II

104TH CONGRESS

2D SESSION S. 1926

To provide for the integrity of the Medicare program under title XVIII

of the Social Security Act, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 28, 1996

Mr. COCHRAN (for himself and Mr. SPECTER) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To provide for the integrity of the Medicare program under

title XVIII of the Social Security Act, and for other

purposes.

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

3 SEC. 11001. SHORT TITLE; AMENDMENTS TO SOCIAL SECU4 RITY ACT; REFERENCES TO OBRA; TABLE OF

5 CONTENTS.

6 (a) SHORT TITLE.—This Act may be cited as the

7 ‘‘Emergency Medicare Protection Act of 1996’’.

8 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex9 cept as otherwise specifically provided, whenever in this

10 Act an amendment is expressed in terms of an amendment
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1 to or repeal of a section or other provision, the reference

2 shall be considered to be made to that section or other

3 provision of the Social Security Act.

4 (c) REFERENCES TO OBRA.—In this Act, the terms

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

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

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

8 the Omnibus Budget Reconciliation Act of 1987 (Public

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

10 of 1989 (Public Law 101–239), the Omnibus Budget Rec11 onciliation Act of 1990 (Public Law 101–508), and the

12 Omnibus Budget Reconciliation Act of 1993 (Public Law

13 103–66), respectively.

14 (d) TABLE OF CONTENTS.—The table of contents of

15 this Act is as follows:

Sec. 11001. Short title; amendments to Social Security Act; references to

OBRA; table of contents.

TITLE I—MEDICARE SAVINGS

Subtitle A—Provisions Relating to Part A

Sec. 11101. Updates for PPS hospitals.

Sec. 11102. Maintaining savings from temporary reduction in PPS capital

rates.

Sec. 11103. Reduction in adjustment for indirect medical education.

Sec. 11104. Revisions in determination of amount of payment for medical education.

Sec. 11105. Elimination of IME and DSH payments attributable to outlier

payments.

Sec. 11106. Treatment of transfer cases.

Sec. 11107. Moratorium on new long-term care hospital exclusions.

Sec. 11108. Payments to hospitals excluded from PPS.

Sec. 11109. Reductions to capital payments for PPS-exempt hospitals.

Sec. 11110. Maintaining savings resulting from temporary freeze on payment

increases for skilled nursing facilities.

Sec. 11111. Interim prospective payment for skilled nursing facilities.

Sec. 11112. Full prospective payment system for skilled nursing facilities.
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Sec. 11113. Salary equivalency guidelines for therapy services.

Sec. 11114. Graduate medical education, indirect medical education, and disproportionate share hospital payments for managed care enrollees.

Sec. 11115. Sole community hospitals.

Sec. 11116. Rural primary care hospital program.

Sec. 11117. Rural referral centers.

Sec. 11118. Telemedicine.

Sec. 11119. Establishment of rural health outreach grant program.

Sec. 11120. Medicare-dependent, small, rural hospital payment extension.

Subtitle B—Provisions Relating to Part B

Sec. 11121. Payments for physicians’ services.

Sec. 11122. Practice expense relative value units.

Sec. 11123. Single fee for surgery.

Sec. 11124. Incentives to control high volume for in-hospital physicians’ services.

Sec. 11125. Ambulatory surgical center service updates.

Sec. 11126. Oxygen and oxygen equipment, other durable medical equipment

and orthotics and prosthetics.

Sec. 11127. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 11128. Extension of reductions in payments for costs of hospital outpatient services.

Sec. 11129. Prospective payment for hospital outpatient department services.

Sec. 11130. Waive cost-sharing for mammography.

Sec. 11131. Annual mammograms.

Sec. 11132. Coverage of colorectal screening.

Sec. 11133. Payments for vaccines and vaccine administration.

Sec. 11134. Diabetes screening benefits.

Sec. 11135. Respite benefit.

Sec. 11136. Payments to physician assistants, nurse practitioners, and clinical

nurse specialists.

Subtitle C—Provisions Relating to Parts A and B

Sec. 11141. Centers of excellence.

Sec. 11142. Maintaining savings resulting from temporary freeze on payment

increases for home health services.

Sec. 11143. Interim payments for home health services.

Sec. 11144. Prospective payment for home health services.

Sec. 11145. Payment based on location where home health service is furnished.

Sec. 11146. Elimination of periodic interim payments for home health agencies.

Sec. 11147. Permanent extension of certain secondary payer provisions.

Subtitle D—Medicare Part B Premium

Sec. 11161. Part B premium.

TITLE II—EXPANDED MEDICARE CHOICE

Sec. 11201. Expanded choice under Medicare.

Sec. 11202. Broader choice among managed care organizations.

Sec. 11203. Development of Federal standards.
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Sec. 11204. Applicability of Medicare rates to enrollees who use an out-of-plan

provider of services.

Sec. 11205. Substitution of quality measurement system for private enrollment

requirement.

Sec. 11206. HMO competitive pricing and related demonstrations.

Sec. 11207. Elimination of health care prepayment plan option for entities eligible to participate under part C.

Sec. 11208. Medigap reforms.

Sec. 11209. Standardized benefits packages.

Sec. 11210. Antitrust rule of reason standard.

Sec. 11211. Reform of the clinical laboratory improvement amendments of

1988.

Sec. 11212. Modifications to exceptions for certain arrangements.

TITLE III—NATIONAL COMMISSION ON MEDICARE REFORM

Sec. 11301. Establishment of Commission.

Sec. 11302. Duties of the Commission.

Sec. 11303. Powers of the Commission.

Sec. 11304. Commission personnel matters.

Sec. 11305. Termination of the Commission.

Sec. 11306. Congressional consideration of Commission proposals.

Sec. 11307. Authorization of appropriations.

1 TITLE I—MEDICARE SAVINGS

2 Subtitle A—Provisions Relating to

3 Part A

4 SEC. 11101. UPDATES FOR PPS HOSPITALS.

5 (a) UPDATE FACTORS.—Section 1886(b)(3)(B)(i)

6 (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended by striking

7 subclauses (XII) and (XIII) and inserting the following:

8 ‘‘(XII) for each of the fiscal years 1997 through

9 2002, the market basket percentage increase minus

10 1.5 percentage points for hospitals in all areas, and

11 ‘‘(XIII) for fiscal year 2003 and each subse12 quent fiscal year, the market basket percentage in13 crease for hospitals in all areas.’’.

14 (b) ADJUSTMENTS FOR CASE MIX WHEN RECALI15 BRATING DRGS.—
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1 (1) IN GENERAL.—Section 1886(d)(3) (42

2 U.S.C. 1395ww(d)(3)) is amended by adding at the

3 end the following:

4 ‘‘(F) ADJUSTING FOR ESTIMATED CHANGE IN

5 CASE MIX.—

6 ‘‘(i) IN GENERAL.—Effective for dis7 charges occurring in a fiscal year in which the

8 Secretary implements significant changes (as

9 defined by the Secretary) in the diagnosis-relat10 ed group classification system and thereafter,

11 the Secretary may (subject to clause (ii)) adjust

12 the standardized amounts to take into account

13 estimated case mix increase not attributable to

14 real case mix increase anticipated to occur dur15 ing the fiscal year to which the standardized

16 amounts apply.

17 ‘‘(ii) REFINEMENT.—With regard to the

18 adjustment described in clause (i), if the Sec19 retary determines, based on data taken from

20 the fiscal year to which the adjustment applied,

21 that the amount of the adjustment varied from

22 the actual amount of case mix increase not at23 tributable to real case mix increase by more

24 than 0.25 percentage points, the Secretary shall
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1 make a prospective adjustment to the standard2 ized amounts to correct for the variance.’’.

3 (2) PROPAC RECOMMENDATIONS.—Section

4 1886(e)(2)(A) (42 U.S.C. 1395ww(e)(2)(A)) is

5 amended by adding at the end the following: ‘‘With

6 respect to subsection (d) hospitals, the Commission’s

7 recommendation regarding the appropriate percent8 age change shall take into account the anticipated

9 difference during the fiscal year between the change

10 in the average weighting factor and the change in

11 real case mix.’’.

12 SEC. 11102. MAINTAINING SAVINGS FROM TEMPORARY RE13 DUCTION IN PPS CAPITAL RATES.

14 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

15 is amended by adding at the end the following: ‘‘In addi16 tion to the reduction described in the preceding sentence,

17 for discharges occurring after October 1, 1996, the Sec18 retary shall reduce by 15.7 percent the unadjusted stand19 ard Federal capital payment rate (as described in section

20 412.308(c) of volume 42 of the Code of Federal Regula21 tions, as in effect on September 30, 1996) and shall re22 duce by 15.7 percent the unadjusted hospital-specific rate

23 (as described in section 412.328(e)(1) of volume 42 of the

24 Code of Federal Regulations, as in effect on September

25 30, 1996).’’.
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1 SEC. 11103. REDUCTION IN ADJUSTMENT FOR INDIRECT

2 MEDICAL EDUCATION.

3 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42

4 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as fol5 lows:

6 ‘‘(ii) For purposes of clause (i)(II), the indirect

7 teaching adjustment factor for discharges occur8 ring—

9 ‘‘(I) on or after October 1, 1988 and be10 fore October 1, 1996, is equal to 1.89 ×

11 (((1+r) to the nth power) ¥1),

12 ‘‘(II) during fiscal year 1997, is equal to

13 1.60 × (((1+r) to the nth power) ¥1),

14 ‘‘(III) during fiscal year 1998, is equal to

15 1.55 × (((1+r) to the nth power) ¥1), and

16 ‘‘(IV) during or after fiscal year 1999, is

17 equal to 1.47 × (((1+r) to the nth power) ¥1),

18 where ‘r’ is the ratio of the hospital’s full-time equiv19 alent interns and residents to beds and ‘n’ equals

20 .405.’’.

21 (b) CONFORMING AMENDMENT RELATING TO DE22 TERMINATION OF STANDARDIZED AMOUNTS.—Section

23 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is

24 amended by adding at the end the following: ‘‘except that

25 the Secretary shall not take into account any reductions

26 in the amount of additional payments under subsection
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1 (d)(5)(B)(ii) resulting from the amendments made by sec2 tion 11103(a) of the Emergency Medicare Protection Act

3 of 1996,’’.

4 (c) ALTERNATIVE TO RESTANDARDIZATION OF

5 COSTS.—Section 1886(d)(3)(A) (42 U.S.C.

6 1395ww(d)(3)(A)) is amended by adding at the end the

7 following:

8 ‘‘(vi) ALTERNATIVE TO RESTANDARDIZATION

9 OF COSTS.—Notwithstanding clauses (i) through (v),

10 if changes in the amount of payment under sub11 sections (d)(3)(E), (d)(5)(B), or (d)(5)(F) would

12 otherwise require the Secretary to restandardize hos13 pital costs under subsection (d)(2)(C), the Secretary

14 may compute payment amounts under this subpara15 graph in a manner that assures that aggregate pay16 ments under this subsection in a fiscal year are not

17 greater or less than those that would have been

18 made in the year if the Secretary had restandardized

19 hospital costs under subsection (d)(2)(C).’’.

20 SEC. 11104. REVISIONS IN DETERMINATION OF AMOUNT OF

21 PAYMENT FOR MEDICAL EDUCATION.

22 (a) INDIRECT MEDICAL EDUCATION.—

23 (1) IN GENERAL.—Section 1886(d)(5)(B) (42

24 U.S.C. 1395ww(d)(5)(B)), as amended by section

25 11103(a), is amended—
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1 (A) in clause (ii), by inserting ‘‘, subject to

2 clause (vi)’’ after ‘‘clause (i)(II)’’, and

3 (B) by adding at the end the following:

4 ‘‘(v) In determining such adjustment with re5 spect to a hospital for discharges occurring on or

6 after October 1, 1996—

7 ‘‘(I) the total number of interns and resi8 dents in either a hospital or nonhospital setting

9 may not exceed the number of interns and resi10 dents in the hospital with respect to the hos11 pital’s cost reporting period ending on or before

12 December 31, 1995, and

13 ‘‘(II) the number of interns and residents

14 who are not primary care residents as defined

15 in subsection (h)(5)(H) or residents in obstet16 rics and gynecology, may not exceed the num17 ber of such residents as of such cost reporting

18 period.

19 ‘‘(vi) For purposes of clause (ii), ‘r’ may not ex20 ceed the ratio of the number of interns and residents

21 as determined under clause (v) with respect to the

22 hospital for its most recent cost reporting period

23 ending on or before December 31, 1995, to the hos24 pital’s available beds (as defined by the Secretary)

25 during such cost reporting period.’’.
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1 (2) PAYMENT FOR INTERNS AND RESIDENTS

2 PROVIDING OFF-SITE SERVICES.—Section

3 1886(d)(5)(B)(iv) (U.S.C. 42 1395ww(d)(5)(B)(iv))

4 is amended to read as follows:

5 ‘‘(iv) Effective for discharges occurring on or

6 after October 1, 1996, all the time spent by an in7 tern or resident in patient care activities under an

8 approved medical residency training program at an

9 entity in a nonhospital setting shall be counted to10 ward the determination of full-time equivalency if

11 the hospital incurs all, or substantially all, of the

12 costs for the training program in that setting.’’.

13 (b) DIRECT GRADUATE MEDICAL EDUCATION.—

14 (1) LIMITATION ON NUMBER OF RESIDENTS.—

15 section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is

16 amended by adding at the end the following:

17 ‘‘(F) LIMITATION ON NUMBER OF RESI18 DENTS FOR CERTAIN FISCAL YEARS.—Such

19 rules shall provide that for purposes of a cost

20 reporting period beginning on or after October

21 1, 1996—

22 ‘‘(i) the total number of full-time

23 equivalent residents (as determined under

24 this paragraph) with respect to a hospital’s

25 approved medical residency training pro-
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1 gram may not exceed the number of full2 time equivalent residents with respect to

3 the hospital’s cost reporting period ending

4 on or before December 31, 1995, and

5 ‘‘(ii) the number of a hospital’s full6 time-equivalent residents as determined

7 under this paragraph who are not primary

8 care residents (as defined in paragraph

9 (5)(H)) or residents in obstetrics and gyn10 ecology may not exceed the number of such

11 residents as of such cost reporting period.

12 ‘‘(G) ADJUSTMENTS TO LIMITATIONS.—

13 The Secretary may adjust the limitations speci14 fied in subparagraph (F) if a hospital has a sig15 nificant increase in the number of primary care

16 or obstetrics and gynecology interns or resi17 dents after June 30, 1995.’’.

18 (2) PERMITTING PAYMENT TO NONHOSPITAL

19 PROVIDERS.—Section 1886 (42 U.S.C. 1395(ww)) is

20 amended by adding at the end the following:

21 ‘‘(j) PAYMENT TO NONHOSPITAL PROVIDERS.—

22 ‘‘(1) IN GENERAL.—Beginning with cost report23 ing periods beginning on or after October 1, 1996,

24 the Secretary may establish rules to make payments

25 (in such amounts and in such form, and from each
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1 of the trust funds under this title, as the Secretary

2 considers appropriate) to federally qualified health

3 centers (as defined in section 1861(aa)(4)) and rural

4 health clinics (as defined in section 1861(aa)(2)) for

5 the direct costs of medical education, if such costs

6 are incurred in the operation of an approved medical

7 residency training program described in subsection

8 (h). The Secretary may designate additional entities

9 as eligible organizations for such payments as the

10 Secretary determines to be appropriate.

11 ‘‘(2) COORDINATION WITH PAYMENTS UNDER

12 PART C.—No payments shall be made under para13 graph (1) for costs with respect to which payment

14 is made under section 1851F(m).’’.

15 (3) PROHIBITION ON DOUBLE PAYMENTS.—

16 Section 1886(h)(3)(B) (42 U.S.C.

17 1395ww(h)(3)(B)) is amended by adding at the end

18 the following new flush sentence: ‘‘The Secretary

19 shall reduce the aggregate approved amount to the

20 extent payment is made under subsection (j) for

21 residents included in the hospital’s full-time equiva22 lent residents.’’.

23 (c) COMMISSION ON MEDICAL EDUCATION AND

24 WORKFORCE PRIORITIES.—
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1 (1) IN GENERAL.—There is established within

2 the Department of Health and Human Services a

3 Commission to be known as the National Commis4 sion on Medical Education and Workforce Priorities

5 (in this subsection referred to as the ‘‘Commis6 sion’’).

7 (2) DUTIES.—The Commission shall have the

8 following responsibilities:

9 (A) To develop and recommend to the Sec10 retary (in this subsection referred to as the

11 ‘‘Secretary’’) specific policies to address the

12 preservation of the research and educational ca13 pacity of the Nation’s academic health centers

14 and the supply, composition, and support of the

15 future health care workforce including—

16 (i) the financing of graduate medical

17 education,

18 (ii) issues relating to children’s and

19 specialty hospitals,

20 (iii) policies regarding international

21 medical school graduates, and

22 (iv) the relationship of graduate medi23 cal education and service generated in24 come.
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1 (B) To make recommendations concerning

2 the most effective allocation of training re3 sources to ensure that the numbers and com4 petencies of health care professionals are re5 sponsive to the Nation’s needs.

6 (3) COMPOSITION.—

7 (A) QUALIFICATIONS.—The Commission

8 shall consist of 15 members appointed by the

9 Secretary, and shall to the extent feasible in10 clude—

11 (i) individuals nationally recognized

12 for expertise in health economics, medical

13 education financing, medial practice, issues

14 relating to the composition of the health

15 care workforce, research on and develop16 ment of technological and scientific ad17 vances in health care, and other related

18 fields; and

19 (ii) health care professionals including

20 physicians (both faculty and nonfaculty),

21 consumers, a dean and a chief executive of22 ficer of an academic health center or a

23 teaching hospital, and representatives from

24 health insurance, managed care, and medi25 cal workforce accrediting organizations.
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1 (B) NATIONAL REPRESENTATION.—To the

2 extent feasible, the membership of the Commis3 sion—

4 (i) shall represent the various geo5 graphic regions of the United States,

6 (ii) shall reflect the racial, ethnic, and

7 gender composition of the United States;

8 and

9 (iii) shall be broadly representative of

10 medical schools, academic health centers,

11 teaching hospitals, and schools involved in

12 the training of nonphysician providers of

13 health services.

14 (4) TERMS OF OFFICE.—Members of the Com15 mission shall first be appointed no later than Janu16 ary 1, 1997, for a term of two and one-half years.

17 (5) EX OFFICIO MEMBERS.—In addition to the

18 members appointed pursuant to paragraph (3), the

19 Commission shall include—

20 (A) the Secretary of Veterans Affairs, and

21 the Secretary of Defense (or a designee of each

22 such official); and

23 (B) such additional individuals as may be

24 designated by the Secretary from among Fed25 eral officers or employees.
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1 (6) CHAIR.—The Secretary shall designate an

2 individual from among the members appointed pur3 suant to paragraph (3) to serve as the chair of the

4 Commission.

5 (7) QUORUM.—Nine members of the Commis6 sion shall constitute a quorum, but a lesser number

7 may hold hearings.

8 (8) VACANCIES.—Any vacancy in the Commis9 sion shall not affect its power to function.

10 (9) COMPENSATION.—Each member of the

11 Commission who is not otherwise employed by the

12 United States Government shall receive compensa13 tion at a rate equal to the daily rate prescribed for

14 GS–18 under the General Schedule under section

15 5332 of title 5, United States Code, for each day,

16 including travel time, such member is engaged in the

17 actual performance of duties as a member of the

18 Commission. A member of the Commission who is

19 an officer or employee of the United States Govern20 ment shall serve without additional compensation.

21 All members of the Commission shall be reimbursed

22 for travel, subsistence, and other necessary expenses

23 incurred by them in the performance of their duties.
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1 (10) CERTAIN AUTHORITIES AND DUTIES.—In

2 order to carry out the provisions of this subsection,

3 the Commission is authorized to—

4 (A) collect such information, hold such

5 hearings, and sit and act at such times and

6 places, either as a whole or by subcommittee,

7 and request the attendance and testimony of

8 such witnesses and the production of such docu9 ments as the Commission may consider advis10 able; and

11 (B) request the cooperation and assistance

12 of Federal departments, agencies, and instru13 mentalities, and such departments, agencies,

14 and instrumentalities are authorized to provide

15 such cooperation and assistance.

16 (11) REPORTS.—The Commission shall submit

17 to the Secretary a preliminary report not later than

18 January 1, 1998, and a final report not later than

19 January 1, 1999, making recommendations on the

20 matters specified in paragraph (2).

21 (12) TERMINATION.—The Commission shall

22 terminate on July 1, 2000.

23 (13) AUTHORIZATION OF APPROPRIATIONS.—

24 There is authorized to be appropriated to the Sec25 retary for use in carrying out this subsection such
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1 sums as may be necessary for each of fiscal years

2 1997, 1998, 1999, and 2000. Funds appropriated

3 for fiscal year 2000 shall remain available until ex4 pended, or until the Commission is terminated,

5 whichever occurs first.

6 SEC. 11105. ELIMINATION OF IME AND DSH PAYMENTS AT7 TRIBUTABLE TO OUTLIER PAYMENTS.

8 (a) INDIRECT MEDICAL EDUCATION.—Section

9 1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is

10 amended by inserting ‘‘, for cases qualifying for additional

11 payment under subparagraph (A)(i),’’ before ‘‘the amount

12 paid to the hospital under subparagraph (A)’’.

13 (b) DISPROPORTIONATE SHARE ADJUSTMENTS.—

14 Section 1886(d)(5)(F)(ii)(I) (42 U.S.C.

15 1395ww(d)(5)(F)(ii)(I)) is amended by inserting ‘‘, for

16 cases qualifying for additional payment under subpara17 graph (A)(i),’’ before ‘‘the amount paid to the hospital

18 under subparagraph (A)’’.

19 (c) COST OUTLIER PAYMENTS.—Section

20 1886(d)(5)(A)(ii) (42 U.S.C. 1395ww(d)(5)(A)(ii)) is

21 amended by striking ‘‘exceed the applicable DRG prospec22 tive payment rate’’ and inserting ‘‘exceed the sum of the

23 applicable DRG prospective payment rate plus any

24 amounts payable under paragraphs (d)(5)(B) and

25 (d)(5)(F)’’.
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1 (d) EFFECTIVE DATE.—The amendments in this sec2 tion apply to discharges occurring on or after October 1,

3 1996.

4 SEC. 11106. TREATMENT OF TRANSFER CASES.

5 Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I))

6 of the Act is amended by adding at the end the following:

7 ‘‘(iii) CERTAIN TRANSFERS.—Effective for discharges

8 occurring on or after October 1, 1996, transfer cases (as

9 otherwise defined by the Secretary) shall also include cases

10 in which a patient is transferred from a subsection (d)

11 hospital to a hospital or hospital unit that is not a sub12 section (d) hospital (under section 1886(d)(1)(B) and im13 plementing regulations) or to a skilled nursing facility for

14 the purpose of receiving extended care services.’’.

15 SEC. 11107. MORATORIUM ON NEW LONG-TERM CARE HOS16 PITAL EXCLUSIONS.

17 Section 1886(d)(1)(B)(iv) (42 U.S.C.

18 1395ww(d)(1)(B)(iv)) is amended by inserting ‘‘(and had

19 such an average on the date of enactment of the Emer20 gency Medicare Protection Act of 1996)’’ before the

21 comma.
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1 SEC. 11108. PAYMENTS TO HOSPITALS EXCLUDED FROM

2 PPS.

3 (a) REDUCTIONS IN UPDATES.—Section

4 1886(b)(3)(B)(ii) (42 U.S.C. 1395ww(b)(3)(B)(ii)) is

5 amended—

6 (1) in subclause (V)—

7 (A) by striking ‘‘through 1997’’ and insert8 ing ‘‘through October 1, 1996’’, and

9 (B) by striking ‘‘and’’,

10 (2) by renumbering subclause (VI) as subclause

11 (VII), and

12 (3) by inserting after subclause (V) the follow13 ing subclause:

14 ‘‘(VI) fiscal years 1997 through 2002, the

15 market basket percentage increase minus 1.5

16 percentage points, and’’.

17 (b) REBASING FOR PPS-EXEMPT HOSPITALS.—Sec18 tion 1886(b)(3)(A)) (42 U.S.C. 1395ww(b)(3)(A)) is

19 amended to read as follows:

20 ‘‘(3)(A)(i) Subject to clauses (ii) and (iii), and except

21 as provided in subparagraphs (C), (D), and (E), for pur22 poses of this subsection, the term ‘target amount’

23 means—

24 ‘‘(I) with respect to the first 12-month cost re25 porting period in which this subparagraph is applied

26 to the hospital, the average allowable operating costs
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1 of inpatient hospital services (as defined in sub2 section (a)(4)) recognized under this title for such

3 hospital for the hospital’s two most recent 12-month

4 cost reporting periods beginning on or after October

5 1, 1991, subject to the floor and ceiling for target

6 amounts as specified in clause (ii), and increased by

7 the applicable percentage increases under subpara8 graph (B)(ii) for the hospital’s succeeding cost re9 porting periods beginning before fiscal year 1997, or

10 ‘‘(II) with respect to a later cost reporting pe11 riod, the target amount for the preceding cost re12 porting period, increased by the applicable percent13 age increase under subparagraph (B)(ii).

14 ‘‘(ii) Subject to clause (iii), the target amount deter15 mined under this subparagraph for a hospital or unit shall

16 not be less than 70 percent nor more than 150 percent

17 of the national mean (adjusted by an appropriate wage

18 index) of the operating costs of inpatient hospital services

19 determined under this paragraph for hospitals (and units

20 thereof as applicable) of each type of hospital described

21 in subsection (d)(1)(B) for the cost reporting periods

22 noted in clause (i)(I) and updated by the applicable per23 centage increase under subparagraph (B)(ii).

24 ‘‘(iii) In the case of a hospital that does not have a

25 cost reporting period beginning before October 1, 1991—
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1 ‘‘(I) with respect to cost reporting periods be2 ginning during the hospital’s first two fiscal years of

3 operation, the amount of payment made under this

4 title with respect to operating costs of inpatient hos5 pital services (as defined in subsection (a)(4)) shall

6 be the reasonable costs for providing such services,

7 except that such amount may not exceed 150 per8 cent of the national mean as determined and up9 dated in clause (ii), and

10 ‘‘(II) with respect to a later cost reporting pe11 riod, clauses (i) and (ii) shall apply to such hospital

12 except that the target amount for the hospital shall

13 be the average allowable operating costs of inpatient

14 hospital services (as defined in subsection (a)(4))

15 recognized under this title for the hospital’s first two

16 12-month cost reporting periods beginning at least

17 one year after the hospital accepts its first patient.’’.

18 (c) EXCEPTIONS AND ADJUSTMENTS.—Section

19 1886(b)(4)(A)(i) (42 U.S.C. 1395ww(b)(4)(A)(i)) is

20 amended by inserting the following after the first sen21 tence: ‘‘The exemption from, or an exception and adjust22 ment to, the method under this subsection for determining

23 the amount of payment to a hospital is limited to situa24 tions where a hospital’s allowable operating costs of inpa25 tient services recognized under this title for the 12-month
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1 cost reporting period exceeds 150 percent of the hospital’s

2 target amount (adjusted by the appropriate wage index)

3 for such cost reporting period.’’.

4 (d) ELIMINATION OF INCENTIVE PAYMENTS.—Sec5 tion 1886(b)(1) (42 U.S.C. 1395ww(b)(1)) is amended to

6 read as follows:

7 ‘‘(b)(1) Notwithstanding section 1814(b), but subject

8 to the provisions of section 1813 and paragraph (2) of

9 this subsection, if the operating costs of inpatient hospital

10 services (as defined in subsection (a)(4)) of a hospital

11 (other than a subsection (d) hospital, as described in sub12 section (d)(1)(B)) for a cost reporting period subject to

13 this paragraph—

14 ‘‘(A) are less than or equal to 110 percent of

15 the target amount (as defined in paragraph (3)) for

16 that hospital for that period, the amount of the pay17 ment with respect to such operating costs payable

18 under part A on a per discharge basis shall be equal

19 to such operating costs or the target amount, which20 ever is less; or

21 ‘‘(B) are greater than the target amount by at

22 least 10 percent, the amount of the payment with

23 respect to such operating costs payable under part

24 A on a per discharge or per admission basis (as ap25 plicable) shall be equal to the sum of—
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1 ‘‘(i) the target amount, plus

2 ‘‘(ii) an additional amount equal to 50 per3 cent of the amount by which the operating costs

4 exceed 110 percent of the target amount after

5 any exceptions or adjustments are made to such

6 target amount for the cost reporting period (ex7 cept that such additional amount may not ex8 ceed 20 percent of the target amount).’’.

9 (e) EFFECTIVE DATE.—Except as otherwise speci10 fied, the amendments made by this section apply to cost

11 reporting periods beginning on or after October 1, 1996.

12 (f) DISCHARGES.—Effective with discharges occur13 ring on or after April 1, 1997, a rehabilitation hospital

14 (or distinct part rehabilitation unit) or long-term hospital

15 that is excluded from the prospective payment system

16 under section 1886(d)(1)(B) shall submit patient assess17 ment data based on a uniform minimum data set defined

18 by the Secretary that can be used to develop a patient’s

19 plan of care and could be used to classify patients under

20 a prospective payment system. To the extent the Secretary

21 determines appropriate, the Secretary may require other

22 excluded hospitals to submit patient assessment data.
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1 SEC. 11109. REDUCTIONS TO CAPITAL PAYMENTS FOR PPS2 EXEMPT HOSPITALS.

3 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is

4 amended by adding at the end the following new subpara5 graph:

6 ‘‘(T) REDUCTIONS FOR PPS-EXEMPT HOSPITALS.—

7 Such regulations shall provide that, in determining the

8 amount of the payments that may be made under this title

9 with respect to the capital-related costs of inpatient hos10 pital services furnished by a hospital that is not a sub11 section (d) hospital (as defined in section 1886(d)(1)(B))

12 or a subsection (d) Puerto Rico hospital (as defined in

13 section 1886(d)(9)(A)), the Secretary shall reduce the

14 amounts of such payments otherwise established under

15 this title by 15 percent for payment attributable to por16 tions of cost reporting periods occurring on or after Octo17 ber 1, 1996, through fiscal year 2002.’’.

18 SEC. 11110. MAINTAINING SAVINGS RESULTING FROM TEM19 PORARY FREEZE ON PAYMENT INCREASES

20 FOR SKILLED NURSING FACILITIES.

21 (a) BASING UPDATES TO PER DIEM COST LIMITS

22 EFFECTIVE FOR FISCAL YEAR 1996 ON LIMITS FOR FIS23 CAL YEAR 1993.—

24 (1) IN GENERAL.—The last sentence of section

25 1888(a) (42 U.S.C. 1395yy(a)) is amended by add26 ing at the end the following: ‘‘, except that the limits
26

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1 effective October 1, 1996, shall be based on the lim2 its effective on October 1, 1992, and shall not take

3 into account any changes in the routine service costs

4 of skilled nursing facilities occurring during cost re5 porting periods which began during fiscal year 1994

6 or fiscal year 1995.’’.

7 (2) NO EXCEPTIONS PERMITTED BASED ON

8 AMENDMENT.—The Secretary of Health and Human

9 Services shall not consider the amendment made by

10 paragraph (1) in making any adjustments pursuant

11 to section 1888(c) of the Social Security Act.

12 (b) PAYMENTS DETERMINED ON PROSPECTIVE

13 BASIS.—Prospective payments made to skilled nursing fa14 cilities under section 1888(d) of the Social Security Act

15 for cost reporting periods beginning on or after October

16 1, 1996, shall be based on the rates effective for cost re17 porting periods beginning October 1, 1992, and before Oc18 tober 1, 1993, and shall not take into account any changes

19 in the costs of services occurring during cost reporting pe20 riods which began during fiscal year 1994 or fiscal year

21 1995.

22 SEC. 11111. INTERIM PROSPECTIVE PAYMENT FOR SKILLED

23 NURSING FACILITIES.

24 (a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy)

25 is amended by adding at the end the following:
27

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1 ‘‘(e) The Secretary shall, for cost reporting periods

2 beginning on or after October 1, 1996, provide for pay3 ment for routine service costs (excluding capital-related

4 costs) of extended care services in accordance with a pro5 spective payment system established by the Secretary in

6 the amounts provided in subsection (f), subject to the ex7 ceptions and limitations in subsections (g) and (h).

8 ‘‘(f)(1) The amount of payment under subsection (e)

9 shall be determined on a per diem basis.

10 ‘‘(2) The Secretary shall compute the routine service

11 costs per diem in a base year (determined by the Sec12 retary) for each skilled nursing facility, and shall update

13 the per diem rate on the basis of a market basket and

14 other factors as the Secretary determines appropriate. In

15 determining the per diem rate, the Secretary shall exclude

16 increases in routine service costs associated with fiscal

17 year 1994 and fiscal year 1995.

18 ‘‘(3) The base year routine service costs used to de19 termine the per diem rate applicable to a skilled nursing

20 facility may not exceed the following limits:

21 ‘‘(A) With respect to skilled nursing facilities

22 located in rural areas, the limit shall be equal to 112

23 percent of the mean per diem routine service costs

24 in a base year (determined by the Secretary) for
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1 freestanding skilled nursing facilities located in rural

2 areas within the same region.

3 ‘‘(B) With respect to skilled nursing facilities

4 located in urban areas, the limit shall be equal to

5 112 percent of the mean per diem routine service

6 costs in a base year (determined by the Secretary)

7 for freestanding skilled nursing facilities located in

8 urban areas within the same region.

9 ‘‘(C) For purposes of this subsection, urban

10 and rural areas shall be determined in the same

11 manner as for purposes of subsection (a), and the

12 term ‘region’ shall have the same meaning as under

13 section 1886(d)(2)(D).

14 ‘‘(D) In establishing limits under this sub15 section, the Secretary may make appropriate adjust16 ments to the labor-related portion of the costs based

17 upon on a wage index and other factors as the Sec18 retary determines appropriate.

19 ‘‘(E) In establishing the routine cost limits

20 under this subsection, the Secretary shall exclude in21 creases in routine service costs associated with fiscal

22 year 1994 and fiscal year 1995.

23 ‘‘(4) Skilled nursing facilities entering the Medicare

24 program subsequent to the base period, determined in sub25 section (f)(1), shall receive a routine payment rate equal
29

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1 to the mean per diem routine costs of freestanding skilled

2 nursing facilities in the urban or rural area in which they

3 are located by region. The Secretary shall compute these

4 payment rates using per diem costs in a base year (deter5 mined by the Secretary) and shall update the rates on the

6 basis of a market basket and other factors as the Sec7 retary determines appropriate. In determining the pay8 ment rates under this paragraph, the Secretary shall ex9 clude increases in routine service costs associated with fis10 cal year 1994 and fiscal year 1995.

