 2.0 percentage points

9 for hospitals in all areas, and

10 ‘‘(XIII) for fiscal year 2003 and each

11 subsequent fiscal year, the market basket

12 percentage increase for hospitals in all

13 areas.’’.

14 SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE

15 PAYMENT ADJUSTMENTS.

16 Section 1886(d)(5)(F) (42 U.S.C.

17 1395ww(d)(5)(F)) is amended—

18 (1) in clause (ii), by striking ‘‘The

19 amount’’ and inserting ‘‘Subject to clause

20 (ix), the amount’’; and

21 (2) by adding at the end the following

22 new clause:

23 ‘‘(ix) In the case of discharges occurring

24 on or after October 1, 1995, the additional
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1 payment amount otherwise determined under

2 clause (ii) shall be reduced as follows:

3 ‘‘(I) For discharges occurring on or

4 after October 1, 1995, and on or before

5 September 30, 1996, by 17 percent.

6 ‘‘(II) For discharges occurring on or

7 after October 1, 1996, and on or before

8 September 30, 1997, by 15 percent.

9 ‘‘(III) For discharges occurring on or

10 after October 1, 1997, and on or before

11 September 30, 1998, by 20 percent.

12 ‘‘(IV) For discharges occurring on or

13 after October 1, 1998, and on or before

14 September 30, 1999, by 20 percent.

15 ‘‘(V) For discharges occurring on or

16 after October 1, 1999, and on or before

17 September 30, 2000, by 25 percent.

18 ‘‘(VI) For discharges occurring on or

19 after October 1, 2000, and on or before

20 September 30, 2001, by 30 percent.

21 ‘‘(VII) For discharges occurring on or

22 after October 1, 2001, by 30 percent.’’.
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1 SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR

2 INPATIENT HOSPITAL SERVICES.

3 (a) REDUCTION IN PAYMENTS FOR PPS HOS4 PITALS.—

5 (1) CONTINUATION OF CURRENT REDUC6 TIONS.—Section 1886(g)(1)(A) (42 U.S.C.

7 1395ww(g)(1)(A)) is amended in the sec8 ond sentence—

9 (A) by striking ‘‘through 1995’’

10 and inserting ‘‘through 2002’’; and

11 (B) by inserting after ‘‘reduction’’

12 the following: ‘‘(or a 15 percent reduc13 tion in the case of payments during

14 fiscal years 1996 through 2002)’’.

15 (2) REDUCTION IN BASE PAYMENT

16 RATES.—Section 1886(g)(1)(A) (42 U.S.C.

17 1395ww(g)(1)(A)) is amended by adding at

18 the end the following new sentence: ‘‘In

19 addition to the reduction described in

20 the preceding sentence, for discharges

21 occurring after September 30, 1995, the

22 Secretary shall reduce by 7.47 percent

23 the unadjusted standard Federal capital

24 payment rate (as described in 42 CFR

25 412.308(c), as in effect on the date of the

26 enactment of the Medicare Preservation
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1 Act of 1995) and shall reduce by 8.27 per2 cent the unadjusted hospital-specific rate

3 (as described in 42 CFR 412.328(e)(1), as

4 in effect on such date of enactment).’’.

5 (b) REDUCTION IN PAYMENTS FOR PPS-EX6 EMPT HOSPITALS.—Section 1886(g) (42 U.S.C.

7 1395ww(g)) is amended by adding at the end

8 the following new paragraph:

9 ‘‘(4)(A) Except as provided in subpara10 graph (B), in determining the amount of the

11 payments that may be made under this title

12 with respect to all the capital-related costs of

13 inpatient hospital services furnished during

14 fiscal years 1996 through 2002 of a hospital

15 which is not a subsection (d) hospital or a sub16 section (d) Puerto Rico hospital, the Secretary

17 shall reduce the amounts of such payments

18 otherwise determined under this title by 15

19 percent.

20 ‘‘(B) Subparagraph (A) shall not apply to

21 payments with respect to the capital-related

22 costs of any hospital that is a sole community

23 hospital (as defined in subsection (d)(5)(D)(iii)

24 or a rural primary care hospital (as defined

25 in section 1861(mm)(1)).’’.
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1 (c) HOSPITAL-SPECIFIC ADJUSTMENT FOR

2 CAPITAL-RELATED TAX COSTS.—Section

3 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amend4 ed—

5 (1) by redesignating subparagraph

6 (C) as subparagraph (D), and

7 (2) by inserting after subparagraph

8 (B) the following:

9 ‘‘(C)(i) For discharges occurring

10 after September 30, 1995, such system

11 shall provide for an adjustment in an

12 amount equal to the amount deter13 mined under clause (iv) for capital-re14 lated tax costs for each hospital that

15 is eligible for such adjustment.

16 ‘‘(ii) Subject to clause (iii), a hos17 pital is eligible for an adjustment

18 under this subparagraph, with re19 spect to discharges occurring in a fis20 cal year, if the hospital—

21 ‘‘(I) is a hospital that may oth22 erwise receive payments under

23 this subsection,

24 ‘‘(II) is not a public hospital,

25 and
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1 ‘‘(III) incurs capital-related

2 tax costs for the fiscal year.

3 ‘‘(iii)(I) In the case of a hospital

4 that first incurs capital-related tax

5 costs in a fiscal year after fiscal year

6 1992 because of a change from

7 nonproprietary to proprietary status

8 or because the hospital commenced

9 operation after such fiscal year, the

10 first fiscal year for which the hospital

11 shall be eligible for such adjustment

12 is the second full fiscal year following

13 the fiscal year in which the hospital

14 first incurs such costs.

15 ‘‘(II) In the case of a hospital that

16 first incurs capital-related tax costs

17 in a fiscal year after fiscal year 1992

18 because of a change in State or local

19 tax laws, the first fiscal year for

20 which the hospital shall be eligible

21 for such adjustment is the fourth full

22 fiscal year following the fiscal year in

23 which the hospital first incurs such

24 costs.
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1 ‘‘(iv) The per discharge adjust2 ment under this clause shall be equal

3 to the hospital-specific capital-related

4 tax costs per discharge of a hospital

5 for fiscal year 1992 (or, in the case of

6 a hospital that first incurs capital-re7 lated tax costs for a fiscal year after

8 fiscal year 1992, for the first full fiscal

9 year for which such costs are in10 curred), updated to the fiscal year to

11 which the adjustment applies. Such

12 per discharge adjustment shall be

13 added to the Federal capital rate,

14 after such rate has been adjusted as

15 described in 42 CFR 412.312 (as in ef16 fect on the date of the enactment of

17 the Medicare Preservation Act of

18 1995), and before such rate is multi19 plied by the applicable Federal rate

20 percentage.

21 ‘‘(v) For purposes of this subpara22 graph, capital-related tax costs in23 clude—

24 ‘‘(I) the costs of taxes on land

25 and depreciable assets owned by
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1 a hospital (or related organiza2 tion) and used for patient care,

3 ‘‘(II) payments in lieu of such

4 taxes (made by hospitals that are

5 exempt from taxation), and

6 ‘‘(III) the costs of taxes paid

7 by a hospital (or related organiza8 tion) as lessee of land, buildings,

9 or fixed equipment from a lessor

10 that is unrelated to the hospital

11 (or related organization) under

12 the terms of a lease that requires

13 the lessee to pay all expenses (in14 cluding mortgage, interest, and

15 amortization) and leaves the les16 sor with an amount free of all

17 claims (sometimes referred to as a

18 ‘net net net’ or ‘triple net’ lease).

19 In determining the adjustment re20 quired under clause (i), the Secretary

21 shall not take into account any cap22 ital-related tax costs of a hospital to

23 the extent that such costs are based

24 on tax rates and assessments that ex-
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1 ceed those for similar commercial

2 properties.

3 ‘‘(vi) The system shall provide

4 that the Federal capital rate for any

5 fiscal year after September 30, 1995,

6 shall be reduced by a percentage suf7 ficient to ensure that the adjustments

8 required to be paid under clause (i)

9 for a fiscal year neither increase nor

10 decrease the total amount that would

11 have been paid under this system but

12 for the payment of such adjustments

13 for such fiscal year.’’.

14 (d) REVISION OF EXCEPTIONS PROCESS

15 UNDER PROSPECTIVE PAYMENT SYSTEM FOR CER16 TAIN PROJECTS.—

17 (1) IN GENERAL.—Section 1886(g)(1) (42

18 U.S.C. 1395ww(g)(1)), as amended by sub19 section (c), is amended—

20 (1) by redesignating subparagraph

21 (D) as subparagraph (E), and

22 (2) by inserting after subparagraph

23 (C) the following:

24 ‘‘(D) The exceptions under the system pro25 vided by the Secretary under subparagraph
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1 (B)(iii) shall include the provision of excep2 tion payments under the special exceptions

3 process provided under 42 CFR 412.348(g) (as

4 in effect on September 1, 1995), except that

5 the Secretary shall revise such process as fol6 lows:

7 ‘‘(i) A hospital with at least 100 beds

8 which is located in an urban area shall

9 be eligible under such process without

10 regard to its disproportionate patient

11 percentage under subsection (d)(5)(F) or

12 whether it qualifies for additional pay13 ment amounts under such subsection.

14 ‘‘(ii) The minimum payment level for

15 qualifying hospitals shall be 85 percent.

16 ‘‘(iii) A hospital shall be considered to

17 meet the requirement that it completes

18 the project involved no later than the end

19 of the hospital’s last cost reporting period

20 beginning after October 1, 2001, if—

21 ‘‘(I) the hospital has obtained a

22 certificate of need for the project ap23 proved by the State or a local plan24 ning authority, and
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1 ‘‘(II) by September 1, 1995, the

2 hospital has expended on the project

3 at least $750,000 or 10 percent of the

4 estimated cost of the project.

5 ‘‘(iv) The amount of the exception

6 payment made shall not be reduced by

7 any offsetting amounts.’’.

8 (2) CONFORMING AMENDMENT.—Section

9 1886(g)(1)(B) (42 U.S.C. 1395ww(g)(1)(B))

10 is amended by striking ‘‘may provide’’

11 and inserting ‘‘shall provide (in accord12 ance with subparagraph (D)’’.

13 SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT

14 MEDICAL EDUCATION.

15 For provisions modifying medicare pay16 ment policies regarding graduate medical

17 education, see part 2 of subtitle E.

18 SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.

19 (a) UPDATES.—Section 1886(b)(3)(B)(ii)(V)

20 (42 U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended

21 by striking ‘‘through 1997’’ and inserting

22 ‘‘through 2002’’.

23 (b) REBASING FOR CERTAIN LONG-TERM

24 CARE HOSPITALS.—
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1 (1) IN GENERAL.—Section 1886(b)(3) (42

2 U.S.C. 1395ww(b)(3)) is amended—

3 (A) in subparagraph (A), by strik4 ing ‘‘and (E)’’ and inserting ‘‘(E), and

5 (F)’’;

6 (B) in subparagraph (B)(ii), by

7 striking ‘‘(A) and (E)’’ and inserting

8 ‘‘(A), (E), and (F)’’; and

9 (C) by adding at the end the fol10 lowing new subparagraph:

11 ‘‘(F)(i) In the case of a qualified long-term

12 care hospital (as defined in clause (ii)), the

13 term ‘target amount’ means—

14 ‘‘(I) with respect to the first 12-month

15 cost reporting period in which this sub16 paragraph is applied to the hospital, the

17 allowable operating costs of inpatient

18 hospital services (as defined in sub19 section (a)(4)) recognized under this title

20 for the hospital for the 12-month cost re21 porting period beginning during fiscal

22 year 1991; or

23 ‘‘(II) with respect to a later cost re24 porting period, the target amount for the

25 preceding cost reporting period, increase
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1 by the applicable percentage increase

2 under subparagraph (B)(ii) for that later

3 cost reporting period.

4 ‘‘(ii) In clause (i), a ‘qualified long-term

5 care hospital’ means, with respect to a cost re6 porting period, a hospital described in clause

7 (iv) of subsection (d)(1)(B) during fiscal year

8 1995 for which the hospital’s allowable oper9 ating costs of inpatient hospital services rec10 ognized under this title for each of the two

11 most recent previous 12-month cost reporting

12 periods exceeded the hospital’s target amount

13 determined under this paragraph for such

14 cost reporting periods, if the hospital—

15 ‘‘(I) has a disproportionate patient

16 percentage during such cost reporting

17 period (as determined by the Secretary

18 under subsection (d)(5)(F)(vi) as if the

19 hospital were a subsection (d) hospital) of

20 at least 25 percent, or

21 ‘‘(II) is located in a State for which no

22 payment is made under the State plan

23 under title XIX for days of inpatient hos24 pital services furnished to any individual

25 in excess of the limit on the number of
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1 days of such services furnished to the in2 dividual for which payment may be made

3 under this title.’’.

4 (2) EFFECTIVE DATE.—The amendment

5 made by paragraph (1) shall apply to dis6 charges occurring during cost reporting

7 periods beginning on or after October 1,

8 1995.

9 (c) TREATMENT OF CERTAIN UNITS LOCATED

10 WITHIN OTHER HOSPITALS.—

11 (1) IN GENERAL.—Section 1886(d)(1)(B)

12 (42 U.S.C. 1395ww(d)(1)(B)) is amended in

13 the matter following clause (v) by strik14 ing the period and inserting the follow15 ing: ‘‘, or a long-term care unit of the hos16 pital if such unit was not treated as a

17 subsection (d) hospital with respect to

18 discharges occurring on or before Sep19 tember 30, 1995.’’.

20 (2) STUDY BY REVIEW COMMISSION.—Not

21 later than 12 months after the date a ma22 jority of the members of the Medicare

23 Payment Review Commission are first ap24 pointed, the Commission shall submit a

25 report to Congress containing rec-
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1 ommendations for appropriate revisions

2 in the treatment of distinct units of hos3 pitals for purposes of section 1886 of the

4 Social Security Act.

5 SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR

6 ENROLLEES’ BAD DEBTS.

7 (a) IN GENERAL.—Section 1861(v)(1) (42

8 U.S.C. 1395x(v)(1)) is amended by adding at

9 the end the following new subparagraph:

10 ‘‘(T) In determining such reasonable costs

11 for hospitals, the amount of bad debts other12 wise treated as allowable costs which are at13 tributable to the deductibles and coinsurance

14 amounts under this title shall be reduced by—

15 ‘‘(i) 75 percent for cost reporting peri16 ods beginning during fiscal year 1996,

17 ‘‘(ii) 60 percent for cost reporting pe18 riods beginning during fiscal year 1997,

19 and

20 ‘‘(iii) 50 percent for subsequent cost

21 reporting periods.

22 (b) EFFECTIVE DATE.—The amendment

23 made by subsection (a) shall apply to hospital

24 cost reporting periods beginning on or after

25 October 1, 1995.
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1 SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS2 THROUGH.

3 Effective as if included in the enactment

4 of OBRA–1989, section 6011(d) of such Act (as

5 amended by section 13505 of OBRA–1993) is

6 amended by striking ‘‘and shall expire Sep7 tember 30, 1994’’.

8 SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION

9 OF CHRISTIAN SCIENCE PROVIDERS.

10 (a) HOSPITALS.—Section 1861(e) (42 U.S.C.

11 1395x(e)) is amended in the sixth sentence by

12 inserting after ‘‘Massachusetts,’’ the following:

13 ‘‘or by the Commission for Accreditation of

14 Christian Science Nursing Organizations/Fa15 cilities, Inc.,’’.

16 (b) SKILLED NURSING FACILITIES.—Section

17 1861(y)(1) is amended by inserting after ‘‘Mas18 sachusetts,’’ the following: ‘‘or by the Commis19 sion for Accreditation of Christian Science

20 Nursing Organizations/Facilities, Inc.,’’.

21 Subpart B—Provisions Relating to Rural Hospitals

22 SEC. 15511. SOLE COMMUNITY HOSPITALS.

23 (a) UPDATE.—Section 1886(b)(3)(B)(iv) (42

24 U.S.C. 1395ww(b)(3)(B)(iv)) is amended—

25 (A) in subclause (III), by striking

26 ‘‘and’’ at the end; and
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1 (B) by striking subclause (IV) and in2 serting the following:

3 ‘‘(IV) for each of the fiscal years 1996

4 through 2000, the market basket percent5 age increase minus 1 percentage points,

6 and

7 ‘‘(V) for fiscal year 2001 and each sub8 sequent fiscal year, the applicable per9 centage increase under clause (i).’’.

10 (b) STUDY OF IMPACT OF SOLE COMMUNITY

11 HOSPITAL DESIGNATIONS.—

12 (1) STUDY.—The Medicare Payment

13 Review Commission shall conduct a

14 study of the impact of the designation of

15 hospitals as sole community hospitals

16 under the medicare program on the de17 livery of health care services to individ18 uals in rural areas, and shall include in

19 the study an analysis of the characteris20 tics of the hospitals designated as such

21 sole community hospitals under the pro22 gram.

23 (2) REPORT.—Not later than 12 months

24 after the date a majority of the members

25 of the Commission are first appointed,
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1 the Commission shall submit to Congress

2 a report on the study conducted under

3 paragraph (1).

4 SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND

5 RPC HOSPITALS.

6 Paragraphs (1)(A) and (2)(A) of section

7 1820(i) (42 U.S.C. 1395i–4(i)) are each amended

8 by striking the semicolon at the end and in9 serting the following: ‘‘, or in a State which

10 the Secretary finds would receive a grant

11 under such subsection during a fiscal year if

12 funds were appropriated for grants under

13 such subsection for the fiscal year;’’.

14 SEC. 15513. RURAL EMERGENCY ACCESS CARE HOSPITALS.

15 (a) ESTABLISHMENT OF PROGRAM.—

16 (1) IN GENERAL.—Section 1861 (42

17 U.S.C. 1395x) is amended by adding at the

18 end the following new subsection:

19 ‘‘Rural Emergency Access Care Hospital;

20 Rural Emergency Access Care Hospital

21 Services

22 ‘‘(oo)(1) The term ‘rural emergency access

23 care hospital’ means, for a fiscal year, a facil24 ity with respect to which the Secretary finds

25 the following:
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1 ‘‘(A) The facility is located in a rural

2 area (as defined in section 1886(d)(2)(D)).

3 ‘‘(B) The facility was a hospital under

4 this title at any time during the 5-year

5 period that ends on the date of the enact6 ment of this subsection.

7 ‘‘(C) The facility is in danger of clos8 ing due to low inpatient utilization rates

9 and negative operating losses, and the

10 closure of the facility would limit the ac11 cess of individuals residing in the facili12 ty’s service area to emergency services.

13 ‘‘(D) The facility has entered into (or

14 plans to enter into) an agreement with a

15 hospital with a participation agreement

16 in effect under section 1866(a), and under

17 such agreement the hospital shall accept

18 patients transferred to the hospital from

19 the facility and receive data from and

20 transmit data to the facility.

21 ‘‘(E) There is a practitioner who is

22 qualified to provide advanced cardiac life

23 support services (as determined by the

24 State in which the facility is located) on25 site at the facility on a 24-hour basis.
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1 ‘‘(F) A physician is available on-call to

2 provide emergency medical services on a

3 24-hour basis.

4 ‘‘(G) The facility is a member of a

5 community rural health network under

6 section 104 of the Rural Health Develop7 ment Act.

8 ‘‘(H) The facility meets such staffing

9 requirements as would apply under sec10 tion 1861(e) to a hospital located in a

11 rural area, except that—

12 ‘‘(i) the facility need not meet hos13 pital standards relating to the num14 ber of hours during a day, or days

15 during a week, in which the facility

16 must be open, except insofar as the

17 facility is required to provide emer18 gency care on a 24-hour basis under

19 subparagraphs (E) and (F); and

20 ‘‘(ii) the facility may provide any

21 services otherwise required to be pro22 vided by a full-time, on-site dietician,

23 pharmacist, laboratory technician,

24 medical technologist, or radiological
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1 technologist on a part-time, off-site

2 basis.

3 ‘‘(I) The facility meets the require4 ments applicable to clinics and facilities

5 under subparagraphs (C) through (J) of

6 paragraph (2) of section 1861(aa) and of

7 clauses (ii) and (iv) of the second sen8 tence of such paragraph (or, in the case

9 of the requirements of subparagraph (E),

10 (F), or (J) of such paragraph, would meet

11 the requirements if any reference in such

12 subparagraph to a ‘nurse practitioner’ or

13 to ‘nurse practitioners’ was deemed to be

14 a reference to a ‘nurse practitioner or

15 nurse’ or to ‘nurse practitioners or

16 nurses’); except that in determining

17 whether a facility meets the require18 ments of this subparagraph, subpara19 graphs (E) and (F) of that paragraph

20 shall be applied as if any reference to a

21 ‘physician’ is a reference to a physician

22 as defined in section 1861(r)(1).

23 ‘‘(2) The term ‘rural emergency access

24 care hospital services’ means the following
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1 services provided by a rural emergency ac2 cess care hospital:

3 ‘‘(A) An appropriate medical screen4 ing examination (as described in section

5 1867(a)).

6 ‘‘(B) Necessary stabilizing examina7 tion and treatment services for an emer8 gency medical condition and labor (as de9 scribed in section 1867(b)).

10 ‘‘(3) The term ‘inpatient rural emergency

11 access care hospital services’ means services

12 described in paragraph (2), furnished to an in13 dividual over a continuous period not to ex14 ceed 24 hours (except that such services may

15 be furnished over a longer period in the case

16 of an individual who is unable to leave the

17 hospital because of inclement weather) that

18 would be inpatient hospital services if fur19 nished to an inpatient of a hospital by a hos20 pital.’’.

21 (2) REQUIRING RURAL EMERGENCY AC22 CESS CARE HOSPITALS TO MEET HOSPITAL

23 ANTI-DUMPING REQUIREMENTS.—Section

24 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is

25 amended by striking ‘‘1861(mm)(1))’’ and
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1 inserting ‘‘1861(mm)(1)) and a rural emer2 gency access care hospital (as defined in

3 section 1861(oo)(1))’’.

4 (b) COVERAGE OF AND PAYMENT FOR SERV5 ICES UNDER PART A.—

6 (1) COVERAGE.—Section 1812(a)(1) (42

7 U.S.C. 1395d(a)(1)) is amended by striking

8 ‘‘or inpatient rural primary care hospital

9 services’’ and inserting ‘‘inpatient rural

10 primary care hospital services, or inpa11 tient rural emergency access care hos12 pital services’’.

13 (2) APPLICATION OF DEDUCTIBLE AND

14 COINSURANCE.—(A) Sections 1813(a) and

15 1813(b)(3)(A) (42 U.S.C. 1395e(a),

16 1395e(b)(3)(A)) are each amended by

17 striking ‘‘services or inpatient rural pri18 mary care hospital services’’ each place it

19 appears and inserting ‘‘services, inpatient

20 rural primary care hospital services, or

21 inpatient rural emergency access care

22 hospital services’’.

23 (B) Section 1813(b)(3)(B) (42 U.S.C.

24 1395e(b)(3)(B)) is amended by inserting ‘‘,

25 inpatient rural emergency access care
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1 hospital services,’’ after ‘‘inpatient rural

2 primary care hospital services’’.

3 (3) PAYMENT BASED ON REASONABLE

4 COSTS.—Section 1814 (42 U.S.C. 1395f) is

5 amended by adding at the end the follow6 ing new subsection:

7 ‘‘Payment for Inpatient Rural Emergency

8 Access Care Hospital Services

9 ‘‘(m) The amount of payment under this

10 part for inpatient rural primary care hospital

11 services shall be equal to the reasonable cost

12 of such services (as determined under section

13 1861(v)), less the amount the hospital may

14 charge as described in clause (ii) of section

15 1866(a)(2)(A), but in no case may the payment

16 for such services exceed 80 percent of such

17 reasonable cost.’’.

18 (4) APPLICATION OF SPELL OF ILLNESS.—

19 Section 1861(a) (42 U.S.C. 1395x(a)) is

20 amended—

21 (A) in paragraph (1), by inserting

22 ‘‘, inpatient rural emergency access

23 care hospital services,’’ after ‘‘inpa24 tient rural primary care hospital

25 services’’; and
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1 (B) in paragraph (2), by striking

2 ‘‘hospital or rural primary care hos3 pital’’ and inserting ‘‘hospital, rural

4 primary care hospital, or rural emer5 gency access care hospital’’.

6 (c) REFERENCE TO PAYMENT PROVISIONS

7 UNDER PART B.—For provisions relating to

8 payment for inpatient rural emergency access

9 care hospital services under part B, see sec10 tion 15607.

11 (d) EFFECTIVE DATE.—The amendments

12 made by this section shall apply to fiscal

13 years beginning on or after October 1, 1995.

14 SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN15 TERS.

16 (a) PROHIBITING DENIAL OF REQUEST FOR

17 RECLASSIFICATION ON BASIS OF COMPARABILITY

18 OF WAGES.—

19 (1) IN GENERAL.—Section

20 1886(d)(10)(D) (42 U.S.C.

21 1395ww(d)(10)(D)) is amended—

22 (A) by redesignating clause (iii) as

23 clause (iv); and

24 (B) by inserting after clause (ii)

25 the following new clause:
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1 ‘‘(iii) Under the guidelines published by

2 the Secretary under clause (i), in the case of

3 a hospital which is classified by the Secretary

4 as a rural referral center under paragraph

5 (5)(C), the Board may not reject the applica6 tion of the hospital under this paragraph on

7 the basis of any comparison between the aver8 age hourly wage of the hospital and the aver9 age hourly wage of hospitals in the area in

10 which it is located.’’.

11 (2) EFFECTIVE DATE.—Notwithstanding

12 section 1886(d)(10)(C)(ii) of the Social Se13 curity Act, a hospital may submit an ap14 plication to the Medicare Geographic

15 Classification Review Board during the

16 30-day period beginning on the date of

17 the enactment of this Act requesting a

18 change in its classification for purposes

19 of determining the area wage index ap20 plicable to the hospital under section

21 1886(d)(3)(D) of such Act for fiscal year

22 1997, if the hospital would be eligible for

23 such a change in its classification under

24 the standards described in section

25 1886(d)(10)(D) (as amended by paragraph
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1 (1)) but for its failure to meet the dead2 line for applications under section

3 1886(d)(10)(C)(ii).

4 (b) CONTINUING TREATMENT OF PREVIOUSLY

5 DESIGNATED CENTERS.—Any hospital classified

6 as a rural referral center by the Secretary of

7 Health and Human Services under section

8 1886(d)(5)(C) of the Social Security Act for fis9 cal year 1994 shall be classified as such a

10 rural referral center for fiscal year 1996 and

11 each subsequent fiscal year.

12 SEC. 15515. FLOOR ON AREA WAGE INDEX.

13 (a) IN GENERAL.—For purposes of section

14 1886(d)(3)(E) of the Social Security Act for dis15 charges occurring on or after October 1, 1995,

16 the area wage index applicable under such

17 section to any hospital which is not located in

18 a rural area (as defined in section

19 1886(d)(2)(D) of such Act) may not be less than

20 the average of the area wage indices applica21 ble under such section to hospitals located in

22 rural areas in the State in which the hospital

23 is located.

24 (b) BUDGET-NEUTRALITY IN IMPLEMENTA25 TION.—The Secretary of Health and Human
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1 Services shall make any adjustments required

2 under subsection (a) in a manner which

3 assures that the aggregate payments made

4 under section 1886(d) of the Social Security

5 Act in a fiscal year for the operating costs of

6 inpatient hospital services are not greater or

7 less than those which would have been made

8 in the year if this section did not apply.

9 PART 2—PAYMENTS TO SKILLED NURSING

10 FACILITIES

11 SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.

12 (a) CLARIFICATION OF DEFINITION OF ROU13 TINE SERVICE COSTS.—Section 1888 (42 U.S.C.

14 1395yy) is amended by adding at the end the

15 following new subsection:

16 ‘‘(e) For purposes of this section, the ‘rou17 tine service costs’ of a skilled nursing facility

18 are all costs which are attributable to nursing

19 services, room and board, administrative

20 costs, other overhead costs, and all other an21 cillary services (including supplies and equip22 ment), excluding costs attributable to covered

23 non-routine services subject to payment lim24 its under section 1888A.’’.
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1 (b) CONFORMING AMENDMENT.—Section

2 1888 (42 U.S.C. 1395yy) is amended in the

3 heading by inserting ‘‘AND CERTAIN ANCILLARY’’

4 after ‘‘SERVICE’’.

5 SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE6 MENT OF COVERED NON-ROUTINE SERVICES.

7 (a) IN GENERAL.—Title XVIII is amended

8 by inserting after section 1888 the following

9 new section:

10 ‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT

11 OF COVERED NON-ROUTINE SERVICES OF

12 SKILLED NURSING FACILITIES

13 ‘‘SEC. 1888A. (a) DEFINITIONS.—For pur14 poses of this section:

15 ‘‘(1) COVERED NON-ROUTINE SERVICES.—

16 The term ‘covered non-routine services’

17 means post-hospital extended care serv18 ices consisting of any of the following:

19 ‘‘(A) Physical or occupational

20 therapy or speech-language pathol21 ogy services, or respiratory therapy.

22 ‘‘(B) Prescription drugs.

23 ‘‘(C) Complex medical equipment.

24 ‘‘(D) Intravenous therapy and so25 lutions (including enteral and paren-
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1 teral nutrients, supplies, and equip2 ment).

3 ‘‘(E) Radiation therapy.

4 ‘‘(F) Diagnostic services, includ5 ing laboratory, radiology (including

6 computerized tomography services

7 and imaging services), and pul8 monary services.

9 ‘‘(2) SNF MARKET BASKET PERCENTAGE

10 INCREASE.—The term ‘SNF market basket

11 percentage increase’ for a fiscal year

12 means a percentage equal to the percent13 age increase in routine service cost limits

14 for the year under section 1888(a).

15 ‘‘(3) STAY.—The term ‘stay’ means,

16 with respect to an individual who is a

17 resident of a skilled nursing facility, a pe18 riod of continuous days during which the

19 facility provides extended care services

20 for which payment may be made under

21 this title to the individual during the in22 dividual’s spell of illness.

23 ‘‘(b) NEW PAYMENT METHOD FOR COVERED

24 NON-ROUTINE SERVICES.—
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1 ‘‘(1) IN GENERAL.—Subject to sub2 section (c), a skilled nursing facility shall

3 receive interim payments under this title

4 for covered non-routine services fur5 nished to an individual during a cost re6 porting period beginning during a fiscal

7 year (after fiscal year 1996) in an amount

8 equal to the reasonable cost of providing

9 such services in accordance with section

10 1861(v). The Secretary may adjust such

11 payments if the Secretary determines (on

12 the basis of such estimated information

13 as the Secretary considers appropriate)

14 that payments to the facility under this

15 paragraph for a cost reporting period

16 would substantially exceed the cost re17 porting period limit determined under

18 subsection (c)(1)(B).

19 ‘‘(2) RESPONSIBILITY OF SKILLED NURS20 ING FACILITY TO MANAGE BILLINGS.—

21 ‘‘(A) CLARIFICATION RELATING TO

22 PART A BILLING.—In the case of a cov23 ered non-routine service furnished to

24 an individual who (at the time the

25 service is furnished) is a resident of a
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1 skilled nursing facility who is entitled

2 to coverage under section 1812(a)(2)

3 for such service, the skilled nursing

4 facility shall submit a claim for pay5 ment under this title for such service

6 under part A (without regard to

7 whether or not the item or service

8 was furnished by the facility, by oth9 ers under arrangement with them

10 made by the facility, under any other

11 contracting or consulting arrange12 ment, or otherwise).

13 ‘‘(B) PART B BILLING.—In the case

14 of a covered non-routine service fur15 nished to an individual who (at the

16 time the service is furnished) is a

17 resident of a skilled nursing facility

18 who is not entitled to coverage under

19 section 1812(a)(2) for such service but

20 is entitled to coverage under part B

21 for such service, the skilled nursing

22 facility shall submit a claim for pay23 ment under this title for such service

24 under part B (without regard to

25 whether or not the item or service
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1 was furnished by the facility, by oth2 ers under arrangement with them

3 made by the facility, under any other

4 contracting or consulting arrange5 ment, or otherwise).

6 ‘‘(C) MAINTAINING RECORDS ON

7 SERVICES FURNISHED TO RESIDENTS.—

8 Each skilled nursing facility receiv9 ing payments for extended care serv10 ices under this title shall document

11 on the facility’s cost report all cov12 ered non-routine services furnished

13 to all residents of the facility to

14 whom the facility provided extended

15 care services for which payment was

16 made under part A during a fiscal

17 year (beginning with fiscal year 1996)

18 (without regard to whether or not the

19 services were furnished by the facil20 ity, by others under arrangement

21 with them made by the facility, under

22 any other contracting or consulting

23 arrangement, or otherwise).

24 ‘‘(c) RECONCILIATION OF AMOUNTS.—
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1 ‘‘(1) LIMIT BASED ON PER STAY LIMIT

2 AND NUMBER OF STAYS.—

3 ‘‘(A) IN GENERAL.—If a skilled

4 nursing facility has received aggre5 gate payments under subsection (b)

6 for covered non-routine services dur7 ing a cost reporting period beginning

8 during a fiscal year in excess of an

9 amount equal to the cost reporting

10 period limit determined under sub11 paragraph (B), the Secretary shall re12 duce the payments made to the facil13 ity with respect to such services for

14 cost reporting periods beginning dur15 ing the following fiscal year in an

16 amount equal to such excess. The Sec17 retary shall reduce payments under

18 this subparagraph at such times and

19 in such manner during a fiscal year

20 as the Secretary finds necessary to

21 meet the requirement of this subpara22 graph.

23 ‘‘(B) COST REPORTING PERIOD

24 LIMIT.—The cost reporting period

25 limit determined under this subpara-
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1 graph is an amount equal to the prod2 uct of—

3 ‘‘(i) the per stay limit applica4 ble to the facility under sub5 section (d) for the period; and

6 ‘‘(ii) the number of stays be7 ginning during the period for

8 which payment was made to the

9 facility for such services.

10 ‘‘(C) PROSPECTIVE REDUCTION IN

11 PAYMENTS.—In addition to the process

12 for reducing payments described in

13 subparagraph (A), the Secretary may

14 reduce payments made to a facility

15 under this section during a cost re16 porting period if the Secretary deter17 mines (on the basis of such estimated

18 information as the Secretary consid19 ers appropriate) that payments to the

20 facility under this section for the pe21 riod will substantially exceed the cost

22 reporting period limit for the period

23 determined under this paragraph.

24 ‘‘(2) INCENTIVE PAYMENTS.—
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1 ‘‘(A) IN GENERAL.—If a skilled

2 nursing facility has received aggre3 gate payments under subsection (b)

4 for covered non-routine services dur5 ing a cost reporting period beginning

6 during a fiscal year in an amount

7 that is less than the amount deter8 mined under paragraph (1)(B), the

9 Secretary shall pay the skilled nurs10 ing facility in the following fiscal

11 year an incentive payment equal to

12 50 percent of the difference between

13 such amounts, except that the incen14 tive payment may not exceed 5 per15 cent of the aggregate payments made

16 to the facility under subsection (b)

17 for the previous fiscal year (without

18 regard to subparagraph (B)).

19 ‘‘(B) INSTALLMENT INCENTIVE PAY20 MENTS.—The Secretary may make in21 stallment payments during a fiscal

22 year to a skilled nursing facility

23 based on the estimated incentive pay24 ment that the facility would be eligi-
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1 ble to receive with respect to such fis2 cal year.

3 ‘‘(d) DETERMINATION OF FACILITY PER STAY

4 LIMIT.—

5 ‘‘(1) LIMIT FOR FISCAL YEAR 1997.—

6 ‘‘(A) IN GENERAL.—Except as pro7 vided in subparagraph (B), the Sec8 retary shall establish separate per

9 stay limits for hospital-based and

10 freestanding skilled nursing facilities

11 for the 12-month cost reporting pe12 riod beginning during fiscal year 1997

13 that are equal to the sum of—

14 ‘‘(i) 50 percent of the facility15 specific stay amount for the facil16 ity (as determined under sub17 section (e)) for the last 12-month

18 cost reporting period ending on

19 or before September 30, 1994, in20 creased (in a compounded man21 ner) by the SNF market basket

22 percentage increase for fiscal

23 years 1995 through 1997; and

24 ‘‘(ii) 50 percent of the average

25 of all facility-specific stay
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1 amounts for all hospital-based fa2 cilities or all freestanding facili3 ties (whichever is applicable) dur4 ing the cost reporting period de5 scribed in clause (i), increased (in

6 a compounded manner) by the

7 SNF market basket percentage in8 crease for fiscal years 1995

9 through 1997.

10 ‘‘(B) FACILITIES NOT HAVING 1994

11 COST REPORTING PERIOD.—In the case

12 of a skilled nursing facility for which

13 payments were not made under this

14 title for covered non-routine services

15 for the last 12-month cost reporting

16 period ending on or before September

17 30, 1994, the per stay limit for the 12-

18 month cost reporting period begin19 ning during fiscal year 1997 shall be

20 twice the amount determined under

21 subparagraph (A)(ii).

22 ‘‘(2) LIMIT FOR SUBSEQUENT FISCAL

23 YEARS.—The per stay limit for a skilled

24 nursing facility for a 12-month cost re25 porting period beginning during a fiscal
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1 year after fiscal year 1997 is equal to the

2 per stay limit established under this sub3 section for the 12-month cost reporting

4 period beginning during the previous fis5 cal year, increased by the SNF market

6 basket percentage increase for such sub7 sequent fiscal year minus 2 percentage

8 points.

9 ‘‘(3) REBASING OF AMOUNTS.—

10 ‘‘(A) IN GENERAL.—The Secretary

11 shall provide for an update to the fa12 cility-specific amounts used to deter13 mine the per stay limits under this

14 subsection for cost reporting periods

15 beginning on or after October 1, 1999,

16 and every 2 years thereafter.

17 ‘‘(B) TREATMENT OF FACILITIES NOT

18 HAVING REBASED COST REPORTING PERI19 ODS.—Paragraph (1)(B) shall apply

20 with respect to a skilled nursing facil21 ity for which payments were not

22 made under this title for covered non23 routine services for the 12-month cost

24 reporting period used by the Sec25 retary to update facility-specific
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1 amounts under subparagraph (A) in

2 the same manner as such paragraph

3 applies with respect to a facility for

4 which payments were not made

5 under this title for covered non-rou6 tine services for the last 12-month

7 cost reporting period ending on or

8 before September 30, 1994.

9 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC

10 STAY AMOUNTS.—The ‘facility-specific stay

11 amount’ for a skilled nursing facility for a cost

12 reporting period is the sum of—

13 ‘‘(1) the average amount of payments

14 made to the facility under part A during

15 the period which are attributable to cov16 ered non-routine services furnished dur17 ing a stay (as determined on a per diem

18 basis); and

19 ‘‘(2) the Secretary’s best estimate of

20 the average amount of payments made

21 under part B during the period for cov22 ered non-routine services furnished to all

23 residents of the facility to whom the facil24 ity provided extended care services for

25 which payment was made under part A
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Subtitle F, Part 2

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1 during the period (without regard to

2 whether or not the services were fur3 nished by the facility, by others under ar4 rangement with them made by the facil5 ity, under any other contracting or con6 sulting arrangement, or otherwise), as es7 timated by the Secretary.

8 ‘‘(f) INTENSIVE NURSING OR THERAPY

9 NEEDS.—

10 ‘‘(1) IN GENERAL.—In applying sub11 section (b) to covered non-routine serv12 ices furnished during a stay beginning

13 during a cost reporting period beginning

14 during a fiscal year (beginning with fiscal

15 years after fiscal year 1997) to a resident

16 of a skilled nursing facility who requires

17 intensive nursing or therapy services, the

18 per stay limit for such resident shall be

19 the per stay limit developed under para20 graph (2) instead of the per stay limit de21 termined under subsection (d)(1)(A).

22 ‘‘(2) PER STAY LIMIT FOR INTENSIVE

23 NEED RESIDENTS.—Not later than June 30,

24 1997, the Secretary, after consultation

25 with the Medicare Payment Review Com-
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Subtitle F, Part 2

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1 mission and skilled nursing facility ex2 perts, shall develop and publish a per

3 stay limit for residents of a skilled nurs4 ing facility who require intensive nursing

5 or therapy services.

6 ‘‘(3) BUDGET NEUTRALITY.—The Sec7 retary shall adjust payments under sub8 section (b) in a manner that ensures that

9 total payments for covered non-routine

10 services under this section are not great11 er or less than total payments for such

12 services would have been but for the ap13 plication of paragraph (1).

14 ‘‘(g) SPECIAL TREATMENT FOR SMALL

15 SKILLED NURSING FACILITIES.—This section

16 shall not apply with respect to a skilled nurs17 ing facility for which payment is made for

18 routine service costs during a cost reporting

19 period on the basis of prospective payments

20 under section 1888(d).

21 ‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIM22 ITS.—

23 ‘‘(1) IN GENERAL.—The Secretary may

24 make exceptions and adjustments to the

25 cost reporting limits applicable to a
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1 skilled nursing facility under subsection

2 (c)(1)(B) for a cost reporting period, ex3 cept that the total amount of any addi4 tional payments made under this section

5 for covered non-routine services during

6 the cost reporting period as a result of

7 such exceptions and adjustments may not

8 exceed 5 percent of the aggregate pay9 ments made to all skilled nursing facili10 ties for covered non-routine services dur11 ing the cost reporting period (determined

12 without regard to this paragraph).

13 ‘‘(2) BUDGET NEUTRALITY.—The Sec14 retary shall adjust payments under sub15 section (b) in a manner that ensures that

16 total payments for covered non-routine

17 services under this section are not great18 er or less than total payments for such

19 services would have been but for the ap20 plication of paragraph (1).

21 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—

22 Before furnishing a covered non-routine serv23 ice consisting of an X-ray service for which

24 payment may be made under part A or part

25 B to a resident, a skilled nursing facility shall
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1 consider whether furnishing the service

2 through a provider of portable X-ray service

3 services would be appropriate, taking into ac4 count the cost effectiveness of the service and

5 the convenience to the resident.’’.

6 (b) CONFORMING AMENDMENT.—Section

7 1814(b) (42 U.S.C. 1395f(b)) is amended in the

8 matter preceding paragraph (1) by striking

9 ‘‘1813 and 1886’’ and inserting ‘‘1813, 1886,

10 1888, and 1888A’’.

11 SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.

12 (a) MAINTAINING SAVINGS RESULTING FROM

13 TEMPORARY FREEZE ON PAYMENT INCREASES.—

14 (1) BASING UPDATES TO PER DIEM COST

15 LIMITS ON LIMITS FOR FISCAL YEAR 1993.—

16 (A) IN GENERAL.—The last sen17 tence of section 1888(a) (42 U.S.C.

18 1395yy(a)) is amended by adding at

19 the end the following: ‘‘(except that

20 such updates may not take into ac21 count any changes in the routine

22 service costs of skilled nursing facili23 ties occurring during cost reporting

24 periods which began during fiscal

25 year 1994 or fiscal year 1995).’’.
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1 (B) NO EXCEPTIONS PERMITTED

2 BASED ON AMENDMENT.—The Secretary

3 of Health and Human Services shall

4 not consider the amendment made by

5 subparagraph (A) in making any ad6 justments pursuant to section 1888(c)

7 of the Social Security Act.

8 (2) PAYMENTS DETERMINED ON PROSPEC9 TIVE BASIS.—Any change made by the Sec10 retary of Health and Human Services in

11 the amount of any prospective payment

12 paid to a skilled nursing facility under

13 section 1888(d) of the Social Security Act

14 for cost reporting periods beginning on

15 or after October 1, 1995, may not take

16 into account any changes in the costs of

17 services occurring during cost reporting

18 periods which began during fiscal year

19 1994 or fiscal year 1995.

20 (b) ESTABLISHMENT OF SCHEDULE FOR MAK21 ING ADJUSTMENTS TO LIMITS.—Section 1888(c)

22 (42 U.S.C. 1395yy(c)) is amended by striking

23 the period at the end of the second sentence

24 and inserting ‘‘, and may only make adjust25 ments under this subsection with respect to a
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Subtitle F, Part 2

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1 facility which applies for an adjustment dur2 ing an annual application period established

3 by the Secretary.’’.

4 (c) LIMITATION ON AGGREGATE INCREASE IN

5 PAYMENTS RESULTING FROM ADJUSTMENTS TO

6 LIMITS.—Section 1888(c) (42 U.S.C. 1395yy(c))

7 is amended—

8 (1) by striking ‘‘(c) The Secretary’’

9 and inserting ‘‘(c)(1) Subject to paragraph

10 (2), the Secretary’’; and

11 (2) by adding at the end the following

12 new paragraph:

13 ‘‘(2) The Secretary may not make any ad14 justments under this subsection in the limits

15 set forth in subsection (a) for a cost reporting

16 period beginning during a fiscal year to the

17 extent that the total amount of the additional

18 payments made under this title as a result of

19 such adjustments is greater than an amount

20 equal to—

21 ‘‘(A) for cost reporting periods begin22 ning during fiscal year 1997, the total

23 amount of the additional payments made

24 under this title as a result of adjustments

25 under this subsection for cost reporting
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1 periods beginning during fiscal year 1996

2 increased by the SNF market basket per3 centage increase (as defined in section

4 1888A(e)(3)) for fiscal year 1997; and

5 ‘‘(B) for cost reporting periods begin6 ning during a subsequent fiscal year, the

7 amount determined under this paragraph

8 for the previous fiscal year increased by

9 the SNF market basket percentage in10 crease for such subsequent fiscal year.’’.

11 (d) IMPOSITION OF LIMITS FOR ALL COST RE12 PORTING PERIODS.—Section 1888(a) (42 U.S.C.

13 1395yy(a)) is amended in the matter preced14 ing paragraph (1) by inserting after ‘‘extended

15 care services’’ the following: ‘‘(for any cost re16 porting period for which payment is made

17 under this title to the skilled nursing facility

18 for such services)’’.

19 SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RE20 LATED COSTS.

21 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)),

22 as amended by section 15506, is amended by

23 adding at the end the following new subpara24 graph:
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1 ‘‘(U) Such regulations shall provide that,

2 in determining the amount of the payments

3 that may be made under this title with re4 spect to all the capital-related costs of skilled

5 nursing facilities, the Secretary shall reduce

6 the amounts of such payments otherwise es7 tablished under this title by 15 percent for

8 payments attributable to portions of cost re9 porting periods occurring during fiscal years

10 1996 through 2002.’’.