11 ‘‘(5) Effective for cost reporting periods beginning on

12 or after October 1, 1996, low Medicare volume skilled

13 nursing facilities, as described in subsection (d), shall re14 ceive payment for routine service costs as otherwise set

15 forth in subsections (e) through (j), except that they may

16 elect to receive payment on the basis of the rates described

17 in subsection (f)(4).

18 ‘‘(6) The Secretary may make prospective adjust19 ments to the routine payment rates to account for changes

20 in facility patient mix (case mix) as the Secretary deter21 mines appropriate. A skilled nursing facility must provide

22 the Secretary with the resident assessment data necessary

23 to develop and implement such a system adjustment. Resi24 dent assessment data required under section 1819(b)(3),

25 using the standard instrument designated by the State
30

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1 under section 1819(e)(5), shall be deemed to fulfill this

2 requirement. Such adjustment shall be made in a manner

3 which does not increase expenditures for the routine costs

4 of skilled nursing facility services beyond what would oth5 erwise occur.

6 ‘‘(g)(1) Subject to paragraphs (2) and (3), a facility’s

7 per diem payment rate based on the application of sub8 sections (e) and (f) is the greater of—

9 ‘‘(A) its per diem payment amount in the base

10 year, and

11 ‘‘(B) its base year cost per diem up to the re12 gional limit plus any exception amounts that may

13 have been granted in the base year (adjusted by the

14 market basket).

15 ‘‘(2) The payment rate determined under paragraph

16 (1) shall not exceed the facility’s cost per diem incurred

17 in the base year adjusted by the market basket.

18 ‘‘(3) Paragraph (1)(A) does not apply if the per diem

19 payment amount in the base year was determined on the

20 basis of an exemption under subsection (f)(4).

21 ‘‘(h) The Secretary, in making determinations on the

22 reasonable costs (both capital and operating) of ancillary

23 services provided by skilled nursing facilities under part

24 A, shall utilize as an upper limit, the carrier fee schedules

25 applicable to such services as specified in sections 1834
31

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1 and 1848. This subsection shall not have the effect of miti2 gating other limits on the reasonable costs of ancillary

3 services currently in effect under part A such as those

4 specified in section 1861(v)(5)(A).

5 ‘‘(i) Exceptions, as described in subsection (c), and

6 exemptions, as described in the applicable regulations, are

7 eliminated for cost reporting periods beginning on or after

8 October 1, 1996.’’.

9 (b) CONSOLIDATED BILLING AND UNIFORM COD10 ING.—

11 (1) IN GENERAL.—Section 1862(a) (42 U.S.C.

12 1395y(a)) is amended—

13 (A) by striking ‘‘or’’ at the end of para14 graph (14),

15 (B) by striking the period at the end of

16 paragraph (15) and adding a semicolon, and

17 (C) by inserting after paragraph (15) the

18 following:

19 ‘‘(16) which are other than physicians’ services,

20 services described by sections 1861(s)(2)(K)(i)

21 through (iii), certified nurse-midwife services, quali22 fied psychologist services, hospice services, and serv23 ices of a certified registered nurse anesthetist, and

24 which are furnished to an individual who is a resi25 dent of a skilled nursing facility by an entity other
32

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1 than the skilled nursing facility, unless the services

2 are furnished under arrangements (as defined in sec3 tion 1861(w)(1)) with the entity made by the skilled

4 nursing facility; or

5 ‘‘(17) which are on a claim submitted by a

6 skilled nursing facility under this title, unless the

7 claim uses the HCFA common procedure coding sys8 tem.’’.

9 (2) CONFORMING AMENDMENT.—Section

10 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is

11 amended—

12 (A) by striking ‘‘(i)’’ and inserting ‘‘(I)’’

13 and striking ‘‘(ii)’’ and inserting ‘‘(II)’’,

14 (B) by striking ‘‘(H)’’ and inserting

15 ‘‘(H)(i)’’, and

16 (C) by adding at the end the following:

17 ‘‘(ii) in the case of skilled nursing facilities

18 which provide services for which payment may be

19 made under this title, to have all items and services

20 (other than physicians’ services, and other than serv21 ices described by section 1861(s)(2)(K) (i) through

22 (iii), certified nurse-midwife services, qualified psy23 chologist services, hospice services, and services of a

24 certified registered nurse anesthetist)—
33

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1 ‘‘(I) that are furnished to an individual

2 who is a resident of the skilled nursing facility,

3 and

4 ‘‘(II) for which the individual is entitled to

5 have payment made under this title, furnished

6 by the skilled nursing facility or otherwise

7 under arrangements (as defined in section

8 1861(w)(1)) made by the skilled nursing facil9 ity,’’.

10 (3) EFFECTIVE DATE.—The amendments made

11 by this subsection are effective for cost reporting pe12 riods beginning on or after October 1, 1996.

13 SEC. 11112. FULL PROSPECTIVE PAYMENT SYSTEM FOR

14 SKILLED NURSING FACILITIES.

15 (a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy),

16 as added by section 11111(a), is amended by striking sub17 sections (e) through (i) and inserting the following:

18 ‘‘(e)(1) The Secretary shall provide for payment for

19 all costs of extended care services (including routine serv20 ice costs, ancillary costs, and capital related costs) in ac21 cordance with a prospective payment system established

22 by the Secretary. Such system shall incorporate an adjust23 ment for patient mix (case mix) based on resident assess24 ment data and other data as appropriate. A skilled nurs25 ing facility must provide the Secretary with the resident
34

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1 assessment data necessary to develop and implement such

2 a system adjustment. Resident assessment data required

3 under section 1819(b)(3) using the standard instrument

4 designated by the State under section 1819(e)(5) fulfills

5 this requirement.

6 ‘‘(2) Prior to implementing the prospective payment

7 system described in paragraph (1) in a budget neutral

8 fashion, the Secretary shall reduce, by 7 percent, the per

9 diem rates for routine costs, and the reasonable costs for

10 ancillary services and capital for skilled nursing facilities

11 as such rates and costs are in effect on September 30,

12 1997.’’.

13 (b) EFFECTIVE DATE.—The amendments made by

14 the preceding subsection apply to cost reporting periods

15 beginning on or after October 1, 1997.

16 SEC. 11113. SALARY EQUIVALENCY GUIDELINES FOR THER17 APY SERVICES.

18 Section 1861(v)(5) (42 U.S.C. 1395x(v)(5)) is

19 amended—

20 (1) by redesignating subparagraph (B) as sub21 paragraph (D),

22 (2) in subparagraph (D), as so redesignated, by

23 adding ‘‘(B), or (C),’’ after ‘‘subparagraph (A),’’,

24 (3) by inserting after subparagraph (A) the fol25 lowing:
35

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1 ‘‘(B)(i) Effective for services furnished on or after

2 October 1, 1996, the Secretary shall apply guidelines

3 based on the methodology described in clause (ii) relating

4 to occupational therapy services and speech-language pa5 thology services, and replace guidelines previously estab6 lished under the subparagraph (A) relating to respiratory

7 therapy services and physical therapy services provided

8 under an arrangement with a provider of services or other

9 organization.

10 ‘‘(ii) The guidelines for each therapy shall be equal

11 to the sum of—

12 ‘‘(I) the sum of an hourly salary rate, plus

13 fringe benefits, plus a rental expense factor (in the

14 same base year), and

15 ‘‘(II) an overhead factor (excluding rental ex16 penses) equal to 28 percent of the amount deter17 mined in subclause (I),

18 adjusted by geographical area using the methodology con19 tained in the final regulation of the Secretary published

20 on page 44928 of volume 48 of the Federal Register on

21 September 30, 1983, updated annually from the base year

22 to the current year by an inflation factor.

23 ‘‘(iii) The data used in establishing the guidelines

24 under clause (ii) shall be—
36

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1 ‘‘(I) in the case of hourly salary rates, for each

2 therapy, the 75th percentile of salaries paid to

3 therapists working full time in an employment rela4 tionship in the area, from the most recent available

5 Bureau of Labor Statistics (BLS) hospital salary

6 data for each, increased by 10 percent,

7 ‘‘(II) in the case of fringe benefits, for each

8 therapy, an aggregate factor derived from hospital

9 cost reports ending in fiscal year 1991 for BLS sur10 vey areas used in subclause (I),

11 ‘‘(III) in the case of the rental expense factor,

12 for each therapy, an amount derived from local area

13 rental income data compiled by the Building Owners

14 and Managers Association International for 1991,

15 for BLS survey areas used in subclause (I), and

16 ‘‘(IV) in the case of the inflation factor, for

17 each therapy, an amount equal to the average of em18 ployment cost indices for wages and benefits of civil19 ian hospital, professional technical and clerical work20 ers, and private executives, administrators and man21 agers, and the Consumer Price Indices (Urban) for

22 Housing and all items less food and energy, weight23 ed by the relative proportion that each component

24 represents of the guidelines amounts.
37

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1 ‘‘(C) Nothing in subparagraph (B) shall preclude the

2 Secretary from updating the guidelines using such data

3 sources and methodology as the Secretary determines to

4 be appropriate, except that any changes to the data

5 sources will be made through rulemaking in a manner that

6 does not increase aggregate spending for such services be7 yond what would otherwise occur.’’, and

8 (4) by adding at the end the following:

9 ‘‘(E) In applying limitations under section

10 1861(v)(5), the Secretary shall not recognize an exception

11 for a provider that entered into a written binding contract

12 or contingency contract with a therapist, provider or other

13 organization prior to the date the initial guidelines are

14 published.’’.

15 SEC. 11114. GRADUATE MEDICAL EDUCATION, INDIRECT

16 MEDICAL EDUCATION, AND DISPROPORTION17 ATE SHARE HOSPITAL PAYMENTS FOR MAN18 AGED CARE ENROLLEES.

19 (a) PAYMENTS FOR GRADUATE MEDICAL EDU20 CATION PROGRAMS.—Section 1851F, as added by title II,

21 is amended by adding at the end the following:

22 ‘‘(m) PAYMENTS FOR GRADUATE MEDICAL EDU23 CATION PROGRAMS.—

24 ‘‘(1) ADDITIONAL PAYMENT TO BE MADE.—

25 Starting in calendar year 1997, each contract with
38

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1 an eligible organization under this section shall pro2 vide for an additional payment for Medicare’s share

3 of allowable direct graduate medical education costs

4 incurred by such organization for an approved medi5 cal residency program.

6 ‘‘(2) ALLOWABLE COSTS.—If the eligible orga7 nization has an approved medical residency program

8 that incurs all or substantially all of the costs of the

9 program, the allowable costs for such program shall

10 equal the national average per resident amount

11 times the number of full-time-equivalent residents in

12 the program in nonhospital settings.

13 ‘‘(3) COSTS UNDER CONTRACTS WITH HOS14 PITALS.—If an eligible organization and a hospital

15 that has an approved medical residency training pro16 gram both voluntarily enter into a written agreement

17 under which the eligible organization agrees to pay

18 the hospital for direct graduate medical education

19 resident time spent in patient care related activities,

20 then those payments are included within the allow21 able costs payable under paragraph (1).

22 ‘‘(4) DEFINITIONS.—As used in this sub23 section—

24 ‘‘(A) the terms ‘approved medical residency

25 program’, ‘direct graduate medical education
39

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1 costs’, and ‘full-time-equivalent residents’ have

2 the same meanings as under section 1886(h),

3 ‘‘(B) the term ‘Medicare’s share’ means

4 the amount determined by multiplying the eligi5 ble organization’s allowable costs for an ap6 proved medical residency program by the ratio

7 of the number of individuals enrolled with the

8 organization under this section to the total

9 number of individuals enrolled with the organi10 zation, and

11 ‘‘(C) the term ‘national average per resi12 dent amount’ means an amount estimated by

13 the Secretary to equal the weighted average

14 amount that would be paid per full-time-equiva15 lent resident under section 1886(h) for the cal16 endar year (determined separately for primary

17 care residency programs as defined under sec18 tion 1886(h) (including obstetrics and gyne19 cology residency programs) and for other resi20 dency programs).’’.

21 (b) ADDITIONAL PAYMENTS TO HOSPITALS FOR

22 MANAGED CARE ENROLLEES.—

23 (1) HOSPITAL PAYMENT AMOUNT PER RESI24 DENT.—Section 1886(h)(3) (42 U.S.C.
40

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1 1395ww(h)(3)) is amended by adding at the end the

2 following:

3 ‘‘(D) PAYMENT FOR MANAGED CARE EN4 ROLLEES.—For portions of cost reporting peri5 ods occurring on or after January 1, 1997, the

6 Secretary shall provide for an additional pay7 ment amount under this subsection for services

8 furnished to individuals who are enrolled under

9 a contract with an eligible organization under

10 part C and who are entitled to part A. Subject

11 to subsection (d)(11)(E), the amount of such

12 payment shall be equal to the product of—

13 ‘‘(i) the aggregate approved amount

14 (as defined in subparagraph (B)) for that

15 period, and

16 ‘‘(ii) the fraction of the total number

17 of inpatient-bed-days (as established by the

18 Secretary) during the period which are at19 tributable to individuals who are enrolled

20 in eligible organizations which have con21 tracts under part C and who are entitled

22 to part A.’’.

23 (2) ADDITIONAL PAYMENTS TO HOSPITALS FOR

24 SUBSECTION (d) HOSPITALS.—Section 1886(d) (42
41

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1 U.S.C. 1395ww(d)) is amended by adding at the end

2 the following:

3 ‘‘(11)(A) For portions of cost reporting periods oc4 curring on or after January 1, 1997, the Secretary shall

5 provide for an additional payment amount for subsection

6 (d) hospitals for services furnished to individuals who are

7 enrolled under a contract with an eligible organization

8 under part C and who are entitled to part A.

9 ‘‘(B) Subject to subparagraph (E), the amount of

10 such payment shall be determined by multiplying—

11 ‘‘(i) the sum of the amounts determined under

12 subparagraphs (C) and (D), by

13 ‘‘(ii) the product of—

14 ‘‘(I) the number of discharges attributable

15 to individuals who are enrolled in an organiza16 tion having a contract under Part C and who

17 are entitled to Part A, and

18 ‘‘(II) the estimated average per discharge

19 amount that would otherwise have been paid

20 under section 1886(d)(1)(A) if the individuals

21 had not been enrolled in an organization having

22 a contract under part C.

23 ‘‘(C) The Secretary shall determine an indirect teach24 ing adjustment factor equal to the indirect teaching ad-
42

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1 justment factor applicable to the hospital under paragraph

2 (5)(B).

3 ‘‘(D) The Secretary shall determine a disproportion4 ate share adjustment factor equal to the disproportionate

5 share adjustment percentage applicable to the hospital

6 under paragraph (5)(F).

7 ‘‘(E)(i) Payments under this paragraph, subsection

8 (h)(3)(D), and section 1851F(1) for services or discharges

9 occurring in a calendar year shall not exceed the annual

10 limit described in clause (iii).

11 ‘‘(ii) At the beginning of each calendar year, if the

12 Secretary determines that the payments described in

13 clause (i) are likely to exceed the limit described in clause

14 (iii), the Secretary shall make an adjustment in the

15 amounts otherwise payable so that total payments will not

16 exceed such limit.

17 ‘‘(iii) The payment limit described in this subclause

18 is the sum, over all counties, of the product of the annual

19 per capita payment adjustment amount, described in

20 clause (iv), and the Secretary’s projection of average en21 rollment in eligible organizations with contracts under

22 part C.

23 ‘‘(iv) The payment adjustment amount described in

24 this clause for a particular county—
43

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1 ‘‘(I) for 1997, is 40 percent of the amount in2 cluded in the per capita rate of payment for 1996

3 determined under section 1876(a)(1)(C) for the pay4 ment adjustments described in section

5 1851F(e)(4)(C)(ii)(III) increased by the update fac6 tor described in clause (v);

7 ‘‘(II) for 1998 is the per capita payment adjust8 ment amount for 1997 as if ‘‘40 percent’’ in sub9 clause (I) was ‘‘100 percent’’, increased by the up10 date factor described in clause (v); and

11 ‘‘(III) for 1999 and subsequent years, is the per

12 capita payment adjustment amount for the previous

13 year increased by the update factor described in

14 clause (v).

15 ‘‘(v) The update factor described in clause (iv) is the

16 Secretary’s projection for the following calendar year of

17 average per capita growth in the payment adjustments de18 scribed in section 1851F(e)(4)(C)(ii)(III).

19 ‘‘(vi) Beginning in 1997, during the month of Janu20 ary, the Secretary shall promulgate the payment limit de21 scribed in clause (iii) for the following calendar year and

22 the payment adjustment described in clause (ii).’’.

23 (c) USE OF INTERIM FINAL REGULATIONS.—The

24 Secretary of Health and Human Services may issue regu-
44

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1 lations on an interim final basis to implement this section

2 and the amendments made by this Act.

3 SEC. 11115. SOLE COMMUNITY HOSPITALS.

4 (a) EXPANDING THE CHOICE OF BASE YEARS.—Sec5 tion 1886(b)(3)(C) (42 U.S.C. 1395ww(b)(3)(C)) is

6 amended—

7 (1) by striking ‘‘or’’ at the end of clause (iii),

8 (2) by striking the period at the end of clause

9 (iv) and inserting ‘‘, or’’, and

10 (3) by striking the second sentence and insert11 ing in its place the following:

12 ‘‘(v) If such a substitution results in an in13 crease in the target amount for the hospital, there

14 shall be substituted for the base cost reporting pe15 riod described in clause (i)—

16 ‘‘(I) a hospital’s cost reporting period (if

17 any) beginning during fiscal year 1987, or

18 ‘‘(II) beginning with discharges occurring

19 in fiscal year 1997, the average of—

20 ‘‘(aa) the allowable operating costs of

21 inpatient hospital services (as defined in

22 subsection (a)(4)) recognized under this

23 title for the hospital’s cost reporting period

24 (if any) beginning during fiscal year 1992

25 increased (in a compounded manner) by
45

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1 the applicable percentage increases applied

2 to such hospital under this paragraph for

3 cost reporting periods beginning in fiscal

4 year 1993 and for discharges occurring in

5 fiscal years 1994, 1995, and 1996, and

6 ‘‘(bb) the allowable operating costs of

7 inpatient hospital services (as defined in

8 subsection (a)(4)) recognized under this

9 title for the hospital’s cost reporting period

10 (if any) beginning during fiscal year 1993

11 increased (in a compounded manner) by

12 the applicable percentage increase applied

13 to such hospital under this paragraph for

14 discharges occurring in fiscal years 1994,

15 1995, and 1996.’’.

16 (b) ELIMINATING THE VOLUME ADJUSTMENT.—Sec17 tion 1886(d)(5)(D)(ii) (42 U.S.C. 1395ww(d)(5)(D)(ii)) is

18 amended by striking ‘‘In’’ at the beginning and inserting

19 ‘‘For cost reporting periods beginning before October 1,

20 1996, in’’.

21 SEC. 11116. RURAL PRIMARY CARE HOSPITAL PROGRAM.

22 (a) IN GENERAL.—The heading to section 1820 (42

23 U.S.C. 1395i–4)) is amended to read as follows:
46

•S 1926 IS

1 ‘‘RURAL PRIMARY CARE HOSPITAL PROGRAM’’.

2 (b) EXPANSION OF PROGRAM TO ALL STATES.—Sec3 tion 1820(a)(1) (42 U.S.C. 1395i–4(a)(1)) is amended by

4 striking ‘‘not more than 7’’.

5 (c) MORATORIUM ON NEW ESSENTIAL ACCESS COM6 MUNITY HOSPITAL DESIGNATIONS.—Section 1820 (42

7 U.S.C. 1395i–4)) is amended—

8 (1) in subsections (a)(3) and (b)(1)(C), by

9 striking ‘‘essential access community hospitals or’’

10 after ‘‘as’’,

11 (2) in subsection (c)(1)(B), by striking ‘‘an es12 sential access community hospital or’’ after ‘‘is des13 ignated as’’,

14 (3) in subsection (d)(1), by striking ‘‘essential

15 access community hospitals or’’ after ‘‘facilities in

16 the State as’’,

17 (4) in subsection (d)(2), by striking ‘‘or an es18 sential access community hospital’’ after ‘‘rural pri19 mary care hospital’’,

20 (5) by repealing subsection (e),

21 (6) in subsection (g)(1), by amending subpara22 graph (A) to read as follows:

23 ‘‘(A) at least one hospital that is not a

24 rural primary care hospital, and’’,

25 (7) in subsection (i)—
47

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1 (A) in the heading, by striking ‘‘HOS2 PITALS OR’’ and ‘‘BY SECRETARY’’,

3 (B) by striking paragraphs (1) and (2)(C),

4 (C) in paragraph (2)(A)(ii), by striking

5 ‘‘subparagraph (B)’’ and inserting ‘‘paragraph

6 (2)’’,

7 (D) by redesignating paragraph (2) as

8 paragraph (1),

9 (E) by striking the subparagraph designa10 tion ‘‘(B)’’ and inserting ‘‘(2) FACILITIES DES11 IGNATED BY THE SECRETARY.—’’,

12 (F) by striking the heading to paragraph

13 (1) (as redesignated by subparagraph (D) of

14 this paragraph) and the subparagraph designa15 tion ‘‘(A)’’ and inserting ‘‘FACILITIES DES16 IGNATED BY THE STATE.—’’, and

17 (G) by redesignating clauses (i) through

18 (iii) of paragraph (1) (as redesignated by sub19 paragraph (D) of this paragraph) as subpara20 graphs (A) through (C), and

21 (8) in paragraphs (1) and (2) of subsection (k),

22 by striking ‘‘an essential access community hospital

23 or’’ each time it appears.

24 (d) CONTINUING PARTICIPATION OF RURAL PRI25 MARY CARE HOSPITALS.—Section 1820(i)(1)(A) (42
48

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1 U.S.C. 1395i–4(i)(1)(A)) (as redesignated by subsection

2 (c)(7) of this section) is amended by inserting before the

3 semicolon the following: ‘‘(or in a State which the Sec4 retary finds would receive a grant under such subsection

5 during a fiscal year if funds were appropriated for grants

6 under such subsection for the fiscal year)’’.

7 (e) DESIGNATION OF NONPROFIT OR PUBLIC HOS8 PITALS.—Section 1820(f)(1)(A) (42 U.S.C. 1395i–

9 4(f)(1)(A)) is amended by inserting ‘‘is a nonprofit or pub10 lic hospital, and’’ after ‘‘(A)’’.

11 (f) ESTABLISHING A MINIMUM SEPARATION DIS12 TANCE BETWEEN FACILITIES.—Section 1820(f)(1) (42

13 U.S.C. 1395i–4(f)(1)) is amended—

14 (1) by striking ‘‘and’’ at the end of subpara15 graph (G),

16 (2) by striking the period at the end of sub17 paragraph (H) and inserting ‘‘; and’’, and

18 (3) by adding at the end the following:

19 ‘‘(I) is located at least a 35-mile drive from

20 any rural primary care hospital or hospital, or

21 is certified by the State as being a necessary

22 provider of health care services to residents in

23 the area, because of local geography or service

24 patterns.’’.
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1 (g) REMOVAL OF REQUIREMENT FOR PRIOR COMPLI2 ANCE WITH HOSPITAL STANDARDS.—Section

3 1820(f)(1)(B) (42 U.S.C. 1395i–4(f)(1)(B)) is amended

4 by striking ‘‘and had not been found, on the basis of a

5 survey under section 1864, to be in violation of any re6 quirement to participate as a hospital under this title’’.

7 (h) LIMITATION ON NUMBER OF INPATIENT BEDS.—

8 The matter in section 1820(f)(1)(F) (42 U.S.C. 1395i–

9 4(f)(1)(F)) preceding clause (i) is amended by striking

10 ‘‘6’’ and inserting ‘‘15’’.

11 (i) LIMITATION ON LENGTH OF INPATIENT STAYS.—

12 Section 1820(f) (42 U.S.C. 1395i–4(f)) is amended—

13 (1) in the matter in paragraph (1)(F) preceding

14 clause (i), by striking ‘‘subject to paragraph (4),’’,

15 (2) in paragraph (1)(F)(i), by striking ‘‘72

16 hours’’ and inserting ‘‘96 hours’’, and

17 (3) by striking paragraph (4).

18 (j) CONFORMING CHANGE.—Section 1814(a)(8) (42

19 U.S.C. 1395f(a)(8)) is amended by striking ‘‘within 72

20 hours’’ and inserting ‘‘within 96 hours’’.

21 (k) PERMITTING RURAL PRIMARY CARE HOSPITALS

22 TO MAINTAIN SWING BEDS.—Section 1820(f)(3) (42

23 U.S.C. 1395i–4(f)(3)) is amended—
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1 (1) in the first sentence, by striking ‘‘are used

2 for the furnishing of extended care services’’ through

3 ‘‘paragraph (1)(F))’’, and

4 (2) by amending the second sentence to read as

5 follows: ‘‘Nothing in this subsection shall be con6 strued to prohibit a rural primary care hospital from

7 entering into an agreement under section 1883

8 under which its facilities are used for the furnishing

9 of extended care services.’’.

10 (l) CONFORMING CHANGE.—Section 1883 (42 U.S.C.

11 1395tt) is amended by striking ‘‘hospital’’ each place it

12 appears and inserting ‘‘hospital or rural primary care hos13 pital’’.

14 (m) CHANGE IN PAYMENT METHODOLOGY.—Section

15 1814(l)(1) (42 U.S.C. 1395f(l)(1)) is amended by striking

16 ‘‘services—’’ and all that follows through the period and

17 inserting ‘‘services is the reasonable cost of the rural pri18 mary care hospital in providing such services, as deter19 mined under section 1861(v).’’.

20 (n) ELIMINATION OF DEADLINE FOR DEVELOPMENT

21 OF PROSPECTIVE PAYMENT SYSTEM.—Section 1814(l)

22 (42 U.S.C. 1395(l)(1)) is amended—

23 (1) by striking paragraph (2), and

24 (2) by striking ‘‘(l)(1)’’ and inserting ‘‘(l)’’.
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1 (o) NO CHANGE IN PAYMENT TO EXISTING ESSEN2 TIAL ACCESS COMMUNITY HOSPITALS.—

3 (1) IN GENERAL.—Section

4 1886(d)(5)(D)(iii)(III) (42 U.S.C.

5 1395ww(d)(5)(D)(iii)(III)) is amended—

6 (A) by inserting ‘‘was’’ after ‘‘is located in

7 a rural area and’’, and

8 (B) by striking ‘‘under section 1820(i)(1).’’

9 and inserting ‘‘under section 1820(i)(1) as in

10 effect on the day before effective date of the

11 Emergency Medicare Protection Act of 1996.

12 The application of a facility that was submitted

13 to the State for designation as an essential ac14 cess community hospital prior to January 1,

15 1996, and on which the State had not acted on

16 by that date shall be deemed to have been ap17 proved by the Secretary prior to the enactment

18 of the Emergency Medicare Protection Act of

19 1996 if, within 2 months of enactment—

20 ‘‘(aa) the State in which the facility is lo21 cated determines that such facility meets the

22 criteria for essential access community hospital

23 designation described in section 1820(e) as in

24 effect prior to the enactment of such Act (or
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1 solely fails to meet the criteria in section

2 1820(e)(2)), and

3 ‘‘(bb) the Secretary determines the facility

4 meets the criteria described in section

5 1820(i)(1)(A) (i) and (iii) as in effect prior to

6 the enactment of such Act.’’.

7 (2) CONFORMING AMENDMENT.—Section

8 1886(d)(5)(D)(v) (42 U.S.C. 1395ww(d)(5)(D)(v))

9 is amended—

10 (A) by inserting ‘‘was’’ after ‘‘is located in

11 a rural area and’’, and

12 (B) by inserting ‘‘as in effect on the day

13 before effective date of the Emergency Medicare

14 Protection Act of 1996’’ after ‘‘section

15 1820(I)(1)’’.

16 (p) CONFORMING AMENDMENT.—Section 1820(c)(3)

17 (42 U.S.C. 1395i–4(c)(3)) is amended by striking

18 ‘‘(i)(2)(C)’’ and inserting ‘‘(i)(2)’’.

19 (q) TECHNICAL AMENDMENT.—Section

20 1820(f)(1)(A) (42 U.S.C. 1395i–4(f)(1)(A)) is amended

21 by striking ‘‘section 1866(d)(2)(D)’’ and inserting ‘‘sec22 tion 1886(d)(2)(D)’’.

23 (r) MEDICAL ASSISTANCE FACILITIES.—Limited

24 service rural hospitals participating in a demonstration de25 scribed in section 4008(i)(1) of the Omnibus Budget Rec-
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1 onciliation Act of 1990 (and any facilities that have ap2 plied for inclusion in the demonstration as of the date of

3 the enactment of this Act and that would have been in4 cluded by the Secretary under provisions applicable as of

5 the date of enactment) shall be deemed to be rural pri6 mary care hospitals as long as they continue to meet the

7 requirements of the demonstration protocol relating to

8 staffing, services, quality assurance, and related factors.

9 SEC. 11117. RURAL REFERRAL CENTERS.

10 (a) PERMANENT GRANDFATHERING OF RURAL RE11 FERRAL CENTER STATUS.—

12 (1) IN GENERAL.—Section 1886(d)(5)(C) (42

13 U.S.C. 1395ww(d)(5)(C)) is amended by adding at

14 the end the following:

15 ‘‘(iii) Notwithstanding any other provisions of law,

16 any hospital that was classified as a rural referral center

17 under this subparagraph on September 30, 1994, shall

18 continue to be classified as a rural referral center for fiscal

19 year 1995 and each subsequent fiscal year with respect

20 to payments under this title, unless the area in which the

21 hospital is located is designated as an MSA for such fiscal

22 year.’’.

23 (2) PERMITTING HOSPITALS TO DECLINE RE24 CLASSIFICATION.—If any hospital fails to comply as

25 a rural referral center under section 1886(d)(5)(C)
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1 as a result of a decision by the Medicare Geographic

2 Classification Review Board under section

3 1886(d)(10) to reclassify the hospital as being lo4 cated in an urban area for fiscal year 1995 or fiscal

5 year 1996, the Secretary of Health and Human

6 Services shall—

7 (A) notify the hospital of the failure to

8 qualify,

9 (B) provide an opportunity for the hospital

10 to decline the reclassification, and

11 (C) if the hospital—

12 (i) declines the reclassification, admin13 ister the Social Security Act (other than

14 section 1886(d)(8)(D)) for such fiscal year

15 as if the decision by the Review Board had

16 not occurred, or

17 (ii) fails to decline the reclassification,

18 administer the Social Security Act without

19 regard to paragraph (1).

20 (b) GEOGRAPHIC RECLASSIFICATION AND GRAD21 UATED AREA WAGE INDEX FOR RURAL REFERRAL CEN22 TERS.—

23 (1) IN GENERAL.—Section 1886(d)(10)(D) (42

24 U.S.C. 1395ww(d)(10)(D)) is amended by adding at

25 the end the following new clauses:
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1 ‘‘(iv) Notwithstanding clause (i) and section

2 412.230(e)(1)(iii) of title 42, Code of Federal Regulations

3 (relating to criteria for use of an area’s wage index), with

4 respect to applications requesting a change in a hospital’s

5 geographic classification pursuant to subparagraph

6 (C)(i)(II) for fiscal year 1998 and subsequent fiscal years,

7 the Secretary shall treat an eligible hospital (as defined

8 in clause (v)) as if it were located in another area.

9 ‘‘(v) For purposes of clause (iv), an ‘‘eligible hos10 pital’’ means a hospital that—

11 ‘‘(I) is classified as a rural referral center under

12 paragraph (5)(C);

13 ‘‘(II) submits an application in accordance with

14 this paragraph requesting a change in the hospital’s

15 geographic classification pursuant to subparagraph

16 (C)(i)(II); and

17 ‘‘(III) meets all other applicable requirements

18 and standards except that the hospital’s average

19 hourly wage (as determined by the Secretary) is less

20 than 108 percent of the average hourly wage of the

21 hospitals in the area in which the hospital is lo22 cated.’’.

23 (2) WAGE INDEX.—Section 1886(d)(8)(C) (42

24 U.S.C. 1395ww(d)(8)(C)) is amended by adding at

25 the end the following new clause:
56

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1 ‘‘(v) Notwithstanding any other provision of

2 law—

3 ‘‘(I) in the case of an eligible hospital (as

4 defined in paragraph (10)(D)(iv) whose average

5 hourly wage (as determined by the Secretary) is

6 equal to or greater than 104 percent and less

7 than 108 percent of the average hourly wage of

8 the hospitals in the area in which the hospital

9 is located, the wage index for such hospital

10 shall be equal to the sum of—

11 ‘‘(aa) the wage index for the area in

12 which the hospital is located; and

13 ‘‘(bb) 66 percent of the difference be14 tween the wage index for the area to which

15 the hospital is reclassified (for a hospital

16 treated as if it were located in such area,

17 and the amount determined under item

18 (aa);

19 ‘‘(II) in the case of an eligible hospital

20 whose average hourly wage (as determined by

21 the Secretary) is greater than 100 percent and

22 less than 104 percent of the average hourly

23 wage of the hospitals in the areas in which the

24 hospital is located, the wage index of such hos25 pital shall be determined as if the reference in
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1 subclause (I) to ‘66 percent’ were a reference to

2 ‘33 percent’.’’.

3 (c) EFFECTIVE DATE.—The amendments made by

4 subsection (b) apply to applications submitted to the Medi5 care Geographic Classification Review Board under sec6 tion 1886(d)(10)(C) for reclassification in fiscal year

7 1998, and for each subsequent application period.

8 SEC. 11118. TELEMEDICINE.

9 Title XVII of the Public Health Service Act (42

10 U.S.C. 300u et seq.) is amended—

11 (1) in the title heading by striking out ‘‘AND

12 HEALTH PROMOTION’’ and inserting ‘‘,

13 HEALTH PROMOTION AND TELEMEDICINE

14 DEVELOPMENT’’;

15 (2) by inserting after the title heading the fol16 lowing:

17 ‘‘PART A—HEALTH INFORMATION AND HEALTH

18 PROMOTION’’;

19 and

20 (3) by adding at the end the following:

21 ‘‘PART B—TELEMEDICINE DEVELOPMENT

22 ‘‘GRANT PROGRAM FOR PROMOTING THE DEVELOPMENT

23 OF RURAL TELEMEDICINE NETWORKS.

24 SEC. 1711. (a) ESTABLISHMENT.—The Secretary

25 shall establish a program to award grants to eligible enti-
58

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1 ties in accordance with this subsection to promote the de2 velopment of rural telemedicine networks.

3 ‘‘(b) GRANTS FOR DEVELOPMENT OF RURAL TELE4 MEDICINE.—The Secretary, acting through the Office of

5 Rural Health Policy, shall award grants to eligible entities

6 that have applications approved under subsection (d) for

7 the purpose of expanding access to health care services

8 for individuals in rural areas through the use of telemedi9 cine. Grants shall be awarded under this section to—

10 ‘‘(1) encourage the initial development of rural

11 telemedicine networks;

12 ‘‘(2) expand existing networks;

13 ‘‘(3) link existing networks together; or

14 ‘‘(4) link such networks to existing fiber optic

15 telecommunications systems.