11 SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID

12 FOR UNDER PART B.

13 (a) REQUIRING PAYMENT FOR ALL ITEMS AND

14 SERVICES TO BE MADE TO FACILITY.—

15 (1) IN GENERAL.—The first sentence of

16 section 1842(b)(6) (42 U.S.C. 1395u(b)(6))

17 is amended—

18 (A) by striking ‘‘and (D)’’ and in19 serting ‘‘(D)’’; and

20 (B) by striking the period at the

21 end and inserting the following: ‘‘,

22 and (E) in the case of an item or serv23 ice furnished to an individual who (at

24 the time the item or service is fur25 nished) is a resident of a skilled nurs-
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1 ing facility, payment shall be made to

2 the facility (without regard to wheth3 er or not the item or service was fur4 nished by the facility, by others

5 under arrangement with them made

6 by the facility, or otherwise).’’.

7 (2) EXCLUSION FOR ITEMS AND SERVICES

8 NOT BILLED BY FACILITY.—Section 1862(a)

9 (42 U.S.C. 1395y(a)) is amended—

10 (A) by striking ‘‘or’’ at the end of

11 paragraph (14);

12 (B) by striking the period at the

13 end of paragraph (15) and inserting ‘‘;

14 or’’; and

15 (C) by inserting after paragraph

16 (15) the following new paragraph:

17 ‘‘(16) where such expenses are for

18 covered non-routine services (as defined

19 in section 1888A(a)(1)) (other than a port20 able X-ray or portable electrocardiogram

21 treated as a physician’s service for pur22 poses of section 1848(j)(3)) furnished to

23 an individual who is a resident of a

24 skilled nursing facility and for which the
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1 claim for payment under this title is not

2 submitted by the facility.’’.

3 (3) CONFORMING AMENDMENT.—Section

4 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is

5 amended by striking ‘‘(2);’’ and inserting

6 ‘‘(2) and section 1842(b)(6)(E);’’.

7 (b) REDUCTION IN PAYMENTS FOR ITEMS AND

8 SERVICES FURNISHED BY OR UNDER ARRANGE9 MENTS WITH FACILITIES.—Section 1861(v)(1) (42

10 U.S.C. 1395x(v)(1)), as amended by sections

11 15506 and 15524, is amended by adding at the

12 end the following new subparagraph:

13 ‘‘(V) In the case of an item or service fur14 nished by a skilled nursing facility (or by oth15 ers under arrangement with them made by a

16 skilled nursing facility) for which payment is

17 made under part B in an amount determined

18 in accordance with section 1833(a)(2)(B), the

19 Secretary shall reduce the reasonable cost for

20 such item or service otherwise determined

21 under clause (i)(I) of such section by 5.8 per22 cent for payments attributable to portions of

23 cost reporting periods occurring during fiscal

24 years 1996 through 2002.’’.
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1 SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE2 VISED NURSING HOME REFORM STANDARDS.

3 (a) IN GENERAL.—Section 1819(a)(3) (42

4 U.S.C. 1395i–3(a)(3)) is amended to read as fol5 lows:

6 ‘‘(3)(A) is certified by the Secretary as

7 meeting the standards established under

8 subsection (b), or (B) is a State-certified

9 facility (as defined in subsection (c)).’’.

10 (b) REQUIREMENTS DESCRIBED.—Section

11 1819 (42 U.S.C. 1395i–3) is amended by strik12 ing subsections (b) through (i) and inserting

13 the following:

14 ‘‘(b) STANDARDS FOR AND CERTIFICATION OF

15 FACILITIES.—

16 ‘‘(1) STANDARDS FOR FACILITIES.—

17 ‘‘(A) IN GENERAL.—The Secretary

18 shall provide for the establishment

19 and maintenance of standards con20 sistent with the contents described in

21 subparagraph (B) for skilled nursing

22 facilities which furnish services for

23 which payment may be made under

24 this title.

25 ‘‘(B) CONTENTS OF STANDARDS.—

26 The standards established for facili-
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1 ties under this paragraph shall con2 tain provisions relating to the follow3 ing items:

4 ‘‘(i) The treatment of resident

5 medical records.

6 ‘‘(ii) Policies, procedures, and

7 bylaws for operation.

8 ‘‘(iii) Quality assurance sys9 tems.

10 ‘‘(iv) Resident assessment pro11 cedures, including care planning

12 and outcome evaluation.

13 ‘‘(v) The assurance of a safe

14 and adequate physical plant for

15 the facility.

16 ‘‘(vi) Qualifications for staff

17 sufficient to provide adequate

18 care.

19 ‘‘(vii) Utilization review.

20 ‘‘(viii) The protection and en21 forcement of resident rights de22 scribed in subparagraph (C).

23 ‘‘(C) RESIDENT RIGHTS DESCRIBED.—

24 The resident rights described in this
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1 subparagraph are the rights of resi2 dents to the following:

3 ‘‘(i) To exercise the individ4 ual’s rights as a resident of the fa5 cility and as a citizen or resident

6 of the United States.

7 ‘‘(ii) To receive notice of

8 rights and services.

9 ‘‘(iii) To be protected against

10 the misuse of resident funds.

11 ‘‘(iv) To be provided privacy

12 and confidentiality.

13 ‘‘(v) To voice grievances.

14 ‘‘(vi) To examine the results of

15 inspections under the certifi16 cation program.

17 ‘‘(vii) To refuse to perform

18 services for the facility.

19 ‘‘(viii) To be provided privacy

20 in communications and to receive

21 mail.

22 ‘‘(ix) To have the facility pro23 vide immediate access to any resi24 dent by any representative of the

25 certification program, the resi-
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Subtitle F, Part 2

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1 dent’s individual physician, the

2 State long term care ombudsman,

3 and any person the resident has

4 designated as a visitor.

5 ‘‘(x) To retain and use per6 sonal property.

7 ‘‘(xi) To be free from abuse, in8 cluding verbal, sexual, physical

9 and mental abuse, corporal pun10 ishment, and involuntary seclu11 sion.

12 ‘‘(xii) To be provided with

13 prior written notice of a pending

14 transfer or discharge.

15 ‘‘(D) REQUIRING NOTICE AND COM16 MENT.—The standards established for

17 facilities under this paragraph may

18 only take effect after the Secretary

19 has provided the public with notice

20 and an opportunity for comment.

21 ‘‘(2) CERTIFICATION PROGRAM.—

22 ‘‘(A) IN GENERAL.—The Secretary

23 shall provide for the establishment

24 and operation of a program consist25 ent with the requirements of subpara-
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1 graph (B) for the certification of

2 skilled nursing facilities which meet

3 the standards established under para4 graph (1) and the decertification of

5 facilities which fail to meet such

6 standards.

7 ‘‘(B) REQUIREMENTS FOR PRO8 GRAM.—In addition to any other re9 quirements the Secretary may im10 pose, in establishing and operating

11 the certification program under sub12 paragraph (A), the Secretary shall en13 sure the following:

14 ‘‘(i) The Secretary shall en15 sure public access (as defined by

16 the Secretary) to the certification

17 program’s evaluations of partici18 pating facilities, including compli19 ance records and enforcement ac20 tions and other reports by the

21 Secretary regarding the owner22 ship, compliance histories, and

23 services provided by certified fa24 cilities.
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1 ‘‘(ii) Not less often than every

2 4 years, the Secretary shall audit

3 its expenditures under the pro4 gram, through an entity des5 ignated by the Secretary which is

6 not affiliated with the program,

7 as designated by the Secretary.

8 ‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—

9 ‘‘(1) AUTHORITY.—In addition to any

10 other authority, where the Secretary de11 termines that a nursing facility which is

12 certified for participation under this title

13 plan no longer substantially meets the re14 quirements for such a facility under this

15 title and further determines that the fa16 cility’s deficiencies—

17 ‘‘(A) immediately jeopardize the

18 health and safety of its residents, the

19 Secretary shall at least provide for

20 the termination of the facility’s cer21 tification for participation under this

22 title, or

23 ‘‘(B) do not immediately jeopard24 ize the health and safety of its resi25 dents, the Secretary may, in lieu of
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Subtitle F, Part 2

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1 providing for terminating the facili2 ty’s certification for participation

3 under the plan, provide lesser sanc4 tions including one that provides that

5 no payment will be made under this

6 title with respect to any individual

7 admitted to such facility after a date

8 specified by the Secretary.

9 ‘‘(2) NOTICE.—The Secretary shall not

10 make such a decision with respect to a fa11 cility until the facility has had a reason12 able opportunity, following the initial de13 termination that it no longer substan14 tially meets the requirements for such a

15 facility under the plan, to correct its defi16 ciencies, and, following this period, has

17 been given reasonable notice and oppor18 tunity for a hearing.

19 ‘‘(3) EFFECTIVENESS.—The Secretary’s

20 decision to deny payment may be made

21 effective only after such notice to the

22 public and to the facility as may be pro23 vided for by the Secretary, and its effec24 tiveness shall terminate (A) when the

25 Secretary finds that the facility is in sub-
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1 stantial compliance (or is making good

2 faith efforts to achieve substantial com3 pliance) with the requirements for such a

4 facility under this title, or (B) in the case

5 described in paragraph (1)(B), with the

6 end of the eleventh month following the

7 month such decision is made effective,

8 whichever occurs first. If a facility to

9 which clause (B) of the previous sentence

10 applies still fails to substantially meet the

11 provisions of the respective section on

12 the date specified in such clause, the Sec13 retary shall terminate such facility’s cer14 tification for participation under this

15 title effective with the first day of the

16 first month following the month specified

17 in such clause.

18 ‘‘(c) STATE-CERTIFIED FACILITY DEFINED.—

19 In subsection (a), a ‘State-certified facility’

20 means a facility licensed or certified as a

21 skilled nursing facility by the State in which

22 it is located, or a facility which otherwise

23 meets the requirements applicable to provid24 ers of nursing facility services under the State
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1 plan under title XIX or the MediGrant pro2 gram under title XXI.’’.

3 (c) CONFORMING AMENDMENTS.—(1) Section

4 1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is

5 amended by striking the second sentence.

6 (2) Section 1864 (42 U.S.C. 1395aa) is

7 amended by striking subsection (d).

8 (3) Section 1866(f)(1) (42 U.S.C.

9 1395cc(f)(1)) is amended by striking

10 ‘‘1819(c)(2)(E),’’.

11 (4) Section 1883(f) (42 U.S.C. 1395tt(f)) is

12 amended—

13 (A) in the second sentence, by strik14 ing ‘‘such a hospital’’ and inserting ‘‘a

15 hospital which enters into an agreement

16 with the Secretary under this section’’;

17 and

18 (B) by striking the first sentence.

19 (d) EFFECTIVE DATE.—The amendments

20 made by this section shall apply with respect

21 to cost reporting periods beginning on or

22 after October 1, 1995.

23 SEC. 15527. MEDICAL REVIEW PROCESS.

24 In order to ensure that medicare bene25 ficiaries are furnished appropriate extended
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1 care services, the Secretary of Health and

2 Human Services shall establish and imple3 ment a thorough medical review process to

4 examine the effects of the amendments made

5 by this part on the quality of extended care

6 services furnished to medicare beneficiaries.

7 In developing such a medical review process,

8 the Secretary shall place a particular empha9 sis on the quality of non-routine covered serv10 ices for which payment is made under section

11 1888A of the Social Security Act.

12 SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM13 MISSION.

14 Not later than October 1, 1997, the Medi15 care Payment Review Commission shall sub16 mit to Congress a report on the system under

17 which payment is made under the medicare

18 program for extended care services furnished

19 by skilled nursing facilities, and shall include

20 in the report the following:

21 (1) An analysis of the effect of the

22 methodology established under section

23 1888A of the Social Security Act (as

24 added by section 15522) on the payments
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1 for, and the quality of, extended care

2 services under the medicare program.

3 (2) An analysis of the advisability of

4 determining the amount of payment for

5 covered non-routine services of facilities

6 (as described in such section) on the

7 basis of the amounts paid for such serv8 ices when furnished by suppliers under

9 part B of the medicare program.

10 (3) An analysis of the desirability of

11 maintaining separate limits for hospital12 based and freestanding facilities in the

13 costs of extended care services recog14 nized as reasonable under the medicare

15 program.

16 (4) An analysis of the quality of serv17 ices furnished by skilled nursing facili18 ties.

19 (5) An analysis of the adequacy of the

20 process and standards used to provide

21 exceptions to the limits described in

22 paragraph (3).

23 SEC. 15529. EFFECTIVE DATE.

24 Except as otherwise provided in this sub25 chapter, the amendments made by this sub-
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1 chapter shall apply to services furnished dur2 ing cost reporting periods (or portions of cost

3 reporting periods) beginning on or after Octo4 ber 1, 1996.

5 Subtitle G—Provisions Relating to

6 Medicare Part B

7 PART 1—PAYMENT REFORMS

8 SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.

9 (a) REPLACEMENT OF VOLUME PERFORM10 ANCE STANDARD WITH SUSTAINABLE GROWTH

11 RATE.—Section 1848(f)(2) (42 U.S.C. 1395w–

12 4(f)(2)) is amended to read as follows:

13 ‘‘(f) SUSTAINABLE GROWTH RATE.—

14 ‘‘(1) SPECIFICATION OF GROWTH RATE.—

15 ‘‘(A) FISCAL YEAR 1996.—The sus16 tainable growth rate for all physi17 cians’ services for fiscal year 1996

18 shall be equal to the product of—

19 ‘‘(i) 1 plus the Secretary’s esti20 mate of the percentage change in

21 the medicare economic index for

22 1996 (described in the fourth sen23 tence of section 1842(b)(3)) (di24 vided by 100),
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1 ‘‘(ii) 1 plus the Secretary’s es2 timate of the percentage change

3 (divided by 100) in the average

4 number of individuals enrolled

5 under this part (other than pri6 vate plan enrollees) from fiscal

7 year 1995 to fiscal year 1996,

8 ‘‘(iii) 1 plus the Secretary’s es9 timate of the projected percent10 age growth in real gross domestic

11 product per capita (divided by

12 100) from fiscal year 1995 to fiscal

13 year 1996, plus 2 percentage

14 points, and

15 ‘‘(iv) 1 plus the Secretary’s es16 timate of the percentage change

17 (divided by 100) in expenditures

18 for all physicians’ services in fis19 cal year 1996 (compared with fis20 cal year 1995) which will result

21 from changes in law, determined

22 without taking into account esti23 mated changes in expenditures

24 due to changes in the volume and

25 intensity of physicians’ services
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1 or changes in expenditures result2 ing from changes in the update to

3 the conversion factor under sub4 section (d),

5 minus 1 and multiplied by 100.

6 ‘‘(B) SUBSEQUENT FISCAL YEARS.—

7 The sustainable growth rate for all

8 physicians’ services for fiscal year

9 1997 and each subsequent fiscal year

10 shall be equal to the product of—

11 ‘‘(i) 1 plus the Secretary’s esti12 mate of the percentage change in

13 the medicare economic index for

14 the fiscal year involved (de15 scribed in the fourth sentence of

16 section 1842(b)(3)) (divided by

17 100),

18 ‘‘(ii) 1 plus the Secretary’s es19 timate of the percentage change

20 (divided by 100) in the average

21 number of individuals enrolled

22 under this part (other than pri23 vate plan enrollees) from the pre24 vious fiscal year to the fiscal year

25 involved,
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1 ‘‘(iii) 1 plus the Secretary’s es2 timate of the projected percent3 age growth in real gross domestic

4 product per capita (divided by

5 100) from the previous fiscal year

6 to the fiscal year involved, plus 2

7 percentage points, and

8 ‘‘(iv) 1 plus the Secretary’s es9 timate of the percentage change

10 (divided by 100) in expenditures

11 for all physicians’ services in the

12 fiscal year (compared with the

13 previous fiscal year) which will

14 result from changes in law (in15 cluding changes made by the Sec16 retary in response to section

17 1895), determined without taking

18 into account estimated changes in

19 expenditures due to changes in

20 the volume and intensity of physi21 cians’ services or changes in ex22 penditures resulting from

23 changes in the update to the con24 version factor under subsection

25 (d)(3),
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1 minus 1 and multiplied by 100.’’.

2 ‘‘(2) EXCLUSION OF SERVICES FURNISHED

3 TO PRIVATE PLAN ENROLLEES.—In this sub4 section, the term ‘physicians’ services’

5 with respect to a fiscal year does not in6 clude services furnished to an individual

7 enrolled under this part who has elected

8 to receive benefits under this title for the

9 fiscal year through a MedicarePlus prod10 uct offered under part C or through en11 rollment with an eligible organization

12 with a risk-sharing contract under sec13 tion 1876.’’.

14 (b) ESTABLISHING UPDATE TO CONVERSION

15 FACTOR TO MATCH SPENDING UNDER SUSTAIN16 ABLE GROWTH RATE.—

17 (1) IN GENERAL.—Section 1848(d) (42

18 U.S.C. 1395w–4(d)(3)) is amended—

19 (A) by striking paragraph (2);

20 (B) by amending paragraph (3) to

21 read as follows:

22 ‘‘(3) UPDATE.—

23 ‘‘(A) IN GENERAL.—Subject to sub24 paragraph (E), for purposes of this

25 section the update for a year (begin-
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1 ning with 1997) is equal to the prod2 uct of—

3 ‘‘(i) 1 plus the Secretary’s esti4 mate of the percentage increase

5 in the medicare economic index

6 (described in the fourth sentence

7 of section 1842(b)(3)) for the year

8 (divided by 100), and

9 ‘‘(ii) 1 plus the Secretary’s es10 timate of the update adjustment

11 factor for the year (divided by

12 100),

13 minus 1 and multiplied by 100.

14 ‘‘(B) UPDATE ADJUSTMENT FAC15 TOR.—The ‘update adjustment factor’

16 for a year is equal to the quotient of—

17 ‘‘(i) the difference between (I)

18 the sum of the allowed expendi19 tures for physicians’ services fur20 nished during each of the years

21 1995 through the year involved

22 and (II) the sum of the amount of

23 actual expenditures for physi24 cians’ services furnished during
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1 each of the years 1995 through

2 the previous year; divided by

3 ‘‘(ii) the Secretary’s estimate

4 of allowed expenditures for physi5 cians’ services furnished during

6 the year.

7 ‘‘(C) DETERMINATION OF ALLOWED

8 EXPENDITURES.—For purposes of sub9 paragraph (B), allowed expenditures

10 for physicians’ services shall be deter11 mined as follows (as estimated by the

12 Secretary):

13 ‘‘(i) In the case of allowed ex14 penditures for 1995, such expendi15 tures shall be equal to actual ex16 penditures for services furnished

17 during the 12-month period end18 ing with June of 1995.

19 ‘‘(ii) In the case of allowed ex20 penditures for 1996 and each sub21 sequent year, such expenditures

22 shall be equal to allowed expendi23 tures for the previous year, in24 creased by the sustainable growth

25 rate under subsection (f) for the
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1 fiscal year which begins during

2 the year.

3 ‘‘(D) DETERMINATION OF ACTUAL EX4 PENDITURES.—For purposes of sub5 paragraph (B), the amount of actual

6 expenditures for physicians’ services

7 furnished during a year shall be

8 equal to the amount of expenditures

9 for such services during the 12-month

10 period ending with June of the pre11 vious year.

12 ‘‘(E) RESTRICTION ON VARIATION

13 FROM MEDICARE ECONOMIC INDEX.—Not14 withstanding the amount of the up15 date adjustment factor determined

16 under subparagraph (B) for a year,

17 the update in the conversion factor

18 under this paragraph for the year

19 may not be—

20 ‘‘(i) greater than 103 percent

21 of 1 plus the Secretary’s estimate

22 of the percentage increase in the

23 medicare economic index (de24 scribed in the fourth sentence of
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1 section 1842(b)(3)) for the year

2 (divided by 100); or

3 ‘‘(ii) except as required to

4 carry out section 1895, less than

5 93 percent of 1 plus the Sec6 retary’s estimate of the percent7 age increase in the medicare eco8 nomic index (described in the

9 fourth sentence of section

10 1842(b)(3)) for the year (divided

11 by 100).’’; and

12 (C) by adding at the end the fol13 lowing new paragraph:

14 ‘‘(4) REPORTING REQUIREMENTS.—

15 ‘‘(A) IN GENERAL.—Not later than

16 November 1 of each year (beginning

17 with 1996), the Secretary shall trans18 mit to the Congress a report that de19 scribes the update in the conversion

20 factor for physicians’ services (as de21 fined in subsection (f)(3)(A)) in the

22 following year.

23 ‘‘(B) COMMISSION REVIEW.—The

24 Medicare Payment Review Commis25 sion shall review the report submit-
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1 ted under subparagraph (A) for a

2 year and shall submit to the Con3 gress, by not later than December 1 of

4 the year, a report containing its anal5 ysis of the conversion factor for the

6 following year.’’.

7 (2) EFFECTIVE DATE.—The amendments

8 made by this subsection shall apply to

9 physicians’ services furnished on or after

10 January 1, 1997.

11 (c) ESTABLISHMENT OF SINGLE CONVERSION

12 FACTOR FOR 1996.—

13 (1) IN GENERAL.—Section 1848(d)(1) (42

14 U.S.C. 1395w–4(d)(1)) is amended—

15 (A) by redesignating subpara16 graph (C) as subparagraph (D); and

17 (B) by inserting after subpara18 graph (B) the following new subpara19 graph:

20 ‘‘(C) SPECIAL RULE FOR 1996.—For

21 1996, the conversion factor under this

22 subsection shall be $34.60 for all phy23 sicians’ services.’’.
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1 (2) CONFORMING AMENDMENTS.—Sec2 tion 1848 (42 U.S.C. 1395w–4) is amend3 ed—

4 (A) by striking ‘‘(or factors)’’ each

5 place it appears in subsection

6 (d)(1)(A) and (d)(1)(C)(ii);

7 (B) in subsection (d)(1)(A), by

8 striking ‘‘or updates’’;

9 (C) in subsection (d)(1)(C)(ii), by

10 striking ‘‘(or updates)’’; and

11 (D) in subsection (i)(1)(C), by

12 striking ‘‘conversion factors’’ and in13 serting ‘‘the conversion factor’’.

14 SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY15 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

16 SERVICES.

17 (a) AMBULATORY SURGICAL CENTER PROCE18 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

19 1395l(i)(3)(B)(i)(II)) is amended—

20 (1) by striking ‘‘of 80 percent’’; and

21 (2) by striking the period at the end

22 and inserting the following: ‘‘, less the

23 amount a provider may charge as de24 scribed in clause (ii) of section

25 1866(a)(2)(A).’’.
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1 (b) RADIOLOGY SERVICES AND DIAGNOSTIC

2 PROCEDURES.—Section 1833(n)(1)(B)(i)(II) (42

3 U.S.C. 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

6 and inserting the following: ‘‘, less the

7 amount a provider may charge as de8 scribed in clause (ii) of section

9 1866(a)(2)(A).’’.

10 (c) EFFECTIVE DATE.—The amendments

11 made by this section shall apply to services

12 furnished during portions of cost reporting

13 periods occurring on or after October 1, 1995.

14 SEC. 15603. REDUCTION IN UPDATES TO PAYMENT

15 AMOUNTS FOR DURABLE MEDICAL EQUIP16 MENT.

17 (a) IN GENERAL.—

18 (1) FREEZE IN UPDATE FOR COVERED

19 ITEMS.—Section 1834(a)(14) (42 U.S.C.

20 1395m(a)(14)) is amended—

21 (A) by striking ‘‘and’’ at the end of

22 subparagraph (A);

23 (B) in subparagraph (B)—
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1 (i) by striking ‘‘a subsequent

2 year’’ and inserting ‘‘1993, 1994,

3 and 1995’’, and

4 (ii) by striking the period at

5 the end and inserting ‘‘; and’’; and

6 (C) by adding at the end the fol7 lowing:

8 ‘‘(C) for each of the years 1996

9 through 2002, 0 percentage points;

10 and

11 ‘‘(D) for a subsequent year, the

12 percentage increase in the consumer

13 price index for all urban consumers

14 (U.S. urban average) for the 12-month

15 period ending with June of the pre16 vious year.’’.