16 ‘‘(c) ELIGIBLE ENTITY DEFINED.—For the purposes

17 of this section the term ‘eligibility entity’ means hospitals

18 and other health care providers operating in a health care

19 network of community-based providers that includes at

20 least three of the following—

21 ‘‘(1) community or migrant health centers;

22 ‘‘(2) local health departments;

23 ‘‘(3) community mental health centers;

24 ‘‘(4) nonprofit hospitals;
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1 ‘‘(5) private practice health professionals, in2 cluding rural health clinics; or

3 ‘‘(6) other publicly funded health or social serv4 ices agencies.

5 ‘‘(d) APPLICATION.—To be eligible to receive a grant

6 under this section an eligible entity shall prepare and sub7 mit to the Secretary an application at such time, in such

8 manner and containing such information as the Secretary

9 may require, including a description of—

10 ‘‘(1) the need of the entity for the grant;

11 ‘‘(2) the use to which the entity would apply

12 any amounts received under such grant;

13 ‘‘(3) the source and amount of non-Federal

14 funds that the entity will pledge for the project

15 funded under the grant; and

16 ‘‘(4) the long-term viability of the project and

17 evidence of the providers commitment to the net18 work.

19 ‘‘(e) PREFERENCE IN AWARDING GRANTS.—In

20 awarding grants under this section, the Secretary shall

21 give preference to applicants that—

22 ‘‘(1) are health care providers operating in

23 rural health care networks or that propose to form

24 such networks with the majority of the providers in
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1 such networks being located in a medically under2 served area or health professional shortage area;

3 ‘‘(2) can demonstrate broad geographic cov4 erage in the rural areas of the State, or States in

5 which the applicant is located;

6 ‘‘(3) propose to use funds received under the

7 grant to develop plans for, or to establish, telemedi8 cine systems that will link rural hospitals and rural

9 health care providers to other hospitals and health

10 care providers;

11 ‘‘(4) will use the amounts provided under the

12 grant for a range of health care applications and to

13 promote greater efficiency in the use of health care

14 resources;

15 ‘‘(5) demonstrate the long-term viability of

16 projects through use of local matching funds (in

17 cash or in-kind); and

18 ‘‘(6) demonstrate financial, institutional, and

19 community support and the long-range viability of

20 the network.

21 ‘‘(f) USE OF AMOUNTS.—Amounts received under a

22 grant awarded under this section shall be utilized for the

23 development of telemedicine networks. Such amounts may

24 be used to cover the costs associated with the development

25 of telemedicine networks and the acquisition of telemedi-
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1 cine equipment and modifications or improvements of tele2 communications facilities, including—

3 ‘‘(1) the development and acquisition through

4 lease or purchase of computer hardware and soft5 ware, audio and visual equipment, computer network

6 equipment, modification or improvements to tele7 communications transmission facilities, telecommuni8 cations terminal equipment, interactive video equip9 ment, data terminal equipment, and other facilities

10 and equipment that would further the purposes of

11 this section;

12 ‘‘(2) the provision of technical assistance and

13 instruction for the development and use of such pro14 gramming equipment or facilities;

15 ‘‘(3) the development and acquisition of instruc16 tional programming;

17 ‘‘(4) the development of projects for teaching or

18 training medical students, residents, and other

19 health professions students in rural training sites

20 about the application of telemedicine;

21 ‘‘(5) transmission costs, maintenance of equip22 ment, and compensation of specialists and referring

23 practitioners;
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1 ‘‘(6) the development of projects to use tele2 medicine to facilitate collaboration between health

3 care providers; and

4 ‘‘(7) such other uses that are consistent with

5 achieving the purposes of this section as approved by

6 the Secretary.

7 ‘‘(g) PROHIBITED USE OF AMOUNTS.—Amounts re8 ceived under a grant awarded under this section shall not

9 be used for—

10 ‘‘(1) expenditures to purchase or lease equip11 ment to the extent the expenditures would exceed

12 more than 60 percent of the total grant funds; or

13 ‘‘(2) expenditures for indirect costs (as deter14 mined by the Secretary) to the extent the expendi15 tures would exceed more than 10 percent of the total

16 grant funds.

17 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

18 are authorized to be appropriated such sums as may be

19 necessary to carry out this section.

20 ‘‘(i) DEFINITION.—For the purposes of this section,

21 the term ‘rural health care network’ means a group of

22 rural hospitals or other rural health care providers (includ23 ing clinics, physicians, and nonphysicians primary care

24 providers) that have entered into a relationship with each

25 other or with nonrural hospitals and health care providers
63

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1 for the purpose of strengthening the delivery of health care

2 services in rural areas or specifically to improve their pa3 tients’ access to telemedicine services. At least 75 percent

4 of hospitals and other health care providers participating

5 in the network shall be located in rural areas.’’.

6 SEC. 11119. ESTABLISHMENT OF RURAL HEALTH OUT7 REACH GRANT PROGRAM.

8 Title III of the Public Health Service Act (42 U.S.C.

9 241 et seq.) is amended by adding at the end the follow10 ing:

11 ‘‘PART O—RURAL HEALTH OUTREACH GRANTS

12 ‘‘RURAL HEALTH OUTREACH GRANT PROGRAM.

13 ‘‘SEC. 3990 (a) IN GENERAL.—The Secretary may

14 make grants to demonstrate the effectiveness of outreach

15 to populations in rural areas that do not normally seek

16 or do not have access to health or mental health services.

17 Grants shall be awarded to enhance linkages, integration,

18 and cooperation in order to provide health or mental

19 health services, to enhance services, or increase access to

20 or utilization of health or mental health services.

21 ‘‘(b) MISSION OF THE OUTREACH PROJECTS.—

22 Projects funded under subsection (a) should be designed

23 to facilitate the integration and coordination of services

24 in or among rural communities in order to address the
64

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1 needs of populations living in rural or frontier commu2 nities.

3 ‘‘(c) COMPOSITION OF PROGRAM.—

4 ‘‘(1) CONSORTIUM ARRANGEMENT.—To be eli5 gible to participate in the grant program established

6 under subsection (a), an applicant entity shall be a

7 consortium of three or more separate and distinct

8 entities formed to carry out an outreach project

9 under subsection (b).

10 ‘‘(2) CERTAIN REQUIREMENTS.—A consortium

11 under paragraph (1) shall be composed of three or

12 more public or private nonprofit health care or social

13 service providers. Consortium members may include

14 local health departments, community or migrant

15 health centers, community mental health centers,

16 hospitals or private practices, or other publicly fund17 ed health or social service agencies.

18 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—For the

19 purpose of carrying out this section, there are authorized

20 to be appropriated $30,000,000 for fiscal year 1997, and

21 such sums as may be necessary for each of the fiscal years

22 1998 through 2001.’’.

23 SEC. 11120. MEDICARE-DEPENDENT, SMALL, RURAL HOS24 PITAL PAYMENT EXTENSION.

25 (a) SPECIAL TREATMENT EXTENDED.—
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1 (1) PAYMENT METHODOLOGY.—Section

2 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(g)) is

3 amended—

4 (A) in clause (i), by striking ‘‘October 1,

5 1994,’’ and inserting ‘‘October 1, 1994, or be6 ginning on or after October 1, 1996, and before

7 October 1, 2000,’’;

8 (B) by striking ‘‘and’’ at the end of clause

9 (ii)(I);

10 (C) by striking the period at the end of

11 clause (ii)(II) and inserting a semicolon;

12 (D) by adding at the end of clause (ii) the

13 following:

14 ‘‘(III) for discharges occurring during any cost

15 reporting period beginning on or before October 1,

16 1996, and before October 1, 2000, 50 percent of the

17 amount by which the hospital’s target amount (as

18 defined in subclause (IV)) for the cost reporting pe19 riod exceeds the amount determined under para20 graph (1)(A)(iii); and

21 ‘‘(IV) for purposes of subclause (III), a facili22 ty’s target amount for the cost reporting period is

23 as defined in subsection (b)(3)(D) except that the

24 base cost reporting period shall be determined in ac25 cordance with subsection (b)(3)(C)(v)(II), as amend-
66

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1 ed in the Emergency Medicare Protection Act of

2 1996.’’; and

3 (E) In clause (iv)—

4 (i) in subclause (III), by striking

5 ‘‘and’’,

6 (ii) in subclause (IV), by striking the

7 period and inserting a comma, and

8 (iii) by adding at the end the follow9 ing:

10 ‘‘(V) for cost reporting periods beginning

11 on or after October 1, 1996, for which not less

12 than 60 percent of its inpatient days or dis13 charges during the cost reporting periods begin14 ning in fiscal year 1992 and fiscal year 1993

15 were attributable to inpatients for which pay16 ments are made under this subsection.’’.

17 (2) EXTENSION OF TARGET AMOUNT.—Section

18 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) is

19 amended—

20 (A) in the matter preceding clause (i), by

21 striking ‘‘September 30, 1994,’’ and inserting

22 ‘‘September 30, 1994, and for cost reporting

23 periods beginning on or after October 1, 1996,

24 and before October 1, 2000,’’;
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1 (B) in clause (ii), by striking ‘‘and’’ at the

2 end;

3 (C) in clause (iii) by striking the period at

4 the end and inserting a comma; and

5 (D) by adding at the end the following new

6 clauses:

7 ‘‘(iv) with respect to discharges occurring dur8 ing fiscal year 1997, the target amount shall be de9 fined as the average of—

10 ‘‘(I) the allowable operating costs of inpa11 tient hospital services (as defined in subsection

12 (a)(4)) recognized under this title for the hos13 pital’s cost reporting period (if any) beginning

14 during fiscal year 1992 increased (in a

15 compounded manner) by the applicable percent16 age increases applied to such hospital under

17 this paragraph for cost reporting periods begin18 ning in fiscal year 1993 and for discharges oc19 curring in fiscal years 1994, 1995, and 1996,

20 and

21 ‘‘(II) the allowable operating costs of inpa22 tient hospital services (as defined in subsection

23 (a)(4)) recognized under this title for the hos24 pital’s cost reporting period (if any) beginning

25 during fiscal year 1993 increased (in a
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1 compounded manner) by the applicable percent2 age increase applied to such hospital for dis3 charges occurring in fiscal years 1994, 1995,

4 and 1996, and

5 ‘‘(v) with respect to discharges occurring during

6 fiscal years 1998 through 2000, the target amount

7 for the preceding year increased by the applicable

8 percentage increase under subparagraph (B)(iv).’’.

9 (3) PERMITTING HOSPITALS TO DECLINE RE10 CLASSIFICATION.—Section 13501(e)(2) of OBRA–93

11 (42 U.S.C. 1395ww note) is amended by striking

12 ‘‘or fiscal year 1994’’ and inserting ‘‘, fiscal year

13 1994, fiscal year 1995, fiscal year 1996, fiscal year

14 1997, fiscal year 1998, or fiscal year 1999’’.

15 (b) EFFECTIVE DATE.—The amendments made by

16 subsection (a) apply with respect to discharges occurring

17 during portions of cost reporting periods beginning on or

18 after October 1, 1996.

19 Subtitle B—Provisions Relating to

20 Part B

21 SEC. 11121. PAYMENTS FOR PHYSICIANS’ SERVICES.

22 (a) ESTABLISHING UPDATE TO CONVERSION FACTOR

23 TO MATCH SPENDING UNDER SUSTAINABLE GROWTH

24 RATE.—

25 (1) UPDATE—
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1 (A) IN GENERAL.—Section 1848(d)(3) (42

2 U.S.C. 1395W–4(d)(3)) is amended to read as

3 follows:

4 ‘‘(3) UPDATE.—

5 ‘‘(A) IN GENERAL.—Unless Congress oth6 erwise provides, subject to subparagraph (D)

7 and the budget-neutrality factor determined by

8 the Secretary under subsection (c)(2)(B)(ii), the

9 update to the single conversion factor estab10 lished in paragraph (1)(C) for a year beginning

11 with 1997 shall be determined as follows:

12 ‘‘(i) 1997.—The update for 1997

13 shall be the Secretary’s estimate of the

14 weighted average of the three separate up15 dates that would otherwise occur were it

16 not for the enactment of section 11121 of

17 the Emergency Medicare Protection Act of

18 1996.

19 ‘‘(ii) SUBSEQUENT YEARS.—The up20 date for years beginning with 1998 shall

21 be equal to the product of—

22 ‘‘(I) 1 plus the Secretary’s esti23 mate of the percentage increase in the

24 MEI (described in section 1842(i)(3))

25 for the year (divided by 100, and
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1 ‘‘(II) 1 plus the Secretary’s esti2 mate of the update adjustment factor

3 for the year (divided by 100),

4 minus 1 and multiplied by 100.

5 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

6 ‘update adjustment factor’ for a year is equal to

7 the quotient (as estimated by the Secretary)

8 of—

9 ‘‘(i) the difference between (I) the

10 sum of the allowed expenditures for physi11 cians’ services furnished during each of the

12 fiscal years 1995 through the year in13 volved, and (II) the sum of the amount of

14 actual expenditures for physicians’ services

15 furnished during each of the fiscal years

16 1995 through the previous year, divided by

17 ‘‘(ii) the allowed expenditures for phy18 sicians’ services furnished during the fiscal

19 year.

20 ‘‘(C) DETERMINATION OF ALLOWED EX21 PENDITURES.—For purposes of subparagraph

22 (B), allowed expenditures for physicians’ serv23 ices shall be determined as follows (as esti24 mated by the Secretary):
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1 ‘‘(i) 1995.—In the case of allowed ex2 penditures for 1995, such expenditures

3 shall be equal to actual expenditures for

4 services furnished during fiscal year 1995.

5 ‘‘(ii) SUBSEQUENT YEARS.—In the

6 case of allowed expenditures for 1996 and

7 each subsequent year, such expenditures

8 shall be equal to allowed expenditures for

9 the previous fiscal year increased by the

10 sustainable growth rate under subsection

11 (f) for the fiscal year.

12 ‘‘(D) RESTRICTION ON VARIATION FROM

13 MEDICARE ECONOMIC INDEX.—Notwithstand14 ing the amount of the update adjustment factor

15 determined under subparagraph (B), the update

16 in the conversion factor under this paragraph

17 for a year may not be—

18 ‘‘(i) greater than 1.03 plus the Sec19 retary’s estimate of the percentage in20 crease in the MEI (described in section

21 1842(i)(3)) for the year (divided by 100),

22 minus 1 and multiplied by 100, or

23 ‘‘(ii) less than 0.9175 plus the Sec24 retary’s estimate of the percentage in25 crease in the MEI (described in section
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1 1842(i)(3)) for the year (divided by 100),

2 minus 1 and multiplied by 100.’’.

3 (B) EFFECTIVE DATE.—The amendments

4 made by subparagraph (A) apply to physicians’

5 services furnished on or after January 1, 1997.

6 (2) CONFORMING AMENDMENTS.—

7 (A) SECTION 1848(d)(2).—Section

8 1848(d)(2)(A) (42 U.S.C. 1395w–4(d)(2)(A)) is

9 amended—

10 (i) in the matter preceding clause

11 (i)—

12 (I) by striking ‘‘(or factors) in

13 the conversion factor (or factors)’’

14 and inserting ‘‘in the conversion fac15 tor’’,

16 (II) by striking ‘‘(beginning with

17 1991)’’ and inserting ‘‘(beginning

18 with 1996)’’, and

19 (III) by striking the second sen20 tence,

21 (ii) by amending clause (ii) to read as

22 follows:

23 ‘‘(ii) such factors as enter into the

24 calculation of the update adjustment factor

25 as described in paragraph (3)(B); and’’,
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1 (iii) by amending clause (iii) to read

2 as follows:

3 ‘‘(iii) access to services.’’,

4 (iv) by striking clauses (iv), (v), and

5 (vi), and

6 (v) by striking the last sentence.

7 (B) SECTION 1848(d)(2)(B).—Section

8 1848(d)(2)(B) (42 U.S.C. 1395w–4(d)(2)(B))

9 is amended—

10 (i) by striking ‘‘and’’ at the end of

11 clause (iii),

12 (ii) by striking the period at the end

13 of clause (iv) and inserting ‘‘; and’’, and

14 (iii) by adding at the end the follow15 ing new clause:

16 ‘‘(v) changes in volume or intensity of

17 services.’’.

18 (C) REDESIGNATION OF SUBPARA19 GRAPH.—Section 1848(d)(2) (42 U.S.C.

20 1395w–4(d)(2)) is further amended—

21 (i) by striking subparagraphs (C),

22 (D), and (E),

23 (ii) by redesignating subparagraph

24 (F) as subparagraph (C), and
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1 (iii) in subparagraph (C), as redesig2 nated, by striking ‘‘(or updates) in the con3 version factor (or factors)’’ and inserting

4 ‘‘in the conversion factor’’.

5 (b) REPLACEMENT OF VOLUME PERFORMANCE

6 STANDARD WITH SUSTAINABLE GROWTH RATE.—

7 (1) IN GENERAL.—Section 1848(f) (42 U.S.C.

8 1395w–4(f)) is amended by striking paragraphs (2)

9 through (5) and inserting the following:

10 ‘‘(2) SPECIFICATION OF GROWTH RATE.—

11 ‘‘(A) FISCAL YEAR 1996.—The sustainable

12 growth rate for all physicians’ services for fiscal

13 year 1996 shall be equal to the product of—

14 ‘‘(i) 1 plus the Secretary’s estimate of

15 the percentage increase in the MEI (de16 scribed in section 1842(i)(3)) for 1996 (di17 vided by 100),

18 ‘‘(ii) 1 plus the Secretary’s estimate of

19 the percentage change (divided by 100) in

20 the average number of individuals enrolled

21 under this part (other than private plan

22 enrollees) from fiscal year 1995 to fiscal

23 year 1996,

24 ‘‘(iii) 1 plus the Secretary’s estimate

25 of the projected percentage growth in real
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1 gross domestic product per capita (divided

2 by 100) from fiscal year 1995 to fiscal

3 year 1996, plus 1 percentage point, and

4 ‘‘(iv) 1 plus the Secretary’s estimate

5 of the percentage change (divided by 100)

6 in expenditures for all physicians’ services

7 in fiscal year 1996 (compared with fiscal

8 year 1995) which will result from changes

9 in law (including the Emergency Medicare

10 Protection Act of 1996), determined with11 out taking into account estimated changes

12 in expenditures due to changes in the vol13 ume and intensity of physicians’ services

14 resulting from changes in the update to

15 the conversion factor under subsection (d),

16 minus 1 and multiplied by 100.

17 ‘‘(B) SUBSEQUENT YEARS.—The sustain18 able growth rate for all physicians’ services for

19 fiscal year 1997 and each subsequent year shall

20 be equal to the product of—

21 ‘‘(i) 1 plus the Secretary’s estimate of

22 the percentage increase in the MEI for the

23 fiscal year involved (described in section

24 1842(i)(3)) (divided by 100),
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1 ‘‘(ii) 1 plus the Secretary’s estimate of

2 the percentage change (divided by 100) in

3 the average number of individuals enrolled

4 under this part (other than private plan

5 enrollees) from the previous fiscal year to

6 the fiscal year involved,

7 ‘‘(iii) 1 plus the Secretary’s estimate

8 of the projected percentage growth in real

9 gross domestic product per capita (divided

10 by 100) from the previous fiscal year to

11 the fiscal year involved, plus 1 percentage

12 point, and

13 ‘‘(iv) 1 plus the Secretary’s estimate

14 of the percentage change (divided by 100)

15 in expenditures for all physicians’ services

16 in the fiscal year (compared with the pre17 vious fiscal year) which will result from

18 changes in law, determined without taking

19 into account estimated changes in expendi20 tures due to changes in the volume and in21 tensity of physicians’ services resulting

22 from changes in the update to the conver23 sion factor under subsection (d),

24 minus 1 and multiplied by 100.

25 ‘‘(3) DEFINITIONS.—In this subsection:
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1 ‘‘(A) SERVICES INCLUDED IN PHYSICIANS’

2 SERVICES.—The term ‘physicians’ services’ in3 cludes other items and services (such as clinical

4 diagnostic laboratory test and radiology serv5 ices), specified by the Secretary, that are com6 monly performed or furnished by a physician or

7 in a physician’s office, but does not include

8 services furnished to an eligible organization en9 rollee.

10 ‘‘(B) ELIGIBLE ORGANIZATION EN11 ROLLEE.—The term ‘eligible organization en12 rollee’ means, with respect to a fiscal year, an

13 individual enrolled under this part who has

14 elected to receive benefits under this title

15 through an eligible organization with a contract

16 under part C (and, through 2000, enrollment

17 with an organization with a contract under sec18 tion 1876(h).’’.

19 (2) CONFORMING AMENDMENTS.—Section

20 1848(f) (42 U.S.C. 1395w–4(f)) is amended—

21 (A) in the heading, by striking ‘‘VOLUME

22 PERFORMANCE STANDARD RATES OF IN23 CREASE’’ and inserting ‘‘SUSTAINABLE

24 GROWTH RATE’’,

25 (B) in paragraph (1)—
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1 (i) in the heading, by striking ‘‘VOL2 UME PERFORMANCE STANDARD RATES OF

3 INCREASE’’ and inserting ‘‘SUSTAINABLE

4 GROWTH RATE’’,

5 (ii) in subparagraph (a), in the matter

6 preceding clause (i), by striking ‘‘perform7 ance standard rates of increase’’ and in8 serting ‘‘sustainable growth rate’’, and

9 (iii) in subparagraph (A), by striking

10 ‘‘HMO enrollees’’ each place it appears

11 and inserting ‘‘eligible organization enroll12 ees’’,

13 (C) in subparagraph (B), by striking ‘‘per14 formance standard rates of increase’’ and in15 serting ‘‘sustainable growth rate’’, and

16 (D) in subparagraph (C)—

17 (i) in the heading, by striking ‘‘PER18 FORMANCE STANDARD RATES OF IN19 CREASE’’ and inserting ‘‘SUSTAINABLE

20 GROWTH RATE’’,

21 (ii) in the first sentence, by striking

22 ‘‘with 1991), the performance standard

23 rates of increase’’ and all that follows

24 through the first period and inserting

25 ‘‘with 1997), the sustainable growth rate
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1 for the fiscal year beginning in that year.’’,

2 and

3 (iii) in the second sentence, by strik4 ing ‘‘January 1, 1990, the performance

5 standard rate of increase under subpara6 graph (D) for fiscal year 1990’’ and insert7 ing ‘‘January 1, 1997, the sustainable

8 growth rate for fiscal year 1997’’.

9 (c) ESTABLISHMENT OF SINGLE CONVERSION FAC10 TOR FOR 1996.—

11 (1) IN GENERAL.—Section 1848(d)(1) (42

12 U.S.C. 1395w–4(d)(1)) is amended—

13 (A) by redesignating subparagraph (C) as

14 subparagraph (E), and

15 (B) by inserting after subparagraph (B)

16 the following:

17 ‘‘(C) SPECIAL RULES FOR 1996.—The sin18 gle conversion factor for 1996 under this sub19 section shall be $35.42 for all physicians’ serv20 ices (other than services covered in subpara21 graph (D)), except that during 1996, conversion

22 factors shall be used for surgical services and

23 nonsurgical services (as defined in subsection

24 (j)(1)) at the levels otherwise established by the

25 Secretary for such services.
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1 ‘‘(D) SPECIAL RULES FOR ANESTHESIA

2 SERVICES.—If the Secretary establishes a sepa3 rate relative value scale and conversion factor

4 for anesthesia services for a year, the separate

5 conversion factor for anesthesia services shall

6 be updated from the conversion factor that ap7 plied for such services in the previous year—

8 ‘‘(i) for 1997, by the same percentage

9 change as for the category of surgical serv10 ices as defined in subsection (j)(1), and

11 ‘‘(ii) for 1998 and thereafter, by the

12 same percentage change as would apply for

13 all physicians’ services as determined

14 under paragraph (3).’’.

15 (2) CONFORMING AMENDMENTS.—Section 1848

16 (42 U.S.C. 1395w–4) is amended—

17 (A) by striking ‘‘(or factors)’’ each place it

18 appears in subsection (d)(1) (A) and (E)(ii) (as

19 redesignated by paragraph (1)(A),

20 (B) in subsection (d)(1)(A), by striking ‘‘or

21 updates’’,

22 (C) in subsection (d)(1)(E)(ii) (as redesig23 nated by paragraph (1)(A)), by striking ‘‘(or

24 updates)’’, and
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1 (D) in subsection (i)(1)(C), by striking

2 ‘‘conversion factors’’ and inserting ‘‘the conver3 sion factor’’.

4 SEC. 11122. PRACTICE EXPENSE RELATIVE VALUE UNITS.

5 (a) EXTENSION TO 1997.—Section 1848(c)(2)(E)(i)

6 (42 U.S.C. 1395w–4(c)(2)(E)(i)) is amended—

7 (1) by striking ‘‘and’’ at the end of subclause

8 (II),

9 (2) by striking the period at the end of sub10 clause (III) and inserting ‘‘, and’’, and

11 (3) by inserting at the end the following:

12 ‘‘(IV) 1997, by an additional 25 percent of

13 such excess.’’.

14 (b) CHANGE IN FLOOR ON REDUCTIONS AND SERV15 ICES COVERED.—Clauses (ii) and (iii)(II) of section

16 1848(c)(2)(E) (42 U.S.C. 1395w–4(c)(2)(E)) are each

17 amended by inserting ‘‘(or 115 percent in the case of

18 1997)’’ after ‘‘128 percent’’.

19 SEC. 11123. SINGLE FEE FOR SURGERY.

20 (a) IN GENERAL.—Section 1848(a) (42 U.S.C.

21 1395w–4(a)) is amended by adding at the end the follow22 ing:

23 ‘‘(5) SINGLE FEE FOR SURGERY.—

24 ‘‘(A) GENERAL RULE.—Payment under

25 this part for surgical services (as defined by the
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1 Secretary under subsection (j)(1)), when a sep2 arate payment is also made for the services of

3 a physician or other practitioners acting as an

4 assistant at surgery, may not (except as pro5 vided in subparagraph (B)), when added to the

6 separate payment made for the services of that

7 other practitioner, exceed the amount that

8 would be paid for the surgical services if a sepa9 rate payment were not made for the services of

10 that practitioner.

11 ‘‘(B) EXCEPTIONS.—The Secretary may

12 specify surgery procedures or situations to

13 which subparagraph (A) does not apply.’’.

14 (b) CONFORMING AMENDMENT.—Section

15 1848(g)(2)(D) (42 U.S.C. 1395w–4(g)(2)(D)) is amended

16 by inserting ‘‘(or the lower amount under subsection

17 (a)(5))’’ after ‘‘subsection (a)’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section apply to services furnished on or after Janu20 ary 1, 1997.

21 SEC. 11124. INCENTIVES TO CONTROL HIGH VOLUME FOR

22 IN-HOSPITAL PHYSICIANS’ SERVICES.

23 (a) IN GENERAL.—
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1 (1) LIMITATIONS DESCRIBED.—Part B of title

2 XVIII is amended by adding at the end the follow3 ing:

4 ‘‘SEC. 1849. INCENTIVES TO CONTROL HIGH VOLUME FOR

5 IN-HOSPITAL PHYSICIANS’ SERVICES.

6 ‘‘(a) SERVICES SUBJECT TO REDUCTION.—

7 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

8 PER ADMISSION RELATIVE VALUE.—Not later than

9 October 1 of each year (beginning with 1998), the

10 Secretary shall determine for each hospital—

11 ‘‘(A) the hospital-specific per admission

12 relative value under subsection (b)(2) for the

13 following year, and

14 ‘‘(B) whether such hospital-specific relative

15 value is projected to exceed the allowable aver16 age per admission relative value applicable to

17 the hospital for the following year under sub18 section (b)(1).

19 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

20 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

21 RELATIVE VALUE.—If the Secretary determines

22 (under paragraph (1)) that a medical staff’s hos23 pital-specific per admission relative value applicable

24 to the medical staff for the year, the Secretary shall

25 reduce (in accordance with subsection (c)) the
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1 amount of payment otherwise determined under this

2 part for each physician’s service furnished during

3 the year to an inpatient of the hospital by an indi4 vidual who is a member of the hospital’s medical

5 staff.

6 ‘‘(3) TIMING OF DETERMINATION; NOTICE TO

7 MEDICAL STAFFS AND CARRIERS.—Not later than

8 October 1 of each year (beginning with 1998), the

9 Secretary shall notify the medical executive commit10 tee of each hospital (as set forth in the Standards

11 of the Joint Commission on the Accreditation of

12 Health Organizations) of the determinations made

13 with respect to the medical staff under paragraph

14 (1).

15 ‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE

16 PER ADMISSION RELATIVE VALUE AND HOSPITAL-SPE17 CIFIC PER ADMISSION RELATIVE VALUES.—

18 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

19 RELATIVE VALUES.—

20 ‘‘(A) URBAN HOSPITALS.—In the case of a

21 hospital located in an urban area, the allowable

22 average per admission relative value established

23 under this subsection for 1999 and 2000 is

24 equal to 125 percent and for years after 2000

25 is 120 percent of the median of 1997 hospital-
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1 specific per admission relative values deter2 mined under paragraph (2) for all hospital

3 medical staffs.

4 ‘‘(B) RURAL HOSPITALS.—In the case of a

5 hospital located in a rural area, the allowable

6 average per admission relative value established

7 under this subsection for 1999 and each suc8 ceeding year, is equal to 140 percent of the me9 dian of the 1997 hospital-specific per admission

10 relative values determined under paragraph (2)

11 for all hospital medical staffs.

12 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL13 ATIVE VALUE.—

14 ‘‘(A) IN GENERAL.—The hospital-specific

15 per admission relative value projected for a hos16 pital (other than a teaching hospital) for a cal17 endar year, shall be equal to the average per

18 admission relative value (as determined under

19 section 1848(c)(2)) for physicians’ services fur20 nished to inpatients of the hospital by the hos21 pital’s medical staff (excluding interns and resi22 dents) during the second year preceding such

23 calendar year, adjusted for variations in case24 mix and disproportionate share status among
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1 hospitals (as determined by the Secretary under

2 subparagraph (C)).

3 ‘‘(B) SPECIAL RULE FOR TEACHING HOS4 PITALS.—The hospital-specific relative value

5 projected for a teaching hospital in a calendar

6 year shall be equal to the sum of—

7 ‘‘(i) the average per admission relative

8 value (as determined under section

9 1848(c)(2)) for physicians’ services fur10 nished to inpatients of the hospital by the

11 hospital’s medical staff (excluding interns

12 and residents) during the second year pre13 ceding such calendar year, and

14 ‘‘(ii) the equivalent per admission rel15 ative value (as determined under section

16 1848(c)(2)) for physicians’ services fur17 nished to inpatients of the hospital by in18 terns and residents of the hospital during

19 the second year preceding such calendar

20 year, adjusted for variations in case-mix,

21 disproportionate share status, and teaching

22 status among hospitals (as determined by

23 the Secretary under subparagraph (C)).

24 The Secretary shall determine such equiva25 lent relative value unit per admission for
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1 interns and residents based on the best

2 available data and may make such adjust3 ment in the aggregate.

4 ‘‘(C) ADJUSTMENT FOR TEACHING AND

5 DISPROPORTIONATE SHARE HOSPITALS.—The

6 Secretary shall adjust the allowable per admis7 sion relative values otherwise determined under

8 this paragraph to take into account the needs

9 of teaching hospitals and hospitals receiving ad10 ditional payments under subparagraphs (F) and

11 (G) of section 1886(d)(5). The adjustment for

12 teaching status or disproportionate share shall

13 not be less than zero.

14 ‘‘(c) AMOUNT OF REDUCTION.—The amount of pay15 ment otherwise made under this part for a physician’s

16 service that is subject to a reduction under subsection (a)

17 during a year shall be reduced 15 percent, in the case of

18 a service furnished by a member of the medical staff of

19 the hospital for which the Secretary determines under sub20 section (a)(1) that the hospital medical staff’s projected

21 relative value per admission exceeds the allowable average

22 per admission relative value.

23 ‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON

24 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

25 WITH ACTUAL RELATIVE VALUES.—
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1 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

2 PER ADMISSION RELATIVE VALUE.—Not later than

3 October 1 of each year (beginning with 2000), the

4 Secretary shall determine the actual average per ad5 mission relative value (as determined pursuant to

6 section 1848(c)(2)) for the physicians’ services fur7 nished by members of a hospital’s medical staff to

8 inpatients of the hospital during the previous year,

9 on the basis of claims for payment for such services

10 that are submitted to the Secretary not later than

11 90 days after the last day of such previous year. The

12 actual average per admission relative value shall be

13 adjusted by the appropriate case-mix, disproportion14 ate share factor, and teaching factor for the hospital

15 medical staff (as determined by the Secretary under

16 subsection (b)(2)(C)). Notwithstanding any other

17 provision of this title, no payment may be made

18 under this part for any physician’s service furnished

19 by a member of a hospital’s medical staff to an inpa20 tient of the hospital during a year unless such claim

21 is submitted to the Secretary for payment for such

22 service not later than 90 days after the last day of

23 the year.

24 ‘‘(2) RECONCILIATION WITH REDUCTIONS

25 TAKEN.—In the case of a hospital for which the pay-
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1 ment amounts for physicians’ services furnished by

2 members of the hospital’s medical staff to inpatients

3 of the hospital were reduced under this section for

4 a year—

5 ‘‘(A) if the actual average per admission

6 relative value for such hospital’s medical staff

7 during the year (as determined by the Secretary

8 under paragraph (1)) did not exceed the allow9 able average per admission relative value appli10 cable to the hospital’s medical staff under sub11 section (b)(1) for the year, the Secretary shall

12 reimburse the fiduciary agent for the medical

13 staff by the amount by which payments for

14 such services were reduced for the year under

15 subsection (c), including interest at an appro16 priate rate determined by the Secretary; and

17 ‘‘(B) if the actual average per admission

18 relative value for such hospital’s medical staff

19 during the year exceeded the allowable average

20 per admission relative value applicable to the

21 hospital’s medical staff under subsection (a)(1)

22 for the year, the Secretary shall reimburse the

23 fiduciary agent for the medical staff the amount

24 withheld under subsection (c) multiplied by the

25 ‘final ratio’, including interest at an appropriate
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1 rate determined by the Secretary. The final

2 ratio described in the previous sentence shall be

3 determined by dividing the difference between

4 the initial ratio and 0.85, by 0.15, where the

5 initial ratio is determined by dividing the medi6 cal staff’s allowable average per admission rel7 ative value for a year (as determined under sub8 section (a)(1)) by the medical staff’s actual hos9 pital-specific per admission relative value for

10 such year, but in no case shall the initial ratio

11 be less than 0.85.

12 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

13 HOSPITAL.—Each medical executive committee of a

14 hospital whose medical staff is projected to exceed

15 the allowable relative value per admission for a year,

16 shall have one year from the date of notification that

17 such medical staff is projected to exceed the allow18 able relative value per admission to designate a fidu19 ciary agent for the medical staff to receive and dis20 burse any appropriate withhold amount made by the

21 carrier.

22 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM23 BERS OF STAFF.—At the request of a fiduciary

24 agent for the medical staff, if the fiduciary agent for

25 the medical staff is owed the reimbursement de-
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1 scribed in paragraph (2)(B) for excess reductions in

2 payments during a year, the Secretary shall make

3 such reimbursement to the members of the hospital’s

4 medical staff, on a pro rata basis according to the

5 proportion of expenditures for physicians’ services

6 furnished to inpatients of the hospital during the

7 year that were furnished by each member of the

8 medical staff.

9 ‘‘(e) DEFINITIONS.—In this section, the following

10 definitions apply:

11 ‘‘(1) MEDICAL STAFF.—An individual furnish12 ing a physician’s service is considered to be on the

13 medical staff of a hospital—

14 ‘‘(A) if (in accordance with requirements

15 for hospitals established by the Joint Commis16 sion on Accreditation of Health Organiza17 tions)—

18 ‘‘(i) the individual is subject to by19 laws, rules, and regulations established by

20 the hospital to provide a framework for the

21 self-governance of medical staff activities,

22 ‘‘(ii) subject to such bylaws, rules, and

23 regulations, the individual has clinical

24 privileges granted by the hospital’s govern25 ing body, and
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1 ‘‘(iii) under such clinical privileges,

2 the individual may provide physicians’

3 services independently within the scope of

4 the individual’s clinical privileges, or

5 ‘‘(B) if such physician provides at least one

6 service to a Medicare beneficiary in such hos7 pital.

8 ‘‘(2) RURAL AREA; URBAN AREA.—The terms

9 ‘rural area’ and ‘urban area’ have the meaning given

10 such terms under section 1886(d)(2)(D).

11 ‘‘(3) TEACHING HOSPITAL.—The term ‘teaching

12 hospital’ means a hospital which has a teaching pro13 gram approved as specified in section 1861(b)(6).

14 ‘‘(4) HOSPITAL.—The term ‘hospital’ means a

15 subsection (d) hospital as defined in section 1886(d).

16 ‘‘(5) PHYSICIANS’ SERVICES.—The term ‘physi17 cians’ services’ means those services described in

18 section 1848(j)(3).’’.

19 (2) CONFORMING AMENDMENTS.—

20 (A) SECTION 1833(a).—Section

21 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is

22 amended by inserting ‘‘subject to reduction

23 under section 1849)’’ after ‘‘1848(a)(1)’’.

24 (B) SECTION 1848(a).—Section

25 1848(a)(1)(B) (42 U.S.C. 1395w–4(a)(1)(B)) is
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1 amended by striking ‘‘this subsection,’’ and in2 serting ‘‘this subsection and section 1849,’’.

3 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

4 AT WHICH SERVICE FURNISHED.—Section

5 1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(A)(i)) is amend6 ed by striking ‘‘beneficiary,’’ and inserting ‘‘beneficiary

7 (and, in the case of a service furnished to an inpatient

8 of a hospital, report the hospital identification number on

9 such claim form),’’.

10 (c) EFFECTIVE DATES.—

11 (1) SUBSECTION (a).—The amendments made

12 by subsection (a) apply to services furnished on or

13 after January 1, 1999.

14 (2) SUBSECTION (b).—The amendments made

15 by subsection (b) apply to services furnished on or

16 after January 1, 1998.

17 11125. AMBULATORY SURGICAL CENTER SERVICE UP18 DATES.

19 Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is

20 amended—

21 (1) by striking ‘‘a fiscal year (beginning with

22 fiscal year 1996)’’ and inserting ‘‘fiscal year 1996,

23 and for other fiscal years beginning with 2003’’, and

24 (2) by inserting after the subparagraph des25 ignation ‘‘(C)’’ the following: ‘‘Notwithstanding the
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1 second sentence of subparagraph (A) or the second

2 sentence of subparagraph (B), with respect to fiscal

3 years 1997 through 2002, the Secretary shall in4 crease amounts for facility services by the percent5 age increase in the Consumer Price Index for all

6 urban consumers (United States city average) as es7 timated by the Secretary for the 12-month period

8 ending with the midpoint of the year involved, re9 duced by two percentage points for fiscal years 1997

10 through 2002.’’.

11 SEC. 11126. OXYGEN AND OXYGEN EQUIPMENT, OTHER DU12 RABLE MEDICAL EQUIPMENT AND

13 ORTHOTICS AND PROSTHETICS.

14 (a) IN GENERAL.—

15 (1) FREEZE IN UPDATE FOR COVERED

16 ITEMS.—Section 1834(a)(14) (42 U.S.C.

17 1395m(a)(14)) is amended—

18 (A) by striking ‘‘and’’ at the end of sub19 paragraph (A),

20 (B) in subparagraph (B)—

21 (i) by striking ‘‘a subsequent year’’

22 and inserting ‘‘1993, 1994, 1995, and

23 1996’’, and

24 (ii) by striking the period at the end

25 and adding ‘‘; and’’, and
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1 (C) by adding at the end the following:

2 ‘‘(C) for each of the years 1997 through

3 2002, 0 percent; and

4 ‘‘(D) for a subsequent year, the percentage

5 increase in the Consumer Price Index for all

6 urban consumers (United States urban average)

7 for the 12-month period ending with June of

8 the previous year.’’.

9 (2) UPDATE FOR ORTHOTICS AND PROSTHET10 ICS.—Section 1834(h)(4)(A) (42 U.S.C.

11 1395m(h)(4)(A)) is amended—

12 (A) in clause (i), by striking the comma at

13 the end and inserting a semicolon,

14 (B) by striking ‘‘and’’ at the end of clause

15 (iii) and inserting a semicolon, and

16 (C) by redesignating clause (iv) as clause

17 (v), and by adding after clause (iii), the follow18 ing clause:

19 ‘‘(iv) for 1996, 3.0 percent, and for

20 1997 through 2002, 0 percent, and’’

21 (b) OXYGEN AND OXYGEN EQUIPMENT.—Section

22 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—

23 (1) by striking ‘‘and’’ at the end of clause (iii);

24 (2) in clause (iv)—
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1 (A) by striking ‘‘a subsequent year’’ and

2 inserting ‘‘1993, 1994, 1995, and 1996’’; 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 ‘‘(v) in each subsequent year, is 90 percent

8 of the national limited monthly payment rate

9 computed under subparagraph (B) for the item

10 for the year.’’.

11 SEC. 11127. ELIMINATION OF FORMULA-DRIVEN OVERPAY12 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

13 SERVICES.

14 (a) IN GENERAL.—Subparagraph (B)(i)(II) of sec15 tion 1833(i)(3) (42 U.S.C. 1395l(i)(3)) and subparagraph

16 (B)(i)(II) of section 1833(n)(1) (42 U.S.C. 1395l(n)(1))

17 are each amended—

18 (1) by striking ‘‘of 80 percent’’; and

19 (2) by striking the period at the end and insert20 ing the following: ‘‘, less the amount a provider may

21 charge as described in clause (ii) of section

22 1866(a)(2)(A).’’.

23 (b) EFFECTIVE DATE.—The amendments made by

24 this section are effective for services furnished during por-
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1 tions of cost reporting periods occurring on or after Octo2 ber 1, 1996.

3 SEC. 11128. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

4 COSTS OF HOSPITAL OUTPATIENT SERVICES.

5 (a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT6 ED COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

7 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘1992

8 through 1998’’ and inserting ‘‘beginning with 1992’’.

9 (b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—

10 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

11 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘1991

12 through 1998’’ and inserting ‘‘beginning with 1991’’.

13 SEC. 11129. PROSPECTIVE PAYMENT FOR HOSPITAL OUT14 PATIENT DEPARTMENT SERVICES.

15 (a) IN GENERAL.—Section 1833 (42 U.S.C. 1395l)

16 is amended by adding at the end the following:

17 ‘‘(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL

18 OUTPATIENT DEPARTMENT SERVICES.—

19 ‘‘(1) IN GENERAL.—Notwithstanding any other

20 provision of this title, with respect to hospital out21 patient services designated by the Secretary and fur22 nished during years beginning with January 1,

23 2002, the amount of payment made for the services

24 determined under this part shall be determined
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1 under a prospective payment system established by

2 the Secretary in accordance with this subsection.

3 ‘‘(2) SYSTEM REQUIREMENTS.—Under the sys4 tem established by the Secretary under this sub5 section—

6 ‘‘(A) the Secretary shall develop a classi7 fication system to reflect the hospital outpatient

8 services furnished under this part;

9 ‘‘(B) groups of procedures and visits shall

10 be established so that procedures and visits

11 within each group are comparable clinically and

12 with respect to the use of resources;

13 ‘‘(C) the Secretary shall, using data from

14 the most recent year available, established rel15 ative payment weights for groups based on me16 dian hospital costs and shall determine the fre17 quency of each group;

18 ‘‘(D) the Secretary shall determine a wage

19 adjustment factor to adjust for relative dif20 ferences in labor and labor-related costs across

21 geographic regions;

22 ‘‘(E) the Secretary shall establish other ad23 justments as determined to be necessary to en24 sure equitable payments, such as outlier adjust-
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1 ments or adjustments for certain classes of hos2 pitals; and

3 ‘‘(F) the Secretary shall examine potential

4 methodologies to control for unnecessary in5 creases in the volume of the services subject to

6 payment under this section.

7 ‘‘(3) GROUP PRICES.—On the basis of the

8 weights and frequencies described in paragraph

9 (2)(C), the Secretary shall establish prices for each

10 group such that 20 percent of the sum of the group

11 prices (taking into account appropriate adjustments

12 described in paragraph (2)(D) and paragraph

13 (2)(E)), multiplied by the frequencies, shall equal

14 the coinsurance target determined in paragraph (4).

15 ‘‘(4) COINSURANCE TARGET.—For purposes of

16 determining the group prices in paragraph (3), the

17 coinsurance target shall equal the Secretary’s esti18 mate of the projected total amount of coinsurance

19 payments that would be made under this part with

20 respect to outpatient hospital services furnished dur21 ing 2002 (without regard to the provisions of this

22 section) as determined under section

23 1866(a)(2)(A)(ii).

24 ‘‘(5) COINSURANCE AMOUNTS.—Beginning in

25 2002, the amount of coinsurance on hospital out-
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1 patient services shall be calculated as 20 percent of

2 the group price determined under paragraph (3), ad3 justed for relative differences in the cost of labor

4 and adjusted for other factors determined by the

5 Secretary.

6 ‘‘(6) MEDICARE’S PAYMENT AMOUNT.—

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

8 ‘‘(i) establish an expenditure target

9 based on an estimate of total projected

10 Medicare payments made to hospitals for

11 outpatient department services in 2002

12 without regard to the provisions of this

13 section; and

14 ‘‘(ii) determine a Medicare payment

15 factor which when applied to the sum of

16 the group prices (taking into account ap17 propriate adjustments described in para18 graph (2)(D) and paragraph (2)(E)) multi19 plied by projected frequencies in 2002 shall

20 equal the expenditure target.

21 ‘‘(B) 2002 AND THEREAFTER.—Beginning

22 on January 1, 2002, the amount of payment

23 made for outpatient department services shall

24 be equal to the applicable group price, adjusted

25 for differences in the cost of labor and adjusted
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1 for other factors determined by the Secretary,

2 multiplied by the Medicare payment factor.

3 ‘‘(7) UPDATES.—

4 ‘‘(A) IN GENERAL.—Beginning on January

5 1, 2003, and until such time as the Medicare

6 payment factor is 0.80, the Medicare payment

7 factor shall be increased each year by the per8 centage increase applicable under section

9 1886(b)(3)(B)(iii) for the fiscal year in which

10 the year begins.

11 ‘‘(B) RULE FOR UPDATES AFTER MEDI12 CARE PAYMENT FACTOR BECOMES 0.80.—Dur13 ing and after the first calendar year following

14 the date on which the Medicare payment factor

15 is 0.80—

16 ‘‘(i) the Medicare payment factor shall

17 be frozen; and

18 ‘‘(ii) the group price shall be increased

19 each year by the percentage increase appli20 cable under section 1886(b)(3)(B)(iii) for

21 the fiscal year in which the year begins.

22 ‘‘(8) PERIODIC REVIEW AND ADJUSTMENTS TO

23 GROUP PRICES.—

24 ‘‘(A) PERIODIC REVIEW.—The Secretary

25 may periodically review and revise the groups,
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1 the relative payment weights, and the wage and

2 other adjustments described in paragraph (2)

3 and the group prices described in paragraph (3)

4 to take into account changes in medical prac5 tice, changes in technology, the addition of new

6 procedures, new cost data and other relevant in7 formation and factors.

8 ‘‘(B) BUDGET NEUTRALITY FOR ADJUST9 MENT.—If the Secretary makes adjustments

10 under subparagraph (A), then such adjustments

11 for a year may not cause the estimated amount

12 of expenditures under this part for the year to

13 increase or decrease from the estimated amount

14 of expenditures under this part that would have

15 been made if such adjustments has not been

16 made.’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) APPROVED ASC PROCEDURES PERFORMED

19 IN HOSPITAL OUTPATIENT DEPARTMENTS.—

20 (A) Section 1833(i)(3)(A) (42 U.S.C.

21 1395l(i)(3)(A)) is amended by inserting ‘‘before

22 January 1, 2002’’ after ‘‘furnished’’ and by

23 striking ‘‘in a cost reporting period’’.

24 (B) Section 1833(a)(4) (42 U.S.C.

25 1395l(a)(4)) is amended by deleting the semi-
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1 colon following ‘‘subsection (i)’’ and inserting

2 ‘‘or subsection (t);’’.

3 (2) RADIOLOGY AND OTHER DIAGNOSTIC PRO4 CEDURES.—

5 (A) Section 1833(n)(1)(A) (42 U.S.C.

6 1395l(n)(1)(A)) is amended by inserting ‘‘and

7 before January 1, 2002’’ after ‘‘October 1,

8 1988,’’ and after ‘‘October 1, 1989,’’.

9 (B) Section 1833(a)(2)(E) (42 U.S.C.

10 1395l(a)(2)(E)) is amended by deleting the

11 semicolon following ‘‘subsection (n)’’ and insert12 ing ‘‘or (t);’’.

13 (3) OTHER HOSPITAL OUTPATIENT SERV14 ICES.—Section 1833(a)(2)(B) (42 U.S.C.

15 1395l(a)(2)(B)) is amended—

16 (A) in clause (i), by inserting ‘‘before Jan17 uary 1, 2002,’’ after ‘‘(i)’’;

18 (B) in clause (ii), by inserting ‘‘before Jan19 uary 1, 2002,’’ after ‘‘(ii)’’;

20 (C) by redesignating clause (iii) as clause

21 (iv); and

22 (D) by striking ‘‘or’’ at the end of clause

23 (ii) and inserting the following new clause:
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1 ‘‘(iii) on or after January 1, 2002, the

2 amount determined under subsection (t),

3 or’’.

4 (4) COINSURANCE.—Section 1866(a)(2)(A)(ii)

5 (42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by add6 ing at the end the following new sentence: ‘‘In the

7 case of items and services for which payment is

8 made under part B under the prospective payment

9 system established under section 1833(t), clause (ii)

10 of the first sentence shall be applied by substituting

11 for 20 percent of the reasonable charge, the applica12 ble coinsurance amount established under such sys13 tem.’’.

14 SEC. 11130. WAIVE COST-SHARING FOR MAMMOGRAPHY.

15 (a) DIAGNOSTIC MAMMOGRAPHY.—Section 1861(s)

16 (42 U.S.C. 1395x(s)) is amended—

17 (1) in paragraph (3), by striking ‘‘including di18 agnostic mammography if conducted by a facility

19 that has a certificate (or provisional certificate) is20 sued under section 354 of the Public Health Service

21 Act’’,

22 (2) by striking ‘‘and’’ at the end of paragraph

23 (15),

24 (3) by striking the period at the end of para25 graph (16) and inserting ‘‘; and’’, and
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1 (4) by adding at the end the following:

2 ‘‘(17) diagnostic mammography, if conducted

3 by a facility that has a certificate (or provisional cer4 tificate) issued under section 354 of the Public

5 Health Service Act.’’.

6 (b) PAYMENT FOR SCREENING MAMMOGRAPHY.—

7 Section 1834(c)(1)(C) (42 U.S.C. 1395m(c)(1)(C)) is

8 amended by striking ‘‘, subject to the deductible estab9 lished under section 1833(b),’’ and ‘‘80 percent of’’.

10 (c) WAIVER OF DEDUCTIBLE.—The first sentence of

11 section 1833(b) (42 U.S.C. 1395l(b)) is amended—

12 (1) by striking ‘‘and’’ before ‘‘(4)’’, and

13 (2) by inserting the following before the period

14 at the end: ‘‘, and (5) such deductible shall not

15 apply with respect to screening and diagnostic mam16 mography described in section 1861(s)(13) and sec17 tion 1861(s)(17)’’.

18 (d) WAIVER OF COINSURANCE.—Section 1833(a)(1)

19 (42 U.S.C. 1395l(a)(1)) is amended—

20 (1) by striking ‘‘and’’ at the end of subpara21 graph (O), and

22 (2) by inserting before the semicolon at the end

23 of subparagraph (P) the following ‘‘, and (Q) with

24 respect to diagnostic mammography described in

25 section 1861(s)(17), the amount paid shall be 100
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1 percent of the fee schedule amount provided under

2 section 1848’’.

3 (e) WAIVER OF COINSURANCE IN HOSPITAL OUT4 PATIENT DEPARTMENTS.—The third sentence of section

5 1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is amended by

6 inserting after ‘‘1861(s)(10)(A)’’ the following: ‘‘, with re7 spect to items and services described in section

8 1861(s)(13), with respect to items and services described

9 in section 1861(s)(17),’’.

10 (f) EFFECTIVE DATE.—The amendments made by

11 the preceding subsections apply to services furnished on

12 or after January 1, 1997 through December 31, 2000.

13 SEC. 11131. ANNUAL MAMMOGRAMS.

14 (a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY

15 FOR WOMEN OVER AGE 49.—Section 1834(c)(2)(A) (42

16 U.S.C. 1395m(c)(2)(A)) is amended—

17 (1) in clause (iv), by striking ‘‘but under 65

18 years of age,’’ and

19 (2) by striking clause (v).

20 (b) EFFECTIVE DATE.—The amendment made by

21 subsection (a) applies to services furnished on or after

22 January 1, 1997 through December 31, 2000.

23 SEC. 11132. COVERAGE OF COLORECTAL SCREENING.

24 (a) IN GENERAL.—Section 1834 (42 U.S.C. 1395m)

25 is amended by inserting after subsection (c) the following:
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1 ‘‘(d) COVERAGE AND DEFINITION OF COLORECTAL

2 SCREENING PROCEDURES.—

3 ‘‘(1) IN GENERAL.—Notwithstanding any other

4 provision of this part, payment may be made only

5 for periodic colonoscopy screening procedures con6 ducted consistent with the frequency permitted

7 under this subsection.

8 ‘‘(2) FREQUENCY LIMITS FOR SCREENING

9 FECAL-OCCULT BLOOD TESTS.—Subject to revision

10 by the Secretary under paragraph (5), no payment

11 may be made under this part for a screening fecal12 occult blood test provided to an individual for the

13 purpose of early detection of colon cancer if the test

14 is performed—

15 ‘‘(A) in the case of an individual under 65

16 years of age, more frequently than is provided

17 in a periodicity schedule established by the Sec18 retary for purposes of this subparagraph, or

19 ‘‘(B) in the case of any other individual,

20 within the 11 months following the month in

21 which a previous screening fecal-occult blood

22 test was performed.

23 ‘‘(3) PERIODIC COLORECTAL SCREENING PRO24 CEDURES FOR INDIVIDUALS NOT AT HIGH RISK FOR

25 COLORECTAL CANCER.—
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1 ‘‘(A) FREQUENCY LIMITS.—Subject to re2 vision by the Secretary under paragraph (5), no

3 payment may be made under this part for a

4 periodic colorectal screening procedure provided

5 to an individual for the purpose of early detec6 tion of colon cancer if the procedure is per7 formed—

8 ‘‘(i) on an individual under 50 years

9 of age; or

10 ‘‘(ii) within the 59 months after a

11 previous periodic colorectal screening pro12 cedure.

13 ‘‘(B) PERIODIC COLORECTAL SCREENING

14 PROCEDURE DEFINED.—The term ‘periodic

15 colorectal screening procedure’ means a flexible

16 sigmoidoscopy, barium enema screening proce17 dure, or other screening procedure for colorectal

18 cancer as determined by the Secretary.

19 ‘‘(4) SCREENING PROCEDURES FOR INDIVID20 UALS AT HIGH RISK FOR COLORECTAL CANCER.—

21 ‘‘(A) FREQUENCY LIMITS.—Subject to re22 vision by the Secretary under paragraph (5), no

23 payment may be made under this part for eligi24 ble procedures defined in subparagraph (B) for

25 individuals at high risk for colorectal cancer for
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1 the purpose of early detection of colon cancer if

2 the procedure is performed within the 47

3 months following the month in which a previous

4 eligible procedure was performed.

5 ‘‘(B) ELIGIBLE PROCEDURES.—Procedures

6 eligible for payment under this part for screen7 ing for individuals at high risk for colorectal

8 cancer for the purpose of early detection of

9 colorectal cancer shall include a screening

10 colonscopy, barium enema screening procedures,

11 or other screening procedures for colorectal can12 cer as the Secretary determines appropriate.

13 ‘‘(C) FACTORS CONSIDERED IN ESTAB14 LISHING CRITERIA FOR DETERMINING INDIVID15 UALS AT HIGH RISK.—In establishing criteria

16 for determining whether an individual is at high

17 risk for colorectal cancer for purposes of this

18 paragraph, the Secretary shall take into consid19 eration family history, prior experience of can20 cer, a history of chronic digestive disease condi21 tion, and the presence of any appropriate recog22 nized gene markers for colorectal cancer.

23 ‘‘(5) REVISION OF FREQUENCY.—

24 ‘‘(A) REVIEW.—The Secretary shall review

25 periodically the appropriate frequency for per-
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1 forming screening fecal-occult blood tests,

2 screening flexible sigmoidoscopies, barium

3 enema screening procedures, screening

4 colonoscopies, and other colorectal screening

5 procedures determined appropriate by the Sec6 retary, based on age and such other factors as

7 the Secretary believes to be pertinent.

8 ‘‘(B) REVISION OF FREQUENCY.—The Sec9 retary, taking into consideration the review

10 made under subparagraph (a), may revise from

11 time to time the frequency with which such

12 tests and procedures may be paid for under this

13 subsection.’’.

14 (b) CONFORMING AMENDMENTS.—

15 (1) SECTION 1833(a).—Paragraphs (1)(D) and

16 (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are

17 each amended by striking ‘‘subsection (h)(1),’’ and

18 inserting ‘‘subsection (h)(1) or section 1834(d)(1),’’.

19 (2) SECTION 1862(a).—Section 1862(a) (42

20 U.S.C. 1395y(a)) is amended)—

21 (A) in paragraph (1)—

22 (i) by striking ‘‘and’’ at the end of

23 subparagraph (E),
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1 (ii) by striking the semicolon at the

2 end of subparagraph (F) and inserting ‘‘,

3 and’’, and

4 (iii) by adding at the end the follow5 ing:

6 ‘‘(G) in the case of screening fecal-occult

7 blood tests, screening flexible sigmoidoscopies,

8 barium enema screening procedures, screening

9 colonoscopies, and other colorectal screening

10 procedures determined appropriate by the Sec11 retary, provided for the purpose of early detec12 tion of colon cancer, which are performed more

13 frequently than is covered under section

14 1834(d);’’, and

15 (B) in paragraph (7), by striking ‘‘para16 graph (1)(B) or under paragraph (1)(F)’’ and

17 inserting ‘‘subparagraphs (B), (F), or (G) of

18 paragraph (1)’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 the preceding subsections apply to services furnished on

21 or after January 1, 1997 through December 31, 2000.

22 SEC. 11133. PAYMENTS FOR VACCINES AND VACCINE AD23 MINISTRATION.

24 (a) PAYMENT AMOUNTS FOR THE ADMINISTRATION

25 OF CERTAIN VACCINES.—
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1 (1) IN GENERAL.—Section 1833(k) (42 U.S.C.

2 1395l(k)) is amended to read as follows:

3 ‘‘(k)(1) The payment amount under this part for the

4 administration of a vaccine described in section

5 1861(s)(10) shall be equal to—

6 ‘‘(A)(i) for a vaccine administered in 1997 not

7 in connection with the furnishing of another service,

8 $9, and

9 ‘‘(ii) for a vaccine administered in 1997 in con10 nection with the furnishing of another service, $4,

11 and

12 ‘‘(B) for a vaccine administered in any subse13 quent year, the amount determined under subpara14 graph (A), or under this subparagraph, for the pre15 vious year, increased by the update under section

16 1848(d)(3) for that subsequent year for physicians’

17 services (described in section 1848(d)(3)(A)(ii)(I)).

18 ‘‘(2) For a limitation on actual charges for items and

19 services described in section 1861(s)(10), see paragraphs

20 (1) and (2) of section 1848(g).’’.

21 (2) CONFORMING AMENDMENT TO SECTION

22 1832(a)(1).—Section 1832(a)(1) (42 U.S.C.

23 1395k(a)(1)) is amended by striking ‘‘and (D)’’ and

24 inserting ‘‘, (D), and (K)’’.
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1 (3) CONFORMING AMENDMENTS TO SECTION

2 1832(a)(2).—Section 1832(a)(2) (42 U.S.C.

3 1395k(a)(2)) is amended—

4 (A) in subparagraph (B), by striking ‘‘de5 scribed in subparagraph (G) or subparagraph

6 (I)’’ and inserting ‘‘or services described in sub7 paragraph (G), (I), or (K)’’,

8 (B) in subparagraph (D), by inserting be9 fore the semicolon the following: ‘‘, other than,

10 in either case, services described in subpara11 graph (K)’’,

12 (C) in subparagraph (H), by inserting be13 fore the semicolon the following: ‘‘, other than

14 services described in subparagraph (K)’’,

15 (D) in subparagraph (I), by striking the

16 final ‘‘and’’,

17 (E) in subparagraph (J), by striking the

18 period and inserting ‘‘; and’’, and

19 (F) by adding at the end the following:

20 ‘‘(K) administration of vaccines by provid21 ers of services, or as rural health clinic or feder22 ally qualified health center services.’’.

23 (4) CONFORMING AMENDMENTS TO SECTION

24 1833(a)(1).—Section 1833(a)(1)(B) (42 U.S.C.

25 1395l(a)(1)(B)) is amended—
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1 (A) by striking ‘‘items and services de2 scribed’’ and inserting ‘‘vaccines listed’’, and

3 (B) by inserting at the end the following:

4 ‘‘and, with respect to the administration of

5 those vaccines, the amounts described in sub6 section (k)(1),’’.

7 (5) CONFORMING AMENDMENTS TO SECTION

8 1833(a)(42).—Section 1833(a)(2) (42 U.S.C.

9 1395l(a)(2)) is amended—

10 (A) in the matter preceding subparagraph

11 (A), by striking ‘‘and (I)’’ and inserting ‘‘, (I),

12 and (K)’’, and

13 (B) in the matter in subparagraph (A) pre14 ceding clause (i), by striking ‘‘items and serv15 ices described’’ and inserting ‘‘vaccines listed’’.

16 (6) CONFORMING AMENDMENT TO SECTION

17 1833(a)(3).—Section 1833(a)(3) (42 U.S.C.

18 1395l(a)(3)) is amended by striking ‘‘items and

19 services described’’ and inserting ‘‘vaccines listed’’.

20 (7) CONFORMING AMENDMENTS TO SECTION

21 1833(a)(6).—Section 1833(a)(6) (42 U.S.C.

22 1395l(a)(6)) is amended—

23 (A) by inserting ‘‘other than services de24 scribed in section 1832(a)(2)(K)’’ after ‘‘serv25 ices’’, and
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1 (B) by striking ‘‘and’’.

2 (8) CONFORMING AMENDMENT TO SECTION

3 1833(a)(7).—Section 1833(a)(7) (42 U.S.C.

4 1395l(a)(7)) is amended by striking the period and

5 inserting ‘‘; and’’.

6 (9) CROSS REFERENCE.—Section 1833(a) (42

7 U.S.C. 1395l(a)) is amended by adding at the end

8 the following:

9 ‘‘(8) in the case of services described in section

10 1832(a)(2)(k), the amount described in subsection

11 (k)(1).’’.

12 (10) CONFORMING AMENDMENT TO SECTION

13 1834(g).—Section 1834(g)(2) (42 U.S.C.

14 1395m(g)(2)) is amended by inserting ‘‘(other than

15 services described in section 1832(a)(2)(K))’’ after

16 ‘‘hospital services’’.

17 (11) CONFORMING AMENDMENTS TO SECTION

18 1842(b).—

19 (A) INITIAL MATTER IN PARAGRAPH

20 (3)(B).—The matter in section 1842(b)(3)(B)

21 (42 U.S.C. 1395u(b)(3)(B)) preceding clause

22 (i) is amended by inserting ‘‘, where payment

23 under this part for a service is on a basis other

24 than a cost basis,’’ after ‘‘carrier, and’’.
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1 (B) PARAGRAPH (3)(B)(ii).—Section

2 1842(b)(3)(B)(ii)(I) (42 U.S.C.

3 1395u(b)(3)(B)(ii)(I)) is amended by inserting

4 ‘‘(or other payment basis)’’ after ‘‘reasonable

5 charge’’.

6 (12) CONFORMING AMENDMENTS TO SECTION

7 1848(g).—

8 (A) PARAGRAPH (1).—The first sentence of

9 section 1848(g)(1) (42 U.S.C. 1395w–4(g)(1))

10 is amended by inserting ‘‘, or items and services

11 described in section 1861(s)(10),’’ after ‘‘serv12 ice’’.

13 (B) PARAGRAPH (2).—Section

14 1848(g)(2)(C) (42 U.S.C. 1395w–4(g)(2)(C)) is

15 amended by adding at the end the following:

16 ‘‘For items and services described in section

17 1861(s)(10) furnished in a year after 1994, the

18 ‘‘limiting charge’’ shall be 115 percent of the

19 applicable amount described in section

20 1833(k)(1).’’.

21 (b) ELIMINATION OF COINSURANCE AND DEDUCT22 IBLE FOR HEPATITIS B VACCINE.—Section

23 1833(a)(1)(B) (42 U.S.C. 1395l(a)(1)(B)), the matter in

24 subparagraph (A) of section 1833(a)(2) (42 U.S.C.

25 1395l(a)(2)) preceding clause (i), section 1833(a)(3) (42
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1 U.S.C. 1395l(a)(3)), paragraph (1) of the first sentence

2 of section 1833(b) (42 U.S.C. 1395l(b)), and the third

3 sentence of section 1866(a)(2)(A) (42 U.S.C.

4 1395cc(a)(2)(A)) are each amended by striking

5 ‘‘1861(s)(10)(A)’’ and inserting ‘‘1861(s)(10)’’.

6 (c) REPEAL OF OBSOLETE PROVISIONS.—

7 (1) SOCIAL SECURITY ACT.—Section

8 1861(s)(10)(A) (42 U.S.C. 1395x(s)(10)(A)) is

9 amended by striking ‘‘, subject to section 4071(b) of

10 the Omnibus Reconciliation Act of 1987,’’.

11 (2) OBRA–1987.—Section 4071(b) of OBRA12 1987 is repealed.

13 (d) EFFECTIVE DATE.—The amendments made by

14 subsections (a) and (b) shall apply to services furnished

15 on or after January 1, 1997 through December 31, 2000.

16 SEC. 11134. DIABETES SCREENING BENEFITS.

17 (a) DIABETES OUTPATIENT SELF-MANAGEMENT

18 TRAINING SERVICES.—

19 (1) IN GENERAL.—Section 1861(s)(2) (42

20 U.S.C. 1395x(s)(2)), is amended—

21 (A) by striking ‘‘and’’ at the end of sub22 paragraph (N);

23 (B) by striking ‘‘and’’ at the end of sub24 paragraph (O); and
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1 (C) by inserting after subparagraph (O)

2 the following new subparagraph:

3 ‘‘(P) diabetes outpatient self-management

4 training services (as defined in subsection (pp));

5 and’’.

6 (2) DEFINITION.—Section 1861 (42 U.S.C.

7 1395x) is amended by adding at the end the follow8 ing new subsection:

9 ‘‘DIABETES OUTPATIENT SELF-MANAGEMENT TRAINING

10 SERVICES

11 ‘‘(pp)(1) The term ‘diabetes outpatient self-manage12 ment training services’ means educational and training

13 services furnished to an individual with diabetes by or

14 under arrangements with a certified provider (as described

15 in paragraph (2)(A)) in an outpatient setting by an indi16 vidual or entity who meets the quality standards described

17 in paragraph (2)(B), but only if the physician who is man18 aging the individual’s diabetic condition certifies that such

19 services are needed under a comprehensive plan of care

20 related to the individual’s diabetic condition to provide the

21 individual with necessary skills and knowledge (including

22 skills related to the self-administrations of injectable

23 drugs) to participate in the management of the individ24 ual’s condition.

25 ‘‘(2) In paragraph (1)—
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1 ‘‘(A) a ‘certified provider’ is an individual or

2 entity that, in addition to providing diabetes out3 patient self-management training services, provides

4 other items or services for which payment may be

5 made under this title; and

6 ‘‘(B) an individual or entity meets the quality

7 standards described in this paragraph if the individ8 ual or entity meets quality standards established by

9 the Secretary, except that the individual or entity

10 shall be deemed to have met such standards if the

11 individual or entity meets applicable standards origi12 nally established by the National Diabetes Advisory

13 Board and subsequently revised by organizations

14 who participated in the establishment of standards

15 by such Board, or is recognized by the American Di16 abetes Association as meeting standards for furnish17 ing the services.’’.

18 (3) CONSULTATION WITH ORGANIZATIONS IN

19 ESTABLISHING PAYMENT AMOUNTS FOR SERVICES

20 PROVIDED BY PHYSICIANS.—In establishing payment

21 amounts under section 1848(a) of the Social Secu22 rity Act for physicians’ services consisting of diabe23 tes outpatient self-management training services, the

24 Secretary of Health and Human Services shall con25 sult with appropriate organizations, including the
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1 American Diabetes Association, in determining the

2 relative value for such services under section

3 1848(c)(2) of such Act.