17 (2) UPDATE FOR ORTHOTICS AND PROS18 THETICS.—Section 1834(h)(4)(A) (42 U.S.C.

19 1395m(h)(4)(A)) is amended—

20 (A) by striking ‘‘and’’ at the end of

21 clause (iii);

22 (B) by redesignating clause (iv) as

23 clause (v); and

24 (C) by inserting after clause (iii)

25 the following new clause:
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1 ‘‘(iv) for each of the years 1996

2 through 2002, 1 percent, and’’.

3 (b) OXYGEN AND OXYGEN EQUIPMENT.—Sec4 tion 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is

5 amended—

6 (1) by striking ‘‘and’’ at the end of

7 clause (iii);

8 (2) in clause (iv)—

9 (A) by striking ‘‘a subsequent

10 year’’ and inserting ‘‘1993, 1994, and

11 1995’’, and

12 (B) by striking the period at the

13 end and inserting a semicolon; and

14 (3) by adding at the end the following

15 new clauses:

16 ‘‘(v) in 1996, is 80 percent of

17 the national limited monthly pay18 ment rate computed under sub19 paragraph (B) for the item for the

20 year; and

21 ‘‘(vi) in a subsequent year, is

22 the national limited monthly pay23 ment rate computed under sub24 paragraph (B) for the item for the

25 year.’’.
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1 SEC. 15604. REDUCTION IN UPDATES TO PAYMENT

2 AMOUNTS FOR CLINICAL DIAGNOSTIC LAB3 ORATORY TESTS.

4 (a) CHANGE IN UPDATE.—Section

5 1833(h)(2)(A)(ii)(IV) (42 U.S.C.

6 1395l(h)(2)(A)(ii)(IV)) is amended striking

7 ‘‘1994 and 1995’’ and inserting ‘‘1994 through

8 2002’’.

9 (b) LOWERING CAP ON PAYMENT AMOUNTS.—

10 Section 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B))

11 is amended—

12 (1) in clause (vi), by striking ‘‘and’’ at

13 the end;

14 (2) in clause (vii)—

15 (A) by inserting ‘‘and before Janu16 ary 1, 1997,’’ after ‘‘1995,’’, and

17 (B) by striking the period at the

18 end and inserting ‘‘, and’’; and

19 (3) by adding at the end the following

20 new clause:

21 ‘‘(viii) after December 31, 1996, is

22 equal to 65 percent of such median.’’.

23 SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

24 COSTS OF HOSPITAL OUTPATIENT SERVICES.

25 (a) REDUCTION IN PAYMENTS FOR CAPITAL26 RELATED COSTS.—Section 1861(v)(1)(S)(ii)(I)
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1 (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amended by

2 striking ‘‘through 1998’’ and inserting

3 ‘‘through 2002’’.

4 (b) REDUCTION IN PAYMENTS FOR OTHER

5 COSTS.—Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

6 1395x(v)(1)(S)(ii)(II)) is amended by striking

7 ‘‘through 1998’’ and inserting ‘‘through 2002’’.

8 SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR9 GICAL CENTER SERVICES.

10 The Secretary of Health and Human Serv11 ices shall not provide for any inflation update

12 in the payment amounts under subpara13 graphs (A) and (B) of section 1833(i)(2) of the

14 Social Security Act for any of the fiscal years

15 1996 through 2002.

16 SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.

17 (a) COVERAGE UNDER PART B.—Section

18 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended—

19 (1) by striking ‘‘and’’ at the end of

20 subparagraph (I);

21 (2) by striking the period at the end

22 of subparagraph (J) and inserting ‘‘; and’’;

23 and

24 (3) by adding at the end the following

25 new subparagraph:
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1 ‘‘(K) rural emergency access care

2 hospital services (as defined in sec3 tion 1861(oo)(2)).’’.

4 (b) PAYMENT BASED ON PAYMENT FOR OUT5 PATIENT RURAL PRIMARY CARE HOSPITAL SERV6 ICES.—

7 (1) IN GENERAL.—Section 1833(a)(6) (42

8 U.S.C. 1395l(a)(6)) is amended by striking

9 ‘‘services,’’ and inserting ‘‘services and

10 rural emergency access care hospital

11 services,’’.

12 (2) PAYMENT METHODOLOGY DE13 SCRIBED.—Section 1834(g) (42 U.S.C.

14 1395m(g)) is amended—

15 (A) in the heading, by striking

16 ‘‘SERVICES’’ and inserting ‘‘SERVICES

17 AND RURAL EMERGENCY ACCESS CARE

18 HOSPITAL SERVICES’’; and

19 (B) by adding at the end the fol20 lowing new sentence: ‘‘The amount of

21 payment for rural emergency access

22 care hospital services provided dur23 ing a year shall be determined using

24 the applicable method provided

25 under this subsection for determining
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1 payment for outpatient rural primary

2 care hospital services during the

3 year.’’.

4 (c) EFFECTIVE DATE.—The amendments

5 made by this section shall apply to services

6 furnished on or after October 1, 1995.

7 SEC. 15608. ENSURING PAYMENT FOR PHYSICIAN AND

8 NURSE FOR JOINTLY FURNISHED ANESTHE9 SIA SERVICES.

10 (a) PAYMENT FOR JOINTLY FURNISHED SIN11 GLE CASE.—

12 (1) PAYMENT TO PHYSICIAN.—Section

13 1848(a)(4) (42 U.S.C. 1395w–4(a)(4)) is

14 amended by adding at the end the follow15 ing new subparagraph:

16 ‘‘(C) PAYMENT FOR SINGLE CASE.—

17 Notwithstanding section

18 1862(a)(1)(A), with respect to physi19 cians’ services consisting of the fur20 nishing of anesthesia services for a

21 single case that are furnished jointly

22 with a certified registered nurse an23 esthetist, if the carrier determines

24 that the use of both the physician and

25 the nurse anesthetist to furnish the
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1 anesthesia service was not medically

2 necessary, the fee schedule amount

3 for the physicians’ services shall be

4 equal to 50 percent (or 55 percent, in

5 the case of services furnished during

6 1996 or 1997) of the fee schedule

7 amount applicable under this section

8 for anesthesia services personally

9 performed by the physician alone

10 (without regard to this subpara11 graph). Nothing in this subparagraph

12 may be construed to affect the appli13 cation of any provision of law regard14 ing balance billing.’’.

15 (2) PAYMENT TO CRNA.—Section

16 1833(l)(4)(B) (42 U.S.C. 1395l(l)(4)(B)) is

17 amended by adding at the end the follow18 ing new clause:

19 ‘‘(iv) Notwithstanding section

20 1862(a)(1)(A), in the case of services of a cer21 tified registered nurse anesthetist consisting

22 of the furnishing of anesthesia services for a

23 single case that are furnished jointly with a

24 physician, if the carrier determines that the

25 use of both the physician and the nurse anes-
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1 thetist to furnish the anesthesia service was

2 not medically necessary, the fee schedule

3 amount for the services furnished by the cer4 tified registered nurse anesthetist shall be

5 equal to 50 percent (or 40 percent, in the case

6 of services furnished during 1996 or 1997) of

7 the fee schedule amount applicable under sec8 tion 1848 for anesthesia services personally

9 performed by the physician alone (without re10 gard to this clause).’’.

11 (b) EFFECTIVE DATE.—The amendments

12 made by subsections (a) shall apply to serv13 ices furnished on or after July 1, 1996.

14 SEC. 15609. STATEWIDE FEE SCHEDULE AREA FOR PHYSI15 CIANS’ SERVICES.

16 (a) IN GENERAL.—Notwithstanding section

17 1848(j)(2) of the Social Security Act, in the

18 case of the State of Wisconsin, the Secretary

19 of Health and Human Services shall treat the

20 State as a single fee schedule area for pur21 poses of determining the fee schedule amount

22 (as referred to in section 1848(a) of such Act)

23 for physicians’ services (as defined in section

24 1848(j)(3) of such Act) under part B of the

25 medicare program.
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1 (b) BUDGET-NEUTRALITY.—Notwithstand2 ing any provision of part B of title XVIII of the

3 Social Security Act, the Secretary shall carry

4 out subsection (a) in a manner that ensures

5 that total payments for physicians’ services

6 (as so defined) furnished by physicians in Wis7 consin during a year are not greater or less

8 than total payments for such services would

9 have been but for this section.

10 (c) CONSTRUCTION.—Nothing in this sec11 tion shall be construed as limiting the avail12 ability (to the Secretary, the appropriate

13 agency or organization with a contract under

14 section 1842 of such Act, or physicians in the

15 State of Wisconsin) of otherwise applicable

16 administrative procedures for modifying the

17 fee schedule area or areas in the State after

18 implementation of subsection (a).

19 (d) EFFECTIVE DATE.—This section shall

20 apply with respect to physicians’ services fur21 nished on or after January 1, 1997.

22 PART 2—PART B PREMIUM

23 SEC. 15611. EXTENSION OF PART B PREMIUM.

24 (a) IN GENERAL.—Section 1839(e)(1) (42

25 U.S.C. 1395r(e)(1)) is amended—
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1 (1) in subparagraph (A)—

2 (A) by striking ‘‘and prior to Jan3 uary 1999’’, and

4 (B) by inserting ‘‘(or, if higher, the

5 percent described in subparagraph

6 (C))’’ after ‘‘50 percent’’; and

7 (2) by adding at the end the following

8 new subparagraph:

9 ‘‘(C) For purposes of subparagraph (A),

10 the percent described in this subparagraph is

11 the ratio (expressed as a percentage) of the

12 monthly premium established under this sec13 tion for months in 1995 to the monthly actuar14 ial rate for enrollees age 65 and over applica15 ble to such months (as specified in the most

16 recent report of the Board of Trustees of the

17 Federal Supplementary Medical Insurance

18 Trust Fund published prior to the date of the

19 enactment of the Medicare Preservation Act

20 of 1995).’’.

21 (b) EFFECTIVE DATE.—The amendments

22 made by subsection (a) apply to premiums for

23 months beginning with January 1996.
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1 SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE

2 SUBSIDY.

3 (a) IN GENERAL.—Section 1839 (42 U.S.C.

4 1395r) is amended by adding at the end the

5 following:

6 ‘‘(h)(1) Notwithstanding the previous sub7 sections of this section, in the case of an indi8 vidual whose modified adjusted gross income

9 for a taxable year ending with or within a cal10 endar year exceeds the threshold amount de11 scribed in paragraph (6)(B), the Secretary

12 shall increase the amount of the monthly pre13 mium for months in the calendar year by an

14 amount equal to the difference between—

15 ‘‘(A) 200 percent of the monthly actu16 arial rate for enrollees age 65 and over as

17 determined under subsection (a)(1) for

18 that calendar year; and

19 ‘‘(B) the total of the monthly pre20 miums paid by the individual under this

21 section (determined without regard to

22 subsection (b)) during such calendar

23 year.

24 ‘‘(2) In the case of an individual described

25 in paragraph (1) whose modified adjusted

26 gross exceeds the threshold amount by less
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1 than $25,000, the amount of the increase in

2 the monthly premium applicable under para3 graph (1) shall be an amount which bears the

4 same ratio to the amount of the increase de5 scribed in paragraph (1) (determined without

6 regard to this paragraph) as such excess

7 bears to $25,000. In the case of a joint return

8 filed under section 6013 of the Internal Reve9 nue Code of 1986 by spouses both of whom are

10 enrolled under this part, the previous sen11 tence shall be applied by substituting ‘$50,000’

12 for ‘$25,000’. The preceding provisions of this

13 paragraph shall not apply to any individual

14 whose threshold amount is zero.

15 ‘‘(3) The Secretary shall make an initial

16 determination of the amount of increase in

17 the monthly premium applicable under para18 graph (1) for a taxable year ending with or

19 within a calendar year for purposes of this

20 subsection as follows:

21 ‘‘(A) Not later than October 1 of the

22 year preceding the year, the Secretary

23 shall provide notice to each individual

24 who the Secretary finds (on the basis of

25 the individual’s actual adjusted gross in-
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1 come for the most recent taxable year for

2 which such information is available or

3 other information provided to the Sec4 retary by the Secretary of the Treasury)

5 will be subject to an increase under this

6 subsection that the individual will be

7 subject to such an increase, and shall in8 clude in such notice the Secretary’s esti9 mate of the individual’s increase in the

10 monthly premium applicable under para11 graph (1) for the year.

12 ‘‘(B) If, during the 30-day period be13 ginning on the date notice is provided to

14 an individual under subparagraph (A),

15 the individual provides the Secretary

16 with information on the individual’s an17 ticipated increase in the monthly pre18 mium for the year, the amount initially

19 determined by the Secretary under this

20 paragraph with respect to the individual

21 shall be based on the information pro22 vided by the individual.

23 ‘‘(C) If an individual does not provide

24 the Secretary with information under

25 subparagraph (B), the amount initially
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1 determined by the Secretary under this

2 paragraph with respect to the individual

3 shall be the amount included in the no4 tice provided to the individual under sub5 paragraph (A).

6 ‘‘(4)(A) If the Secretary determines (on the

7 basis of final information provided by the Sec8 retary of the Treasury) that the amount of an

9 individual’s actual increase in the monthly

10 premium applicable under paragraph (1) for

11 a taxable year ending with or within a cal12 endar year is less than or greater than the

13 amount initially determined by the Secretary

14 under paragraph (3), the Secretary shall in15 crease or decrease the amount of the individ16 ual’s monthly premium under this section (as

17 the case may be) for months during the fol18 lowing calendar year by an amount equal to

1 19 ⁄12 of the difference between—

20 ‘‘(i) the total amount of all monthly

21 premiums paid by the individual under

22 this section during the previous calendar

23 year; and

24 ‘‘(ii) the total amount of all such pre25 miums which would have been paid by
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1 the individual during the previous cal2 endar year if the amount of the individ3 ual’s increase in the monthly premium

4 applicable under paragraph (1) initially

5 determined under paragraph (3) were

6 equal to the actual amount of the individ7 ual’s increase in the monthly premium

8 determined under this paragraph.

9 ‘‘(B) In the case of an individual who is

10 not enrolled under this part for any calendar

11 year for which the individual’s monthly pre12 mium under this section for months during

13 the year would be increased pursuant to sub14 paragraph (A) if the individual were enrolled

15 under this part for the year, the Secretary

16 may take such steps as the Secretary consid17 ers appropriate to recover from the individ18 ual the total amount by which the individual’s

19 monthly premium for months during the year

20 would have been increased under subpara21 graph (A) if the individual were enrolled

22 under this part for the year.

23 ‘‘(5) The Secretary shall not obtain (or be

24 provided) any income-related information

25 that is not necessary for the determination of
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1 the increase in the monthly premium applica2 ble under paragraph (1), including (in the

3 case of an individual described in paragraph

4 (1) and not described in paragraph (2)) any in5 formation other than the fact that the individ6 ual is described in paragraph (1).

7 ‘‘(6) In this subsection, the following defi8 nitions apply:

9 ‘‘(A) The term ‘modified adjusted

10 gross income’ means, with respect to an

11 individual for a taxable year, the individ12 ual’s adjusted gross income under the In13 ternal Revenue Code of 1986—

14 ‘‘(i) determined without regard to

15 sections 135, 911, 931, and 933 of such

16 Code, and

17 ‘‘(ii) increased by the amount of

18 interest received or accrued by the

19 individual during the taxable year

20 which is exempt from tax under such

21 Code.

22 ‘‘(B) The term ‘threshold amount’

23 means—

24 ‘‘(i) except as otherwise provided

25 in this paragraph, $75,000,
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1 ‘‘(ii) $125,000, in the case of a joint

2 return, and

3 ‘‘(iii) zero in the case of a tax4 payer who—

5 ‘‘(I) is married at the close of

6 the taxable year but does not file

7 a joint return for such year, and

8 ‘‘(II) does not live apart from

9 his spouse at all times during the

10 taxable year.’’.

11 (b) CONFORMING AMENDMENT.—Section

12 1839(f) (42 U.S.C. 1395r(f)) is amended by

13 striking ‘‘if an individual’’ and inserting the

14 following: ‘‘if an individual (other than an in15 dividual subject to an increase in the monthly

16 premium under this section pursuant to sub17 section (h))’’.

18 (c) REPORTING REQUIREMENTS FOR SEC19 RETARY OF THE TREASURY.—Notwithstanding

20 section 6103 of the Internal Revenue Code of

21 1986, the Secretary of the Treasury shall pro22 vide, at the request of the Secretary of Health

23 and Human Services, such information (at

24 such times and in such form as the Secretary

25 of Health and Human Services may require)
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1 as is necessary for the Secretary of Health

2 and Human Services to carry out section

3 1839(h) of the Social Security Act (as added by

4 subsection (a)).

5 (d) EFFECTIVE DATE.—The amendments

6 made by subsections (a) and (b) shall apply to

7 the monthly premium under section 1839 of

8 the Social Security Act for months beginning

9 with January 1997.

10 PART 3—BILLING AND ADMINISTRATION OF

11 LABORATORY SERVICES

12 SEC. 15621. RESTRICTIONS ON DIRECT BILLING FOR LAB13 ORATORY SERVICES.

14 (a) REQUIREMENT FOR DIRECT BILLING.—

15 Section 1833(h) (42 U.S.C. 1395l(h)) is amend16 ed by adding at the end the following new

17 paragraph:

18 ‘‘(7)(A) Effective for services furnished on

19 or October 1, 1996, as a condition for coverage

20 and payment under this part of clinical lab21 oratory diagnostic tests performed by an indi22 vidual or entity, the individual or entity per23 forming such a test (whether or not under

24 this part) shall not present or cause to be pre25 sented a claim, bill, or demand for payment to
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1 any person, other than the individual receiv2 ing such services or the health plan des3 ignated by such person, except that the Sec4 retary may by regulation establish appro5 priate exceptions to the requirement of this

6 subparagraph.

7 ‘‘(B)(i) Any person that furnishes clinical

8 laboratory services for which payment is

9 made under paragraph (1)(D)(i) or paragraph

10 (2)(D)(i) that knowingly violates subpara11 graph (A) is subject to a civil money penalty

12 of not more than $10,000 for each such viola13 tion. The provisions of section 1128A (other

14 than subsections (a) and (b)) shall apply to a

15 civil money penalty under this paragraph in

16 the same manner as such provisions apply

17 with respect to a penalty or proceeding under

18 section 1128A(a).

19 ‘‘(ii)(I) Any individual or entity that the

20 Secretary determines has repeatedly violated

21 subparagraph (A) may be excluded from par22 ticipation in any Federal health care pro23 gram. The provisions of section 1128A (other

24 than subsections (a) and (b)) shall apply to an

25 exclusion under this paragraph in the same
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1 manner as such provisions apply with respect

2 to a penalty or proceeding under section

3 1128A(a).

4 ‘‘(II) The provisions of section 1128(e) of

5 the Social Security Act shall apply to any ex6 clusion under clause (iii)(I) in the same man7 ner as such provisions apply to a proceeding

8 under section 1128.

9 ‘‘(C) For purposes of this paragraph, the

10 following definitions shall apply:

11 ‘‘(i) The term ‘Federal health care

12 program’ means—

13 ‘‘(I) the program under this title;

14 ‘‘(II) a State plan under title XIX

15 or XXI; or

16 ‘‘(III) a program receiving funds

17 under title V or from an allotment to

18 a State under such title.

19 ‘‘(ii) The term ‘health plan’ means any

20 hospital or medical service policy or cer21 tificate, hospital or medical service plan

22 contract, or health maintenance organi23 zation contract offered by an insurer, ex24 cept that such term does not include any

25 of the following:
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1 ‘‘(I) Coverage only for accident,

2 dental, vision, disability income, or

3 long-term care insurance, or any com4 bination thereof.

5 ‘‘(II) Medicare supplemental

6 health insurance.

7 ‘‘(III) Coverage issued as a supple8 ment to liability insurance.

9 ‘‘(IV) Liability insurance, includ10 ing general liability insurance and

11 automobile liability insurance.

12 ‘‘(V) Worker’s compensation or

13 similar insurance.

14 ‘‘(VI) Automobile medical-pay15 ment insurance.

16 ‘‘(VII) Coverage for a specified

17 disease or illness.

18 ‘‘(VIII) A hospital or fixed indem19 nity policy.’’.

20 (b) LOOK BACK PROVISIONS TO ASSURE SAV21 INGS.—

22 (1) IN GENERAL.—Section 1833(h)(4)(B)

23 (42 U.S.C. 1395l(h)(4)(B)), as amended by

24 section 15604(b), is amended—
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1 (A) in clause (vii), by striking

2 ‘‘and’’ at the end;

3 (B) in clause (viii)—

4 (i) by inserting ‘‘and before

5 January 1, 2000,’’ after ‘‘1996,’’,

6 and

7 (ii) by striking the period at

8 the end and inserting ‘‘, and’’; and

9 (C) by adding at the end the fol10 lowing new clause:

11 ‘‘(ix) after December 31, 1999, is equal

12 to such percentage of such median as the

13 Secretary establishes under paragraph

14 (8)(B), or, if the Secretary does not act

15 under paragraph (8)(B), is equal to 65

16 percent of such median.’’.

17 (2) PROCESS FOR REDUCTIONS.—Section

18 1833(h) (42 U.S.C. 1395l(h)), as amended

19 by subsection (a), is amended by adding

20 at the end the following new paragraph:

21 ‘‘(8)(A) On July 31, 1999, the Secretary

22 shall estimate—

23 ‘‘(i) the amount of expenditures under

24 this section for clinical diagnostic labora25 tory tests which will be made in the pe-
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1 riod from January 1, 1997, through Sep2 tember 30, 2002, and

3 ‘‘(ii) the amount of expenditures

4 which would have been made under this

5 section for clinical diagnostic laboratory

6 tests in the period from January 1, 1997,

7 through September 30, 2002, if paragraph

8 (7) had not been enacted.

9 ‘‘(B) If the amount estimated under sub10 paragraph (A)(i) is greater than 97 percent of

11 the amount estimated under subparagraph

12 (A)(ii), the Secretary shall establish a limita13 tion amount under paragraph (4)(B)(ix) such

14 that, when such limitation amount is consid15 ered, the amount estimated under subpara16 graph (A)(i) is 97 percent of the amount esti17 mated under subparagraph (A)(ii).

18 ‘‘(C) The Director of the Congressional

19 Budget Office (hereafter in this subparagraph

20 referred to as the ‘Director’) shall—

21 ‘‘(i) independently estimate the

22 amounts specified in subparagraph (A)

23 and compute any limitation amount re24 quired under subparagraph (B), and
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1 ‘‘(ii) submit a report on such esti2 mates and computation to Congress not

3 later than August 31, 1999.

4 The Secretary shall provide the Director with

5 such data as the Director reasonably requires

6 to prepare such estimates and computation.’’.