4 (b) BLOOD GLUCOSE MONITORS FOR INDIVIDUALS

5 WITH DIABETES.—

6 (1) INCLUDING STRIPS AS DURABLE MEDICAL

7 EQUIPMENT.—Section 1861(n) (42 U.S.C.

8 1395x(n)) is amended by striking the semicolon in

9 the first sentence and inserting the following: ‘‘and

10 includes blood glucose monitors for individuals with

11 diabetes without regard to whether the individual

12 has Type I or Type II diabetes or to the individual’s

13 use of insulin (as determined under standards estab14 lished by the Secretary in consultation with the

15 American Diabetes Association);’’.

16 (2) PAYMENT FOR MONITORS BASED ON METH17 ODOLOGY FOR INEXPENSIVE AND ROUTINELY PUR18 CHASED EQUIPMENT.—Section 1834(a)(2)(A) of

19 such Act (42 U.S.C. 1395m(a)(2)(A)) is amended—

20 (A) by striking ‘‘or’’ at the end of clause

21 (ii);

22 (B) by adding ‘‘or’’ at the end of clause

23 (iii); and

24 (C) by inserting after clause (iii) the fol25 lowing new clause:
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1 ‘‘(iv) which is a blood-testing monitor

2 for an individual with diabetes,’’.

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section apply to items and services furnished on or

5 after January 1, 1997 through December 31, 2000.

6 SEC. 11135. RESPITE BENEFIT.

7 (A) ENTITLEMENT.—Section 1832(a)(2) (42 U.S.C.

8 1395k(a)(2)), as amended by section 11133(a), is amend9 ed by—

10 (1) striking ‘‘and’’ at the end of subparagraph

11 (J),

12 (2) striking the period at the end of subpara13 graph (K) and inserting ‘‘; and’’, and

14 (3) inserting at the end the following new sub15 paragraph:

16 ‘‘(L) respite services for no more than 32

17 hours each year.’’.

18 (b) CONDITIONS AND LIMITATIONS ON PAYMENT.—

19 (1) PAYMENT RATE.—Section 1833(a)(2) (42

20 U.S.C. 1395l(a)(2)) is amended by—

21 (A) adding a new subparagraph (G) to

22 read as follows:

23 ‘‘(G)(i) with respect to respite services,

24 payment shall be made at a rate equal to $7.50

25 per hour for 1996 and at a rate to be deter-
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1 mined by the Secretary in subsequent years;

2 and

3 ‘‘(ii) notwithstanding any provisions of sec4 tion 1861(v), in the case of respite services fur5 nished by a home health agency (or other orga6 nization designated by the Secretary pursuant

7 to regulations), payment to the agency or other

8 organization for respite services may not exceed

9 100 percent of the hourly respite allowance

10 times the number of hours of respite for which

11 the agency authorizes payment.’’.

12 (2) CONDITIONS OF PAYMENT.—Section

13 1835(a)(2) (42 U.S.C. 1395n(a)(2)) is amended

14 by—

15 (A) striking ‘‘and’’ at the end of subpara16 graph (E),

17 (B) striking the period at the end of sub18 paragraph (F) and inserting ‘‘; and’’, and

19 (C) inserting at the end the following new

20 subparagraph:

21 ‘‘(G) In the case of respite services, the in22 dividual for whom payment is claimed is se23 verely impaired due to irreversible dementia

24 (the individual has scored three or more errors

25 on the Short Portable Mental Status Question-
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1 naire) and either needs assistance in at least

2 one out of five activities of daily living (bathing,

3 dressing, transferring, toileting, and eating) or

4 in at least one out of four instrumental activi5 ties of daily living (meal preparation, medica6 tion management, money management, and

7 telephoning), or needs constant supervision be8 cause of one or more behavioral problems, as

9 defined by the Secretary.’’.

10 (3) FAMILY DESIGNATION OF RESPITE SERV11 ICES PROVIDER AND CARE GIVER.—Section

12 1835(a)(2) (42 U.S.C. 1395n(a)(2)) is amended by

13 adding at the end the following new sentences: ‘‘In

14 the case of respite services that are the subject of

15 the certification described in subparagraph (G), the

16 entity or individual providing the care for which res17 pite is sought shall designate a respite services

18 caregiver either through a home health agency or (if

19 the Secretary designates other organizations to pro20 vide or arrange for such services) other organization.

21 The agency or organization shall determine the

22 amount of respite entitlement remaining in the cal23 endar year and inform the entity or individual of the

24 extent to which respite services may be authorized.

25 When services have been provided, the entity or indi-
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1 vidual shall inform the agency or organization, which

2 shall then make payment to the caregiver. Where ad3 ditional payment is made on behalf of the bene4 ficiary, the agency or organization shall assure that

5 the entity or individual is informed of the limits ap6 plicable to payments for such services. No payment

7 may be made under this title for respite services if

8 the per-hour charge to the patient for care by respite

9 aides exceeds by more than $2 the hourly rates es10 tablished under this title.’’.

11 (c) DEFINITIONS.—Section 1861 (42 U.S.C. 1395x)

12 is amended—

13 (1) in subsection (m)—

14 (A) by striking ‘‘and’’ at the end of para15 graph (6);

16 (B) by adding ‘‘and’’ at the end of para17 graph (7); and

18 (C) by inserting after paragraph (7) the

19 following:

20 ‘‘(8) respite services as described in subsection

21 (oo);’’,

22 (2) in subsection (o)—

23 (A) by striking ‘‘and’’ at the end of para24 graph (6);
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1 (B) by adding ‘‘and’’ at the end of para2 graph (7); and

3 (C) by inserting after paragraph (7) the

4 following:

5 ‘‘(8) agrees to provide or arrange for respite

6 services as described in subsection (oo);’’, and

7 (3) by adding after subsection (nn) the follow8 ing:

9 ‘‘RESPITE SERVICES; RESPITE AIDES; RESPITE

10 PROVIDERS

11 ‘‘(oo)(1) The term ‘respite services’ means temporary

12 care provided to individuals who meet the requirements

13 of section 1835(a)(2) for the purposes of ensuring periodic

14 time-off for co-resident primary informal caregivers. Al15 though respite providers may provide assistance with per16 sonal care or household maintenance activities, their pri17 mary function is to provide protective supervision for per18 sons with Alzheimer’s and related dementias whose mem19 ory, orientation, judgment, and reasoning abilities have

20 become so impaired that, for safety’s sake, they require

21 the constant attention or close physical proximity of an22 other person at all or almost all hours of the day or night.

23 ‘‘(2) The term ‘respite aides’ means individuals who

24 have been designated by the Secretary as qualified to act

25 as caregivers for purposes of providing the services de26 scribed in paragraph (1). Respite aides may be nurse aides
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1 who meet the requirements of section 1819(b)(5), home

2 health aides who meet the requirements of section

3 1891(a)(3), or other individuals licensed by the State or

4 recognized by the Secretary as having the skills necessary

5 to provide such services.

6 ‘‘(3) The term ‘respite providers’ means organiza7 tions identified by the Secretary in regulations as qualified

8 to provide or arrange for respite services under this title.

9 The Secretary may establish by regulation such require10 ments for respite providers as the Secretary determines

11 appropriate.’’.

12 (d) PAYMENT FROM SUPPLEMENTARY MEDICAL IN13 SURANCE TRUST FUND FOR RESPITE SERVICES FUR14 NISHED TO INDIVIDUALS WITH ONLY HOSPITAL INSUR15 ANCE COVERAGE.—Section 1812(a) (42 U.S.C. 1395d(a))

16 is amended—

17 (1) by striking ‘‘and’’ at the end of paragraph

18 (3),

19 (2) by striking the period at the end of para20 graph (4) and inserting ‘‘; and’’; and

21 (3) by inserting at the end the following new

22 paragraph:

23 ‘‘(5) respite services, described in section

24 1832(a)(2)(L), except that such services shall be
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1 furnished under the Supplementary Medical Insur2 ance Program.’’.

3 (e) EFFECTIVE DATE.—The amendments made by

4 this section shall be effective for services beginning in fis5 cal year 2002.

6 SEC. 11136. PAYMENTS TO PHYSICIAN ASSISTANTS, NURSE

7 PRACTITIONERS, AND CLINICAL NURSE SPE8 CIALISTS.

9 (a) COVERAGE IN HOME AND AMBULATORY SET10 TINGS IN WHICH A FACILITY OR PROVIDER FEE IS NOT

11 BILLED FOR PHYSICIAN ASSISTANTS, NURSE PRACTI12 TIONERS, AND CLINICAL NURSE SPECIALISTS.—Section

13 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended—

14 (1) in clause (i)—

15 (A) by striking ‘‘or’’ at the end of sub16 clause (II); and

17 (B) by inserting ‘‘or (IV) in a home or am18 bulatory setting in which a facility or provider

19 fee is not billed (as defined by the Secretary),’’

20 following ‘‘shortage area,’’; and

21 (2) in clause (iii)—

22 (A) by striking ‘‘in a rural’’ and inserting

23 ‘‘in (I) a rural’’; and

24 (B) by inserting ‘‘, or (II) in a home or

25 ambulatory setting in which a facility or pro-
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1 vider fee is not billed (as defined by the Sec2 retary),’’ after ‘‘(as defined in 1886(d)(2)(D))’’.

3 (b) PAYMENTS TO PHYSICIAN ASSISTANTS, NURSE

4 PRACTITIONERS, AND CLINICAL NURSE SPECIALISTS IN

5 HOME AND AMBULATORY SETTINGS IN WHICH A FACIL6 ITY OR PROVIDER FEE IS NOT BILLED.—

7 (1) IN GENERAL.—Section 1833(r)(1) (42

8 U.S.C. 1395l(r)(1)) is amended by striking ‘‘clinical

9 nurse specialist services provided in a rural area)’’

10 and inserting ‘‘clinical nurse specialist services)’’.

11 (2) CONFORMING AMENDMENTS.—

12 (A) Section 1842(b)(6)(C) (42 U.S.C.

13 1395u(b)(6)(C)) is amended by striking

14 ‘‘clauses (i), (ii), or (iv)’’ and inserting ‘‘clauses

15 (i) or (ii)’’.

16 (B) Section 1861(s)(2)(K) (42 U.S.C.

17 1395x(s)(2)(k)) is amended—

18 (i) in clause (i), by inserting ‘‘and

19 such services and supplies furnished as an

20 incident to such services as would be cov21 ered under subparagraph (A) if furnished

22 as an incident to a physician’s professional

23 service,’’ after ‘‘are performed,’’;

24 (ii) in clause (ii), by inserting ‘‘and

25 such services and supplies furnished as an
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1 incident to such service as would be cov2 ered under subparagraph (A) if furnished

3 as an incident to a physician’s professional

4 service, and’’ after ‘‘are performed,’’;

5 (iii) in clause (iii), by striking ‘‘, and’’

6 at the end and inserting a period; and

7 (iv) by striking clause (iv).

8 (c) PAYMENT UNDER THE FEE SCHEDULE TO PHY9 SICIAN ASSISTANTS, NURSE PRACTITIONERS, AND CLINI10 CAL NURSE SPECIALISTS IN HOME AND AMBULATORY

11 SETTINGS IN WHICH A FACILITY OR PROVIDER FEE IS

12 NOT BILLED.—

13 (1) PAYMENT.—Section 1842(b)(12)(A) (42

14 U.S.C. 1395u(b)(12)(A)) is amended in the matter

15 preceding clause (i) by striking ‘‘(i), (ii), or (iv)’’

16 and inserting ‘‘(i) and (ii)’’.

17 (2) TECHNICAL AMENDMENT.—Section

18 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is

19 amended in the matter preceding clause (i) by strik20 ing ‘‘a physician assistants’’ and inserting ‘‘physi21 cian assistants’’.

22 (d) EFFECTIVE DATE.—The amendments made by

23 this section apply to services furnished on or after Janu24 ary 1, 1997.
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1 Subtitle C—Provisions Relating to

2 Parts A and B

3 SEC. 11141. CENTERS OF EXCELLENCE.

4 (a) IN GENERAL.—Title XVIII is amended by insert5 ing after section 1888 the following:

6 ‘‘CENTERS OF EXCELLENCE

7 ‘‘SEC. 1889. (a) IN GENERAL.—The Secretary shall

8 use a competitive process to contract with centers of excel9 lence for coronary artery bypass surgery or other heart

10 procedures, knee surgery, hip surgery, and such other

11 services as the Secretary determines to be appropriate.

12 Payment under this title shall be made for services subject

13 to such contracts on the basis of negotiated or all-inclusive

14 rates as follows:

15 ‘‘(1) COVERAGE OF URBAN AREA.—The center

16 shall cover services provided in an urban area (as

17 defined in section 1886(d)(2)(D)) for years begin18 ning with fiscal year 1997.

19 ‘‘(2) SAVINGS REQUIRED.—The amount of pay20 ment made by the Secretary to the center under this

21 title for services covered under the project shall be

22 less than the aggregate amount of the payments

23 that the Secretary would have made to the center for

24 such services had the project not been in effect.
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1 ‘‘(3) TYPES OF SERVICES.—The Secretary shall

2 make payments to the center on such a basis for the

3 following services furnished to individuals entitled to

4 benefits under this title:

5 ‘‘(A) Facility, professional, and services re6 lating to the procedure.

7 ‘‘(B) Such other services as the Secretary

8 and the center may agree to cover under the

9 agreement.’’.

10 (b) EFFECTIVE DATE.—The amendments made by

11 subsection (a) apply to services furnished on or after Octo12 ber 1, 1996.’’.

13 SEC. 11142. MAINTAINING SAVINGS RESULTING FROM TEM14 PORARY FREEZE ON PAYMENT INCREASES

15 FOR HOME HEALTH SERVICES.

16 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

17 LIMITS FOR FISCAL YEAR 1993.—Section

18 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

19 amended by adding at the end the following sentence: ‘‘In

20 establishing limits under this subparagraph, the Secretary

21 may not take into account any changes in the costs of

22 the provision of services furnished by home health agencies

23 with respect to cost reporting periods which began on or

24 after July 1, 1994, and before October 1, 1996.’’.
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1 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND2 MENT.—The Secretary of Health and Human Services

3 shall not consider the amendment made by subsection (a)

4 in making any exemptions and exceptions pursuant to sec5 tion 1861(v)(1)(L)(ii) (42 U.S.C. 1395x(v)(1)(L)(ii)) of

6 the Social Security Act.

7 SEC. 11143. INTERIM PAYMENTS FOR HOME HEALTH SERV8 ICES.

9 (a) REDUCTIONS IN COST LIMITS.—Section

10 1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amend11 ed—

12 (1) by inserting ‘‘and before October 1, 1996,’’

13 after ‘‘July 1, 1987’’ in subclause (III),

14 (2) by striking the period at the end of the

15 matter following subclause (III), and inserting ‘‘,

16 and’’, and

17 (3) by adding at the end the following new sub18 clause:

19 ‘‘(IV) October 1, 1996, 105 percent of the

20 median of the labor-related and nonlabor per

21 visit costs for freestanding home health agen22 cies.’’.

23 (b) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii)

24 (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking

25 ‘‘July 1, 1996’’ and inserting ‘‘October 1, 1996’’.
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1 (c) ADDITIONS TO COST LIMITS.—Section

2 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by

3 adding at the end the following:

4 ‘‘(iv) For services furnished by home health agencies

5 for cost reporting periods beginning on or after October

6 1, 1996, but before October 1, 1999, the Secretary shall

7 provide for an interim system of limits. Payment shall be

8 the lower of—

9 ‘‘(I) costs determined under the preceding pro10 visions of this subparagraph, or

11 ‘‘(II) an agency-specific per beneficiary annual

12 limitation calculated from the agency’s 12-month

13 cost reporting period ending on or after January 1,

14 1994, and on or before December 31, 1994, based

15 on reasonable costs (including nonroutine medical

16 supplies), updated by the home health market basket

17 index. The per beneficiary limitation shall be multi18 plied by the agency’s unduplicated census count of

19 patients (entitled to benefits under this title) for the

20 year subject to the limitation to determine the ag21 gregate agency-specific per beneficiary limitation.

22 ‘‘(v) For services furnished by home health agencies

23 for cost reporting periods beginning on or after October

24 1, 1996, the following rules shall apply:
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1 ‘‘(I) For new providers and those providers

2 without a 12-month cost reporting period ending in

3 calendar year 1994, the per beneficiary limitation

4 shall be equal to the mean of these limits (or the

5 Secretary’s best estimates thereof) applied to home

6 health agencies as determined by the Secretary.

7 Home health agencies that have altered their cor8 porate structure or name shall not be considered

9 new providers for payment purposes.

10 ‘‘(II) For beneficiaries who use services fur11 nished by more than one home health agency, the

12 per beneficiary limitations shall be prorated among

13 the agencies.

14 ‘‘(vi) Home health agencies whose cost or utilization

15 experience is below 125 percent of the mean national or

16 census region aggregate per beneficiary cost or utilization

17 experience for 1994, or best estimates thereof, and whose

18 year-end reasonable costs are below the agency-specific per

19 beneficiary limitation, shall receive payments equal to 50

20 percent of the difference between the agency’s reasonable

21 costs and its limit for fiscal years 1997, 1998, and 1999.

22 Such payments may not exceed 5 percent of such agency’s

23 aggregate Medicare reasonable cost in a year.

24 ‘‘(vii) Effective January 1, 1997, or as soon as fea25 sible, the Secretary shall modify the agency-specific per
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1 beneficiary annual limitation described in clause (iv) to

2 provide for regional or national variations in utilization.

3 For purposes of determining payment under clause (iv),

4 the limit shall be calculated through a blend of 75 percent

5 of the agency-specific cost or utilization experience in

6 1994 with 25 percent of the national or census region cost

7 or utilization experience in 1994, or the Secretary’s best

8 estimates thereof.’’.

9 (d) USE OF INTERIM FINAL REGULATIONS.—The

10 Secretary of Health and Human Services (in this section

11 referred to as the ‘‘Secretary’’) shall implement the pay12 ment limits described in section 1861(v)(1)(L)(iv) of the

13 Social Security Act by publishing in the Federal Register

14 a notice of interim final payment limits by August 1,

15 1996, and allowing for a period of public comment there16 on. Payments subject to these limits will be effective for

17 cost reporting periods beginning on or after October 1,

18 1996, without the necessity for consideration of comments

19 received, but the Secretary shall, by Federal Register no20 tice, affirm or modify the limits after considering those

21 comments.

22 (e) DEVELOPMENT OF CASE MIX SYSTEM.—The Sec23 retary shall expand research on a prospective payment sys24 tem for home health agencies that shall tie prospective

25 payments to an episode of care, including an intensive ef-
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1 fort to develop a reliable case mix adjuster that explains

2 a significant amount of the variances in costs.

3 (f) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—

4 Effective for cost reporting periods beginning on or after

5 October 1, 1997, the Secretary may require all home

6 health agencies to submit such additional information as

7 the Secretary considers necessary for the development of

8 a reliable case mix system.

9 SEC. 11144. PROSPECTIVE PAYMENT FOR HOME HEALTH

10 SERVICES.

11 Title XVIII is amended by adding at the end the fol12 lowing:

13 ‘‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

14 ‘‘SEC. 1893. (a) IN GENERAL.—Notwithstanding sec15 tion 1861(v), the Secretary shall, for cost reporting peri16 ods beginning on or after October 1, 1999, provide for

17 payments for home health services in accordance with a

18 prospective payment system, which pays home health

19 agencies on a per episode basis, established by the Sec20 retary.

21 ‘‘(b) ELEMENTS OF SYSTEM.—Such a system shall

22 include the following:

23 ‘‘(1) BASED ON A PER EPISODE AMOUNT.—All

24 services covered and paid on a reasonable cost basis

25 under the Medicare home health benefit as of the

26 date of the enactment of the Emergency Medicare
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1 Protection Act of 1996, including medical supplies,

2 shall be subject to the per episode amount. In defin3 ing an episode of care, the Secretary shall consider

4 an appropriate length of time for an episode, the use

5 of services, and the number of visits provided within

6 an episode, potential changes in the mix of services

7 provided within an episode and their cost, and a

8 general system design that will provide for continued

9 access to quality services. The per episode amount

10 shall be based on the most current audited cost re11 port data available to the Secretary.

12 ‘‘(2) USE OF CASE MIX.—The Secretary shall

13 employ an appropriate case mix adjustment that ex14 plains a significant amount of the variation in cost.

15 ‘‘(3) ANNUAL ADJUSTMENTS.—The episode

16 payment amount shall be adjusted annually by the

17 home health market basket index. The labor portion

18 of the episode amount shall be adjusted for geo19 graphic differences in labor-related costs based on

20 the most current hospital index.

21 ‘‘(4) OUTLIERS.—The Secretary may designate

22 a payment provision for outliers, recognizing the

23 need to adjust payments due to unusual variations

24 in the type or amount of medically necessary care.
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1 ‘‘(5) PRORATION OF EPISODE PAYMENTS.—A

2 home health agency shall be responsible for coordi3 nating all home health care for a beneficiary. If a

4 beneficiary elects to transfer to, or receive services

5 from, another home health agency within an episode

6 period, the episode payment shall be prorated be7 tween home health agencies.

8 ‘‘(c) SAVINGS.—Prior to implementing the prospec9 tive system described in subsections (a) and (b) in a budg10 et-neutral fashion, the Secretary shall first reduce, by 15

11 percent, the payments based on the cost limits, per bene12 ficiary limits, and actual costs, described in section

13 1861(v)(1)(L)(iv), as such limits are in effect on Septem14 ber 30, 1999.’’.

15 SEC. 11145. PAYMENT BASED ON LOCATION WHERE HOME

16 HEALTH SERVICE IS FURNISHED.

17 (a) CONDITIONS OF PARTICIPATION.—Section 1891

18 (42 U.S.C. 1395bbb) is amended by adding at the end

19 the following:

20 ‘‘(g) A home health agency shall submit claims for

21 payment of home health services under this title only on

22 the basis of the geographic location at which the service

23 is furnished, as determined by the Secretary.’’.
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1 (b) WAGE ADJUSTMENT.—Section 1861(v)(1)(L)(iii)

2 (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking

3 ‘‘agency is located’’ and inserting ‘‘service is furnished’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section apply to services furnished on or after Janu6 ary 1, 1997.

7 SEC. 11146. ELIMINATION OF PERIODIC INTERIM PAY8 MENTS FOR HOME HEALTH AGENCIES.

9 (a) IN GENERAL.—Section 1815(e)(2) (42 U.S.C.

10 1395g(e)(2)) is amended—

11 (1) by inserting ‘‘and’’ at the end of subpara12 graph (C),

13 (2) by striking subparagraph (D), and

14 (3) by redesignating subparagraph (E) as (D).

15 (b) EFFECTIVE DATE.—The amendments made by

16 subsection (a) apply to payments made on or after the

17 implementation of prospective payments as described in

18 section 1893 of the Social Security Act, as added by sec19 tion 11144 of this Act.

20 SEC. 11147. PERMANENT EXTENSION OF CERTAIN SECOND21 ARY PAYER PROVISIONS.

22 (a) WORKING DISABLED.—Section 1862(b)(1)(B)

23 (42 U.S.C. 1395y(b)(1)(B)) is amended by striking clause

24 (iii).
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1 (b) INDIVIDUAL WITH END-STAGE RENAL DIS2 EASE.—Section 1862(b)(1)(C) (42 U.S.C.

3 1395y(b)(1)(C)) is amended—

4 (1) in the first sentence, by striking ‘‘12-

5 month’’ each place it occurs and inserting ‘‘18-

6 month’’, and

7 (2) by striking the second sentence.

8 (c) IRS-SSA-HCFA DATA MATCH.—

9 (1) SOCIAL SECURITY ACT.—Section

10 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is

11 amended by striking clause (iii).

12 (2) INTERNAL REVENUE CODE.—Section

13 6103(l)(12) of the Internal Revenue Code of 1986 is

14 amended by striking subparagraph (F).

15 Subtitle D—Medicare Part B

16 Premium

17 SEC. 11161. PART B PREMIUM.

18 (a) IN GENERAL.—The first, second, and third sen19 tences of section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are

20 amended to read as follows: ‘‘The Secretary shall, during

21 September of each year, determine and promulgate a

22 monthly premium rate for the succeeding calendar year.

23 That monthly premium rate shall be equal to 50 percent

24 of the monthly actuarial rate for enrollees age 65 and over,
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1 determined according to paragraph (1), for that succeed2 ing calendar year.’’.

3 (b) CONFORMING AND TECHNICAL AMENDMENTS.—

4 Section 1839 (42 U.S.C. 1395r) is amended—

5 (1) in subsection (a)(2), by striking ‘‘(b) and

6 (e)’’ and inserting ‘‘(b), (c), and (f)’’,

7 (2) in the third sentence of subsection (a)(3),

8 as amended by subsection (a) or this section—

9 (A) by inserting ‘‘rate’’ after ‘‘premium’’,

10 and

11 (B) by striking ‘‘and the derivation of the

12 dollar amounts specified in this paragraph’’,

13 (3) by striking subsection (e), and

14 (4) by redesignating subsection (g) as (e) and

15 inserting that subsection after subsection (d).

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section apply to premiums for months after December

18 1995.

19 TITLE II—EXPANDED MEDICARE

20 CHOICE

21 SEC. 11201. EXPANDED CHOICE UNDER MEDICARE.

22 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

23 seq.) is amended by inserting after section 1804 the fol24 lowing:
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1 ‘‘OPTION TO ENROLL IN MANAGED CARE PLANS

2 ‘‘SEC. 1805. Every individual entitled to benefits

3 under part A and enrolled under part B or enrolled under

4 part B only shall be eligible to enroll under part C with

5 any eligible organization with which the Secretary has en6 tered into a contract under part C and which serves the

7 geographic area in which the individual resides.’’.

8 (b) EFFECTIVE DATE.—The amendment made by

9 subsection (a) applies to enrollments whose periods begin

10 after 1996.

11 SEC. 11202. BROADER CHOICE AMONG MANAGED CARE OR12 GANIZATIONS.

13 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

14 seq.) is amended—

15 (1) by redesignating part C (42 U.S.C. 1395x

16 et seq.) as part D, and

17 (2) by inserting after part B the following new

18 part:

19 ‘‘PART C—MANAGED CARE ORGANIZATIONS

20 ‘‘SEC. 1851A. TYPES OF MANAGED CARE ORGANIZATIONS.

21 ‘‘(a) ELIGIBLE ORGANIZATIONS.—For purposes of

22 this part, the term ‘eligible organization’ means a public

23 or private entity, organized under the laws of any State,

24 that is—
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•S 1926 IS

1 ‘‘(1) a qualified health maintenance organiza2 tion (QHMO),

3 ‘‘(2) a competitive medical plan (CMP),

4 ‘‘(3) a preferred provider organization (PPO),

5 ‘‘(4) a provider sponsored organization (PSO),

6 or

7 ‘‘(5) any other managed care organization that

8 meets the requirements of subparagraphs (C), (D),

9 and (E) of subsection (c)(1) and any additional re10 quirements developed by the Secretary.

11 ‘‘(b) QUALIFIED HEALTH MAINTENANCE ORGANIZA12 TION (QHMO).—For purposes of this part, the term

13 ‘qualified health maintenance organization’ means such an

14 organization (as defined in section 1310(d) of the Public

15 Health Service Act) that meets the requirements of sub16 paragraphs (B) and (E) of subsection (c)(1).

17 ‘‘(c) COMPETITIVE MEDICAL PLAN (CMP).—

18 ‘‘(1) IN GENERAL.—For purposes of this part,

19 the term ‘competitive medical plan’ means an entity

20 that meets the following requirements:

21 ‘‘(A) MINIMUM SERVICES TO ALL MEM22 BERS.—The entity provides to enrolled mem23 bers at least the following health care services:
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•S 1926 IS

1 ‘‘(i) Physicians’ services performed by

2 physicians (as defined in section

3 1861(r)(1)).

4 ‘‘(ii) Inpatient hospital services.

5 ‘‘(iii) Laboratory, X-ray, emergency,

6 and preventive services.

7 ‘‘(iv) Out-of-area coverage.

8 ‘‘(B) PROVISION OF PHYSICIANS’ SERV9 ICES.—The entity provides physicians’ services

10 primarily—

11 ‘‘(i) directly through physicians who

12 are either employees or partners of such

13 organization, or

14 ‘‘(ii) through contracts with individual

15 physicians or one or more groups of physi16 cians (organized on a group practice or in17 dividual practice basis).

18 ‘‘(C) COMPENSATION ON PREPAID RISK

19 BASIS.—The entity is compensated (except for

20 deductibles, coinsurance, and copayments) for

21 the provision of health care services to enrolled

22 members by a payment which is paid on a peri23 odic basis without regard to the date the health

24 care services are provided and which is fixed

25 without regard to the frequency, extent, or kind
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•S 1926 IS

1 of health care service actually provided to a

2 member.

3 ‘‘(D) ASSUMPTION OF RISK.—The entity

4 assumes full financial risk on a prospective

5 basis for the provision of the health care serv6 ices listed in subparagraph (A), except that

7 such entity may—

8 ‘‘(i) obtain insurance or make other

9 arrangements for the cost of providing to

10 any enrolled member health care services

11 listed in subparagraph (A) the aggregate

12 value of which exceeds $5,000 in any year,

13 ‘‘(ii) obtain insurance or make other

14 arrangements for the cost of health care

15 services listed in subparagraph (A) pro16 vided to its enrolled members other than

17 through the entity because medical neces18 sity required their provision before they

19 could be secured through the entity,

20 ‘‘(iii) obtain insurance or make other

21 arrangements for not more than 90 per22 cent of the amount by which its costs for

23 any of its fiscal years exceed 115 percent

24 of its income for such fiscal year, and
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•S 1926 IS

1 ‘‘(iv) make arrangements with physi2 cians or other health professionals, health

3 care institutions, or any combination of

4 such individuals or institutions to assume

5 all or part of the financial risk on a pro6 spective basis for the provision of basic

7 health services by the physicians or other

8 health professionals or through the institu9 tions.

10 ‘‘(E) FISCAL SOUNDNESS; PROVISION

11 AGAINST INSOLVENCY.—The entity meets

12 standards for fiscal soundness (including stand13 ards for provision against the risk of insol14 vency) applicable to federally qualified health

15 maintenance organizations under title XIII of

16 the Public Health Service Act.

17 ‘‘(2) EXCEPTION FOR CERTAIN GRAND18 FATHERED CONTRACTS.—Paragraph (1)(A)(ii) shall

19 not apply to an entity which had contracted with a

20 single State agency administering a State plan ap21 proved under title XIX for the provision of services

22 (other than inpatient hospital services) to individuals

23 eligible for such services under such State plan on

24 a prepaid risk basis prior to 1970.
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1 ‘‘(d) PREFERRED PROVIDER ORGANIZATION

2 (PPO).—

3 ‘‘(1) IN GENERAL.—For purposes of this part,

4 the term ‘preferred provider organization’ means an

5 entity that meets the following requirements:

6 ‘‘(A) MINIMUM SERVICES TO ALL MEM7 BERS.—The entity provides at least physicians’

8 services performed by physicians (as defined in

9 section 1861(r)(1)).

10 ‘‘(B) PROVISION OF PHYSICIAN SERVICES;

11 FISCAL SOUNDNESS.—The entity meets the re12 quirements of subparagraphs (B) and (E) of

13 subsection (c)(1).

14 ‘‘(C) ASSUMPTION OF RISK.—The entity

15 meets the requirements of subsection (c)(1)(D)

16 with respect to members enrolled with the orga17 nization under this part.

18 ‘‘(2) DETERMINATION OF PRIVATE MEMBER19 SHIP.—In applying the provisions of sections

20 1851E(g) and 1851F (e)(1)(B)(i) and (f)(1)(B)(i)

21 (concerning minimum private enrollment) to an or22 ganization that meets the requirements of paragraph

23 (1), individuals for whom the organization has as24 sumed substantial financial risk shall be considered

25 to be members of the organization.
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1 ‘‘(e) PROVIDER SPONSORED ORGANIZATION

2 (PSO).—

3 ‘‘(1) IN GENERAL.—For purposes of this part,

4 the term ‘provider sponsored organization’ means an

5 entity that meets the following requirements:

6 ‘‘(A) TYPE OF ENTITY.—The entity is a

7 hospital, a group of affiliated hospitals, or an

8 affiliated group consisting of a hospital or hos9 pitals and physicians or other entities that fur10 nish health services.

11 ‘‘(B) MINIMUM SERVICES TO ALL MEM12 BERS.—The entity provides at least physicians’

13 services performed by physicians (as defined in

14 section 1861(r)(1)) and inpatient hospital serv15 ices.

16 ‘‘(C) DIRECT PROVISION OF SERVICES.—

17 The entity provides directly a substantial por18 tion of the services covered under this title (as

19 determined by the Secretary, which may vary

20 for rural or underserved areas).

21 ‘‘(D) ASSUMPTION OF RISK.—The entity

22 meets the requirements of subsection (c)(1)(D)

23 with respect to members enrolled with the orga24 nization under this part.
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1 ‘‘(E) FISCAL SOUNDNESS; PROVISION

2 AGAINST INSOLVENCY.—The entity meets re3 quirements for fiscal soundness and provision

4 against insolvency developed by the Secretary.

5 ‘‘(2) DETERMINATION OF PRIVATE MEMBER6 SHIP.—In applying the provisions of sections

7 1851E(g) and 1851F (e)(1)(B)(i) and (f)(1)(B)(i)

8 (concerning minimum private enrollment) to an or9 ganization that meets the requirements of paragraph

10 (1), individuals for whom the organization has as11 sumed substantial financial risk shall be considered

12 to be members of the organization.

13 ‘‘(3) PREEMPTION OF STATE LICENSURE RE14 QUIREMENTS.—Except as otherwise provided in the

15 next sentence, an organization that meets the re16 quirements of paragraph (1) may provide health

17 benefits to individuals enrolled with the organization

18 under this part without regard to any State law that

19 imposes requirements for licensure different from

20 the requirements for a contract under this part. If

21 the Secretary determines that a State has met the

22 criteria for participation in the alternative certifi23 cation and monitoring program described in section

24 1851H(b), the Secretary shall require the organiza25 tion to obtain a license from the State.
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1 ‘‘SEC. 1851B. ENROLLMENT AND DISENROLLMENT.

2 ‘‘(a) IN GENERAL.—

3 ‘‘(1) SECRETARY’S RESPONSIBILITY.—The Sec4 retary shall carry out enrollment and termination of

5 enrollment of individuals with eligible organizations.

6 ‘‘(2) INDIVIDUAL OPTIONS.—An individual may,

7 as prescribed by regulations—

8 ‘‘(A) enroll under this part with an eligible

9 organization; and

10 ‘‘(B) terminate enrollment with such orga11 nization—

12 ‘‘(i) as of the beginning of the first

13 calendar month following the date on

14 which the request is made for such termi15 nation;

16 ‘‘(ii) as of the date determined in ac17 cordance with regulations, in the case of fi18 nancial insolvency of the organization; and

19 ‘‘(iii) retroactively to the date of en20 rollment, in such special circumstances as

21 the Secretary may designate.

22 ‘‘(b) INFORMATION CONCERNING ENROLLMENT.—

23 ‘‘(1) STANDARDIZED COMPARATIVE MATE24 RIALS.—The Secretary shall develop and distribute

25 standardized comparative materials about eligible or26 ganizations and Medicare supplemental policies (as
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•S 1926 IS

1 defined in section 1882(g)(1)) to enable individuals

2 to compare benefits, costs, and quality indicators.

3 ‘‘(2) COST-SHARING BY PARTICIPATING ORGANI4 ZATIONS.—Each eligible organization with a con5 tract under this part shall pay the Secretary for its

6 pro rata share (as determined by the Secretary) of

7 the estimated costs to be incurred by the Secretary

8 in carrying out the requirements of paragraph (1),

9 subsection (a)(1), and section 4360 of OBRA–1990.

10 Those payments are appropriated to defray the costs

11 described in the preceding sentence, to remain avail12 able until expended.

13 ‘‘(3) REVIEW OF MARKETING MATERIALS.—The

14 Secretary may prescribe the procedures and condi15 tions under which an eligible organization that has

16 entered into a contract with the Secretary under this

17 subsection may furnish information about the orga18 nization to enrollees and individuals eligible to enroll

19 under this part. No brochures, application forms, or

20 other promotional or informational material may be

21 distributed by an organization to (or for the use of)

22 such individuals unless at least 45 days before its

23 distribution, the organization has submitted the ma24 terial to the Secretary for review, and the Secretary

25 has not disapproved the distribution of the material.
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•S 1926 IS

1 The Secretary shall review all such material submit2 ted and shall disapprove such material if the Sec3 retary determines, in the Secretary’s discretion, that

4 the material is materially inaccurate or misleading

5 or otherwise makes a material misrepresentation.

6 ‘‘(c) PERIODS OF ENROLLMENT.—

7 ‘‘(1) STANDARD ENROLLMENT OPPORTUNI8 TIES.—Subject to the provisions of this section, an

9 organization with a contract under this part shall

10 permit enrollment under this part by any individ11 ual—

12 ‘‘(A) during the month of each year speci13 fied by the Secretary for all eligible organiza14 tions;

15 ‘‘(B) during the individual’s initial enroll16 ment period in the program under part B (as

17 described in section 1837(d));

18 ‘‘(C) during a special enrollment period in

19 the program under part B (for individuals for20 merly electing employment-based coverage) de21 scribed in section 1837(i)(3); and

22 ‘‘(D) during the 90-day period beginning

23 30 days before the date the individual takes up

24 residence in the service area of the organiza25 tion.
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•S 1926 IS

1 ‘‘(2) SPECIAL ENROLLMENT PERIOD FOR INDI2 VIDUALS LOSING COVERAGE BY ANOTHER ORGANIZA3 TION.—

4 ‘‘(A) IN GENERAL.—Subject to other pro5 visions of this section, if a contract with an or6 ganization under this part is not renewed or

7 otherwise terminated, or is renewed in a man8 ner that discontinues coverage for individuals

9 residing in part of the service area, each other

10 organization with a contract under this part

11 shall permit enrollment under this part by af12 fected individuals enrolled with such other orga13 nization on the effective date of such termi14 nation or discontinuation of coverage.

15 ‘‘(B) ENROLLMENT PERIOD.—The enroll16 ment period required by subparagraph (A) shall

17 be for 30 days and shall begin 30 days after the

18 date that the Secretary provides notice of such

19 requirement.

20 ‘‘(3) ACCEPTANCE OR DENIAL OF APPLICA21 TION.—An eligible organization shall enroll individ22 uals under this part in the order of application, and

23 may deny enrollment of such an individual only if

24 the enrollment—
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•S 1926 IS

1 ‘‘(A) would exceed the limits of the organi2 zation’s capacity (as determined by the Sec3 retary);

4 ‘‘(B) would result in an enrolled population

5 substantially nonrepresentative, as determined

6 in accordance with regulations of the Secretary,

7 of the population in the geographic area served

8 by the organization; or

9 ‘‘(C) would result in the organization’s

10 failing to meet the requirements of sections

11 1851E(g) and 1851F (e)(1)(B)(i) and

12 (f)(1)(B)(i) (concerning minimum private en13 rollment).

14 ‘‘(4) EFFECTIVE DATE OF ENROLLMENT.—An

15 individual’s enrollment with an eligible organization

16 under this part shall be effective—

17 ‘‘(A) in the case of an enrollment under

18 paragraph (1)(A), on the first day of the third

19 month beginning after the end of the enroll20 ment period;

21 ‘‘(B) in the case of an enrollment under

22 paragraph (1)(B), as specified by section

23 1838(a);
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•S 1926 IS

1 ‘‘(C) in the case of an enrollment under

2 paragraph (1)(C), as specified by section

3 1838(e);

4 ‘‘(D) in the case of an enrollment under

5 paragraph (1)(D), on the first day of the first

6 month following the month in which the individ7 ual enrolled; and

8 ‘‘(E) in the case of an enrollment under

9 paragraph (2), 30 days after the end of the

10 open enrollment period, or, if the Secretary de11 termines that such date is not feasible, such

12 other date as the Secretary specifies.

13 ‘‘(d) ENROLLMENT OR TERMINATION FOR HEALTH

14 REASONS PROHIBITED.—An eligible organization—

15 ‘‘(1) shall not refuse to enroll, and shall not

16 expel or refuse to reenroll, any individual eligible to

17 enroll or enrolled with the organization under this

18 part because of the individual’s health status or re19 quirements for health care services;

20 ‘‘(2) shall include in any marketing materials a

21 statement of the requirements of paragraph (1); and

22 ‘‘(3) shall notify each such individual of the re23 quirements of paragraph (1) at the time of the indi24 vidual’s enrollment.
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1 ‘‘SEC. 1851C. BENEFITS.

2 ‘‘(a) BASIC BENEFITS.—

3 ‘‘(1) IN GENERAL.—An eligible organization

4 must provide to members enrolled under this part,

5 either directly or through providers and other per6 sons that meet the applicable requirements of this

7 title and part A of title XI—

8 ‘‘(A) those services (other than hospice

9 care) covered under parts A and B of this title,

10 for those members entitled to benefits under

11 part A and enrolled under part B, or

12 ‘‘(B) those services covered under part B,

13 for those members enrolled only under such

14 part,

15 which are available to individuals residing in the ge16 ographic area served by the organization.

17 ‘‘(2) PPO REQUIRED TO AFFORD ‘POINT OF

18 SERVICE’ OPTION.—An eligible organization that

19 contracts as a preferred provider organization under

20 this part, in addition to providing services in accord21 ance with paragraph (1), shall also pay for any serv22 ice (other than hospice care) furnished to a member

23 enrolled under this part (in the amounts, if any, that

24 otherwise would be paid under this title) by any en25 tity that may furnish that service under this title

26 (other than an entity through which the organization
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•S 1926 IS

1 provides services, or other than a service with re2 spect to which the organization is required to pro3 vide for reimbursement under subsection (e)(2) (con4 cerning urgently needed services provided outside

5 the organization).

6 ‘‘(3) PSO PROHIBITED FROM AFFORDING

7 ‘POINT OF SERVICE’ OPTION.—An eligible organiza8 tion that contracts as a provider sponsored organiza9 tion under this part may not pay for any service de10 scribed in paragraph (2) that is furnished to a mem11 ber enrolled under this part.

12 ‘‘(b) ADDITIONAL BENEFITS OR OTHER ADJUST13 MENT UNDER RISK PLANS.—

14 ‘‘(1) REQUIREMENT WHERE ADJUSTED COMMU15 NITY RATES BELOW PAYMENT RATES.—Each con16 tract under section 1851F(e) shall provide for ad17 justment in accordance with this subsection, if—

18 ‘‘(A) the adjusted community rate for serv19 ices under parts A and B (as reduced for the

20 actuarial value of the coinsurance and

21 deductibles under those parts) for members en22 rolled under this part with the organization and

23 entitled to benefits under part A and enrolled in

24 part B, or
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•S 1926 IS

1 ‘‘(B) the adjusted community rate for serv2 ices under part B (as reduced for the actuarial

3 value of the coinsurance and deductibles under

4 that part) for members enrolled under this part

5 with the organization and entitled to benefits

6 under part B only,

7 is less than the average of the per capita rates of

8 payment to be made under section 1851F(e)(2) at

9 the beginning of an annual contract period for mem10 bers enrolled under this part with the organization

11 and entitled to benefits under part A and enrolled

12 in part B, or enrolled in part B only, respectively.

13 ‘‘(2) SELECTION BY ORGANIZATION OF ADDI14 TIONAL BENEFITS.—An eligible organization to

15 which paragraph (1) applies shall either—

16 ‘‘(A) provide to members described in

17 paragraph (1) (A) or (B), as applicable, the ad18 ditional benefits described in paragraph (3)

19 which are selected by the eligible organization

20 and which the Secretary finds are at least equal

21 in value to the difference between that average

22 per capita payment and the adjusted commu23 nity rate (as so reduced); or

24 ‘‘(B) elect an alternative, in accordance

25 with paragraph (4).
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•S 1926 IS

1 ‘‘(3) ADDITIONAL BENEFITS.—The additional

2 benefits referred to in paragraph (2) are—

3 ‘‘(A) the reduction of the premium rate or

4 other charges made with respect to services fur5 nished by the organization to members enrolled

6 under this part; or

7 ‘‘(B) the provision of additional health

8 benefits; or both.

9 ‘‘(4) ALTERNATIVES TO ADDITIONAL BENE10 FITS.—An eligible organization to which paragraph

11 (1) applies—

12 ‘‘(A) may elect to receive a lesser payment

13 such that there is no longer a difference be14 tween the average of the per capita rates of

15 payment to be made under section 1851F(e)(2)

16 and the adjusted community rate (as so re17 duced); and

18 ‘‘(B) may (with the approval of the Sec19 retary) provide that a part of the value of such

20 additional benefits be withheld and reserved by

21 the Secretary as provided in paragraph (5).

22 ‘‘(5) BENEFIT STABILIZATION FUND.—An orga23 nization having a contract under section 1851(e)

24 may (with the approval of the Secretary) provide

25 that a part of the value of additional benefits other-
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1 wise required to be provided by reason of paragraph

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

3 Insurance Trust Fund and in the Federal Supple4 mentary Medical Insurance Trust Fund (in such

5 proportions as the Secretary determines to be appro6 priate) by the Secretary for subsequent annual con7 tract periods, to the extent required to stabilize and

8 prevent undue fluctuations in the additional benefits

9 offered in those subsequent periods by the organiza10 tion in accordance with paragraph (3). Any of such

11 value of additional benefits which is not provided to

12 members of the organization in accordance with

13 paragraph (3) prior to the end of such period, shall

14 revert for the use of such trust funds.

15 ‘‘(6) DETERMINATION OF PER CAPITA RATES.—

16 If the Secretary finds that there is insufficient en17 rollment experience to determine an average of the

18 per capita rates of payment to be made under sec19 tion 1851F(e)(2) at the beginning of a contract pe20 riod, the Secretary may determine such an average

21 based on the enrollment experience of other con22 tracts entered into under this part.

23 ‘‘(c) SUPPLEMENTAL BENEFITS.—

24 ‘‘(1) SUBJECT TO SECRETARY’S APPROVAL.—

25 An eligible organization may provide to individuals
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1 enrolled under this part (without affording such in2 dividuals an option to decline such coverage), such

3 additional health care services as the Secretary may

4 approve. The Secretary shall approve any such addi5 tional services unless the Secretary determines that

6 including such additional services will substantially

7 discourage enrollment by covered individuals with

8 the organization.

9 ‘‘(2) AT ENROLLEES’ OPTION.—Such an orga10 nization may provide to such individuals such addi11 tional health care services as such individuals may

12 elect, at their option, to have covered.

13 ‘‘(3) DISCLOSURE OF PREMIUM.—Such an or14 ganization shall furnish to such individuals informa15 tion on the portion of its premium rate or other

16 charges applicable to such supplemental benefits.

17 ‘‘(d) STANDARDIZED PACKAGES OF ADDITIONAL

18 BENEFITS.—Any health care service described in sub19 section (b) or (c) that is included in a standardized pack20 age of benefits specified by the Secretary may be offered

21 only as part of that standardized package.

22 ‘‘(e) AVAILABILITY AND ACCESSIBILITY OF SERV23 ICES.—

24 ‘‘(1) SERVICES PROVIDED THROUGH THE ORGA25 NIZATION.—An eligible organization with a contract
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1 under this part must make the services it has con2 tracted to provide to individuals enrolled with the or3 ganization under this part—

4 ‘‘(A) available and accessible to each such

5 individual, within the area served by the organi6 zation, with reasonable promptness and in a

7 manner which assures continuity, and

8 ‘‘(B) when medically necessary, available

9 and accessible 24 hours a day and 7 days a

10 week.

11 ‘‘(2) SERVICES PROVIDED OUTSIDE THE ORGA12 NIZATION.—An eligible organization with a contract

13 under this part must provide for reimbursement with

14 respect to services described in paragraph (1) pro15 vided to such an individual other than through the

16 organization, if—

17 ‘‘(A) the services were medically necessary

18 and immediately required because of an unfore19 seen illness, injury, or condition; and

20 ‘‘(B) it was not reasonable given the cir21 cumstances to obtain the services through the

22 organization.
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1 ‘‘SEC. 1851D. LIABILITY OF BENEFICIARY AND THIRD PAR2 TIES.

3 ‘‘(a) LIMITS ON LIABILITY FOR REQUIRED BENE4 FITS.—

5 ‘‘(1) LIMITATION TO ACTUARIAL VALUE OF

6 FEE-FOR-SERVICE COVERAGE.—Total charges by an

7 eligible organization to individuals enrolled with the

8 organization under this part, with respect to services

9 described in section 1851C(a)—

10 ‘‘(A) shall include no amounts other than

11 the individual’s share of premiums, deductibles,

12 coinsurance, and copayments; and

13 ‘‘(B) shall not exceed the actuarial value of

14 the deductibles and coinsurance that would be

15 applicable under this title on the average to

16 such individuals if they were not members of an

17 eligible organization.

18 ‘‘(2) ALTERNATIVE DATA.—If the Secretary

19 finds that adequate data are not available for the de20 termination required under paragraph (1) with re21 spect to an eligible organization, the Secretary may

22 substitute the actuarial value of the deductibles and

23 coinsurance applicable on the average to individuals

24 in the area, in the State, or in the United States,

25 eligible to enroll under this part with the organiza26 tion, or other appropriate data.
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•S 1926 IS

1 ‘‘(b) LIMITS ON PREMIUM FOR SUPPLEMENTAL BEN2 EFITS.—If an eligible organization provides to its mem3 bers enrolled under this part supplemental benefits in ac4 cordance with section 1851C, the sum of—

5 ‘‘(1) the portion of such organization’s premium

6 rate charged, with respect to such supplemental ben7 efits, to members enrolled under this part, and

8 ‘‘(2) the deductibles, coinsurance, and copay9 ments charged, with respect to such services to such

10 members,

11 shall not exceed the adjusted community rate for such

12 services.

13 ‘‘(c) LIMITATION ON AMOUNTS AN OUT-OF-PLAN

14 PHYSICIAN OR OTHER ENTITY MAY COLLECT.—

15 ‘‘(1) IN GENERAL.—A physician or other entity

16 (other than a provider of services) that does not

17 have a contract establishing payment amounts for

18 services furnished to an individual enrolled under

19 this part with an eligible organization shall accept as

20 payment in full for services that are furnished to

21 such an individual the amounts that the physician or

22 other entity could collect if the individual were not

23 so enrolled. Any penalty or other provision of law

24 that applies to such payments with respect to an in25 dividual entitled to benefits under this title (but not
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•S 1926 IS

1 enrolled with an eligible organization under this

2 part) shall also apply with respect to an individual

3 so enrolled.

4 ‘‘(2) SIMILAR REQUIREMENTS.—For similar re5 quirements applicable to providers of services, see

6 section 1866(a)(1)(O).

7 ‘‘(d) PLAN AS A SECONDARY PAYER.—Notwithstand8 ing any other provision of law, an eligible organization

9 may (in the case of the provision of services for which the

10 Medicare program is a secondary payer under section

11 1862(b)(2)) charge or authorize the provider of such serv12 ices to charge, in accordance with the charges allowed

13 under such law, plan, or policy—

14 ‘‘(1) the insurance carrier, employer, or other

15 entity which under such law, plan, or policy is to pay

16 for the provision of such services, or

17 ‘‘(2) such member to the extent that the mem18 ber has been paid under such law, plan, or policy for

19 such services.

20 ‘‘SEC. 1851E. BENEFICIARY PROTECTIONS.

21 ‘‘(a) EXPLANATION OF RIGHTS AND RESTRIC22 TIONS.—Each eligible organization shall provide each en23 rollee, at the time of enrollment and not less frequently

24 than annually thereafter, an explanation of the enrollee’s
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•S 1926 IS

1 rights under this part and other important information,

2 including the following:

3 ‘‘(1) COVERAGE.—The enrollee’s rights to bene4 fits from the organization, and benefit limitations,

5 including—

6 ‘‘(A) out-of-area coverage provided by the

7 organization,

8 ‘‘(B) the organization’s coverage of emer9 gency services and urgently needed care, and

10 ‘‘(C) the restrictions on payments under

11 this title for services furnished other than by or

12 through the organization.

13 ‘‘(2) TERMINATION OF COVERAGE.—An expla14 nation that—

15 ‘‘(A) the organization may terminate or

16 refuse to renew the contract under this part;

17 and

18 ‘‘(B) termination of such contract could re19 sult in termination of enrollment of individuals

20 with the organization.

21 ‘‘(3) PATIENT RIGHTS.—Safeguards on enroll22 ees’ rights, including—

23 ‘‘(A) appeal rights of enrollees,

24 ‘‘(B) the right to be informed about var25 ious treatment options, and
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1 ‘‘(C) the right to decline treatment.

2 ‘‘(4) EMERGENCIES.—The appropriate use of

3 the 911 emergency telephone system in the case of

4 medical emergencies.

5 ‘‘(5) FRAUD AND ABUSE REPORTING.—The

6 processes for reporting potential fraud or abuse.

7 ‘‘(b) NOTIFICATION OF TERMINATION OPTION IN

8 MARKETING MATERIALS.—Each eligible organization

9 with a contract under this part shall include the informa10 tion required by subsection (a)(2) in any marketing mate11 rials described in section 1851B(b)(3) that are distributed

12 by an eligible organization to individuals eligible to enroll

13 under this part with the organization.

14 ‘‘(c) GRIEVANCE MECHANISM.—An eligible organiza15 tion with a contract under this part must provide mean16 ingful procedures for hearing and resolving grievances be17 tween the organization (including any entity or individual

18 through which the organization provides health care serv19 ices) and members enrolled with the organization under

20 this part.

21 ‘‘(d) COVERAGE DETERMINATIONS AND APPEALS.—

22 ‘‘(1) DETERMINATION BY ORGANIZATION.—An

23 eligible organization with a contract under this part

24 shall have a procedure for determining whether an

25 individual enrolled with the organization under this
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1 part is entitled to receive a health service described

2 in section 1851C(a) and the amount (if any) that

3 the individual is required to pay for that service,

4 which includes the following elements:

5 ‘‘(A) TIMELY REVIEW.—The organization

6 shall provide for review of a coverage issue

7 within 30 days of a request by such individual,

8 and for reconsideration, where requested, within

9 60 days after the initial review.

10 ‘‘(B) EXPEDITED REVIEW IN URGENT

11 CASES.—The organization shall have an expe12 dited process for review and reconsideration of

13 a coverage issue in cases in which delayed treat14 ment may place the health of such individual in

15 jeopardy, risk serious impairment of bodily

16 functions, or limit medically appropriate treat17 ment options.

18 ‘‘(2) REVIEW BY EXTERNAL CONTRACTOR.—An

19 individual dissatisfied with a determination under

20 paragraph (1) concerning such individual’s coverage

21 under a contract under this part is entitled to a

22 hearing before an independent reviewer designated

23 by the Secretary.

24 ‘‘(3) APPEAL TO SECRETARY.—An individual

25 dissatisfied with a determination under paragraph
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•S 1926 IS

1 (2) concerning such individual’s coverage under a

2 contract under this part is entitled, if the amount in

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

4 Secretary to the same extent as is provided in sec5 tion 205(b), and in any such hearing the Secretary

6 shall make the eligible organization a party. If the

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

9 the other party, be entitled to judicial review of the

10 Secretary’s final decision as provided in section

11 205(g), and both the individual and the eligible or12 ganization shall be entitled to be parties to that judi13 cial review. In applying sections 205(b) and 105(g)

14 as provided in this subparagraph, and in applying

15 section 205(l) thereto, any reference therein to the

16 Commissioner of Social Security or the Social Secu17 rity Administration shall be considered a reference

18 to the Secretary or the Department of Health and

19 Human Services, respectively.

20 ‘‘(e) QUALITY ASSURANCE.—

21 ‘‘(1) INTERNAL QUALITY ASSURANCE (IQA) PRO22 GRAM.—

23 ‘‘(A) IN GENERAL.—Subject to subpara24 graph (B), an eligible organization must have

25 arrangements, established in accordance with
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1 regulations of the Secretary, for an ongoing

2 quality assurance program for health care serv3 ices provided to individuals enrolled with the or4 ganization under this part that—

5 ‘‘(i) focuses on health outcomes; and

6 ‘‘(ii) provides for review by physicians

7 and other health care professionals of the

8 process followed in the provision of such

9 health care services.

10 ‘‘(B) ACCEPTANCE OF ACCREDITATION IN

11 SATISFACTION OF IQA STANDARDS.—If (or to

12 the extent that) an eligible organization has

13 been accredited by an accrediting body whose

14 standards with respect to one or more of the

15 elements of an internal quality assurance pro16 gram are at least as stringent as such stand17 ards pursuant to subparagraph (A), the organi18 zation shall be deemed to meet the require19 ments of such subparagraph (A) with respect to

20 such program elements.

21 ‘‘(2) EXTERNAL QUALITY REVIEW.—

22 ‘‘(A) REQUIREMENTS.—Each contract with

23 an eligible organization under this part shall

24 provide that the organization will maintain an

25 agreement with—
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1 ‘‘(i) a utilization and quality control

2 peer review organization (which has a con3 tract with the Secretary under part B of

4 title XI for the area in which the eligible

5 organization is located);

6 ‘‘(ii) an entity selected by the Sec7 retary under section 1154(a)(4)(C); or

8 ‘‘(iii) an independent quality review

9 and improvement organization selected by

10 the organization and approved by the Sec11 retary,

12 under which the review organization will per13 form functions under section 1154(a) (4)(B)

14 and (14) (other than those performed under

15 contracts described in section 1866(a)(1)(F))

16 with respect to services, furnished by the eligi17 ble organization, for which payment may be

18 made under this title.

19 ‘‘(B) QUALITY REVIEW AS COVERED SERV20 ICE.—For purposes of payment under this title,

21 the cost of such agreement to the eligible orga22 nization shall be considered a cost incurred by

23 a provider of services in providing covered serv24 ices under this title and shall be paid directly

25 by the Secretary to the review organization on
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1 behalf of such eligible organization in accord2 ance with a schedule established by the Sec3 retary.

4 ‘‘(C) PAYMENT FROM TRUST FUNDS.—

5 Such payments—

6 ‘‘(i) shall be transferred in appro7 priate proportions from the Federal Hos8 pital Insurance Trust Fund and from the

9 Supplementary Medical Insurance Trust

10 Fund, without regard to amounts appro11 priated in advance in appropriation Acts,

12 in the same manner as transfers are made

13 for payment for services provided directly

14 to beneficiaries, and

15 ‘‘(ii) shall not be less in the aggregate

16 for such organizations for a fiscal year

17 than the amounts the Secretary determines

18 to be sufficient to cover the costs of such

19 organizations’ conducting activities de20 scribed in subparagraph (A) with respect

21 to such eligible organizations under part B

22 of title XI.

23 ‘‘(f) BENEFICIARY ADVANCE DIRECTIVES CONCERN24 ING MEDICAL TREATMENT.—A contract under this part

25 shall provide that an eligible organization shall meet the
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1 requirements of section 1866(f) (relating to maintaining

2 written policies and procedures respecting advance direc3 tives).

4 ‘‘(g) PRIVATE ENROLLMENT REQUIREMENTS.—

5 ‘‘(1) 50 PERCENT REQUIREMENT.—Subject to

6 section 11205 of the Emergency Medicare Protec7 tion Act of 1996, each eligible organization with

8 which the Secretary enters into a contract under this

9 part shall have, for the duration of such contract, an

10 enrolled membership (without consideration of mem11 bers enrolled in the program under title XIX) at

12 least one-half of which consists of individuals who

13 are entitled to benefits under this title.

14 ‘‘(2) EXCEPTIONS.—The Secretary may modify

15 or waive the requirement imposed by paragraph (1)

16 only in the following circumstances:

17 ‘‘(A) AREA WITH LARGE MEDICARE POPU18 LATION.—If more than 50 percent of the popu19 lation of the area served by the organization

20 consists of individuals who are entitled to bene21 fits under this title.

22 ‘‘(B) INITIAL PERIOD FOR GOVERNMENTAL

23 CONTRACTOR.—In the case of an eligible orga24 nization that is owned and operated by a gov25 ernmental entity, only with respect to a period
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1 of three years beginning on the date the organi2 zation first enters into a contract under this

3 part, and only if the organization has taken and

4 is making reasonable efforts to enroll individ5 uals who are not entitled to benefits under this

6 title.

7 ‘‘(C) UNDERSERVED RURAL AREA.—If the

8 organization serves an underserved rural area.

9 ‘‘(D) CONTRACTOR WITH GOOD PAST

10 RECORD.—If the organization has had contracts

11 under this part for a total of at least three

12 years, has complied with all applicable require13 ments during that period, maintains a level of

14 enrollment of individuals not entitled to benefits

15 under this title determined by the Secretary,

16 and complies with any additional monitoring re17 quirements established by the Secretary.

18 ‘‘(E) CONTRACTOR WITH GOOD RECORD IN

19 ANOTHER GEOGRAPHIC AREA.—If—

20 ‘‘(i) the Secretary has not previously

21 entered into a contract with the organiza22 tion under this part in the same geo23 graphic area (or has entered into contracts

24 for a total of three years or less),
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1 ‘‘(ii) the organization (or a parent

2 company that controls the organization)

3 has entered into (or subsidiaries of the or4 ganization or parent company have entered

5 into) contracts under this part for at least

6 three different geographic areas—

7 ‘‘(I) for which no waiver has been

8 granted under this paragraph and

9 during the course of which there has

10 been compliance with all applicable re11 quirements; or

12 ‘‘(II) for which a waiver has been

13 granted under subparagraph (D);

14 ‘‘(iii) the organization (or parent com15 pany) demonstrates to the Secretary a

16 long-term business and financial commit17 ment to the geographic area served by the

18 organization, and the Secretary determines

19 that a waiver is necessary to promote com20 petition in that area; and

21 ‘‘(iv) the organization complies with

22 all applicable requirements and any addi23 tional monitoring requirements established

24 by the Secretary.
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1 ‘‘(F) OTHER SITUATIONS.—In such situa2 tions and under such conditions as the Sec3 retary determines will be in the best interest of

4 individuals entitled to benefits under this title.

5 ‘‘(h) ACCESS TO SPECIALTY CARE AND CASE MAN6 AGEMENT.—Each eligible organization shall ensure that

7 enrollees with chronic illnesses or disabilities and other en8 rollees as appropriate, shall have access to medically ap9 propriate specialty care and medically appropriate case

10 management.

11 ‘‘(i) RESTRICTIONS ON PHYSICIAN INCENTIVE

12 PLANS.—

13 ‘‘(1) CRITERIA.—Each contract with an eligible

14 organization under this part shall provide that the

15 organization may not operate any physician incentive

16 plan (as defined in paragraph (2)) unless the follow17 ing requirements are met:

18 ‘‘(A) NO INDUCEMENT TO LIMIT CARE.—

19 No specific payment is made directly or indi20 rectly under the plan to a physician or physi21 cian group as an inducement to reduce or limit

22 medically necessary services provided with re23 spect to a specific individual enrolled with the

24 organization.
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1 ‘‘(B) REQUIREMENTS WHERE PHYSICIAN

2 AT FINANCIAL RISK.—If the plan places a phy3 sician or physician group at substantial finan4 cial risk (as determined by the Secretary) for

5 services not provided by the physician or physi6 cian group, the organization—

7 ‘‘(i) provides stop-loss protection for

8 the physician or group that is adequate

9 and appropriate, based on standards devel10 oped by the Secretary that take into ac11 count the number of physicians placed at

12 such substantial financial risk in the group

13 or under the plan and the number of indi14 viduals enrolled with the organization who

15 receive services from the physician or the

16 physician group, and

17 ‘‘(ii) conducts periodic surveys of both

18 individuals enrolled and individuals pre19 viously enrolled with the organization to

20 determine the degree of access of such in21 dividuals to services provided by the orga22 nization and satisfaction with the quality

23 of such services.

24 ‘‘(C) DISCLOSURE TO SECRETARY.—The

25 organization provides the Secretary with de-
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1 scriptive information regarding the plan, suffi2 cient to permit the Secretary to determine

3 whether the plan is in compliance with the re4 quirements of this paragraph.

5 ‘‘(2) DEFINITION OF ‘PHYSICIAN INCENTIVE

6 PLAN’.—In this subsection, the term ‘physician in7 centive plan’ means any compensation arrangement

8 between an eligible organization and a physician or

9 physician group that may directly or indirectly have

10 the effect of reducing or limiting services provided

11 with respect to individuals enrolled with the organi12 zation.

13 ‘‘(j) ADDITIONAL STANDARDS FOR OTHER MANAGED

14 CARE ORGANIZATIONS.—The Secretary shall establish

15 such additional standards for entities treated as eligible

16 organizations under section 1851A(a)(5) as the Secretary

17 determines appropriate.

18 ‘‘SEC. 1851F. CONTRACTS WITH, AND PAYMENTS TO, PLANS.

19 ‘‘(a) GENERAL RULES ON PAYMENTS TO CONTRACT20 ING ORGANIZATION.—

21 ‘‘(1) PAYMENT TO ORGANIZATION ONLY UNDER

22 CONTRACT.—Payments to an eligible organization

23 under a risk or partial risk contract under this part

24 shall be in lieu of the amounts which (in the absence

25 of the contract) would be otherwise payable, pursu-
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•S 1926 IS

1 ant to sections 1814(b) and 1833(a), for services

2 furnished by or through the organization to individ3 uals enrolled with the organization under this part,

4 except as otherwise provided in this subsection.

5 ‘‘(2) PAYMENT FOR ENROLLED INDIVIDUAL

6 ONLY TO ORGANIZATION WITH CONTRACT.—If an in7 dividual is enrolled under this part with an eligible

8 organization, only the eligible organization shall be

9 entitled to receive payments from the Secretary

10 under this title for services (other than hospice care)

11 furnished to the individual, except as otherwise pro12 vided in this subsection.

13 ‘‘(3) EXCEPTIONS.—

14 ‘‘(A) FAILURE OF ORGANIZATION TO MAKE

15 PROMPT PAYMENT.—For the exception to para16 graph (1) that applies if an eligible organization

17 fails to make prompt payments under the con18 tract, see subsection (d).

19 ‘‘(B) MID-YEAR NATIONAL COVERAGE DE20 TERMINATION.—For the exception to paragraph

21 (1) that applies if the Secretary makes a mid22 contract year determination that expands bene23 fits under this title, see subsection (i).

24 ‘‘(C) PATIENT HOSPITALIZED ON DATE OF

25 ENROLLMENT.—For the exception to para-
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1 graphs (1) and (2) that applies in the case of

2 a patient hospitalized on the effective date of

3 enrollment with an organization under this

4 part, see subsection (h).

5 ‘‘(D) MEDICAL EDUCATION AND DIS6 PROPORTIONATE SHARE HOSPITAL PAY7 MENTS.—The Secretary may make payments

8 (as otherwise provided under this title) to hos9 pitals for payment adjustments for hospitals

10 serving a disproportionate share of low-income

11 patients, for the indirect costs of medical edu12 cation, or for direct graduate medical education.

13 ‘‘(E) ENROLLED INDIVIDUAL WHO ELECTS

14 HOSPICE CARE.—For the exception to para15 graphs (1) and (2) that applies in the case of

16 an individual who is enrolled under this part

17 with an eligible organization and elects under

18 section 1812(d)(1) to receive hospice care pro19 vided by a particular hospice program, see sub20 section (l).

21 ‘‘(4) PAYMENT FROM TRUST FUNDS.—The pay22 ment to an eligible organization under this part of

23 individuals enrolled under this part with the organi24 zation and entitled to benefits under part A and en25 rolled under part B shall be made from the Federal
181

•S 1926 IS

1 Hospital Insurance Trust Fund and the Federal

2 Supplementary Medical Insurance Trust Fund. The

3 portion of that payment to the organization for a

4 month to be paid by each trust fund shall be deter5 mined each year by the Secretary based on the rel6 ative weight that benefits from each fund contribute

7 to the per capita payments made under section

8 1851F(e)(2).

9 ‘‘(b) CONTRACT TERM; RENEWAL; TERMINATION.—

10 ‘‘(1) IN GENERAL.—Each contract under this

11 part shall be for a term of at least one year, as de12 termined by the Secretary, beginning on a date spec13 ified in the contract, and may be made automatically

14 renewable from term to term in the absence of no15 tice by either party of intention to terminate at the

16 end of the current term, except as provided in para17 graph (2).

18 ‘‘(2) TERMINATION BY SECRETARY FOR

19 CAUSE.—The Secretary may terminate any contract

20 described in paragraph (1) at any time (after such

21 reasonable notice and opportunity for hearing to the

22 eligible organization involved as may be provided in

23 regulations), if the Secretary finds that the organi24 zation—
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1 ‘‘(A) has failed substantially to carry out

2 the contract,

3 ‘‘(B) is carrying out the contract in a man4 ner inconsistent with the efficient and effective

5 administration of this part, or

6 ‘‘(C) no longer substantially meets the ap7 plicable conditions of this part.

8 ‘‘(c) CONTRACT TERMS AND CONDITIONS.—Each

9 contract under this part shall provide for the following:

10 ‘‘(1) AUDIT, INSPECTIONS, EVALUATIONS.—The

11 contract shall provide that the Secretary, or any per12 son or organization designated by the Secretary—

13 ‘‘(A) shall have the right to inspect or oth14 erwise evaluate—

15 ‘‘(i) the quality, appropriateness, and

16 timeliness of services performed under the

17 contract; and

18 ‘‘(ii) the facilities of the organization

19 when there is reasonable evidence of some

20 need for such inspection; and

21 ‘‘(B) shall have the right to audit and in22 spect any books and records of the eligible or23 ganization that pertain—
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1 ‘‘(i) to the ability of the organization

2 to bear the risk of potential financial

3 losses; or

4 ‘‘(ii) to services performed or deter5 minations of amounts payable under the

6 contract.