7 SEC. 15622. ADMINISTRATIVE SIMPLIFICATION.

8 (a) IN GENERAL.—Not later than 1 year

9 after the date of the enactment of this Act, the

10 Secretary of Health and Human Services (in

11 accordance with the process described in sub12 section (b)) shall adopt uniform coverage, ad13 ministration, and payment policies for clini14 cal diagnostic laboratory tests under part B of

15 the medicare program.

16 (b) PROCESS FOR ADOPTION OF POLICIES.—

17 The Secretary shall adopt uniform policies

18 under subsection (a) in accordance with the

19 following process:

20 (1) The Secretary shall select from

21 carriers with whom the Secretary has a

22 contract under part B during 1995 15

23 medical directors, who will meet and de24 velop recommendations for such uniform

25 policies. The medical directors selected
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1 shall represent various geographic areas

2 and have a varied range of experience in

3 relevant medical fields, including pathol4 ogy and clinical laboratory practice.

5 (2) The medical directors selected

6 under paragraph (1) shall consult with

7 independent experts in each major dis8 cipline of clinical laboratory medicine,

9 including clinical laboratory personnel,

10 bioanalysts, pathologists, and practicing

11 physicians. The medical directors shall

12 also solicit comments from other individ13 uals and groups who wish to participate,

14 including consumers and other affected

15 parties. This process shall be conducted

16 as a negotiated rulemaking under title 5,

17 United States Code.

18 (3) Under the negotiated rulemaking,

19 the recommendations for uniform poli20 cies shall be designed to simplify and re21 duce unnecessary administrative burdens

22 in connection with the following:

23 (A) Beneficiary information re24 quired to be submitted with each

25 claim.
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1 (B) Physicians’ obligations re2 garding documentation requirements

3 and recordkeeping,

4 (C) Procedures for filing claims

5 and for providing remittances by

6 electronic media.

7 (D) The performance of post-pay8 ment review of test claims.

9 (E) The prohibition of the docu10 mentation of medical necessity except

11 when determined to be appropriate

12 after identification of aberrant utili13 zation pattern through focused medi14 cal review.

15 (F) Beneficiary responsibility for

16 payment.

17 (4) During the pendency of the adop18 tion by the Secretary of the uniform poli19 cies, fiscal intermediaries and carriers

20 under the medicare program may not im21 plement any new requirement relating to

22 the submission of a claim for clinical di23 agnostic laboratory tests retroactive to

24 January 1, 1995, and carriers may not ini25 tiate any new coverage, administrative,
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1 or payment policy unless the policy pro2 motes the goal of administrative sim3 plification of requirements imposed on

4 clinical laboratories in accordance with

5 the Secretary’s promulgation of the nego6 tiated rulemaking.

7 (5) Not later than 6 months after the

8 date of the enactment of this Act, the

9 medical directors shall submit their rec10 ommendations to the Secretary, and the

11 Secretary shall publish the recommenda12 tions and solicit public comment using

13 negotiated rulemaking in accordance

14 with title 5, United States Code. The Sec15 retary shall publish final uniform policies

16 for coverage, administration, and pay17 ment of claims for clinical diagnostic lab18 oratory tests, effective after the expira19 tion of the 180-day period which begins

20 on the date of publication.

21 (6) After the publication of the final

22 uniform policies, the Secretary shall im23 plement identical uniform documentation

24 and processing policies for all clinical di25 agnostic laboratory tests paid under the
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1 medicare program through fiscal

2 intermediaries or carriers.

3 (c) OPTIONAL SELECTION OF SINGLE CAR4 RIER.—Effective for claims submitted after the

5 expiration of the 90-day period which begins

6 on the date of the enactment of this Act, an

7 independent laboratory may select a single

8 carrier for the processing of all of its claims

9 for payment under part B of the medicare

10 program, without regard to the location

11 where the laboratory or the patient or pro12 vider involved resides or conducts business.

13 Such election of a single carrier shall be made

14 by the clinical laboratory and an agreement

15 made between the carrier and the laboratory

16 shall be forwarded to the Secretary of Health

17 and Human Services. Nothing in this sub18 section shall be construed to require a labora19 tory to select a single carrier under this sub20 section.
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1 PART 4—QUALITY STANDARDS FOR DURABLE

2 MEDICAL EQUIPMENT

3 SEC. 15631. RECOMMENDATIONS FOR QUALITY STANDARDS

4 FOR DURABLE MEDICARE EQUIPMENT.

5 (a) APPOINTMENT OF TASK FORCE BY SEC6 RETARY.—

7 (1) IN GENERAL.—The Secretary of

8 Health and Human Services shall estab9 lish a broadly based task force to develop

10 recommendations for quality standards

11 for durable medical equipment under

12 part B of the medicare program.

13 (2) COMPOSITION.—The task force shall

14 include individuals selected by the Sec15 retary from representatives of suppliers

16 of items of durable medical equipment

17 under part B, consumers, and other users

18 of such equipment. In appointing mem19 bers, the Secretary shall assure represen20 tation from various geographic regions of

21 the United States.

22 (3) NO COMPENSATION FOR SERVICE.—

23 Members of the task force shall not re24 ceive any compensation for service on

25 the task force.
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1 (4) TERMINATION.—The task force shall

2 terminate 30 days after it submits the re3 port described in subsection (b).

4 (b) REPORT.—Not later than 1 year after

5 the date of the enactment of this Act, the task

6 force established under subsection (a) shall

7 submit to the Secretary its recommendations

8 for quality standards for durable medicare

9 equipment under part B of the medicare pro10 gram.

11 Subtitle H—Provisions Relating to

12 Medicare Parts A and B

13 PART 1—PAYMENTS FOR HOME HEALTH

14 SERVICES

15 SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.

16 (a) IN GENERAL.—Title XVIII (42 U.S.C.

17 1395 et seq.), as amended by section 15106, is

18 amended by adding at the end the following

19 new section:

20 ‘‘PAYMENT FOR HOME HEALTH SERVICES

21 ‘‘SEC. 1894. (a) IN GENERAL.—

22 ‘‘(1) PER VISIT PAYMENTS.—Subject to

23 subsection (c), the Secretary shall make

24 per visit payments beginning with fiscal

25 year 1997 to a home health agency in ac26 cordance with this section for each type
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1 of home health service described in para2 graph (2) furnished to an individual who

3 at the time the service is furnished is

4 under a plan of care by the home health

5 agency under this title (without regard to

6 whether or not the item or service was

7 furnished by the agency or by others

8 under arrangement with them made by

9 the agency, or otherwise).

10 ‘‘(2) TYPES OF SERVICES.—The types of

11 home health services described in this

12 paragraph are the following:

13 ‘‘(A) Part-time or intermittent

14 nursing care provided by or under

15 the supervision of a registered profes16 sional nurse.

17 ‘‘(B) Physical therapy.

18 ‘‘(C) Occupational therapy.

19 ‘‘(D) Speech-language pathology

20 services.

21 ‘‘(E) Medical social services under

22 the direction of a physician.

23 ‘‘(F) To the extent permitted in

24 regulations, part-time or intermittent

25 services of a home health aide who
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1 has successfully completed a training

2 program approved by the Secretary.

3 ‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR

4 EACH TYPE OF SERVICES.—

5 ‘‘(1) IN GENERAL.—The Secretary shall,

6 subject to paragraph (3), establish a per

7 visit payment rate for a home health

8 agency in an area for each type of home

9 health service described in subsection

10 (a)(2). Such rate shall be equal to the na11 tional per visit payment rate determined

12 under paragraph (2) for each such type,

13 except that the labor-related portion of

14 such rate shall be adjusted by the area

15 wage index applicable under section

16 1886(d)(3)(E) for the area in which the

17 agency is located (as determined without

18 regard to any reclassification of the area

19 under section 1886(d)(8)(B) or a decision

20 of the Medicare Geographic Classifica21 tion Review Board or the Secretary

22 under section 1886(d)(10) for cost report23 ing periods beginning after October 1,

24 1995).
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1 ‘‘(2) NATIONAL PER VISIT PAYMENT

2 RATE.—The national per visit payment

3 rate for each type of service described in

4 subsection (a)(2)—

5 ‘‘(A) for fiscal year 1997, is an

6 amount equal to the national average

7 amount paid per visit under this title

8 to home health agencies for such type

9 of service during the most recent 12-

10 month cost reporting period ending

11 on or before June 30, 1994, increased

12 (in a compounded manner) by the

13 home health market basket percent14 age increase for fiscal years 1995,

15 1996, and 1997; and

16 ‘‘(B) for each subsequent fiscal

17 year, is an amount equal to the na18 tional per visit payment rate in effect

19 for the preceding fiscal year, in20 creased by the home health market

21 basket percentage increase for such

22 subsequent fiscal year minus 2 per23 centage points.

24 ‘‘(3) REBASING OF RATES.—The Sec25 retary shall provide for an update to the
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1 national per visit payment rates under

2 this subsection for cost reporting periods

3 beginning not later than the first day of

4 the fifth fiscal year which begins after

5 fiscal year 1997, and not later than every

6 5 years thereafter, to reflect the most re7 cent available data.

8 ‘‘(4) HOME HEALTH MARKET BASKET PER9 CENTAGE INCREASE.—For purposes of this

10 subsection, the term ‘home health market

11 basket percentage increase’ means, with

12 respect to a fiscal year, a percentage (es13 timated by the Secretary before the be14 ginning of the fiscal year) determined

15 and applied with respect to the types of

16 home health services described in sub17 section (a)(2) in the same manner as the

18 market basket percentage increase under

19 section 1886(b)(3)(B)(iii) is determined

20 and applied to inpatient hospital services

21 for the fiscal year.

22 ‘‘(c) PER EPISODE LIMIT.—

23 ‘‘(1) AGGREGATE LIMIT.—

24 ‘‘(A) IN GENERAL.—Except as pro25 vided in paragraph (2), a home health
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1 agency may not receive aggregate per

2 visit payments under subsection (a)

3 for a fiscal year in excess of an

4 amount equal to the sum of the fol5 lowing products determined for each

6 case-mix category for which the agen7 cy receives payments:

8 ‘‘(i) The number of episodes of

9 each case-mix category during the

10 fiscal year; multiplied by

11 ‘‘(ii) the per episode limit de12 termined for such case-mix cat13 egory for such fiscal year.

14 ‘‘(B) ESTABLISHMENT OF PER EPI15 SODE LIMITS.—

16 ‘‘(i) IN GENERAL.—The per epi17 sode limit for a fiscal year for any

18 case-mix category for the area in

19 which a home health agency is lo20 cated is equal to—

21 ‘‘(I) the mean number of

22 visits for each type of home

23 health service described in

24 subsection (a)(2) furnished

25 during an episode of such
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1 case-mix category in such

2 area during fiscal year 1994,

3 adjusted by the case-mix ad4 justment factor determined in

5 clause (ii) for the fiscal year

6 involved; multiplied by

7 ‘‘(II) the per visit payment

8 rate established under sub9 section (b) for such type of

10 home health service for the

11 fiscal year for which the de12 termination is being made.

13 ‘‘(ii) CASE MIX ADJUSTMENT FAC14 TOR.—For purposes of clause (i),

15 the case-mix adjustment factor

16 for a year is the factor deter17 mined by the Secretary to assure

18 that aggregate payments for

19 home health services under this

20 section during the year will not

21 exceed the payment for such serv22 ices during the previous year as a

23 result of changes in the number

24 and type of home health visits
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1 within case-mix categories over

2 the previous year.

3 ‘‘(iii) REBASING OF PER EPISODE

4 AMOUNTS.—Beginning with fiscal

5 year 1999 and every 2 years there6 after, the Secretary shall revise

7 the mean number of home health

8 visits determined under clause

9 (i)(I) for each type of home health

10 service visit described in sub11 section (a)(2) furnished during an

12 episode in a case-mix category to

13 reflect the most recently available

14 data on the number of visits.

15 ‘‘(iv) DETERMINATION OF APPLI16 CABLE AREA.—For purposes of de17 termining per episode limits

18 under this subparagraph, the

19 area in which a home health

20 agency is considered to be located

21 shall be such area as the Sec22 retary finds appropriate for pur23 poses of this subparagraph.

24 ‘‘(C) CASE-MIX CATEGORY.—For pur25 poses of this paragraph, the term
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1 ‘case-mix category’ means each of the

2 18 case-mix categories established

3 under the Phase II Home Health

4 Agency Prospective Payment Dem5 onstration Project conducted by the

6 Health Care Financing Administra7 tion. The Secretary may develop an

8 alternate methodology for determin9 ing case-mix categories.

10 ‘‘(D) EPISODE.—

11 ‘‘(i) IN GENERAL.—For purposes

12 of this paragraph, the term ‘epi13 sode’ means the continuous 120-

14 day period that—

15 ‘‘(I) begins on the date of

16 an individual’s first visit for a

17 type of home health service

18 described in subsection (a)(2)

19 for a case-mix category, and

20 ‘‘(II) is immediately pre21 ceded by a 60-day period in

22 which the individual did not

23 receive visits for a type of

24 home health service described

25 in subsection (a)(2).
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1 ‘‘(ii) TREATMENT OF EPISODES

2 SPANNING COST REPORTING PERI3 ODS.—The Secretary shall provide

4 for such rules as the Secretary

5 considers appropriate regarding

6 the treatment of episodes under

7 this paragraph which begin dur8 ing a cost reporting period and

9 end in a subsequent cost report10 ing period.

11 ‘‘(E) EXEMPTIONS AND EXCEP12 TIONS.—The Secretary may provide

13 for exemptions and exceptions to the

14 limits established under this para15 graph for a fiscal year as the Sec16 retary deems appropriate, to the ex17 tent such exemptions and exceptions

18 do not result in greater payments

19 under this section than the exemp20 tions and exceptions provided under

21 section 1861(v)(1)(L)(ii) in fiscal year

22 1994, increased by the home health

23 market basket percentage increase

24 for the fiscal year involved (as de25 fined in subsection (b)(4)).
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1 ‘‘(2) RECONCILIATION OF AMOUNTS.—

2 ‘‘(A) OVERPAYMENTS TO HOME

3 HEALTH AGENCIES.—Subject to sub4 paragraph (B), if a home health agen5 cy has received aggregate per visit

6 payments under subsection (a) for a

7 fiscal year in excess of the amount

8 determined under paragraph (1) with

9 respect to such home health agency

10 for such fiscal year, the Secretary

11 shall reduce payments under this sec12 tion to the home health agency in the

13 following fiscal year in such manner

14 as the Secretary considers appro15 priate (including on an installment

16 basis) to recapture the amount of

17 such excess.

18 ‘‘(B) EXCEPTION FOR HOME HEALTH

19 SERVICES FURNISHED OVER A PERIOD

20 GREATER THAN 165 DAYS.—

21 ‘‘(i) IN GENERAL.—For purposes

22 of subparagraph (A), the amount

23 of aggregate per visit payments

24 determined under subsection (a)

25 shall not include payments for
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1 home health visits furnished to an

2 individual on or after a continu3 ous period of more than 165 days

4 after an individual begins an epi5 sode described in subsection

6 (c)(1)(D) (if such period is not in7 terrupted by the beginning of a

8 new episode).

9 ‘‘(ii) REQUIREMENT OF CERTIFI10 CATION.—Clause (i) shall not apply

11 if the agency has not obtained a

12 physician’s certification with re13 spect to the individual requiring

14 such visits that includes a state15 ment that the individual requires

16 such continued visits, the reason

17 for the need for such visits, and a

18 description of such services fur19 nished during such visits.

20 ‘‘(C) SHARE OF SAVINGS.—

21 ‘‘(i) BONUS PAYMENTS.—If a

22 home health agency has received

23 aggregate per visit payments

24 under subsection (a) for a fiscal

25 year in an amount less than the
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1 amount determined under para2 graph (1) with respect to such

3 home health agency for such fis4 cal year, the Secretary shall pay

5 such home health agency a bonus

6 payment equal to 50 percent of

7 the difference between such

8 amounts in the following fiscal

9 year, except that the bonus pay10 ment may not exceed 5 percent of

11 the aggregate per visit payments

12 made to the agency for the year.

13 ‘‘(ii) INSTALLMENT BONUS PAY14 MENTS.—The Secretary may make

15 installment payments during a

16 fiscal year to a home health agen17 cy based on the estimated bonus

18 payment that the agency would

19 be eligible to receive with respect

20 to such fiscal year.

21 ‘‘(d) MEDICAL REVIEW PROCESS.—The Sec22 retary shall implement a medical review proc23 ess (with a particular emphasis on fiscal years

24 1997 and 1998) for the system of payments de25 scribed in this section that shall provide an
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1 assessment of the pattern of care furnished to

2 individuals receiving home health services

3 for which payments are made under this sec4 tion to ensure that such individuals receive

5 appropriate home health services. Such re6 view process shall focus on low-cost cases de7 scribed in subsection (e)(3) and cases de8 scribed in subsection (c)(2)(B) and shall re9 quire recertification by intermediaries at 30,

10 60, 90, 120, and 165 days into an episode de11 scribed in subsection (c)(1)(D).

12 ‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID

13 CIRCUMVENTION OF LIMITS.—

14 ‘‘(1) IN GENERAL.—The Secretary shall

15 provide for appropriate adjustments to

16 payments to home health agencies under

17 this section to ensure that agencies do

18 not circumvent the purpose of this sec19 tion by—

20 ‘‘(A) discharging patients to an21 other home health agency or similar

22 provider;

23 ‘‘(B) altering corporate structure

24 or name to avoid being subject to this
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1 section or for the purpose of increas2 ing payments under this title; or

3 ‘‘(C) undertaking other actions

4 considered unnecessary for effective

5 patient care and intended to achieve

6 maximum payments under this title.

7 ‘‘(2) TRACKING OF PATIENTS THAT

8 SWITCH HOME HEALTH AGENCIES DURING EPI9 SODE.—

10 ‘‘(A) DEVELOPMENT OF SYSTEM.—

11 The Secretary shall develop a system

12 that tracks home health patients that

13 receive home health services de14 scribed in subsection (a)(2) from more

15 than 1 home health agency during an

16 episode described in subsection

17 (c)(1)(D).

18 ‘‘(B) ADJUSTMENT OF PAYMENTS.—

19 The Secretary shall adjust payments

20 under this section to each home

21 health agency that furnishes an indi22 vidual with a type of home health

23 service described in subsection (a)(2)

24 to ensure that aggregate payments on

25 behalf of such individual during such
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1 episode do not exceed the amount

2 that would be paid under this section

3 if the individual received such serv4 ices from a single home health agen5 cy.

6 ‘‘(3) LOW-COST CASES.—The Secretary

7 shall develop a system designed to adjust

8 payments to a home health agency for a

9 fiscal year to eliminate any increase in

10 growth of the percentage of low-cost epi11 sodes for which home health services are

12 furnished by the agency over such per13 centage determined for the agency for

14 the 12-month cost reporting period end15 ing on June 30, 1994. The Secretary shall

16 define a low-cost episode in a manner

17 that provides that a home health agency

18 has an incentive to be cost efficient in de19 livering home health services and that

20 the volume of such services does not in21 crease as a result of factors other than

22 patient needs.

23 ‘‘(f) REPORT BY MEDICARE PAYMENT REVIEW

24 COMMISSION.—During the first 3 years in

25 which payments are made under this section,
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1 the Medicare Payment Review Commission

2 shall annually submit a report to Congress on

3 the effectiveness of the payment methodology

4 established under this section that shall in5 clude recommendations regarding the follow6 ing:

7 ‘‘(1) Case-mix and volume increases.

8 ‘‘(2) Quality monitoring of home

9 health agency practices.

10 ‘‘(3) Whether a capitated payment for

11 home care patients receiving care during

12 a continuous period exceeding 165 days

13 is warranted.

14 ‘‘(4) Whether public providers of serv15 ice are adequately reimbursed

16 ‘‘(5) The adequacy of the exemptions

17 and exceptions to the limits provided

18 under subsection (c)(1)(E).

19 ‘‘(6) The appropriateness of the meth20 ods provided under this section to adjust

21 the per episode limits and annual pay22 ment updates to reflect changes in the

23 mix of services, number of visits, and as24 signment to case categories to reflect

25 changing patterns of home health care.
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1 ‘‘(7) The geographic areas used to de2 termine the per episode limits.’’.

3 (b) PAYMENT FOR PROSTHETICS AND

4 ORTHOTICS UNDER PART A.—Section 1814(k)

5 (42 U.S.C. 1395f(k)) is amended—

6 (1) by inserting ‘‘and prosthetics and

7 orthotics’’ after ‘‘durable medical equip8 ment’’; and

9 (2) by inserting ‘‘and 1834(h), respec10 tively’’ after ‘‘1834(a)(1)’’.

11 (c) CONFORMING AMENDMENTS.—

12 (1) PAYMENTS UNDER PART A.—Section

13 1814(b) (42 U.S.C. 1395f(b)), as amended

14 by section 15522(b), is amended in the

15 matter preceding paragraph (1) by strik16 ing ‘‘1888 and 1888A’’ and inserting ‘‘1888,

17 1888A, and 1894’’.

18 (2) TREATMENT OF ITEMS AND SERVICES

19 PAID UNDER PART B.—

20 (A) PAYMENTS UNDER PART B.—Sec21 tion 1833(a)(2) (42 U.S.C. 1395l(a)(2))

22 is amended—

23 (i) by amending subparagraph

24 (A) to read as follows:
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1 ‘‘(A) with respect to home health

2 services—

3 ‘‘(i) that are a type of home

4 health service described in sec5 tion 1894(a)(2), and which are fur6 nished to an individual who (at

7 the time the item or service is fur8 nished) is under a plan of care of

9 a home health agency, the

10 amount determined under section

11 1894;

12 ‘‘(ii) that are not described in

13 clause (i) (other than a covered

14 osteoporosis drug) (as defined in

15 section 1861(kk)), the lesser of—

16 ‘‘(I) the reasonable cost of

17 such services, as determined

18 under section 1861(v), or

19 ‘‘(II) the customary

20 charges with respect to such

21 services;’’.

22 (ii) by striking ‘‘and’’ at the

23 end of subparagraph (E);

24 (iii) by adding ‘‘and’’ at the

25 end of subparagraph (F); and
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1 (iv) by adding at the end the

2 following new subparagraph:

3 ‘‘(G) with respect to items and

4 services described in section

5 1861(s)(10)(A), the lesser of—

6 ‘‘(i) the reasonable cost of

7 such services, as determined

8 under section 1861(v), or

9 ‘‘(ii) the customary charges

10 with respect to such services,

11 or, if such services are furnished by a

12 public provider of services, or by an13 other provider which demonstrates to

14 the satisfaction of the Secretary that

15 a significant portion of its patients

16 are low-income (and requests that

17 payment be made under this provi18 sion), free of charge or at nominal

19 charges to the public, the amount de20 termined in accordance with section

21 1814(b)(2);’’.

22 (B) REQUIRING PAYMENT FOR ALL

23 ITEMS AND SERVICES TO BE MADE TO

24 AGENCY.—
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1 (i) IN GENERAL.—The first sen2 tence of section 1842(b)(6) (42

3 U.S.C. 1395u(b)(6)) is amended—

4 (I) by striking ‘‘and (D)’’

5 and inserting ‘‘(D)’’; and

6 (II) by striking the period

7 at the end and inserting the

8 following: ‘‘, and (E) in the

9 case of types of home health

10 services described in section

11 1894(a)(2) furnished to an in12 dividual who (at the time the

13 item or service is furnished)

14 is under a plan of care of a

15 home health agency, payment

16 shall be made to the agency

17 (without regard to whether or

18 not the item or service was

19 furnished by the agency, by

20 others under arrangement

21 with them made by the agen22 cy, or otherwise).’’.

23 (ii) CONFORMING AMENDMENT.—

24 Section 1832(a)(1) (42 U.S.C.

25 1395k(a)(1)) is amended by strik-
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1 ing ‘‘(2);’’ and inserting ‘‘(2) and

2 section 1842(b)(6)(E);’’.

3 (C) EXCLUSIONS FROM COVERAGE.—

4 Section 1862(a) (42 U.S.C. 1395y(a)), as

5 amended by section 15525(a)(2), is

6 amended—

7 (i) by striking ‘‘or’’ at the end

8 of paragraph (15);

9 (ii) by striking the period at

10 the end of paragraph (16) and in11 serting ‘‘or’’; and

12 (iii) by adding at the end the

13 following new paragraph:

14 ‘‘(17) where such expenses are for

15 home health services furnished to an in16 dividual who is under a plan of care of

17 the home health agency if the claim for

18 payment for such services is not submit19 ted by the agency.’’.

20 (3) SUNSET OF REASONABLE COST LIMI21 TATIONS.—Section 1861(v)(1)(L) (42 U.S.C.

22 1395x(v)(1)(L)) is amended by adding at

23 the end the following new clause:

24 ‘‘(iv) This subparagraph shall apply only

25 to services furnished by home health agencies
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1 during cost reporting periods ending on or

2 before September 30, 1996.’’.

3 (c) EFFECTIVE DATE.—The amendments

4 made by subsections (a) and (b) shall apply to

5 cost reporting periods beginning on or after

6 October 1, 1996.

7 SEC. 15702. MAINTAINING SAVINGS RESULTING FROM TEM8 PORARY FREEZE ON PAYMENT INCREASES

9 FOR HOME HEALTH SERVICES.

10 (a) BASING UPDATES TO PER VISIT COST LIM11 ITS ON LIMITS FOR FISCAL YEAR 1993.—Section

12 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii))

13 is amended by adding at the end the following

14 sentence: ‘‘In establishing limits under this

15 subparagraph, the Secretary may not take

16 into account any changes in the costs of the

17 provision of services furnished by home

18 health agencies with respect to cost reporting

19 periods which began on or after July 1, 1994,

20 and before July 1, 1996.’’.

21 (b) NO EXCEPTIONS PERMITTED BASED ON

22 AMENDMENT.—The Secretary of Health and

23 Human Services shall not consider the

24 amendment made by subsection (a) in making

25 any exemptions and exceptions pursuant to
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1 section 1861(v)(1)(L)(ii) of the Social Security

2 Act.

3 SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF

4 LACK OF KNOWLEDGE OF EXCLUSION FROM

5 COVERAGE FOR HOME HEALTH AGENCIES.

6 Section 9305(g)(3) of OBRA–1986, as

7 amended by section 426(d) of the Medicare

8 Catastrophic Coverage Act of 1988 and sec9 tion 4207(b)(3) of OBRA–1990 (as renumbered

10 by section 160(d)(4) of the Social Security Act

11 Amendments of 1994), is amended by striking

12 ‘‘December 31, 1995’’ and inserting ‘‘Septem13 ber 30, 1996’’.

14 SEC. 15704. STUDY OF COVERAGE OF SERVICES OF CHRIS15 TIAN SCIENCE PROVIDERS.

16 (a) STUDY.—The Secretary of Health and

17 Human Services shall conduct a study of the

18 feasibility and desirability of providing for

19 coverage under the medicare program of

20 home health services furnished by Christian

21 Science providers who meet applicable re22 quirements of the First Church of Christ, Sci23 entist, Boston, Massachusetts.

24 (b) REPORT.—Not later than July 1, 1996,

25 the Secretary shall submit a report to Con-
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1 gress on the study conducted under sub2 section (a), and (to the extent the report in3 cludes recommendations for coverage under

4 the medicare program of home health serv5 ices furnished by Christian Science provid6 ers) shall include in the report recommenda7 tions regarding appropriate criteria for the

8 certification of such providers and an appro9 priate methodology for making payments

10 under the medicare program for such serv11 ices.

12 PART 2—MEDICARE SECONDARY PAYER

13 IMPROVEMENTS

14 SEC. 15711. EXTENSION AND EXPANSION OF EXISTING RE15 QUIREMENTS.

16 (a) DATA MATCH.—

17 (1) Section 1862(b)(5)(C) (42 U.S.C.

18 1395y(b)(5)(C)) is amended by striking

19 clause (iii).

20 (2) Section 6103(l)(12) of the Internal

21 Revenue Code of 1986 is amended by

22 striking subparagraph (F).

23 (b) APPLICATION TO DISABLED INDIVIDUALS

24 IN LARGE GROUP HEALTH PLANS.—
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1 (1) IN GENERAL.—Section 1862(b)(1)(B)

2 (42 U.S.C. 1395y(b)(1)(B)) is amended—

3 (A) in clause (i), by striking

4 ‘‘clause (iv)’’ and inserting ‘‘clause

5 (iii)’’,

6 (B) by striking clause (iii), and

7 (C) by redesignating clause (iv) as

8 clause (iii).

9 (2) CONFORMING AMENDMENTS.—Para10 graphs (1) through (3) of section 1837(i)

11 (42 U.S.C. 1395p(i)) and the second sen12 tence of section 1839(b) (42 U.S.C.

13 1395r(b)) are each amended by striking

14 ‘‘1862(b)(1)(B)(iv)’’ each place it appears

15 and inserting ‘‘1862(b)(1)(B)(iii)’’.

16 (c) EXPANSION OF PERIOD OF APPLICATION

17 TO INDIVIDUALS WITH END STAGE RENAL DIS18 EASE.—Section 1862(b)(1)(C) (42 U.S.C.

19 1395y(b)(1)(C)) is amended—

20 (1) in the first sentence, by striking

21 ‘‘12-month’’ each place it appears and in22 serting ‘‘24-month’’, and

23 (2) by striking the second sentence.
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1 SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

2 (a) PERMITTING RECOVERY AGAINST THIRD

3 PARTY ADMINISTRATORS OF PRIMARY PLANS.—

4 Section 1862(b)(2)(B)(ii) (42 U.S.C.

5 1395y(b)(2)(B)(ii)) is amended—

6 (1) by striking ‘‘under this subsection

7 to pay’’ and inserting ‘‘(directly, as a

8 third-party administrator, or otherwise)

9 to make payment’’, and

10 (2) by adding at the end the follow11 ing: ‘‘The United States may not recover

12 from a third-party administrator under

13 this clause in cases where the third-party

14 administrator would not be able to re15 cover the amount at issue from the em16 ployer or group health plan for whom it

17 provides administrative services due to

18 the insolvency or bankruptcy of the em19 ployer or plan.’’.

20 (b) EXTENSION OF CLAIMS FILING PERIOD.—

21 Section 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B))

22 is amended by adding at the end the following

23 new clause:

24 ‘‘(vi) CLAIMS-FILING PERIOD.—

25 Notwithstanding any other time

26 limits that may exist for filing a
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1 claim under an employer group

2 health plan, the United States

3 may seek to recover conditional

4 payments in accordance with this

5 subparagraph where the request

6 for payment is submitted to the

7 entity required or responsible

8 under this subsection to pay with

9 respect to the item or service (or

10 any portion thereof) under a pri11 mary plan within the 3-year pe12 riod beginning on the date on

13 which the item or service was fur14 nished.’’.

15 (c) EFFECTIVE DATE.—The amendments

16 made by this section shall apply to items and

17 services furnished on or after the date of the

18 enactment of this Act.

19 SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF

20 POLICY REGARDING ESRD BENEFICIARIES

21 ENROLLED IN PRIMARY PLANS.

22 For purposes of carrying out section

23 1862(b)(1)(C) of the Social Security Act, the

24 Secretary of Health and Human Services shall

25 apply the policy directive issued by the Ad-
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1 ministrator of the Health Care Financing Ad2 ministration on April 24, 1995, only with re3 spect to items and services furnished on or

4 after such date.

5 PART 3—FAILSAFE

6 SEC. 15721. FAILSAFE BUDGET MECHANISM.

7 (a) IN GENERAL.—Title XVIII, as amended

8 by sections 15106(a) and 15701(a), is amended

9 by adding at the end the following new sec10 tion:

11 ‘‘FAILSAFE BUDGET MECHANISM

12 ‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT

13 ADJUSTMENTS TO ACHIEVE MEDICARE BUDGET

14 TARGETS.—If the Secretary determines under

15 subsection (e)(3)(C) before a fiscal year (be16 ginning with fiscal year 1998) that—

17 ‘‘(1) the fee-for-service expenditures

18 (as defined in subsection (f)) for a sector

19 of medicare services (as defined in sub20 section (b)) for the fiscal year, will exceed

21 ‘‘(2) the allotment specified under

22 subsection (c)(2) for such fiscal year (tak23 ing into account any adjustment in the

24 allotment under subsection (h) for that

25 fiscal year),
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1 then, notwithstanding any other provision of

2 this title, there shall be an adjustment (con3 sistent with subsection (d)) in applicable pay4 ment rates or payments for items and services

5 included in the sector in the fiscal year so

6 that such expenditures for the sector for the

year will be reduced by 1331 7 ⁄3 percent of the

8 amount of such excess.

9 ‘‘(b) SECTORS OF MEDICARE SERVICES DE10 SCRIBED.—

11 ‘‘(1) IN GENERAL.—For purposes of this

12 section, items and services included

13 under each of the following subpara14 graphs shall be considered to be a sepa15 rate ‘sector’ of medicare services:

16 ‘‘(A) Inpatient hospital services.

17 ‘‘(B) Home health services.

18 ‘‘(C) Extended care services (for

19 inpatients of skilled nursing facili20 ties).

21 ‘‘(D) Hospice care.

22 ‘‘(E) Physicians’ services (includ23 ing services and supplies described in

24 section 1861(s)(2)(A)) and services of

25 other health care professionals (in-
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1 cluding certified registered nurse an2 esthetists, nurse practitioners, physi3 cian assistants, and clinical psycholo4 gists) for which separate payment is

5 made under this title.

6 ‘‘(F) Outpatient hospital services

7 and ambulatory facility services.

8 ‘‘(G) Durable medical equipment

9 and supplies, including prosthetic de10 vices and orthotics.

11 ‘‘(H) Diagnostic tests (including

12 clinical laboratory services and x-ray

13 services).

14 ‘‘(I) Other items and services.

15 ‘‘(2) CLASSIFICATION OF ITEMS AND

16 SERVICES.—The Secretary shall classify

17 each type of items and services covered

18 and paid for separately under this title

19 into one of the sectors specified in para20 graph (1). After publication of such classi21 fication under subsection (e)(1), the Sec22 retary is not authorized to make sub23 stantive changes in such classification.

24 ‘‘(c) ALLOTMENT.—
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1 ‘‘(1) ALLOTMENTS FOR EACH SECTOR.—

2 For purposes of this section, subject to

3 subsection (h)(1), the allotment for a sec4 tor of medicare services for a fiscal year

5 is equal to the product of—

6 ‘‘(A) the total allotment for the fis7 cal year established under paragraph

8 (2), and

9 ‘‘(B) the allotment proportion

10 (specified under paragraph (3)) for

11 the sector and fiscal year involved.

12 ‘‘(2) TOTAL ALLOTMENT.—

13 ‘‘(A) IN GENERAL.—For purposes of

14 this section, the total allotment for a

15 fiscal year is equal to—

16 ‘‘(i) the medicare benefit

17 budget for the fiscal year (as

18 specified under subparagraph

19 (B)), reduced by

20 ‘‘(ii) the amount of payments

21 the Secretary estimates will be

22 made in the fiscal year under the

23 MedicarePlus program under part

24 C.
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1 In making the estimate under clause

2 (ii), the Secretary shall take into ac3 count estimated enrollment and de4 mographic profile of individuals

5 electing MedicarePlus products.

6 ‘‘(B) MEDICARE BENEFIT BUDGET.—

7 For purposes of this subsection, sub8 ject to subparagraph (C), the ‘medi9 care benefit budget’—

10 ‘‘(i) for fiscal year 1997 is

11 $203.1 billion;

12 ‘‘(ii) for fiscal year 1998 is

13 $214.3 billion;

14 ‘‘(iii) for fiscal year 1999 is

15 $227.2 billion;

16 ‘‘(iv) for fiscal year 2000 is

17 $241.0 billion;

18 ‘‘(v) for fiscal year 2001 is

19 $259.1 billion;

20 ‘‘(vi) for fiscal year 2002 is

21 $280.0 billion; and

22 ‘‘(vii) for a subsequent fiscal

23 year is equal to the medicare ben24 efit budget under this subpara25 graph for the preceding fiscal
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1 year increased by the product of

2 (I) 1.05, and (II) 1 plus the annual

3 percentage increase in the aver4 age number of medicare bene5 ficiaries from the previous fiscal

6 year to the fiscal year involved.

7 ‘‘(3) MEDICARE ALLOTMENT PROPORTION

8 DEFINED.—

9 ‘‘(A) IN GENERAL.—For purposes of

10 this section and with respect to a sec11 tor of medicare services for a fiscal

12 year, the term ‘medicare allotment

13 proportion’ means the ratio of—

14 ‘‘(i) the baseline-projected

15 medicare expenditures (as deter16 mined under subparagraph (B))

17 for the sector for the fiscal year,

18 to

19 ‘‘(ii) the sum of such baseline

20 expenditures for all such sectors

21 for the fiscal year.

22 ‘‘(B) BASELINE-PROJECTED MEDI23 CARE EXPENDITURES.—In this para24 graph, the ‘baseline, projected medi-
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1 care expenditures’ for a sector of

2 medicare services—

3 ‘‘(i) for fiscal year 1996 is

4 equal to fee-for-service expendi5 tures for such sector during fiscal

6 year 1995, increased by the base7 line annual growth rate for such

8 sector of medicare services for fis9 cal year 1996 (as specified in table

10 in subparagraph (C)); and

11 ‘‘(ii) for a subsequent fiscal

12 year is equal to the baseline-pro13 jected medicare expenditures

14 under this subparagraph for the

15 sector for the previous fiscal year

16 increased by the baseline annual

17 growth rate for such sector for

18 the fiscal year involved (as speci19 fied in such table).

20 ‘‘(C) BASELINE ANNUAL GROWTH

21 RATES.—The following table specifies

22 the baseline annual growth rates for

23 each of the sectors for different fiscal

24 years:
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‘‘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%

1 ‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—

2 ‘‘(1) IN GENERAL.—Subject to the suc3 ceeding provisions of this subsection, the

4 Secretary shall apply a payment reduc5 tion for a sector for a fiscal year in such

6 a manner as to—

7 ‘‘(A) make a change in payment

8 rates (to the maximum extent prac9 ticable) at the time payment rates are

10 otherwise changed or subject to

11 change for that fiscal year; and

12 ‘‘(B) provide for the full appro13 priate adjustment so that the fee-for14 service expenditures for the sector

15 for the fiscal year will approximate
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1 (and not exceed) the allotment for the

2 sector for the fiscal year.

3 ‘‘(2) TAKING INTO ACCOUNT VOLUME AND

4 CASH FLOW.—In providing for an adjust5 ment in payments under this subsection

6 for a sector for a fiscal year, the Sec7 retary shall take into account (in a man8 ner consistent with actuarial projec9 tions)—

10 ‘‘(A) the impact of such an adjust11 ment on the volume or type of serv12 ices provided in such sector (and

13 other sectors), and

14 ‘‘(B) the fact that an adjustment

15 may apply to items and services fur16 nished in a fiscal year (payment for

17 which may occur in a subsequent fis18 cal year),

19 in a manner that is consistent with assur20 ing that total fee-for-services expendi21 tures for each sector for the fiscal year

22 will not exceed the allotment under sub23 section (c)(1) for such sector for such

24 year.
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1 ‘‘(3) PROPORTIONALITY OF REDUCTIONS

2 WITHIN A SECTOR.—In making adjustments

3 under this subsection in payment for

4 items and services included within a sec5 tor of medicare services for a fiscal year,

6 the Secretary shall provide for such an

7 adjustment that results (to the maximum

8 extent feasible) in the same percentage

9 reductions in aggregate Federal pay10 ments under parts A and B for the dif11 ferent classes of items and services in12 cluded within the sector for the fiscal

13 year.

14 ‘‘(4) APPLICATION TO PAYMENTS MADE

15 BASED ON PROSPECTIVE PAYMENT RATES DE16 TERMINED ON A FISCAL YEAR BASIS.—

17 ‘‘(A) IN GENERAL.—In applying sub18 section (a) with respect to items and

19 services for which payment is made

20 under part A or B on the basis of

21 rates that are established on a pro22 spective basis for (and in advance of)

23 a fiscal year, the Secretary shall pro24 vide for the payment adjustment

25 under such subsection through an ap-
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1 propriate reduction in such rates es2 tablished for items and services fur3 nished (or, in the case of payment for

4 operating costs of inpatient hospital

5 services of subsection (d) hospitals

6 and subsection (d) Puerto Rico hos7 pitals (as defined in paragraphs (1)(B)

8 and (9)(A) of section 1886(d)), dis9 charges occurring) during such year.

10 ‘‘(B) DESCRIPTION OF APPLICATION

11 TO SPECIFIC SERVICES.—The payment

12 adjustment described in subpara13 graph (A) applies for a fiscal year to

14 at least the following:

15 ‘‘(i) UPDATE FACTOR FOR PAY16 MENT FOR OPERATING COSTS OF IN17 PATIENT HOSPITAL SERVICES OF PPS

18 HOSPITALS.—To the computation

19 of the applicable percentage in20 crease specified in section

21 1886(d)(3)(B)(i) for discharges oc22 curring in the fiscal year.

23 ‘‘(ii) HOME HEALTH SERVICES.—

24 To the extent payment amounts

25 for home health services are
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1 based on per visit payment rates

2 under section 1894, to the com3 putation of the increase in the na4 tional per visit payment rates es5 tablished for the year under sec6 tion 1894(b)(2)(B).

7 ‘‘(iii) HOSPICE CARE.—To the

8 update of payment rates for hos9 pice care under section 1814(i) for

10 services furnished during the fis11 cal year.

12 ‘‘(iv) UPDATE FACTOR FOR PAY13 MENT OF OPERATING COSTS OF INPA14 TIENT HOSPITAL SERVICES OF PPS15 EXEMPT HOSPITALS.—To the com16 putation of the target amount

17 under section 1886(b)(3) for dis18 charges occurring during the fis19 cal year.

20 ‘‘(v) COVERED NON-ROUTINE

21 SERVICES OF SKILLED NURSING FA22 CILITIES.—To the computation of

23 the facility per stay limits for the

24 year under section 1888A(d) for

25 covered non-routine services of a
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1 skilled nursing facility (as de2 scribed in such section).

3 ‘‘(5) APPLICATION TO PAYMENTS MADE

4 BASED ON PROSPECTIVE PAYMENT RATES DE5 TERMINED ON A CALENDAR YEAR BASIS.—

6 ‘‘(A) IN GENERAL.—In applying sub7 section (a) for a fiscal year with re8 spect to items and services for which

9 payment is made under part A or B

10 on the basis of rates that are estab11 lished on a prospective basis for (and

12 in advance of) a calendar year, the

13 Secretary shall provide for the pay14 ment adjustment under such sub15 section through an appropriate re16 duction in such rates established for

17 items and services furnished at any

18 time during such calendar year as fol19 lows:

20 ‘‘(i) For fiscal year 1997, the

21 reduction shall be made for pay22 ment rates during calendar year

23 1997 in a manner so as to achieve

24 the necessary payment reductions

25 for such fiscal year for items and
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1 services furnished during the

2 first 3 quarters of calendar year

3 1997.

4 ‘‘(ii) For a subsequent fiscal

5 year, the reduction shall be made

6 for payment rates during the cal7 endar year in which the fiscal

8 year ends in a manner so as to

9 achieve the necessary payment

10 reductions for such fiscal year for

11 items and services furnished dur12 ing the first 3 quarters of the cal13 endar year, but also taking into

14 account the payment reductions

15 made in the first quarter of the

16 fiscal year resulting from pay17 ment reductions made under this

18 paragraph for the previous cal19 endar year.

20 ‘‘(iii) Payment rate reductions

21 effected under this subparagraph

22 for a calendar year and applica23 ble to the last 3 quarters of the

24 fiscal year in which the calendar

25 year ends shall continue to apply
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1 during the first quarter of the

2 succeeding fiscal year.

3 ‘‘(B) APPLICATION IN SPECIFIC

4 CASES.—The payment adjustment de5 scribed in subparagraph (A) applies

6 for a fiscal year to at least the follow7 ing:

8 ‘‘(i) UPDATE IN CONVERSION

9 FACTOR FOR PHYSICIANS’ SERV10 ICES.—To the computation of the

11 conversion factor under sub12 section (d) of section 1848 used in

13 the fee schedule established

14 under subsection (b) of such sec15 tion, for items and services fur16 nished during the calendar year

17 in which the fiscal year ends.

18 ‘‘(ii) PAYMENT RATES FOR OTHER

19 HEALTH CARE PROFESSIONALS.—To

20 the computation of payments for

21 professional services of certified

22 registered nurse anesthetists

23 under section 1833(l), nurse mid24 wives, physician assistants, nurse

25 practitioners and clinical nurse
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1 specialists under section 1833(r),

2 clinical psychologists, clinical so3 cial workers, physical or occupa4 tional therapists, and any other

5 health professionals for which

6 payment rates are based (in

7 whole or in part) on payments for

8 physicians’ services, for services

9 furnished during the calendar

10 year in which the fiscal year

11 ends.

12 ‘‘(iii) UPDATE IN LAB FEE SCHED13 ULE.—To the computation of the

14 fee schedule amount under sec15 tion 1833(h)(2) for clinical diag16 nostic laboratory services fur17 nished during the calendar year

18 in which the fiscal year ends.

19 ‘‘(iv) UPDATE IN REASONABLE

20 CHARGES FOR VACCINES.—To the

21 computation of the reasonable

22 charge for vaccines described in

23 section 1861(s)(10) for vaccines

24 furnished during the calendar
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1 year in which the fiscal year

2 ends.

3 ‘‘(v) DURABLE MEDICAL EQUIP4 MENT-RELATED ITEMS.—To the com5 putation of the payment basis

6 under section 1834(a)(1)(B) for

7 covered items described in sec8 tion 1834(a)(13), for items fur9 nished during the calendar year

10 in which the fiscal year ends.

11 ‘‘(vi) RADIOLOGIST SERVICES.—

12 To the computation of conversion

13 factors for radiologist services

14 under section 1834(b), for services

15 furnished during the calendar

16 year in which the fiscal year

17 ends.

18 ‘‘(vii) SCREENING MAMMOG19 RAPHY.—To the computation of

20 payment rates for screening mam21 mography under section

22 1834(c)(1)(C)(ii), for screening

23 mammography performed during

24 the calendar year in which the

25 fiscal year ends.
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1 ‘‘(viii) PROSTHETICS AND

2 ORTHOTICS.—To the computation

3 of the amount to be recognized

4 under section 1834(h) for payment

5 for prosthetic devices and

6 orthotics and prosthetics, for

7 items furnished during the cal8 endar year in which the fiscal

9 year ends.

10 ‘‘(ix) SURGICAL DRESSINGS.—To

11 the computation of the payment

12 amount referred to in section

13 1834(i)(1)(B) for surgical

14 dressings, for items furnished

15 during the calendar year in which

16 the fiscal year ends.