7 ‘‘(2) NOTICE TO ENROLLEES IN EVENT OF TER8 MINATION OF CONTRACT.—The contract shall re9 quire the organization to provide (and pay for) writ10 ten notice in advance of the contract’s termination,

11 as well as a description of alternatives for obtaining

12 benefits under this title, to each individual enrolled

13 under this part with the organization.

14 ‘‘(3) DISCLOSURES.—

15 ‘‘(A) FINANCIAL AND LIABILITY INFORMA16 TION.—The contract shall require the organiza17 tion to comply with subsections (a) and (c) of

18 section 1318 of the Public Health Service Act

19 (relating to disclosure of certain financial infor20 mation) and with the requirement of section

21 1301(c)(7) of such Act (relating to liability ar22 rangements to protect members).

23 ‘‘(B) OWNERSHIP AND CONTROL INTER24 ESTS.—The contract shall require the organiza25 tion to report the information required to be re-
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1 ported by disclosing entities under section 1124

2 (concerning ownership and control interests).

3 ‘‘(C) LOANS AND OTHER FINANCIAL AR4 RANGEMENTS.—The contract shall require the

5 organization to notify the Secretary of loans

6 and other special financial arrangements which

7 are made between the organization and sub8 contractors, affiliates, and related parties.

9 ‘‘(4) OTHER TERMS AND CONDITIONS.—The

10 contract shall contain such other terms and condi11 tions not inconsistent with this part (including re12 quirements that the organization furnish to the Sec13 retary such information) as the Secretary may find

14 necessary and appropriate.

15 ‘‘(d) PROMPT PAYMENT BY ELIGIBLE ORGANIZA16 TION.—

17 ‘‘(1) REQUIREMENT.—A contract under this

18 part shall require an eligible organization to provide

19 prompt payment (consistent with the provisions of

20 sections 1816(c)(2) and 1842(c)(2)) of claims sub21 mitted for services and supplies furnished to individ22 uals pursuant to such contract, if the services or

23 supplies are not furnished under a contract between

24 the organization and the provider or supplier.
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1 ‘‘(2) SECRETARY’S OPTION TO BYPASS NON2 COMPLYING ORGANIZATION.—In the case of an eligi3 ble organization which the Secretary determines,

4 after notice and opportunity for a hearing, has failed

5 to make payments of amounts in compliance with

6 paragraph (1), the Secretary may provide for direct

7 payment of the amounts owed to providers and sup8 pliers for such covered services furnished to individ9 uals enrolled under this part under the contract. If

10 the Secretary provides for such direct payments, the

11 Secretary shall provide for an appropriate reduction

12 in the amount of payments otherwise made to the

13 organization under this part to reflect the amount of

14 the Secretary’s payments (and costs incurred by the

15 Secretary in making such payments).

16 ‘‘(e) RISK CONTRACTS.—

17 ‘‘(1) IN GENERAL.—

18 ‘‘(A) SECRETARY’S AUTHORITY TO CON19 TRACT.—The Secretary may enter into a risk

20 contract under this subsection (under which

21 payment by the Secretary for covered services

22 to individuals eligible for benefits under this

23 title is based on the per capita rate determined

24 annually under paragraph (2)) with any eligible
186

•S 1926 IS

1 organization meeting the requirements of sub2 paragraph (B).

3 ‘‘(B) REQUIREMENTS APPLICABLE TO

4 CONTRACTING ORGANIZATIONS.—An eligible or5 ganization qualified to enter a contract under

6 this subsection must meet the following require7 ments:

8 ‘‘(i) MINIMUM PRIVATE ENROLL9 MENT.—The organization must have at

10 least 5,000 members not eligible for bene11 fits under this title or title XIX, except

12 that the Secretary may enter into such a

13 contract with an eligible organization that

14 has fewer such members—

15 ‘‘(I) if the organization primarily

16 serves members residing outside of ur17 banized areas, or

18 ‘‘(II) in such situations and

19 under such conditions as the Sec20 retary determines will be in the best

21 interests of individuals entitled to ben22 efits under this title.

23 ‘‘(ii) ABILITY TO BEAR RISK.—The

24 organization must satisfy the Secretary

25 that it has the ability to bear the risk of
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•S 1926 IS

1 potential losses under a risk contract

2 under this subsection.

3 ‘‘(2) PAYMENTS.—

4 ‘‘(A) MONTHLY PAYMENTS.—Under a con5 tract under paragraph (1), the Secretary shall

6 make monthly payments in advance to each eli7 gible organization, with respect to each individ8 ual enrolled under this part with the organiza9 tion in a payment area for a month, in an

10 amount equal to one-twelfth of the annual capi11 tation rate (as calculated under paragraph (4))

12 with respect to that individual for that area, ad13 justed for such risk factors as age, disability

14 status, gender, institutional status, ESRD sta15 tus, and such other factors as the Secretary de16 termines to be appropriate, so as to ensure ac17 tuarial equivalence. The Secretary may add to,

18 or modify, or substitute for such factors, if such

19 changes will improve the determination of actu20 arial equivalence.

21 ‘‘(B) ADJUSTMENT TO REFLECT NUMBER

22 OF ENROLLEES.—

23 ‘‘(i) IN GENERAL.—The amount of

24 payment under this paragraph may be

25 retroactively adjusted to take into account
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1 any difference between the actual number

2 of individuals enrolled with the organiza3 tion under this part and the number of

4 such individuals estimated to be so enrolled

5 in determining the amount of the advance

6 payment.

7 ‘‘(ii) SPECIAL RULE FOR CERTAIN EN8 ROLLEES.—

9 ‘‘(I) IN GENERAL.—Subject to

10 subclause (II), the Secretary may

11 make retroactive adjustments under

12 clause (i) to take into account individ13 uals enrolled during the period (not to

14 exceed 90 days) beginning on the date

15 on which the individual enrolls with

16 an eligible organization under a plan

17 operated, sponsored, or contributed to

18 by the individual’s employer or former

19 employer (or the employer or former

20 employer of the individual’s spouse)

21 and ending on the date on which the

22 individual is enrolled in the organiza23 tion under this part.

24 ‘‘(II) EXCEPTION.—No adjust25 ment may be made under subclause
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1 (I) with respect to any individual who

2 does not certify that the organization

3 provided the individual with the dis4 closure statement described in section

5 1851E(a) at the time the individual

6 enrolled with the organization.

7 ‘‘(3) ANNUAL ANNOUNCEMENT OF PAYMENT

8 RATES.—

9 ‘‘(A) ANNUAL ANNOUNCEMENT.—The Sec10 retary shall annually determine, and shall an11 nounce (in a manner intended to provide notice

12 to interested parties) not later than August 1

13 before the calendar year concerned—

14 ‘‘(i) the annual capitation rate for

15 each payment area for the year;

16 ‘‘(ii) the risk and other factors to be

17 used in adjusting the rates under para18 graph (2)(A) for payments for months in

19 that year;

20 ‘‘(iii) any adjustments to be made to

21 offset favorable selection under paragraph

22 (4)(F);

23 ‘‘(iv) any adjustments for national

24 coverage determinations under paragraph

25 (4)(G); and
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1 ‘‘(v) any adjustment made to the

2 blended payment rate under paragraph

3 (4)(E).

4 ‘‘(B) ADVANCE NOTICE OF METHODOLOGI5 CAL CHANGES.—At least 45 days before making

6 the announcement under subparagraph (A) for

7 a year, the Secretary shall provide for notice to

8 eligible organizations of proposed changes to be

9 made in the methodology from the methodology

10 and assumptions used in the previous an11 nouncement and shall provide eligible organiza12 tions an opportunity to comment on the pro13 posed changes.

14 ‘‘(C) EXPLANATION OF ASSUMPTIONS.—In

15 each announcement made under subparagraph

16 (A) for a year, the Secretary shall include an

17 explanation of the assumptions and changes in

18 methodology used in the announcement in suffi19 cient detail so that eligible organizations can

20 compute monthly adjusted capitation rates for

21 individuals in each payment area.

22 ‘‘(4) CALCULATION OF ANNUAL CAPITATION

23 RATES.—

24 ‘‘(A) IN GENERAL.—The annual capitation

25 rate for a payment area for a calendar year is
191

•S 1926 IS

1 equal to the greatest of the following (adjusted

2 as provided by subparagraphs (F) through

3 (H)):

4 ‘‘(i) BLENDED CAPITATION RATE.—

5 The sum of—

6 ‘‘(I) the area-specific percentage

7 (as specified under subparagraph (B)

8 for the year) of the area-specific capi9 tation rate for the year for the pay10 ment area, as determined under sub11 paragraph (C), and

12 ‘‘(II) the national percentage (as

13 specified under subparagraph (B) for

14 the year) of the input-price-adjusted

15 national capitation rate for the year,

16 as determined under subparagraph

17 (D),

18 multiplied by a budget neutrality factor ad19 justment factor determined under subpara20 graph (E).

21 ‘‘(ii) MINIMUM AMOUNT.—

22 ‘‘(I) for 1997, $325; and

23 ‘‘(II) for a subsequent year, the

24 amount determined under this clause

25 for the preceding year increased by
192

•S 1926 IS

1 the national average per capital

2 growth percentage, as specified under

3 subparagraph (I) for that succeeding

4 year.

5 ‘‘(iii) MINIMUM INCREASE OVER PRE6 VIOUS YEAR’S RATE.—

7 ‘‘(I) for 1997, 102 percent of the

8 annual per capita rate of payment for

9 1996 determined under section

10 1876(a)(1)(C) for the payment area;

11 and

12 ‘‘(II) for a subsequent year, 102

13 percent of the annual capitation rate

14 under this paragraph for the preced15 ing year for the payment area.

16 ‘‘(B) AREA-SPECIFIC AND NATIONAL PER17 CENTAGES.—For purposes of subparagraph

18 (A)(i)—

19 ‘‘(i) for 1997, the ‘area-specific per20 centage’ is 90 percent and the ‘national

21 percentage’ is 10 percent,

22 ‘‘(ii) for 1998, the ‘area-specific per23 centage’ is 85 percent and the ‘national

24 percentage’ is 15 percent,
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1 ‘‘(iii) for 1999, the ‘area-specific per2 centage’ is 80 percent and the ‘national

3 percentage’ is 20 percent,

4 ‘‘(iv) for 2000, the ‘area-specific per5 centage’ is 75 percent and the ‘national

6 percentage’ is 25 percent, and

7 ‘‘(v) for a year after 2000, the ‘area8 specific percentage’ is 70 percent and the

9 ‘national percentage’ is 30 percent.

10 ‘‘(C) AREA-SPECIFIC CAPITATION RATE.—

11 ‘‘(i) IN GENERAL.—For purposes of

12 subparagraph (A)(i)(I), subject to clause

13 (ii) of this subparagraph, the area-specific

14 capitation rate for a payment area—

15 ‘‘(I) for 1997 is the annual per

16 capita rate of payment for 1996 de17 termined under section 1876(a)(1)(C)

18 for the payment area, increased by

19 the national average per capita growth

20 percentage for 1997 (as specified in

21 subparagraph (I)), and

22 ‘‘(II) for a subsequent year is the

23 area-specific capitation rate for the

24 previous year for the payment area,
194

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1 increased by that percentage for that

2 subsequent year.

3 ‘‘(ii) REMOVAL OF MEDICAL EDU4 CATION AND DISPROPORTIONATE SHARE

5 HOSPITAL PAYMENTS FROM CALCULATION

6 OF ADJUSTED AVERAGE PER CAPITA

7 COST.—In determining the area-specific

8 capitation rate under clause (i)(II) for

9 1998 and for subsequent years, the area10 specific capitation rate for 1997 deter11 mined under clause (i)(I) shall be adjusted

12 to exclude from that rate any amount

13 which the Secretary estimates was payable

14 under this title during 1996 for payment

15 adjustments under section 1886(d)(5)(F)

16 for hospitals serving a disproportionate

17 share of low-income patients, for the indi18 rect costs of medical education under sec19 tion 1886(d)(5)(B), or for direct graduate

20 medical education costs under section

21 1886(h).

22 ‘‘(D) INPUT-PRICE-ADJUSTED NATIONAL

23 CAPITATION RATE.—

24 ‘‘(i) IN GENERAL.—For purposes of

25 subparagraph (A)(i)(II), the ‘input-price-
195

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1 adjusted national capitation rate’ for a

2 year for a payment area is equal to the

3 sum, for all the types of services under this

4 title (as classified by the Secretary), of the

5 product (for each such type) of—

6 ‘‘(I) the national standardized

7 capitation rate (determined under

8 clause (ii)) for the year,

9 ‘‘(II) the proportion of that rate

10 for the year that is attributable to

11 that type of services, and

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

13 that year and that type of services)

14 the relative input price of the services

15 in the area compared with the na16 tional input price of the services.

17 In applying subclause (III), the Secretary

18 shall, subject to clause (iii), apply those in19 dices under this title that are used in ap20 plying (or updating) national payment

21 rates for specific areas and localities.

22 ‘‘(ii) NATIONAL STANDARDIZED CAPI23 TATION RATE.—In clause (i)(I), the ‘na24 tional standardized capitation rate’ for a

25 year is equal to—
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1 ‘‘(I) the sum (for all payment

2 areas) of the product of the area-spe3 cific capitation rate for the year for

4 the area under subparagraph (C) and

5 the average number of individuals en6 titled to benefits under this title who

7 reside in that area in the year, divided

8 by

9 ‘‘(II) the total average number of

10 individuals entitled to benefits under

11 this title who reside in all payment

12 areas in the year.

13 ‘‘(iii) SPECIAL RULES FOR 1997 AND

14 1998.—In applying this subparagraph for

15 1997—

16 ‘‘(I) services under this title shall

17 be divided into services under part A

18 and services under part B,

19 ‘‘(II) the proportions described in

20 clause (i)(II) for such types of services

21 shall be, for services under part A, the

22 ratio (expressed as a percentage) of

23 the average annual per capita rate of

24 payment for the area for part A for

25 1995 to the total average annual per
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1 capita rate of payment for the area

2 for parts A and B, and, for services

3 under part B, 100 percent minus the

4 percentage described for services

5 under part A,

6 ‘‘(III) for services under part A,

7 70 percent of payments attributable

8 to those services shall be adjusted by

9 the index used under section

10 1886(d)(3)(E) to adjust payment

11 rates for relative hospital wage levels

12 for hospitals located in the payment

13 area involved,

14 ‘‘(IV) for services under part B,

15 66 percent of payment attributable to

16 those services shall be adjusted by the

17 index of the geographic area factors

18 used under section 1848(e) to adjust

19 payment rates for physicians’ services

20 furnished in the payment area, and 70

21 percent of the remaining 34 percent

22 shall be adjusted by the index de23 scribed in subclause (III), and

24 ‘‘(V) the index values shall be

25 computed based only on the popu-
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1 lation of individuals entitled to bene2 fits under this title who are 65 years

3 of age or older and who have not been

4 determined to have end-stage renal

5 disease.

6 The Secretary may continue to apply the

7 rules described in the preceding subclauses

8 (or similar rules) in 1998.

9 ‘‘(E) BUDGET NEUTRALITY ADJUSTMENT

10 FACTOR.—For each year, the Secretary shall

11 determine a budget neutrality adjustment factor

12 so that the aggregate of the payments under

13 this part shall not exceed the aggregate pay14 ments that would have been made under this

15 part if the area-specific percentage for the year

16 had been 100 percent and the national percent17 age had been 0 percent.

18 ‘‘(F) ADJUSTMENT TO OFFSET COST OF

19 FAVORABLE SELECTION.—For each year, the

20 Secretary shall determine the adjustment, if

21 any, needed to offset any estimated increases in

22 total projected expenditures under this title re23 sulting from increases in enrollment in eligible

24 organizations attributable to enactment of this

25 part.
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1 ‘‘(G) ADJUSTMENT FOR NATIONAL COV2 ERAGE DETERMINATIONS.—If the Secretary

3 makes a determination with respect to coverage

4 under this title that the Secretary projects will

5 result in a significant increase in the costs to

6 eligible organizations of providing benefits

7 under contracts under this part (for periods

8 after any period described in subsection (i)), the

9 Secretary shall make an appropriate adjustment

10 in the payments to eligible organizations under

11 this part.

12 ‘‘(H) ADJUSTMENT TO REMOVE MEDICAL

13 EDUCATION AND DISPROPORTIONATE SHARE

14 HOSPITAL PAYMENTS FROM 1997 RATES.—An15 nual capitation rates for 1997 shall be adjusted

16 to exclude from that rate any amount which the

17 Secretary estimates were payable under this

18 title during 1996 for payment adjustments

19 under section 1886(d)(5)(F) for hospitals serv20 ing a disproportionate share of low-income pa21 tients, for the indirect costs of medical edu22 cation under section 1886(d)(5)(B), or for di23 rect graduate medical education costs under

24 section 1886(h).
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1 ‘‘(I) NATIONAL AVERAGE PER CAPITA

2 GROWTH PERCENTAGE.—For purposes of sub3 paragraphs (A)(ii)(II) and (C)(i)(I), the ‘na4 tional average per capita growth percentage’

5 shall be the percentage determined by the Sec6 retary on an annual basis (not later than Au7 gust 1 before the year concerned) to reflect the

8 Secretary’s estimate of the projected per capita

9 rate of growth in expenditures under this title.

10 ‘‘(5) PAYMENT AREA DEFINED.—

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

12 part, except as provided by subparagraph (B),

13 the term ‘payment area’ means a county, or

14 equivalent area specified by the Secretary.

15 ‘‘(B) RULE FOR ESRD BENEFICIARIES.—In

16 the case of individuals who are determined to

17 have end-stage renal disease, the payment area

18 shall be a State or other area specified by the

19 Secretary.

20 ‘‘(f) PARTIAL RISK CONTRACTS.—

21 ‘‘(1) IN GENERAL.—

22 ‘‘(A) SECRETARY’S AUTHORITY TO CON23 TRACT.—The Secretary may enter into a partial

24 risk contract under this subsection (under

25 which payment by the Secretary for covered
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1 services to individuals eligible for benefits under

2 this title shall be made as provided in para3 graph (2)) with any eligible organization meet4 ing the requirements of subparagraph (B).

5 ‘‘(B) REQUIREMENTS APPLICABLE TO

6 CONTRACTING ORGANIZATIONS.—An eligible or7 ganization qualified to enter a contract under

8 this subsection must meet the following require9 ments:

10 ‘‘(i) MINIMUM PRIVATE ENROLL11 MENT.—The organization must have at

12 least 1,500 members not entitled to bene13 fits under this title or title XIX, except in

14 such situations and under such conditions

15 as the Secretary determines will be in the

16 best interests of individuals entitled to ben17 efits under this title.

18 ‘‘(ii) ABILITY TO BEAR RISK.—The

19 organization must satisfy the Secretary

20 that it has the ability to bear the risk of

21 potential losses under a partial risk con22 tract under this subsection.

23 ‘‘(2) PAYMENTS.—The Secretary shall make

24 payments to an organization with a partial risk con-
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1 tract under this subsection, for services provided

2 under such contract, as follows:

3 ‘‘(A) INTERIM MONTHLY PAYMENTS.—The

4 Secretary shall make payments over a 12-month

5 period in amounts equal to 95 percent of modi6 fied fee for service amounts (as defined in para7 graph (4)).

8 ‘‘(B) FINAL RETROSPECTIVE ADJUST9 MENT.—After the end of such 12-month period,

10 the Secretary shall make a final payment ad11 justment, as follows:

12 ‘‘(i) IF PLAN COSTS ARE BELOW

13 TOTAL ANNUAL CAPITATION PAYMENTS.—

14 If 100 percent of the modified fee for serv15 ice amounts paid under subparagraph (A)

16 for that period were less than total annual

17 capitation payments (as defined in para18 graph (4)), the Secretary shall pay the or19 ganization (in addition to the amounts

20 paid under subparagraph (A)) 5 percent of

21 modified fee for service amounts, plus one22 half of the difference between the total an23 nual capitation payments and 100 percent

24 of the modified fee for service amounts

25 paid under subparagraph (A).
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1 ‘‘(ii) IF PLAN COSTS ARE BETWEEN

2 THE TOTAL ANNUAL CAPITATION PAY3 MENTS AND 110 PERCENT OF SUCH PAY4 MENTS.—If 100 percent of the modified

5 fee for service amounts paid made under

6 subparagraph (A) equal to or greater than

7 total annual capitation payments, but not

8 more than 110 percent of such amount,

9 the Secretary shall pay the organization an

10 additional amount (in addition to the

11 amounts paid under subparagraph (A))

12 such that the total amounts paid the orga13 nization equal the sum of the total annual

14 capitation payments plus one-half of the

15 difference between 100 percent of the

16 modified fee for service amounts and total

17 annual capitation payments.

18 ‘‘(iii) IF PLAN COSTS ARE GREATER

19 THAN 110 PERCENT OF TOTAL ANNUAL

20 CAPITATION PAYMENTS.—If 100 percent of

21 the modified fee for service amounts paid

22 under subparagraph (A) exceeded 110 per23 cent of total annual capitation payments,

24 the Secretary shall pay the organization, or

25 the organization shall refund to the Sec-
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1 retary, an amount such that the total

2 amounts paid the organization equal 105

3 percent of total annual capitation pay4 ments.

5 ‘‘(3) NONRENEWAL FOR EXCESSIVE COSTS.—If

6 paragraph (2)(B)(iii) applies two years in succes7 sion, the contract shall not be renewed.

8 ‘‘(4) DEFINITIONS.—

9 ‘‘(A) MODIFIED FEE FOR SERVICE

10 AMOUNTS.—For purposes of this subsection,

11 ‘modified fee for service amounts’ are the

12 amounts that the Secretary would have paid

13 under this title (other than under this part) ex14 cluding payment adjustments under section

15 1886(d)(5)(F) for hospitals serving a dispropor16 tionate share of low-income patients, for the in17 direct costs of medical education under section

18 1886(d)(5)(B), or for direct graduate medical

19 education costs under section 1886(h).

20 ‘‘(B) TOTAL ANNUAL CAPITATION PAY21 MENTS.—For purposes of this subsection, ‘total

22 annual capitation payments’ are equal to the

23 total payments that the eligible organization

24 would have received for the year if it had a con-
205

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1 tract under subsection (e) instead of under this

2 subsection.

3 ‘‘(g) MINIMUM PERIOD OF NONPARTICIPATION

4 AFTER CONTRACT TERMINATION.—

5 ‘‘(1) IN GENERAL.—The Secretary may not

6 enter into a contract with an eligible organization

7 under this part, except in circumstances (as deter8 mined by the Secretary) which warrant special con9 sideration, if a previous contract with that organiza10 tion was terminated within the preceding five-year

11 period—

12 ‘‘(A) at the request of the organization; or

13 ‘‘(B) pursuant to subsection (f)(3), for ex14 cessive costs under a partial risk contract.

15 ‘‘(2) INAPPLICABILITY TO CONTRACT CONVER16 SIONS.—For purposes of the requirement of para17 graph (1), a conversion from a risk to a partial risk

18 contract shall not be considered a contract termi19 nation.

20 ‘‘(h) SPECIAL RULE FOR HOSPITALIZED PA21 TIENTS.—A contract under this part shall provide that in

22 the case of an individual who is receiving inpatient hos23 pital services from a subsection (d) hospital (as defined

24 in section 1886(d)(1)(B)) as of the effective date of the

25 individual’s—
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•S 1926 IS

1 ‘‘(1) enrollment with an eligible organization

2 under this part—

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

4 date of the individual’s discharge shall be made

5 under this title as if the individual were not en6 rolled with the organization,

7 ‘‘(B) the organization shall not be finan8 cially responsible for payment for such services

9 until the date after the date of the individual’s

10 discharge, and

11 ‘‘(C) the organization shall nonetheless be

12 paid the full amount otherwise payable to the

13 organization under this part, or

14 ‘‘(2) termination of enrollment with an eligible

15 organization under this part—

16 ‘‘(A) the organization shall be financially

17 responsible for payment for such services after

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

19 discharge,

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

21 stay shall not be made under section 1886(d),

22 and

23 ‘‘(C) the organization shall not receive any

24 payment with respect to the individual under
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•S 1926 IS

1 this part during the period the individual is not

2 enrolled.

3 ‘‘(i) SPECIAL RULE FOR NATIONAL COVERAGE DE4 TERMINATION.—

5 ‘‘(1) If the Secretary makes a determination

6 with respect to coverage under this title that the

7 Secretary projects will result in a significant in8 crease in the costs to eligible organizations of pro9 viding benefits under contracts under this part—

10 ‘‘(A) during an annual contract period

11 under a risk contract; or

12 ‘‘(B) during a 12-month payment period

13 under a partial risk contract,

14 the provisions of this subsection apply to benefits

15 and payments during the remainder of the term of

16 such contract.

17 ‘‘(2) COVERAGE OF EXPANDED BENEFITS.—

18 The organization shall be required to provide (or ar19 range for provision of) the expanded benefit to indi20 viduals enrolled under this part as of the date such

21 benefit would have been available to them had they

22 not been so enrolled.

23 ‘‘(3) PAYMENT FOR EXPANDED BENEFITS.—If

24 (or to the extent) the increased costs attributable to

25 the expanded benefits were not taken into account in
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•S 1926 IS

1 establishing per capita payment rates under a risk

2 contract, or in determining the total annual capita3 tion payments applicable to a partial risk contract—

4 ‘‘(A) in the case of an organization with a

5 risk contract, the Secretary shall make an addi6 tional payment for the provision of such ex7 panded benefits during such remaining portion

8 of the contract term, notwithstanding any other

9 provision of this part, equal to the amount that

10 the Secretary would have paid under this title

11 (other than under this part); and

12 ‘‘(B) in the case of an organization with a

13 partial risk contract, the applicable total annual

14 capitation payments shall be recalculated to

15 take the increased costs of such expanded bene16 fits into account for such remaining portion of

17 the contract term.

18 ‘‘(j) GENERAL PROVISIONS.—

19 ‘‘(1) GENERAL AUTHORITY OF SECRETARY.—

20 The authority vested in the Secretary by this part

21 may be performed without regard to such provisions

22 of law or regulations relating to the making, per23 formance, amendment, or modification of contracts

24 of the United States as the Secretary may determine
209

•S 1926 IS

1 to be inconsistent with the furtherance of the pur2 pose of this title.

3 ‘‘(2) SERVICE AREA.—The Secretary may pre4 scribe criteria for the geographic area to be served

5 by an eligible organization. The criteria may vary for

6 different kinds of eligible organizations.

7 ‘‘(k) USER FEES.—

8 ‘‘(1) FEE FOR CERTIFICATION.—Each entity

9 requesting to be certified as an eligible organization

10 shall pay the Secretary for the estimated costs to be

11 incurred by the Secretary for certification activities.

12 ‘‘(2) FEE FOR MONITORING ACTIVITIES.—Eligi13 ble organizations with a contract under this part

14 shall pay the Secretary for the estimated costs to be

15 incurred by the Secretary for monitoring activities.

16 ‘‘(3) AUTHORIZATION.—The payments de17 scribed in paragraphs (1) and (2) are appropriated

18 to defray the cost described in such paragraphs, to

19 remain available until expended.

20 ‘‘(l) SPECIAL RULE FOR HOSPICE CARE.—

21 ‘‘(1) INFORMATION.—A contract under this

22 part shall require the organization to inform each in23 dividual enrolled under this part with the organiza24 tion about the availability of hospice care if—
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•S 1926 IS

1 ‘‘(A) a hospice participating under this

2 title is located within the organization’s geo3 graphic area; or

4 ‘‘(B) it is common practice to refer pa5 tients to hospices outside the geographic area.

6 ‘‘(2) PAYMENT.—If an individual who is en7 rolled with an eligible organization under this part

8 makes an election under section 1812(d)(1) to re9 ceive hospice care from a particular hospice—

10 ‘‘(A) payment for the hospice care services

11 furnished to the individual shall be made by the

12 Secretary for the hospices elected by the indi13 vidual; and

14 ‘‘(B) payment for other services for which

15 the individual is eligible notwithstanding the in16 dividual’s election of hospice care under section

17 1812(d)(1), including services not related to the

18 individual’s terminal illness, shall be made by

19 the Secretary to the eligible organization or the

20 provider or supplier of the service in lieu of

21 payments calculated under subsections (e) and

22 (f).

23 ‘‘SEC. 1851G. SANCTIONS.

24 ‘‘(a) VIOLATIONS SUBJECT TO CIVIL MONEY PEN25 ALTIES.—In addition to any other remedies authorized by
211

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1 law, the Secretary may impose a civil money penalty in

2 accordance with subsection (c) on an eligible organization

3 with a contract under this part that has committed any

4 of the following violations.

5 ‘‘(1) FAILURE TO PROVIDE MEDICALLY NEC6 ESSARY CARE.—The organization has failed substan7 tially to provide medically necessary items and serv8 ices that are required (under law or under the con9 tract) to be provided to an individual covered under

10 the contract, if the failure has adversely affected (or

11 has substantial likelihood of adversely affecting) the

12 individual.

13 ‘‘(2) EXCESSIVE PREMIUMS.—The organization

14 has imposed premiums on individuals enrolled under

15 this part in excess of the premiums permitted.

16 ‘‘(3) DISCONTINUATION OF COVERAGE.—The

17 organization has expelled or refused to reenroll an

18 individual in violation of the provisions of this part.

19 ‘‘(4) DISCOURAGING ENROLLMENT.—The orga20 nization has engaged in any practice that would rea21 sonably be expected to have the effect of denying or

22 discouraging enrollment (except as permitted by this

23 part) by eligible individuals with the organization

24 whose medical condition or history indicates a need

25 for substantial future medical services.
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•S 1926 IS

1 ‘‘(5) FALSE INFORMATION.—The organization

2 has misrepresented or falsified information fur3 nished—

4 ‘‘(A) to the Secretary under this part, or

5 ‘‘(B) to an individual or to any other entity

6 under this part.

7 ‘‘(6) FAILURE TO COOPERATE WITH EXTERNAL

8 QUALITY REVIEW.—The organization fails to cooper9 ate in the performance of the review required under

10 section 1851E(e)(2).

11 ‘‘(7) PHYSICIAN INCENTIVE PLAN VIOLA12 TIONS.—The organization fails to comply with the

13 requirements of section 1851E(i).

14 ‘‘(8) RELATIONSHIP WITH EXCLUDED INDIVID15 UAL OR ENTITY.—The organization—

16 ‘‘(A) employs or contracts with any indi17 vidual or entity that is excluded from participa18 tion under this title under section 1128 or

19 1128A for the provision of health care, utiliza20 tion review, medical social work, or administra21 tive services; or

22 ‘‘(B) employs or contracts with any entity

23 for the provision (directly or indirectly) through

24 such an excluded individual or entity of such

25 services.
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•S 1926 IS

1 ‘‘(b) VIOLATIONS SUBJECT TO INTERMEDIATE SANC2 TIONS.—In addition to any other remedies authorized by

3 law, the Secretary may impose an intermediate sanction

4 in accordance with subsection (d) on an eligible organiza5 tion with a contract under this part that has committed

6 any of the following violations:

7 ‘‘(1) VIOLATION SUBJECT TO CIVIL MONEY

8 PENALTY.—Any violation specified in subsection (a).

9 ‘‘(2) GROUNDS FOR TERMINATION OF CON10 TRACT.—Any violation that would be grounds for

11 termination of the contract with the organization

12 pursuant to section 1851F(b)(2).

13 ‘‘(3) FAILURE TO MAKE PROMPT PAYMENT.—

14 Failure to make prompt payment as required by sec15 tion 1851F(d).

16 ‘‘(4) DELAYED COVERAGE DETERMINATIONS.—

17 Failure to meet timeliness standards for coverage

18 determinations under section 1851E(d)(1).

19 ‘‘(5) INSUFFICIENT PRIVATE ENROLLMENT.—

20 Failure to meet the minimum requirements of sec21 tion 1851E(g).

22 ‘‘(c) CIVIL MONEY PENALTIES.—

23 ‘‘(1) AMOUNT OF PENALTY.—The Secretary

24 may impose, on an eligible organization determined

25 to have committed a violation specified in subsection
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•S 1926 IS

1 (a), civil money penalties not to exceed the sum of

2 the following amounts, as applicable:

3 ‘‘(A) For each such determination, not

4 more than—

5 ‘‘(i) $100,000, in the case of a deter6 mination under subsection (a) (4) or

7 (5)(A); or

8 ‘‘(ii) $25,000, in the case of any other

9 such determination.

10 ‘‘(B) With respect to a determination

11 under subsection (a)(2), double the excess

12 amount charged (and the excess amount

13 charged shall be deducted from the penalty and

14 returned to the individual concerned).

15 ‘‘(C) With respect to a determination

16 under subsection (a)(4), $15,000 for each indi17 vidual not enrolled as a result of the practice

18 involved.

19 ‘‘(2) ADMINISTRATIVE PROCEDURE.—The pro20 visions of section 1128A (other than subsections (a)

21 and (b) shall apply to a civil money penalty under

22 this section in the same manner as they apply to a

23 civil money penalty or proceeding under section

24 1128A(a).
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•S 1926 IS

1 ‘‘(d) INTERMEDIATE SANCTIONS.—The Secretary

2 may impose, on an eligible organization determined to

3 have committed a violation specified in subsection (a) or

4 (b), either or both of the following sanctions.

5 ‘‘(1) SUSPENSION OF ENROLLMENT.—Suspen6 sion of enrollment of individuals with the organiza7 tion under this part after the date the Secretary no8 tifies the organization of a determination under sub9 section (a) or (b) and until the Secretary is satisfied

10 that the basis for such determination has been cor11 rected and is not likely to recur.

12 ‘‘(2) SUSPENSION OF PAYMENT.—Suspension of

13 payment to the organization under this part for indi14 viduals enrolled after the date the Secretary notifies

15 the organization of a determination under subsection

16 (a) or (b) and until the Secretary is satisfied that

17 the basis for such determination has been corrected

18 and is not likely to recur.

19 ‘‘SEC. 1851H. ALTERNATIVE CERTIFICATION AND MONITOR20 ING PROGRAM.