17 ‘‘(x) PARENTERAL AND ENTERAL

18 NUTRITION.—To the computation

19 of reasonable charge screens for

20 payment for parenteral and en21 teral nutrition under section

22 1834(h), for nutrients furnished

23 during the calendar year in which

24 the fiscal year ends.
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1 ‘‘(xi) AMBULANCE SERVICES.—To

2 the computation of limits on rea3 sonable charges for ambulance

4 services, for services furnished

5 during the calendar year in which

6 the fiscal year ends.

7 ‘‘(6) APPLICATION TO PAYMENTS MADE

8 BASED ON COSTS DURING A COST REPORTING

9 PERIOD.—

10 ‘‘(A) IN GENERAL.—In applying sub11 section (a) for a fiscal year with re12 spect to items and services for which

13 payment is made under part A or B

14 on the basis of costs incurred for

15 items and services in a cost reporting

16 period, the Secretary shall provide

17 for the payment adjustment under

18 such subsection for a fiscal year

19 through an appropriate proportional

20 reduction in the payment for costs for

21 such items and services incurred at

22 any time during each cost reporting

23 period any part of which occurs dur24 ing the fiscal year involved, but only

25 (for each such cost reporting period)
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1 in the same proportion as the frac2 tion of the cost reporting period that

3 occurs during the fiscal year in4 volved.

5 ‘‘(B) APPLICATION IN SPECIFIC

6 CASES.—The payment adjustment de7 scribed in subparagraph (A) applies

8 for a fiscal year to at least the follow9 ing:

10 ‘‘(i) CAPITAL-RELATED COSTS OF

11 HOSPITAL SERVICES.—To the com12 putation of payment amounts for

13 inpatient and outpatient hospital

14 services under sections 1886(g)

15 and 1861(v) for portions of cost

16 reporting periods occurring dur17 ing the fiscal year.

18 ‘‘(ii) OPERATING COSTS FOR PPS19 EXEMPT HOSPITALS.—To the com20 putation of payment amounts

21 under section 1886(b) for operat22 ing costs of inpatient hospital

23 services of PPS-exempt hospitals

24 for portions of cost reporting pe-
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1 riods occurring during the fiscal

2 year.

3 ‘‘(iii) DIRECT GRADUATE MEDI4 CAL EDUCATION.—To the computa5 tion of payment amounts under

6 section 1886(h) for reasonable

7 costs of direct graduate medical

8 education costs for portions of

9 cost reporting periods occurring

10 during the fiscal year.

11 ‘‘(iv) INPATIENT RURAL PRIMARY

12 CARE HOSPITAL SERVICES.—To the

13 computation of payment amounts

14 under section 1814(j) for inpatient

15 rural primary care hospital serv16 ices for portions of cost reporting

17 periods occurring during the fis18 cal year.

19 ‘‘(v) EXTENDED CARE SERVICES

20 OF A SKILLED NURSING FACILITY.—

21 To the computation of payment

22 amounts under section 1861(v) for

23 post-hospital extended care serv24 ices of a skilled nursing facility

25 (other than covered non-routine
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1 services subject to section 1888A)

2 for portions of cost reporting pe3 riods occurring during the fiscal

4 year.

5 ‘‘(vi) REASONABLE COST CON6 TRACTS.—To the computation of

7 payment amounts under section

8 1833(a)(1)(A) for organizations for

9 portions of cost reporting periods

10 occurring during the fiscal year.

11 ‘‘(vii) HOME HEALTH SERV12 ICES.—Subject to paragraph

13 (4)(B)(ii), for payment amounts

14 for home health services, for por15 tions of cost reporting periods oc16 curring during such fiscal year.

17 ‘‘(7) OTHER.—In applying subsection

18 (a) for a fiscal year with respect to items

19 and services for which payment is made

20 under part A or B on a basis not de21 scribed in a previous paragraph of this

22 subsection, the Secretary shall provide

23 for the payment adjustment under such

24 subsection through an appropriate pro25 portional reduction in the payments (or
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1 payment bases for items and services fur2 nished) during the fiscal year.

3 ‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—

4 The Secretary shall provide for such pro5 portional adjustment in any limits on

6 payment established under part A or B

7 for payment for items and services within

8 a sector as may be appropriate based on

9 (and in order to properly carry out) the

10 adjustment on the amount of payment

11 under this subsection in the sector.

12 ‘‘(9) REFERENCES TO PAYMENT RATES.—

13 Except as the Secretary may provide, any

14 reference in this title (other than this

15 section) to a payment rate is deemed a

16 reference to such a rate as adjusted

17 under this subsection.

18 ‘‘(e) PUBLICATION OF DETERMINATIONS; JU19 DICIAL REVIEW.—

20 ‘‘(1) ONE-TIME PUBLICATION OF SECTORS

21 AND GENERAL PAYMENT ADJUSTMENT METH22 ODOLOGY.—Not later than October 1, 1996,

23 the Secretary shall publish in the Federal

24 Register the classification of medicare

25 items and services into the sectors of
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1 medicare services under subsection (b)

2 and the general methodology to be used

3 in applying payment adjustments to the

4 different classes of items and services

5 within the sectors.

6 ‘‘(2) INCLUSION OF INFORMATION IN

7 PRESIDENT’S BUDGET.—

8 ‘‘(A) IN GENERAL.—With respect to

9 fiscal years beginning with fiscal year

10 1999, the President shall include in

11 the budget submitted under section

12 1105 of title 31, United States Code,

13 information on—

14 ‘‘(i) the fee-for-service expend15 itures, within each sector, for the

16 second previous fiscal year, and

17 how such expenditures compare

18 to the adjusted sector allotment

19 for that sector for that fiscal year;

20 and

21 ‘‘(ii) actual annual growth

22 rates for fee-for-service expendi23 tures in the different sectors in

24 the second previous fiscal year.
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1 ‘‘(B) RECOMMENDATIONS REGARDING

2 GROWTH FACTORS.—The President may

3 include in such budget for a fiscal

4 year (beginning with fiscal year 1998)

5 recommendations regarding percent6 ages that should be applied (for one

7 or more fiscal years beginning with

8 that fiscal year) instead of the base9 line annual growth rates under sub10 section (c)(3)(C). Such recommenda11 tions shall take into account medi12 cally appropriate practice patterns.

13 ‘‘(3) DETERMINATIONS CONCERNING PAY14 MENT ADJUSTMENTS.—

15 ‘‘(A) RECOMMENDATIONS OF COMMIS16 SION.—By not later than March 1 of

17 each year (beginning with 1997), the

18 Medicare Payment Review Commis19 sion shall submit to the Secretary and

20 the Congress a report that analyzes

21 the previous operation (if any) of this

22 section and that includes rec23 ommendations concerning the man24 ner in which this section should be

25 applied for the following fiscal year.
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1 ‘‘(B) PRELIMINARY NOTICE BY SEC2 RETARY.—Not later than May 15 pre3 ceding the beginning of each fiscal

4 year (beginning with fiscal year

5 1998), the Secretary shall publish in

6 the Federal Register a notice contain7 ing the Secretary’s preliminary deter8 mination, for each sector of medicare

9 services, concerning the following:

10 ‘‘(i) The projected allotment

11 under subsection (c) for such sec12 tor for the fiscal year.

13 ‘‘(ii) Whether there will be a

14 payment adjustment for items

15 and services included in such sec16 tor for the fiscal year under sub17 section (a).

18 ‘‘(iii) If there will be such an

19 adjustment, the size of such ad20 justment and the methodology to

21 be used in making such a pay22 ment adjustment for classes of

23 items and services included in

24 such sector.
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1 ‘‘(iv) Beginning with fiscal

2 year 1999, the fee-for-service ex3 penditures for such sector for the

4 second preceding fiscal year.

5 Such notice shall include an expla6 nation of the basis for such deter7 mination. Determinations under this

8 subparagraph and subparagraph (C)

9 shall be based on the best data avail10 able at the time of such determina11 tions.

12 ‘‘(C) FINAL DETERMINATION.—Not

13 later than September 1 preceding the

14 beginning of each fiscal year (begin15 ning with fiscal year 1998), the Sec16 retary shall publish in the Federal

17 Register a final determination, for

18 each sector of medicare services, con19 cerning the matters described in sub20 paragraph (B) and an explanation of

21 the reasons for any differences be22 tween such determination and the

23 preliminary determination for such

24 fiscal year published under subpara25 graph (B).
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1 ‘‘(4) LIMITATION ON ADMINISTRATIVE OR

2 JUDICIAL REVIEW.—There shall be no ad3 ministrative or judicial review under sec4 tion 1878 or otherwise of—

5 ‘‘(A) the classification of items

6 and services among the sectors of

7 medicare services under subsection

8 (b),

9 ‘‘(B) the determination of the

10 amounts of allotments for the dif11 ferent sectors of medicare services

12 under subsection (c),

13 ‘‘(C) the determination of the

14 amount (or method of application) of

15 any payment adjustment under sub16 section (d), or

17 ‘‘(D) any adjustment in an allot18 ment effected under subsection (h).

19 ‘‘(f) FEE-FOR-SERVICE EXPENDITURES DE20 FINED.—In this section, the term ‘fee-for-serv21 ice expenditures’, for items and services with22 in a sector of medicare services in a fiscal

23 year, means amounts payable for such items

24 and services which are furnished during the

25 fiscal year, and—
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1 ‘‘(1) includes types of expenses other2 wise reimbursable under parts A and B

3 (including administrative costs incurred

4 by organizations described in sections

5 1816 and 1842) with respect to such items

6 and services, and

7 ‘‘(2) does not include amounts paid

8 under part C.

9 ‘‘(g) EXPEDITED PROCESS FOR ADJUSTMENT

10 OF SECTOR GROWTH RATES.—

11 ‘‘(1) OPTIONAL INCLUSION OF LEGISLA12 TIVE PROPOSAL.—The President may in13 clude in recommendations under sub14 section (e)(2)(B) submitted with respect

15 to a fiscal year a specific legislative pro16 posal that provides only for the substi17 tution of percentages specified in the

18 proposal for one or more of the baseline

19 annual growth rates (specified in the

20 table in subsection (c)(3)(C) or in a pre21 vious legislative proposal under this sub22 section) for that fiscal year or any subse23 quent fiscal year.

24 ‘‘(2) CONGRESSIONAL CONSIDERATION.—
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1 ‘‘(A) IN GENERAL.—The percent2 ages contained in a legislative pro3 posal submitted under paragraph (1)

4 shall apply under this section if a

5 joint resolution (described in sub6 paragraph (B)) approving such pro7 posal is enacted, in accordance with

8 the provisions of subparagraph (C),

9 before the end of the 60-day period

10 beginning on the date on which such

11 proposal was submitted. For purposes

12 of applying the preceding sentence

13 and subparagraphs (B) and (C), the

14 days on which either House of Con15 gress is not in session because of an

16 adjournment of more than three days

17 to a day certain shall be excluded in

18 the computation of a period.

19 ‘‘(B) JOINT RESOLUTION OF AP20 PROVAL.—A joint resolution described

21 in this subparagraph means only a

22 joint resolution which is introduced

23 within the 10-day period beginning

24 on the date on which the President
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1 submits a proposal under paragraph

2 (1) and—

3 ‘‘(i) which does not have a

4 preamble;

5 ‘‘(ii) the matter after the re6 solving clause of which is as fol7 lows: ‘That Congress approves the

8 proposal of the President provid9 ing for substitution of percent10 ages for certain baseline annual

11 growth rates under section 1895

12 of the Social Security Act, as sub13 mitted by the President on

14 lllllll.’, the blank space

15 being filled in with the appro16 priate date; and

17 ‘‘(iii) the title of which is as

18 follows: ‘Joint resolution approv19 ing Presidential proposal to sub20 stitute certain specified percent21 ages for baseline annual growth

22 rates under section 1895 of the

23 Social Security Act, as submitted

24 by the President on

25 lllllll.’, the blank space
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1 being filled in with the appro2 priate date.

3 ‘‘(C) PROCEDURES FOR CONSIDER4 ATION OF RESOLUTION OF APPROVAL.—

5 Subject to subparagraph (D), the pro6 visions of section 2908 (other than

7 subsection (a)) of the Defense Base

8 Closure and Realignment Act of 1990

9 shall apply to the consideration of a

10 joint resolution described in subpara11 graph (B) in the same manner as such

12 provisions apply to a joint resolution

13 described in section 2908(a) of such

14 Act.

15 ‘‘(D) SPECIAL RULES.—For pur16 poses of applying subparagraph (C)

17 with respect to such provisions—

18 ‘‘(i) any reference to the Com19 mittee on Armed Services of the

20 House of Representatives shall be

21 deemed a reference to an appro22 priate Committee of the House of

23 Representatives (specified by the

24 Speaker of the House of Rep25 resentatives at the time of sub-
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1 mission of a legislative proposal

2 under paragraph (1)) and any ref3 erence to the Committee on

4 Armed Services of the Senate

5 shall be deemed a reference to

6 the Committee on Finance of the

7 Senate; and

8 ‘‘(ii) any reference to the date

9 on which the President transmits

10 a report shall be deemed a ref11 erence to the date on which the

12 President submits the legislative

13 proposal under paragraph (1).

14 ‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOT15 MENTS TO REFLECT ACTUAL EXPENDITURES.—

16 ‘‘(1) IN GENERAL.—If the Secretary de17 termines under subsection (e)(3)(B) with

18 respect to a particular fiscal year (begin19 ning with fiscal year 1999) that the fee20 for-service expenditures for a sector of

21 medicare services for the second preced22 ing fiscal year—

23 ‘‘(A) exceeded the adjusted allot24 ment for such sector for such year (as

25 defined in paragraph (2)), then the al-
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1 lotment for the sector for the particu2 lar fiscal year shall be reduced by

1331 3 ⁄3 percent of the amount of such

4 excess, or

5 ‘‘(B) was less than the adjusted al6 lotment for such sector for such year,

7 then the allotment for the sector for

8 the particular fiscal year shall be in9 creased by the amount of such deficit.

10 ‘‘(2) ADJUSTED ALLOTMENT.—The ad11 justed allotment under this paragraph for

12 a sector for a fiscal year is—

13 ‘‘(A) the amount that would be

14 computed as the allotment under sub15 section (c) for the sector for the fiscal

16 year if the actual amount of payments

17 made in the fiscal year under the

18 MedicarePlus program under part C

19 in the fiscal year were substituted for

20 the amount described in subsection

21 (c)(2)(A)(ii) for that fiscal year,

22 ‘‘(B) adjusted to take into account

23 the amount of any adjustment under

24 paragraph (1) for that fiscal year
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1 (based on expenditures in the second

2 previous fiscal year).

3 ‘‘(i) PROSPECTIVE APPLICATION OF CERTAIN

4 NATIONAL COVERAGE DETERMINATIONS.—In the

5 case of a national coverage determination

6 that the Secretary projects will result in sig7 nificant additional expenditures under this

8 title (taking into account any substitution for

9 existing procedures or technologies), such de10 termination shall not become effective before

11 the beginning of the fiscal year that begins

12 after the date of such determination and shall

13 apply to contracts under part C entered into

14 (or renewed) after the date of such determina15 tion.’’.

16 (b) REPORT OF TRUSTEES ON GROWTH RATE

17 IN PART A EXPENDITURES.—Section 1817 (42

18 U.S.C. 1395i) is amended by adding at the end

19 the following new subsection:

20 ‘‘(k) Each annual report provided in sub21 section (b)(2) shall include information re22 garding the annual rate of growth in program

23 expenditures that would be required to main24 tain the financial solvency of the Trust Fund

25 and the extent to which the provisions of sec-
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1 tion 1895 restrain the rate of growth of ex2 penditures under this part in order to achieve

3 such solvency.’’.

4 PART 4—ADMINISTRATIVE SIMPLIFICATION

5 SEC. 15731. STANDARDS FOR MEDICARE INFORMATION

6 TRANSACTIONS AND DATA ELEMENTS.

7 Title XVIII, as amended by section 15031,

8 is amended by inserting after section 1806 the

9 following new section:

10 ‘‘STANDARDS FOR MEDICARE INFORMATION

11 TRANSACTIONS AND DATA ELEMENTS

12 ‘‘SEC. 1807. (a) ADOPTION OF STANDARDS

13 FOR DATA ELEMENTS.—

14 ‘‘(1) IN GENERAL.—Pursuant to sub15 section (b), the Secretary shall adopt

16 standards for information transactions

17 and data elements of medicare informa18 tion and modifications to the standards

19 under this section that are—

20 ‘‘(A) consistent with the objective

21 of reducing the administrative costs

22 of providing and paying for health

23 care; and

24 ‘‘(B) developed or modified by a

25 standard setting organization (as de26 fined in subsection (h)(8)).
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1 ‘‘(2) SPECIAL RULE RELATING TO DATA

2 ELEMENTS.—The Secretary may adopt or

3 modify a standard relating to data ele4 ments that is different from the standard

5 developed by a standard setting organiza6 tion, if—

7 ‘‘(A) the different standard or

8 modification will substantially reduce

9 administrative costs to health care

10 providers and health plans compared

11 to the alternative; and

12 ‘‘(B) the standard or modification

13 is promulgated in accordance with

14 the rulemaking procedures of sub15 chapter III of chapter 5 of title 5,

16 United States Code.

17 ‘‘(3) SECURITY STANDARDS FOR HEALTH

18 INFORMATION NETWORK.—

19 ‘‘(A) IN GENERAL.—Each person,

20 who maintains or transmits medicare

21 information or data elements of medi22 care information and is subject to

23 this section, shall maintain reason24 able and appropriate administrative,

25 technical, and physical safeguards—
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1 ‘‘(i) to ensure the integrity

2 and confidentiality of the infor3 mation;

4 ‘‘(ii) to protect against any

5 reasonably anticipated—

6 ‘‘(I) threats or hazards to

7 the security or integrity of the

8 information; and

9 ‘‘(II) unauthorized uses or

10 disclosures of the informa11 tion; and

12 ‘‘(iii) to otherwise ensure com13 pliance with this section by the

14 officers and employees of such

15 person.

16 ‘‘(B) SECURITY STANDARDS.—The

17 Secretary shall establish security

18 standards and modifications to such

19 standards with respect to medicare

20 information network services, health

21 plans, and health care providers

22 that—

23 ‘‘(i) take into account—

24 ‘‘(I) the technical capabili25 ties of record systems used to
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1 maintain medicare informa2 tion;

3 ‘‘(II) the costs of security

4 measures;

5 ‘‘(III) the need for training

6 persons who have access to

7 medicare information; and

8 ‘‘(IV) the value of audit

9 trails in computerized record

10 systems; and

11 ‘‘(ii) ensure that a medicare

12 information network service, if it

13 is part of a larger organization,

14 has policies and security proce15 dures which isolate the activities

16 of such service with respect to

17 processing information in a man18 ner that prevents unauthorized

19 access to such information by

20 such larger organization.

21 The security standards established by

22 the Secretary shall be based on the

23 standards developed or modified by

24 standard setting organizations. If

25 such standards do not exist, the Sec-
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Subtitle H, Part 4

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1 retary shall rely on the recommenda2 tions of the Medicare Information Ad3 visory Committee (established under

4 subsection (g)) and shall consult with

5 appropriate government agencies and

6 private organizations in accordance

7 with paragraph (5).

8 ‘‘(4) IMPLEMENTATION SPECIFICATIONS.—

9 The Secretary shall establish specifica10 tions for implementing each of the stand11 ards and the modifications to the stand12 ards adopted pursuant to paragraph (1)

13 or (3).

14 ‘‘(5) ASSISTANCE TO THE SECRETARY.—In

15 complying with the requirements of this

16 section, the Secretary shall rely on rec17 ommendations of the Medicare Informa18 tion Advisory Committee established

19 under subsection (g) and shall consult

20 with appropriate Federal and State agen21 cies and private organizations. The Sec22 retary shall publish in the Federal Reg23 ister the recommendations of the Medi24 care Information Advisory Committee re-
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1 garding the adoption of a standard under

2 this section.

3 ‘‘(b) STANDARDS FOR INFORMATION TRANS4 ACTIONS AND DATA ELEMENTS.—

5 ‘‘(1) IN GENERAL.—The Secretary shall

6 adopt standards for transactions and

7 data elements to make medicare informa8 tion uniformly available to be exchanged

9 electronically, that is—

10 ‘‘(A) appropriate for the following

11 financial and administrative trans12 actions: claims (including coordina13 tion of benefits) or equivalent en14 counter information, enrollment and

15 disenrollment, eligibility, premium

16 payments, and referral certification

17 and authorization; and

18 ‘‘(B) related to other financial and

19 administrative transactions deter20 mined appropriate by the Secretary

21 consistent with the goals of improv22 ing the operation of the health care

23 system and reducing administrative

24 costs.

25 ‘‘(2) UNIQUE HEALTH IDENTIFIERS.—
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1 ‘‘(A) ADOPTION OF STANDARDS.—The

2 Secretary shall adopt standards pro3 viding for a standard unique health

4 identifier for each individual, em5 ployer, health plan, and health care

6 provider for use in the medicare in7 formation system. In developing

8 unique health identifiers for each

9 health plan and health care provider,

10 the Secretary shall take into account

11 multiple uses for identifiers and mul12 tiple locations and specialty classi13 fications for health care providers.

14 ‘‘(B) PENALTY FOR IMPROPER DIS15 CLOSURE.—A person who knowingly

16 uses or causes to be used a unique

17 health identifier under subparagraph

18 (A) for a purpose that is not author19 ized by the Secretary shall—

20 ‘‘(i) be fined not more than

21 $50,000, imprisoned not more

22 than 1 year, or both; or

23 ‘‘(ii) if the offense is commit24 ted under false pretenses, be

25 fined not more than $100,000, im-
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1 prisoned not more than 5 years,

2 or both.

3 ‘‘(3) CODE SETS.—

4 ‘‘(A) IN GENERAL.—The Secretary,

5 in consultation with the Medicare In6 formation Advisory Committee, ex7 perts from the private sector, and

8 Federal and State agencies, shall—

9 ‘‘(i) select code sets for appro10 priate data elements from among

11 the code sets that have been de12 veloped by private and public en13 tities; or

14 ‘‘(ii) establish code sets for

15 such data elements if no code sets

16 for the data elements have been

17 developed.

18 ‘‘(B) DISTRIBUTION.—The Secretary

19 shall establish efficient and low-cost

20 procedures for distribution (includ21 ing electronic distribution) of code

22 sets and modifications made to such

23 code sets under subsection (c)(2).

24 ‘‘(4) ELECTRONIC SIGNATURE.—
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1 ‘‘(A) IN GENERAL.—The Secretary,

2 after consultation with the Medicare

3 Information Advisory Committee,

4 shall promulgate regulations specify5 ing procedures for the electronic

6 transmission and authentication of

7 signatures, compliance with which

8 will be deemed to satisfy Federal and

9 State statutory requirements for writ10 ten signatures with respect to infor11 mation transactions required by this

12 section and written signatures on en13 rollment and disenrollment forms.

14 ‘‘(B) PAYMENTS FOR SERVICES AND

15 PREMIUMS.—Nothing in this section

16 shall be construed to prohibit the

17 payment of health care services or

18 health plan premiums by debit, cred19 it, payment card or numbers, or other

20 electronic means.

21 ‘‘(5) TRANSFER OF INFORMATION BE22 TWEEN HEALTH PLANS.—The Secretary

23 shall develop rules and procedures—

24 ‘‘(A) for determining the financial

25 liability of health plans when health
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1 care benefits are payable under two

2 or more health plans; and

3 ‘‘(B) for transferring among

4 health plans appropriate standard

5 data elements needed for the coordi6 nation of benefits, the sequential

7 processing of claims, and other data

8 elements for individuals who have

9 more than one health plan.

10 ‘‘(6) COORDINATION OF BENEFITS.—If, at

11 the end of the 5-year period beginning on

12 the date of the enactment of this section,

13 the Secretary determines that additional

14 transaction standards for coordinating

15 benefits are necessary to reduce adminis16 trative costs or duplicative (or inappro17 priate) payment of claims, the Secretary

18 shall establish further transaction stand19 ards for the coordination of benefits be20 tween health plans.

21 ‘‘(7) PROTECTION OF TRADE SECRETS.—

22 Except as otherwise required by law, the

23 standards adopted under this section

24 shall not require disclosure of trade se25 crets or confidential commercial informa-
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1 tion by an entity operating a medicare in2 formation network.

3 ‘‘(c) TIMETABLES FOR ADOPTION OF STAND4 ARDS.—

5 ‘‘(1) INITIAL STANDARDS.—Not later

6 than 18 months after the date of the en7 actment of this section, the Secretary

8 shall adopt standards relating to the in9 formation transactions, data elements of

10 medicare information and security de11 scribed in subsections (a) and (b).

12 ‘‘(2) ADDITIONS AND MODIFICATIONS TO

13 STANDARDS.—

14 ‘‘(A) IN GENERAL.—The Secretary

15 shall review the standards adopted

16 under this section and shall adopt ad17 ditional or modified standards, that

18 have been developed or modified by a

19 standard setting organization, as de20 termined appropriate, but not more

21 frequently than once every 12

22 months. Any addition or modification

23 to such standards shall be completed

24 in a manner which minimizes the dis25 ruption and cost of compliance.
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1 ‘‘(B) ADDITIONS AND MODIFICATIONS

2 TO CODE SETS.—

3 ‘‘(i) IN GENERAL.—The Sec4 retary shall ensure that proce5 dures exist for the routine main6 tenance, testing, enhancement,

7 and expansion of code sets.

8 ‘‘(ii) ADDITIONAL RULES.—If a

9 code set is modified under this

10 paragraph, the modified code set

11 shall include instructions on how

12 data elements of medicare infor13 mation that were encoded prior

14 to the modification may be con15 verted or translated so as to pre16 serve the informational value of

17 the data elements that existed be18 fore the modification. Any modi19 fication to a code set under this

20 paragraph shall be implemented

21 in a manner that minimizes the

22 disruption and cost of complying

23 with such modification.

24 ‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—
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1 ‘‘(1) IN GENERAL.—If a person desires

2 to conduct any of the information trans3 actions described in subsection (b)(1)

4 with a health plan as a standard trans5 action, the health plan shall conduct such

6 standard transaction in a timely manner

7 and the information transmitted or re8 ceived in connection with such trans9 action shall be in the form of standard

10 data elements of medicare information.

11 ‘‘(2) SATISFACTION OF REQUIREMENTS.—

12 A health plan may satisfy the require13 ment imposed on such plan under para14 graph (1) by directly transmitting stand15 ard data elements of medicare informa16 tion or submitting nonstandard data ele17 ments to a medicare information network

18 service for processing into standard data

19 elements and transmission.

20 ‘‘(3) TIMETABLES FOR COMPLIANCE WITH

21 REQUIREMENTS.—Not later than 24 months

22 after the date on which standards are

23 adopted under subsections (a) and (b)

24 with respect to any type of information

25 transaction or data element of medicare
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1 information or with respect to security, a

2 health plan shall comply with the re3 quirements of this section with respect to

4 such transaction or data element.

5 ‘‘(4) COMPLIANCE WITH MODIFIED STAND6 ARDS.—If the Secretary adopts a modified

7 standard under subsection (a) or (b), a

8 health plan shall be required to comply

9 with the modified standard at such time

10 as the Secretary determines appropriate

11 taking into account the time needed to

12 comply due to the nature and extent of

13 the modification. However, the time de14 termined appropriate under the preced15 ing sentence shall be not earlier than the

16 last day of the 180-day period beginning

17 on the date such modified standard is

18 adopted. The Secretary may extend the

19 time for compliance for small health

20 plans, if the Secretary determines such

21 extension is appropriate.

22 ‘‘(e) GENERAL PENALTY FOR FAILURE TO

23 COMPLY WITH REQUIREMENTS AND STAND24 ARDS.—

25 ‘‘(1) GENERAL PENALTY.—
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1 ‘‘(A) IN GENERAL.—Except as pro2 vided in paragraph (2), the Secretary

3 shall impose on any person that vio4 lates a requirement or standard—

5 ‘‘(i) with respect to medicare

6 information transactions, data

7 elements of medicare information,

8 or security imposed under sub9 section (a) or (b); or

10 ‘‘(ii) with respect to health

11 plans imposed under subsection

12 (d);

13 a penalty of not more than $100 for

14 each such violation of a specific

15 standard or requirement, but the

16 total amount imposed for all such vio17 lations of a specific standard or re18 quirement during the calendar year

19 shall not exceed $25,000.

20 ‘‘(B) PROCEDURES.—The provisions

21 of section 1128A (other than sub22 sections (a) and (b) and the second

23 sentence of subsection (f)) shall apply

24 to the imposition of a civil money

25 penalty under this paragraph in the
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1 same manner as such provisions

2 apply to the imposition of a penalty

3 under such section 1128A.

4 ‘‘(C) DENIAL OF PAYMENT.—Except

5 as provided in paragraph (2), the Sec6 retary may deny payment under this

7 title for an item or service furnished

8 by a person if the person fails to com9 ply with an applicable requirement

10 or standard for medicare information

11 relating to that item or service.

12 ‘‘(2) LIMITATIONS.—

13 ‘‘(A) NONCOMPLIANCE NOT DISCOV14 ERED.—A penalty may not be imposed

15 under paragraph (1) if it is estab16 lished to the satisfaction of the Sec17 retary that the person liable for the

18 penalty did not know, and by exercis19 ing reasonable diligence would not

20 have known, that such person failed

21 to comply with the requirement or

22 standard described in paragraph (1).

23 ‘‘(B) FAILURES DUE TO REASONABLE

24 CAUSE.—
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1 ‘‘(i) IN GENERAL.—Except as

2 provided in clause (ii), a penalty

3 may not be imposed under para4 graph (1) if—

5 ‘‘(I) the failure to comply

6 was due to reasonable cause

7 and not to willful neglect; and

8 ‘‘(II) the failure to comply

9 is corrected during the 30-day

10 period beginning on the first

11 date the person liable for the

12 penalty knew, or by exercis13 ing reasonable diligence

14 would have known, that the

15 failure to comply occurred.

16 ‘‘(ii) EXTENSION OF PERIOD.—

17 ‘‘(I) NO PENALTY.—The pe18 riod referred to in clause

19 (i)(II) may be extended as de20 termined appropriate by the

21 Secretary based on the nature

22 and extent of the failure to

23 comply.

24 ‘‘(II) ASSISTANCE.—If the

25 Secretary determines that a
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1 health plan failed to comply

2 because such plan was unable

3 to comply, the Secretary may

4 provide technical assistance

5 to such plan during the pe6 riod described in clause (i)(II).

7 Such assistance shall be pro8 vided in any manner deter9 mined appropriate by the Sec10 retary.

11 ‘‘(C) REDUCTION.—In the case of a

12 failure to comply which is due to rea13 sonable cause and not to willful ne14 glect, any penalty under paragraph

15 (1) that is not entirely waived under

16 subparagraph (B) may be waived to

17 the extent that the payment of such

18 penalty would be excessive relative to

19 the compliance failure involved.

20 ‘‘(f) EFFECT ON STATE LAW.—

21 ‘‘(1) GENERAL EFFECT.—

22 ‘‘(A) GENERAL RULE.—Except as

23 provided in subparagraph (B), a pro24 vision, requirement, or standard

25 under this section shall supersede
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1 any contrary provision of State law,

2 including a provision of State law

3 that requires medical or health plan

4 records (including billing informa5 tion) to be maintained or transmitted

6 in written rather than electronic

7 form.

8 ‘‘(B) EXCEPTIONS.—A provision, re9 quirement, or standard under this

10 section shall not supersede a contrary

11 provision of State law if the Secretary

12 determines that the provision of State

13 law should be continued for any rea14 son, including for reasons relating to

15 prevention of fraud and abuse or reg16 ulation of controlled substances.

17 ‘‘(2) PUBLIC HEALTH REPORTING.—Noth18 ing in this section shall be construed to

19 invalidate or limit the authority, power,

20 or procedures established under any law

21 providing for the reporting of disease or

22 injury, child abuse, birth, or death, public

23 health surveillance, or public health in24 vestigation or intervention.
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1 ‘‘(g) MEDICARE INFORMATION ADVISORY

2 COMMITTEE.—

3 ‘‘(1) ESTABLISHMENT.—There is estab4 lished a committee to be known as the

5 Medicare Information Advisory Commit6 tee (in this subsection referred to as the

7 ‘committee’).

8 ‘‘(2) DUTIES.—The committee shall—

9 ‘‘(A) advise the Secretary in the

10 development of standards under this

11 section; and

12 ‘‘(B) be generally responsible for

13 advising the Secretary and the Con14 gress on the status and the future of

15 the medicare information network.

16 ‘‘(3) MEMBERSHIP.—

17 ‘‘(A) IN GENERAL.—The committee

18 shall consist of 9 members of whom—

19 ‘‘(i) 3 shall be appointed by

20 the President;

21 ‘‘(ii) 3 shall be appointed by

22 the Speaker of the House of Rep23 resentatives after consultation

24 with the minority leader of the

25 House of Representatives; and
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1 ‘‘(iii) 3 shall be appointed by

2 the President pro tempore of the

3 Senate after consultation with the

4 minority leader of the Senate.

5 The appointments of the members

6 shall be made not later than 60 days

7 after the date of the enactment of this

8 section. The President shall designate

9 1 member as the Chair.

10 ‘‘(B) EXPERTISE.—The membership

11 of the committee shall consist of indi12 viduals who are of recognized stand13 ing and distinction in the areas of in14 formation systems, information

15 networking and integration,

16 consumer health, or health care fi17 nancial management, and who pos18 sess the demonstrated capacity to dis19 charge the duties imposed on the

20 committee.

21 ‘‘(C) TERMS.—Each member of the

22 committee shall be appointed for a

23 term of 5 years, except that the mem24 bers first appointed shall serve stag25 gered terms such that the terms of
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1 not more than 3 members expire at

2 one time.

3 ‘‘(D) INITIAL MEETING.—Not later

4 than 30 days after the date on which

5 a majority of the members have been

6 appointed, the committee shall hold

7 its first meeting.

8 ‘‘(4) REPORTS.—Not later than 1 year

9 after the date of the enactment of this

10 section, and annually thereafter, the com11 mittee shall submit to Congress and the

12 Secretary a report regarding—

13 ‘‘(A) the extent to which entities

14 using the medicare information net15 work are meeting the standards

16 adopted under this section and work17 ing together to form an integrated

18 network that meets the needs of its

19 users;

20 ‘‘(B) the extent to which such en21 tities are meeting the security stand22 ards established pursuant to this sec23 tion and the types of penalties as24 sessed for noncompliance with such

25 standards;
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1 ‘‘(C) any problems that exist with

2 respect to implementation of the med3 icare information network; and

4 ‘‘(D) the extent to which time5 tables under this section are being

6 met.

7 Reports made under this subsection shall

8 be made available to health care provid9 ers, health plans, and other entities that

10 use the medicare information network to

11 exchange medicare information.

12 ‘‘(h) DEFINITIONS.—For purposes of this

13 section:

14 ‘‘(1) CODE SET.—The term ‘code set’

15 means any set of codes used for encoding

16 data elements, such as tables of terms,

17 enrollment information, and encounter

18 data.

19 ‘‘(2) COORDINATION OF BENEFITS.—The

20 term ‘coordination of benefits’ means de21 termining and coordinating the financial

22 obligations of health plans when health

23 care benefits are payable under such a

24 plan and under this title (including

25 under a MedicarePlus product).
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1 ‘‘(3) MEDICARE INFORMATION.—The

2 term ‘medicare information’ means any

3 information that relates to the enroll4 ment of individuals under this title (in5 cluding information relating to elections

6 of MedicarePlus products under section

7 1805) and the provision of health benefits

8 (including benefits provided under such

9 products) under this title.

10 ‘‘(4) MEDICARE INFORMATION NET11 WORK.—The term ‘medicare information

12 network’ means the medicare informa13 tion system that is formed through the

14 application of the requirements and

15 standards established under this section.

16 ‘‘(5) MEDICARE INFORMATION NETWORK

17 SERVICE.—The term ‘medicare informa18 tion network service’ means a public or

19 private entity that—

20 ‘‘(A) processes or facilitates the

21 processing of nonstandard data ele22 ments of medicare information into

23 standard data elements;
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1 ‘‘(B) provides the means by which

2 persons may meet the requirements

3 of this section; or

4 ‘‘(C) provides specific information

5 processing services.

6 ‘‘(6) HEALTH PLAN.—The term ‘health

7 plan’ means a plan which provides, or

8 pays the cost of, health benefits. Such

9 term includes the following, or any com10 bination thereof:

11 ‘‘(A) Part A or part B of this title,

12 and includes a MedicarePlus product.

13 ‘‘(B) The medicaid program under

14 title XIX and the MediGrant program

15 under title XXI.

16 ‘‘(C) A medicare supplemental pol17 icy (as defined in section 1882(g)(1)).

18 ‘‘(D) Worker’s compensation or

19 similar insurance.

20 ‘‘(E) Automobile or automobile

21 medical-payment insurance.

22 ‘‘(F) A long-term care policy, other

23 than a fixed indemnity policy.
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1 ‘‘(G) The Federal Employees

2 Health Benefit Plan under chapter 89

3 of title 5, United States Code.

4 ‘‘(H) An employee welfare benefit

5 plan, as defined in section 3(1) of the

6 Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1002(1)), but

8 only to the extent the plan is estab9 lished or maintained for the purpose

10 of providing health benefits.

11 ‘‘(7) INDIVIDUALLY IDENTIFIABLE MEDI12 CARE INFORMATION.—The term ‘individ13 ually identifiable medicare information’

14 means medicare enrollment information,

15 including demographic information col16 lected from an individual, that—

17 ‘‘(A) is created or received by a

18 health care provider, health plan, em19 ployer, or medicare information net20 work service, and

21 ‘‘(B) identifies an individual.

22 ‘‘(8) STANDARD SETTING ORGANIZA23 TION.—The term ‘standard setting organi24 zation’ means a standard setting organi-
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1 zation accredited by the American Na2 tional Standards Institute.

3 ‘‘(9) STANDARD TRANSACTION.—The

4 term ‘standard transaction’ means, when

5 referring to an information transaction

6 or to data elements of medicare informa7 tion, any transaction that meets the re8 quirements and implementation speci9 fications adopted by the Secretary under

10 subsections (a) and (b).’’.

11 PART 5—OTHER PROVISIONS RELATING TO

12 PARTS A AND B

13 SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF

14 ITEMS AND SERVICES ASSOCIATED WITH

15 CERTAIN MEDICAL DEVICES APPROVED FOR

16 INVESTIGATIONAL USE.

17 (a) COVERAGE.—Nothing in title XVIII of

18 the Social Security Act may be construed to

19 prohibit coverage under part A or part B of

20 the medicare program of items and services

21 associated with the use of a medical device in

22 the furnishing of inpatient or outpatient hos23 pital services (including outpatient diagnostic

24 imaging services) for which payment may be

25 made under the program solely on the
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1 grounds that the device is not an approved

2 device, if—

3 (1) the device is an investigational de4 vice; and

5 (2) the device is used instead of either

6 an approved device or a covered proce7 dure.

8 (b) CLARIFICATION OF PAYMENT AMOUNT.—

9 Notwithstanding any other provision of title

10 XVIII of the Social Security Act, the amount

11 of payment made under the medicare pro12 gram for any item or service associated with

13 the use of an investigational device in the fur14 nishing of inpatient or outpatient hospital

15 services (including outpatient diagnostic im16 aging services) for which payment may be

17 made under the program may not exceed the

18 amount of the payment which would have

19 been made under the program for the item or

20 service if the item or service were associated

21 with the use of an approved device or a cov22 ered procedure.

23 (c) DEFINITIONS.—In this section—

24 (1) the term ‘‘approved device’’ means

25 a medical device (or devices) which has
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1 been approved for marketing under pre2 market approval under the Federal Food,

3 Drug, and Cosmetic Act or cleared for

4 marketing under a 510(k) notice under

5 such Act; and

6 (2) the term ‘‘investigational device’’

7 means—

8 (A) a medical device or devices

9 (other than a device described in

10 paragraph (1)) approved for inves11 tigational use under section 520(g) of

12 the Federal Food, Drug, and Cosmetic

13 Act, or

14 (B) a product authorized for use

15 under section 505(i) of the Federal

16 Food, Drug, and Cosmetic Act which

17 includes the use of a medical device

18 (or devices) or an investigational

19 combination product under section

20 503(g) of such Act which includes a

21 device (or devices) authorized for use

22 under section 505(i) of such Act.
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1 SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.

2 (a) IN GENERAL.—Section 1862(a) (42 U.S.C.

3 1395y(a)), as amended by section 15525(a)(2)

4 and section 15701(c)(2)(C), is amended—

5 (1) by striking ‘‘or’’ at the end of para6 graph (16),

7 (2) by striking the period at the end

8 of paragraph (17) and inserting ‘‘; or’’,

9 and

10 (3) by inserting after paragraph (17)

11 the following new paragraph:

12 ‘‘(18) where such expenses are for

13 items or services, or to assist in the pur14 chase, in whole or in part, of health bene15 fit coverage that includes items or serv16 ices, for the purpose of causing, or assist17 ing in causing, the death, suicide, eutha18 nasia, or mercy killing of a person.’’.

19 (b) EFFECTIVE DATE.—The amendments

20 made by subsection (a) shall apply to payment

21 for items and services furnished on or after

22 the date of the enactment of this Act.

23 SEC. 15743. COMPETITIVE BIDDING FOR CERTAIN ITEMS

24 AND SERVICES.

25 (a) ESTABLISHMENT OF DEMONSTRATION.—

26 Not later than 1 year after the date of the en-
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1 actment of this Act, the Secretary of Health

2 and Human Services shall establish and oper3 ate over a 2-year period a demonstration

4 project in 2 geographic regions selected by

5 the Secretary under which (notwithstanding

6 any provision of title XVIII of the Social Secu7 rity Act to the contrary) the amount of pay8 ment made under the medicare program for

9 a selected item or service furnished in the re10 gion shall be equal to the price determined

11 pursuant to a competitive bidding process

12 which meets the requirements of subsection

13 (b).

14 (b) REQUIREMENTS FOR COMPETITIVE BID15 DING PROCESS.—The competitive bidding proc16 ess used under the demonstration project

17 under this section shall meet such require18 ments as the Secretary may impose to ensure

19 the cost-effective delivery to medicare bene20 ficiaries in the project region of items and

21 services of high quality.

22 (c) DETERMINATION OF SELECTED ITEMS OR

23 SERVICES.—The Secretary shall select items

24 and services to be subject to the demonstra25 tion project under this section if the Sec-
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1 retary determines that the use of competitive

2 bidding with respect to the item or service

3 under the project will be appropriate and

4 cost-effective. In determining the items or

5 services to be selected, the Secretary shall

6 consult with an advisory taskforce which in7 cludes representatives of providers and sup8 pliers of items and services (including small

9 business providers and suppliers) in each geo10 graphic region in which the project will be ef11 fective.

12 Subtitle I—Clinical Laboratories

13 SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA14 TORIES.

15 Section 353(d) of the Public Health Serv16 ice Act (42 U.S.C. 263a(d)) is amended—

17 (1) by redesignating paragraphs (2),

18 (3), and (4) as paragraphs (3), (4), and (5)

19 and by adding after paragraph (1) the fol20 lowing:

21 ‘‘(4) EXEMPTION OF PHYSICIAN OFFICE

22 LABORATORIES.—

23 ‘‘(A) IN GENERAL.—Except as pro24 vided in subparagraph (B), a clinical

25 laboratory in a physician’s office (in-
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1 cluding an office of a group of physi2 cians) which is directed by a physi3 cian and in which examinations and

4 procedures are either performed by a

5 physician or by individuals super6 vised by a physician solely as an ad7 junct to other services provided by

8 the physician’s office is exempt from

9 this section.

10 ‘‘(B) EXCEPTION.—A clinical lab11 oratory described in subparagraph

12 (A) is not exempt from this section

13 when it performs a pap smear (Papa14 nicolaou Smear) analysis.

15 ‘‘(C) DEFINITION.—For purposes of

16 subparagraph (A), the term ‘physi17 cian’ has the same meaning as is pre18 scribed for such term by section

19 1861(r) of the Social Security Act (42

20 U.S.C. 1395x(r)).’’;

21 (2) in paragraph (3) (as so redesig22 nated) by striking ‘‘(3)’’ and inserting

23 ‘‘(4)’’; and
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1 (3) in paragraphs (4) and (5) (as so re2 designated) by striking ‘‘(2)’’ and insert3 ing ‘‘(3)’’.

4 Subtitle J—Lock-Box Provisions

5 for Medicare Part B Savings

6 from Growth Reductions

7 SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH RE8 DUCTION TRUST FUND FOR PART B SAVINGS.

9 Part B of title XVIII is amended by insert10 ing after section 1841 the following new sec11 tion:

12 ‘‘MEDICARE GROWTH REDUCTION TRUST FUND

13 ‘‘SEC. 1841A. (a)(1) There is hereby created

14 on the books of the Treasury of the United

15 States a trust fund to be known as the ‘Fed16 eral Medicare Growth Reduction Trust Fund’

17 (in this section referred to as the ‘Trust

18 Fund’). The Trust Fund shall consist of such

19 gifts and bequests as may be made as pro20 vided in section 201(i)(1) and amounts appro21 priated under paragraph (2).

22 ‘‘(2) There are hereby appropriated to the

23 Trust Fund, out of any amounts in the Treas24 ury not otherwise appropriated, amounts

25 equivalent to 100 percent of the Secretary’s

26 estimate of the reductions in outlays under
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1 this part that are attributable to the Medicare

2 Preservation Act of 1995. The amounts appro3 priated by the preceding sentence shall be

4 transferred from time to time (not less fre5 quently than monthly) from the general fund

6 in the Treasury to the Trust Fund.

7 ‘‘(3)(A) Subject to subparagraph (B), with

8 respect to monies transferred to the Trust

9 Fund, no transfers, authorizations of appro10 priations, or appropriations are permitted.

11 ‘‘(B) Beginning with fiscal year 2003, the

12 Secretary may expend funds in the Trust

13 Fund to carry out this title, but only to the ex14 tent provided by Congress in advance

15 through a specific amendment to this section.

16 ‘‘(b) The provisions of subsections (b)

17 through (e) of section 1841 shall apply to the

18 Trust Fund in the same manner as they apply

19 to the Federal Supplementary Medical Insur20 ance Trust Fund, except that the Board of

21 Trustees and Managing Trustee of the Trust

22 Fund shall be composed of the members of the

23 Board of Trustees and the Managing Trustee,

24 respectively, of the Federal Supplementary

25 Medical Insurance Trust Fund.’’.
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