21 ‘‘(a) IN GENERAL.—The Secretary shall develop a

22 program under which States using Federal standards

23 could certify entities as eligible organizations and assist

24 in monitoring eligible organizations with contracts under

25 section 1851F.
216

•S 1926 IS

1 ‘‘(b) CRITERIA FOR STATE PARTICIPATION.—States

2 can participate in the program described in subsection (a)

3 if upon the request of a State the Secretary determines

4 that—

5 ‘‘(1) the State’s standards are substantially

6 equivalent to Federal standards for certification as

7 an eligible organization;

8 ‘‘(2) the State has the ability and sufficient re9 sources to carry out the certification function to the

10 Secretary’s satisfaction; and

11 ‘‘(3) the State has the ability and sufficient re12 sources to carry out the monitoring function to the

13 Secretary’s satisfaction.

14 ‘‘(c) FEDERAL ROLE AFTER APPROVAL OF STATE

15 PROGRAM.—

16 ‘‘(1) ‘LOOK-BEHIND’ FUNCTION.—The Sec17 retary will periodically review the performance of

18 State programs under this section to ensure contin19 ued compliance with the requirements under sub20 section (b). Such review program shall include re21 view of a sample of plans certified in each State.

22 ‘‘(2) FEDERAL ADMINISTRATIVE AND OVER23 SIGHT ACTIVITIES.—In developing the program

24 under this section, the Secretary would retain, at a

25 minimum, responsibility for enrollment and
217

•S 1926 IS

1 disenrollment of Medicare beneficiaries, payment to

2 plans, approval of adjusted community rate (ACR)

3 proposals and supplemental benefits, approval of

4 Medicare marketing material, development of com5 parative materials, monitoring resolution of com6 plaints, administering the Medicare reconsideration

7 and appeals process, reviewing and approving re8 quests for waivers of the 50/50 and minimum enroll9 ment requirements, and managing the external qual10 ity review program.

11 ‘‘(3) ENFORCEMENT ACTIVITIES.—The Sec12 retary will determine the appropriate sanctions or

13 contract actions against plans that are out of com14 pliance with standards.

15 ‘‘(4) CONTRACTING AUTHORITY.—In general,

16 once a State has certified an entity as an eligible or17 ganization, the entity is eligible for a contract under

18 section 1851F. However, the Secretary can deny a

19 contract to an otherwise eligible organization if the

20 Secretary determines either that the organization

21 cannot bear the level of risk required under the con22 tract, or that the organization is not otherwise able

23 to administer a contract effectively.

24 ‘‘(d) USE OF MORE STRINGENT STANDARDS.—Be25 ginning in 1999, States participating in the program de-
218

•S 1926 IS

1 scribed in this section could impose more stringent re2 quirements in certifying eligible organizations and in mon3 itoring eligible organizations with contracts under section

4 1851F, if such requirements—

5 ‘‘(1) have been approved by the Secretary, and

6 ‘‘(2) are imposed on health plans in a non7 discriminatory manner.

8 ‘‘SEC. 1851I. DEFINITIONS.

9 ‘‘(a) ADJUSTED COMMUNITY RATE.—

10 ‘‘(1) IN GENERAL.—For purposes of this part,

11 the term ‘adjusted community rate’ for a service or

12 services means, at the election of an eligible organi13 zation, either—

14 ‘‘(A) the rate of payment for that service

15 or services which the Secretary annually deter16 mines would apply to a member enrolled under

17 this part with an eligible organization if the

18 rate of payment were determined under a ‘com19 munity rating system’ (as defined in section

20 1302(8) of the Public Health Service Act, other

21 than subparagraph (C)), or

22 ‘‘(B) such portion of the weighted aggre23 gate premium, which the Secretary annually es24 timates would apply to a member enrolled

25 under this part with the eligible organization,
219

•S 1926 IS

1 as the Secretary annually estimates is attrib2 utable to that service or services,

3 adjusted in accordance with paragraph (2).

4 ‘‘(2) ADJUSTMENT OF DIFFERENCES IN UTILI5 ZATION.—The rate determined in accordance with

6 subparagraphs (A) and (B) of paragraph (1) shall

7 be adjusted for—

8 ‘‘(A) the differences between the utilization

9 characteristics of the members enrolled with the

10 eligible organization under this part and the

11 utilization characteristics of the other members

12 of the organization; or

13 ‘‘(B) (if the Secretary finds that adequate

14 data are not available to calculate the adjust15 ment pursuant to subparagraph (A)) the dif16 ferences between—

17 ‘‘(i) the utilization characteristics of

18 members in other eligible organizations, or

19 individuals in the area, in the State, or in

20 the United States, eligible to enroll under

21 this part with an eligible organization, and

22 ‘‘(ii) the utilization characteristics of

23 the rest of the population in the area, in

24 the State, or in the United States, respec25 tively.
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•S 1926 IS

1 ‘‘(b) ADJUSTED AVERAGE PER CAPITA COST

2 (AAPCC).—For purposes of this part, the term ‘AAPCC’

3 (adjusted average per capita cost) means the average per

4 capita amount that the Secretary estimates in advance (on

5 the basis of actual experience, or retrospective actuarial

6 equivalent based upon an adequate sample and other in7 formation and data, in a geographic area served by an

8 eligible organization or in a similar area, with appropriate

9 adjustments to assure actuarial equivalence) would be pay10 able in any contract year for services covered under parts

11 A and B, or part B only, and types of expenses otherwise

12 reimbursable under parts A and B, or part B only (includ13 ing administrative costs incurred by organizations de14 scribed in sections 1816 and 1842), if the services were

15 to be furnished by other than an eligible organization or,

16 in the case of services covered only under section

17 1861(s)(2)(H), if the services were to be furnished by a

18 physician or as an incident to a physician’s service.’’.

19 (b) REPEAL OF SUPERSEDED PROVISION.—Section

20 1876 (42 U.S.C. 1395mm) is repealed, except to the ex21 tent provided in subsection (e).

22 (c) CONFORMING AMENDMENTS.—

23 (1) Section 1154(a)(4)(B) (42 U.S.C. 1320c–

24 3(a)(4)(B)) is amended—
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•S 1926 IS

1 (A) in the first sentence, by striking ‘‘risk2 sharing contract under section 1876’’ and in3 serting ‘‘contract under part C of title XVIII’’,

4 and

5 (B) in the second sentence, by striking ‘‘a

6 health maintenance organization or competitive

7 medical plan under section 1876’’ and inserting

8 ‘‘an eligible organization under part C of title

9 XVIII’’.

10 (2) The second sentence of section

11 1154(a)(4)(C) (42 U.S.C. 1320c–3(a)(4)(C)) is

12 amended by striking ‘‘section 1876’’ and inserting

13 ‘‘part C of title XVIII’’.

14 (3) Section 1866(a)(1)(O) (42 U.S.C.

15 1395cc(a)(1)(O)) is amended by striking ‘‘risk-shar16 ing contract under section 1876’’ and inserting

17 ‘‘contract under part C’’.

18 (4) The matter in the first sentence of section

19 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) preceding sub20 paragraph (A) is amended by striking ‘‘1876(c)(8)’’

21 and inserting ‘‘1851E(f)’’.

22 (5) Section 1866(f)(2)(E) (42 U.S.C.

23 1395cc(f)(2)(E)) is amended by striking ‘‘1876(b)’’

24 and inserting ‘‘1851A(a)’’.
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1 (6) Section 1882(g)(1) (42 U.S.C.

2 1399ss(g)(1)) is amended—

3 (A) by striking ‘‘1876(b)’’ and inserting

4 ‘‘1851A’’; and

5 (B) by striking ‘‘section 1876’’ and insert6 ing ‘‘part C’’.

7 (d) EFFECTIVE DATE.—Except to the extent other8 wise provided, the amendments made by the preceding

9 subsections apply to items and services furnished after

10 1996.

11 (e) TRANSITION PROVISIONS FOR COST CON12 TRACTS.—

13 (1) REPEAL OF AUTHORITY FOR COST CON14 TRACTS DELAYED TO 2001.—The amendments made

15 by the preceding subsections (other than the amend16 ments specified in paragraph (2)) do not apply to

17 items and services furnished before 2001 under a

18 contract under section 1876(h) of the Social Secu19 rity Act (42 U.S.C. 1395mm(h)).

20 (2) PROVISIONS WHOSE EFFECT IS NOT DE21 LAYED.—The effective dates of the following provi22 sions of part C of the Social Security Act (as added

23 by subsection (a)(2) of this section) shall not be de24 layed by reason of paragraph (1):
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1 (A) DEFINITION OF QUALIFIED HMO.—

2 Section 1851A(b).

3 (B) ENROLLMENT AND DISENROLL4 MENT.—Section 1851B.

5 (C) BENEFICIARY PROTECTIONS.—Sub6 sections (a) (explanation of patients’ rights and

7 restrictions), (c) (grievance mechanism), (d)

8 (coverage determinations and appeals), and (g)

9 (private enrollment requirements) of section

10 1851E.

11 (3) OPTION RESTRICTED TO GRANDFATHERED

12 ORGANIZATIONS.—With respect to services provided

13 after 1996 but before 2001, the Secretary of Health

14 and Human Services (in this section referred to as

15 the ‘‘Secretary’’) may enter into contracts under

16 subsection (h) of section 1876 of the Social Security

17 Act (42 U.S.C. 1395mm) only with entities with

18 which the Secretary has entered into contracts under

19 that subsection for all or part of 1996, or to which

20 payments have been made during 1996 under sec21 tion 1833(a)(1)(A) of such Act (42 U.S.C.

22 1395l(a)(1)(A)).

23 (f) REGULATIONS.—

24 (1) CONTINUITY OF CURRENT REGULATIONS.—

25 Regulations in effect (or available in proposed form)
224

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1 on December 31, 1996, that apply to section 1876

2 of the Social Security Act (42 U.S.C. 1395mm) shall

3 apply to part C of title XVIII of that Act (as added

4 by subsection (a)(2)), except to the extent that the

5 regulations are inconsistent with the provisions of

6 that part.

7 (2) INTERIM FINAL REGULATIONS.—The Sec8 retary may issue regulations before 1998 for part C

9 of title XVIII of the Social Security Act (as added

10 by subsection (a)(2)) on an interim final basis.

11 (g) CONSIDERATION OF EXPERIENCE UNDER SEC12 TION 1876 IN SATISFACTION OF REQUIREMENTS OF PART

13 C.—Any requirement in part C of title XVIII of the Social

14 Security Act (as added by subsection (a)(2)) that (in a

15 particular context) relates to matters that occurred before

16 1997 shall be satisfied if the corresponding requirement

17 was satisfied under section 1876 (42 U.S.C. 1395mm) of

18 such Act.

19 (h) ENROLLMENT TRANSITION RULE.—An individ20 ual who is enrolled on December 31, 1996, with an eligible

21 organization under section 1876 of the Social Security Act

22 (42 U.S.C. 1395mm) shall be considered to be enrolled

23 with that organization on January 1, 1997, under part

24 C of title XVIII of that Act (as added by subsection

25 (a)(2)) if that organization has a contract under such part
225

•S 1926 IS

1 for providing services on January 1, 1997 (unless the indi2 vidual has disenrolled effective on that date).

3 (i) IMMEDIATE EFFECTIVE DATE FOR CERTAIN RE4 QUIREMENTS FOR DEMONSTRATIONS.—Section

5 1851B(b)(2) of the Social Security Act (as added by sub6 section (a)(2)) (requiring contribution to certain costs re7 lated to the enrollment process comparative materials) ap8 plies to demonstrations occurring after the date of enact9 ment of this Act.

10 SEC. 11203. DEVELOPMENT OF FEDERAL STANDARDS.

11 (a) PUBLISHING REGULATIONS.—By January 1,

12 1997, the Secretary of Health and Human Services shall

13 develop and promulgate interim final regulations for—

14 (1) certification standards for eligible organiza15 tions under section 1851A(a) (as added by section

16 11202);

17 (2) standards for fiscal soundness and require18 ments concerning adequate protection against the

19 risk of insolvency for provider sponsored organiza20 tions seeking certification as an eligible organization;

21 (3) standards for monitoring eligible organiza22 tions with contracts under section 1851F (as added

23 by such section); and
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•S 1926 IS

1 (4) any other standards or procedures required

2 to implement provisions of part C (as added by such

3 section).

4 (b) CONSULTATION.—In developing the regulations

5 described in subsection (a), the Secretary of Health and

6 Human Services shall consult, among others, with the Na7 tional Association of Insurance Commissioners, organiza8 tions that provide or pay for health care services, and

9 consumer organizations.

10 SEC. 11204. APPLICABILITY OF MEDICARE RATES TO EN11 ROLLEES WHO USE AN OUT-OF-PLAN PRO12 VIDER OF SERVICES.

13 (a) IN GENERAL.—Section 1866(a)(1)(O) (42 U.S.C.

14 1395cc(a)(1)(O)) is amended—

15 (1) by striking ‘‘in the case of hospitals and

16 skilled nursing facilities,’’;

17 (2) by striking ‘‘inpatient hospital and extended

18 care services that are covered under this title and’’

19 and inserting ‘‘services that’’; and

20 (3) by striking ‘‘(in the case of hospitals) or

21 limits (in the case of skilled nursing facilities)’’.

22 (b) EFFECTIVE DATE.—The amendment made by

23 subsection (a) applies to services furnished after 1996.
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1 SEC. 11205. SUBSTITUTION OF QUALITY MEASUREMENT

2 SYSTEM FOR PRIVATE ENROLLMENT RE3 QUIREMENT.

4 (a) PROMULGATION OF REGULATIONS.—The Sec5 retary of Health and Human Services, after consulting

6 with representatives from managed health care plans (in7 cluding representatives of provider service organizations),

8 consumer organizations, and other major purchasers of

9 managed care services shall publish—

10 (1) proposed regulations by July 1, 1997, re11 quiring the collection, analysis, and reporting of data

12 that will permit measurement of outcomes and other

13 indices of the quality of managed care plans; and

14 (2) final regulations after completing review of

15 comments on the proposed regulations published

16 pursuant to paragraph (1).

17 (b) REVISION OF BENEFICIARY PROTECTION RE18 QUIREMENT.—As of the effective date of final regulations

19 published pursuant to subsection (a), section 1851E(g)

20 (as added by section 11202(a)(2) of this Act) is amended

21 to read as follows:

22 ‘‘(g) QUALITY MEASUREMENT SYSTEM.—Each eligi23 ble organization with which the Secretary enters into a

24 contract under this part shall meet the requirements of

25 the quality measurement system established by the Sec26 retary in regulations.’’.
228

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1 SEC. 11206. HMO COMPETITIVE PRICING AND RELATED

2 DEMONSTRATIONS.

3 (a) AMENDMENT EFFECTIVE ON DATE OF ENACT4 MENT.—Section 402(b) of the Social Security Amend5 ments of 1967 (42 U.S.C. 1395–1(b)) is amended by in6 serting after the first sentence the following: ‘‘The Sec7 retary may also waive, in the case of such an experiment

8 or demonstration project, compliance with the require9 ments of sections 1876 and 1882 of that Act.’’.

10 (b) AMENDMENT EFFECTIVE FOR 1997–2000.—

11 (1) The second sentence of section 402(b) of

12 the Social Security Amendments of 1967 (42 U.S.C.

13 1395b–1(b)) (as added by subsection (a) of this sec14 tion) is amended by inserting ‘‘and part C of title

15 XVIII’’ after ‘‘1882’’.

16 (2) The amendment made by paragraph (1) ap17 plies to activities occurring after 1996.

18 (c) AMENDMENT EFFECTIVE AFTER 2000.—

19 (1) The second sentence of section 402(b) of

20 the Social Security Amendments of 1967 (42 U.S.C.

21 1395b–1(b)) (as added by subsection (a) and

22 amended by subsection (b) of this section) is further

23 amended by striking ‘‘sections 1876 and 1882’’ and

24 inserting ‘‘section 1882’’.

25 (2) The amendment made by paragraph (1) ap26 plies to activities occurring after 2000.
229

•S 1926 IS

1 (d) RECOMMENDATIONS ON NEW PAYMENT METH2 ODOLOGY.—Not later than January 1, 2002, the Sec3 retary of Health and Human Services shall make rec4 ommendations to Congress concerning a new payment

5 methodology for contracts under part C of title XVIII of

6 the Social Security Act, based on the results of competitive

7 pricing or related demonstrations.

8 SEC. 11207. ELIMINATION OF HEALTH CARE PREPAYMENT

9 PLAN OPTION FOR ENTITIES ELIGIBLE TO

10 PARTICIPATE UNDER PART C.

11 (a) ELIMINATION OF OPTION.—

12 (1) IN GENERAL.—Section 1833(a)(1)(A) (42

13 U.S.C. 1395l(a)(1)(A)) is amended by inserting

14 after ‘‘prepayment basis’’ the following: ‘‘(and either

15 is sponsored by a union or employer, or does not

16 provide, or arrange for the provision of, any inpa17 tient hospital services)’’.

18 (2) EFFECTIVE DATE.—The amendment made

19 by paragraph (1) applies to services furnished after

20 1996.

21 (b) MEDIGAP AMENDMENT.—Section 1882(g) (42

22 U.S.C. 1395ss(g)) is amended by striking ‘‘, during the

23 period beginning on the date specified in subsection

24 (p)(1)(C) and ending on December 31, 1995,’’.
230

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1 SEC. 11208. MEDIGAP REFORMS.

2 (a) UNIFORM ENROLLMENT PERIODS.—

3 (1) IN GENERAL.—Section 1882(s)(2)(A) (42

4 U.S.C. 1395ss(s)(2)(A)) is amended by striking ‘‘an

5 application is submitted’’ and all that follows and in6 serting the following: ‘‘an application is submitted—

7 ‘‘(i) prior to or during the 6-month period be8 ginning with the first month as of the first day on

9 which the individual is 65 years of age or older and

10 is enrolled for benefits under part B;

11 ‘‘(ii) during an annual 30-day period specified

12 by the Secretary; or

13 ‘‘(iii) during a period specified by the Secretary

14 in the circumstances described in section

15 1851B(c)(2) (with respect to an individual losing

16 coverage through an organization’s termination of

17 contract or discontinuation of coverage).’’.

18 (2) EFFECTIVE DATE.—The amendment made

19 by paragraph (1) is effective after 1996.

20 (b) STANDARDIZED INFORMATION.—

21 (1) PAYMENTS.—

22 (A) PRO RATA SHARE.—

23 (i) IN GENERAL.—Section 1882 (42

24 U.S.C. 1395ss) is amended by adding at

25 the end the following:
231

•S 1926 IS

1 ‘‘(u) Each entity that offers a Medicare supplemental

2 policy shall pay the Secretary for its pro rata share (as

3 determined by the Secretary) of the estimated costs to be

4 incurred by the Secretary in carrying out the requirements

5 of the first sentence of section 1851B(b)(1) and section

6 4360 of the Omnibus Reconciliation Act of 1990. Those

7 payments are appropriated to defray the costs described

8 in the preceding sentence, to remain available until ex9 pended.’’.

10 (ii) CONFORMING AMENDMENT.—Sec11 tion 1882(c)(5) (42 U.S.C. 1395ss(c)(5))

12 is amended by striking ‘‘(t)’’ and inserting

13 ‘‘(u)’’.

14 (B) FUNDING.—Section 4360(g) of the

15 Omnibus Reconciliation Act of 1990 (42 U.S.C.

16 1395b–4(g)) is amended to read as follows:

17 ‘‘(g) FUNDING.—For funding provisions, see section

18 1851B(b)(2), and section 1882(u), of the Social Security

19 Act.’’.

20 (2) EFFECTIVE DATE.—The amendments made

21 by paragraph (1) apply to demonstrations occurring

22 after the date of enactment of this Act, and to other

23 activities occurring after 1996.

24 (c) COMMUNITY RATING.—
232

•S 1926 IS

1 (1) IN GENERAL.—Section 1882(c) (42 U.S.C.

2 1395ss(c)) is amended—

3 (A) by striking ‘‘and’’ at the end of para4 graph (4),

5 (B) by striking the period at the end of

6 paragraph (5) and inserting ‘‘; and’’, and

7 (C) by adding after paragraph (5) the fol8 lowing:

9 ‘‘(6) provides for the same premium for each

10 enrollee.’’.

11 (2) CONFORMING AMENDMENT.—Section

12 1882(b)(1)(B) (42 U.S.C. 1395ss(b)(1)(B)) is

13 amended by striking ‘‘(5)’’ and inserting ‘‘(6)’’.

14 (3) EFFECTIVE DATE AND TRANSITIONAL PRO15 VISIONS.—The amendments made by this subsection

16 apply to policies and plans as of the beginning of

17 1997 (whether issued before or after that time), sub18 ject to such transitional rules as the Secretary of

19 Health and Human Services may develop after con20 sulting with the National Association of Insurance

21 Commissioners.

22 (d) LONG-TERM CARE INSURANCE SAFE HARBOR.—

23 (1) IN GENERAL.—Section 1882(d)(3)(C) (42

24 U.S.C. 1395ss(d)(3)(C)) is amended—
233

•S 1926 IS

1 (A) by striking ‘‘or (iii)’’ and inserting

2 ‘‘(iii)’’; and

3 (B) by inserting before the period the fol4 lowing: ‘‘, or (iv) the sale or issuance of a

5 health insurance policy (or rider to an insur6 ance contract which is not a health insurance

7 policy) providing benefits only for long-term

8 care, nursing home care, home health care, or

9 community-based care, or any combination

10 thereof, that coordinates against or excludes

11 items and services available under this title, if

12 such coordination or exclusion is disclosed in

13 the policy’s outline of coverage.’’.

14 (2) EFFECTIVE DATE AND OTHER RULES.—

15 (A) IN GENERAL.—The amendments made

16 by this subsection shall take effect as if in17 cluded in the enactment of section 4354 of

18 OBRA–1990.

19 (B) PENALTY.—No penalty shall be im20 posed under section 1882(d)(3)(A)(i) (42

21 U.S.C. 1395ss(d)(3)(A)(i)) of the Social Secu22 rity Act for any Act or omission occurring after

23 the effective date of the amendments made by

24 section 4354 of OBRA–1990 and before the

25 date of the enactment of this Act relating to the
234

•S 1926 IS

1 sale of a health insurance policy described in

2 section 1882(d)(3)(C)(iv) of the Social Security

3 Act.

4 SEC. 11209. STANDARDIZED BENEFITS PACKAGES.

5 (a) MANAGED CARE.—The Secretary of Health and

6 Human Services (in this section referred to as the ‘‘Sec7 retary’’), not later than July 1, 1996, after consulting with

8 the National Association of Insurance Commissioners,

9 consumer groups, managed care plans, providers of health

10 care, and insurers, shall develop standard packages of ben11 efits (in addition to the benefits covered under title XVIII

12 of the Social Security Act (42 U.S.C. 1395 et seq.)) that

13 may be offered by eligible organizations under part C of

14 that title (as added by section 11202(a)(2) of this Act).

15 (b) MEDIGAP.—

16 (1) EXAMINATION AND RECOMMENDATION.—

17 (A) IN GENERAL.—The Secretary shall re18 quest the National Association of Insurance

19 Commissioners, in consultation with consumer

20 groups, managed care plans, providers of health

21 care, and insurers, to examine (and recommend

22 by March 1, 1997, any restructuring needed

23 for) the standard benefit packages developed

24 under section 1882(p)(2) of the Social Security

25 Act (42 U.S.C. 1395ss(p)(2)) in order to facili-
235

•S 1926 IS

1 tate to the maximum extent feasible comparison

2 across Medicare supplemental policies and bene3 fits offered by eligible organizations under sec4 tion 1876 of such Act.

5 (B) RESTRUCTURE.—The Secretary, not

6 later than May 1, 1997, after taking into ac7 count any recommendations made under sub8 paragraph (A) by the National Association of

9 Insurance Commissioners, shall restructure, as

10 needed, those standard benefit packages.

11 (2) AMENDMENTS.—

12 (A) BENEFITS.—Section 1882(p) (42

13 U.S.C. 1395ss(p)) is amended by adding at the

14 end the following:

15 ‘‘(11) The groups or packages of benefits (in16 cluding the core group of basic benefits) under para17 graph (2) shall be modified by any changes made by

18 the Secretary under section 11209(b)(1)(B) of the

19 Emergency Medicare Protection Act of 1996.’’.

20 (B) EFFECTIVE DATE.—The amendment

21 made by subparagraph (A) applies to services

22 provided after 1997.

23 SEC. 11210. ANTITRUST RULE OF REASON STANDARD.

24 In any action under the antitrust laws (or under any

25 State law similar to the antitrust laws)—
236

•S 1926 IS

1 (1) the conduct of an organization that provides

2 health care services in negotiating, making, or per3 forming a contract (including the establishment and

4 modification of a fee schedule and the development

5 of a panel of physicians) under part C of title XVIII

6 of the Social Security Act (as added by section

7 11202(a)(2)), and

8 (2) the conduct of any member of such an orga9 nization in carrying out such a contract,

10 shall not be deemed illegal per se if each member of the

11 organization shares, directly or indirectly, substantial fi12 nancial risk in connection with the organization’s oper13 ations.

14 SEC. 11211. REFORM OF THE CLINICAL LABORATORY IM15 PROVEMENT AMENDMENTS OF 1988.

16 (a) REDUCED REQUIREMENTS FOR CERTIFICATES.—

17 Section 353(d)(1) of the Public Health Service Act (42

18 U.S.C. 263a(d)(1)) is amended—

19 (1) by striking ‘‘or have its certificate renewed’’

20 in the matter preceding subparagraph (A);

21 (2) by amending clause (ii) of subparagraph (A)

22 to read as follows:

23 ‘‘(ii) that describes the characteristics

24 of the laboratory examinations and other

25 procedures performed by the laboratory,
237

•S 1926 IS

1 including the number and type of labora2 tory examinations and procedures, and’’;

3 and

4 (3) by adding after subparagraph (E) the fol5 lowing:

6 ‘‘A certificate may be renewed by the Secretary after

7 the Secretary verifies certain essential information in

8 a renewal process established by the Secretary not

9 later than July 1, 1996.’’.

10 (b) ANNOUNCEMENT OF INSPECTIONS.—Section

11 353(g)(1) of the Public Health Service Act (42 U.S.C.

12 263a(g)(1)) is amended—

13 (1) in the first sentence, by striking ‘‘, on an

14 announced or unannounced basis,’’; and

15 (2) by adding at the end the following: ‘‘All in16 spections under this paragraph which are routine

17 shall be announced and inspections under this para18 graph which are based on a complaint or other rea19 son to believe a laboratory may not be in compliance

20 with the requirements of subsection (d) or the stand21 ards issued under subsection (f) may be unan22 nounced.’’.

23 (c) FLEXIBLE INSPECTIONS OF UNACCREDITED

24 LABORATORIES.—The next to last sentence of section

25 353(g)(2) of the Public Health Service Act (42 U.S.C.
238

•S 1926 IS

1 263a(g)(2)) is amended to read as follows: ‘‘Inspections

2 of laboratories not accredited under subsection (e) shall

3 be conducted with such frequency as the Secretary deter4 mines to be necessary to assure compliance with perform5 ance-based criteria established by the Secretary not later

6 than January 1, 1997, except that such inspections may

7 not be conducted more frequently than biennially unless

8 the Secretary has received a complaint or has other reason

9 to believe that the laboratory may not be in compliance

10 with the requirements of subsection (d) or the standards

11 issued under subsection (f).’’.

12 SEC. 11212. MODIFICATIONS TO EXCEPTIONS FOR CER13 TAIN ARRANGEMENTS.

14 (a) EXCEPTIONS FOR BOTH OWNERSHIP AND COM15 PENSATION ARRANGEMENTS.—

16 (1) REPEAL OF EXCEPTION FOR PHYSICIANS’

17 SERVICES.—Section 1877(b) (42 U.S.C. 1395nn(b))

18 is amended by striking ‘‘Subsection (a)(1) shall not

19 apply in the following cases:’’ and all that follows

20 through the end of paragraph (1).

21 (2) NEW EXCEPTION FOR SHARED FACILITY

22 SERVICES.—Section 1877(b) (42 U.S.C. 1395nn(b)),

23 as amended by paragraph (1), is amended by insert24 ing before paragraph (2) the following:

25 ‘‘(1) SHARED FACILITY SERVICES.—
239

•S 1926 IS

1 ‘‘(A) IN GENERAL.—Subsection (a)(1)

2 shall not apply in the case of a designated

3 health service consisting of a shared facility

4 service of a shared facility—

5 ‘‘(i) that is furnished—

6 ‘‘(I) personally by the referring

7 physician who is a shared facility phy8 sician or personally by an individual

9 directly employed by such a physician,

10 ‘‘(II) by a shared facility in a

11 building in which the referring physi12 cian furnishes substantially all of the

13 services of the physician that are un14 related to the furnishing of shared fa15 cility services, and

16 ‘‘(III) to a patient of a shared fa17 cility physician; and

18 ‘‘(ii) that is billed by the referring

19 physician.

20 ‘‘(B) SHARED FACILITY RELATED DEFINI21 TIONS.—

22 ‘‘(i) SHARED FACILITY SERVICE.—

23 The term ‘shared facility service’ means,

24 with respect to a shared facility, a des25 ignated health service furnished by the fa-
240

•S 1926 IS

1 cility to patients of shared facility physi2 cians.

3 ‘‘(ii) SHARED FACILITY.—The term

4 ‘shared facility’ means an entity that fur5 nishes shared facility services under a

6 shared facility arrangement.

7 ‘‘(iii) SHARED FACILITY PHYSICIAN.—

8 The term ‘shared facility physician’ means,

9 with respect to a shared facility, a physi10 cian who has a financial relationship under

11 a shared facility arrangement with the fa12 cility.

13 ‘‘(iv) SHARED FACILITY ARRANGE14 MENT.—The term ‘shared facility arrange15 ment’ means, with respect to the provision

16 of shared facility services in a building, a

17 financial arrangement—

18 ‘‘(I) which is only between physi19 cians who are providing services (un20 related to shared facility services) in

21 the same building,

22 ‘‘(II) in which the overhead ex23 penses of the facility are shared, in

24 accordance with methods previously

25 determined by the physicians in the
241

•S 1926 IS

1 arrangement, among the physicians in

2 the arrangement, and

3 ‘‘(III) which, in the case of a cor4 poration, is wholly owned and con5 trolled by shared facility physicians.’’.

6 (3) INCLUSION OF DURABLE MEDICAL EQUIP7 MENT AND PARENTERAL AND ENTERAL NUTRIENTS,

8 EQUIPMENT, AND SUPPLIES IN EXCEPTION FOR IN9 OFFICE ANCILLARY SERVICES.—Section 1877(b)(2)

10 (42 U.S.C. 1395nn(b)(2)) is amended by striking

11 ‘‘In the case of’’ and all that follows through ‘‘sup12 plies)’’ and inserting ‘‘Subsection (a)(1) shall not

13 apply in the case of designated health services’’.

14 (4) NEW EXCEPTION FOR SERVICES FUR15 NISHED IN COMMUNITIES WITH NO ALTERNATIVE

16 PROVIDERS.—Section 1877(b) (42 U.S.C.

17 1395nn(b)) is amended—

18 (A) by redesignating paragraph (4) as

19 paragraph (5); and

20 (B) by inserting after paragraph (3) the

21 following new paragraph:

22 ‘‘(4) NO ALTERNATIVE PROVIDERS IN AREA.—

23 Subsection (a)(1) shall not apply in the case of a

24 designated health service furnished in any area with

25 respect to which the Secretary determines that indi-
242

•S 1926 IS

1 viduals residing in the area do not have reasonable

2 access to such a designated health service.’’.

3 (5) NEW EXCEPTION FOR SERVICES FUR4 NISHED IN AMBULATORY SURGICAL CENTERS.—Sec5 tion 1877(b) (42 U.S.C. 1395nn(b)), as amended by

6 paragraph (4), is amended—

7 (A) by redesignating paragraph (5) as

8 paragraph (6); and

9 (B) by inserting after paragraph (4) the

10 following new paragraph:

11 ‘‘(5) SERVICES FURNISHED IN AMBULATORY

12 SURGICAL CENTERS.—Subsection (a)(1) shall not

13 apply in the case of a designated health service fur14 nished in an ambulatory surgical center described in

15 section 1832(a)(F)(i).’’.

16 (6) NEW EXCEPTION FOR SERVICES FUR17 NISHED IN A HOSPICE.—Section 1877(b) (42 U.S.C.

18 1395nn(b)), as amended by the preceding para19 graphs, is amended—

20 (A) by redesignating paragraph (6) as

21 paragraph (7); and

22 (B) by inserting after paragraph (5) the

23 following new paragraph:

24 ‘‘(6) SERVICES FURNISHED BY A HOSPICE PRO25 GRAM.—Subsection (a)(1) shall not apply in the case
243

•S 1926 IS

1 of a designated health service furnished by a hospice

2 program under section 1861(dd)(2).’’.

3 (7) CONFORMING AMENDMENTS.—Paragraphs

4 (3) and (7) of section 1877(b) (42 U.S.C.

5 1395nn(b)), as redesignated by paragraph (6), are

6 each amended by striking ‘‘In the case of’’ and in7 serting ‘‘Subsection (a)(1) shall not apply in the

8 case of’’.

9 (b) REVISION OF EXCEPTIONS FOR CERTAIN COM10 PENSATION ARRANGEMENTS.—

11 (1) EXCEPTION FOR ALL ARRANGEMENTS

12 MEETING REQUIREMENTS.—Section 1877(a)(2)(B)

13 (42 U.S.C. 1395nn(a)(2)(B)) is amended—

14 (A) by striking ‘‘except as provided in sub15 section (e),’’; and

16 (B) by striking ‘‘entity.’’ and inserting

17 ‘‘entity which does not meet the requirements

18 of subsection (e).’’.

19 (2) REQUIREMENTS DESCRIBED.—Section

20 1877(e) (42 U.S.C. 1395nn(e)) is amended to read

21 as follows:

22 ‘‘(e) REQUIREMENTS FOR PERMISSIBLE COMPENSA23 TION ARRANGEMENTS.—The requirements under this

24 subsection with respect to a compensation arrangement

25 are as follows:
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•S 1926 IS

1 ‘‘(1) The arrangement is in writing and is

2 signed by all parties to the arrangement.

3 ‘‘(2) The arrangement is consistent with fair

4 market value.

5 ‘‘(3) The amount of compensation under the ar6 rangement is not determined in a manner that takes

7 into account the volume or value of any referrals or

8 other business generated between the parties. Not9 withstanding the preceding sentence, nothing in this

10 paragraph shall prohibit the payment of remunera11 tion in the form of a productivity bonus based on

12 services, other than designated health services, per13 formed personally by the physician (or an immediate

14 family member of such physician).

15 ‘‘(4) The arrangement would be commercially

16 reasonable even if no referrals were made between

17 the parties.

18 ‘‘(5) The items and services compensated or

19 contracted for do not exceed those that are reason20 able and necessary for the legitimate business pur21 poses of the arrangement.

22 ‘‘(6) The arrangement meets such other re23 quirements as the Secretary may impose as needed

24 to protect against program or patient abuse.’’.
245

•S 1926 IS

1 (c) REMOVAL OF HOSPITAL SERVICES FROM LIST OF

2 DESIGNATED HEALTH SERVICES.—Section 1877(h)(6)

3 (42 U.S.C. 1395nn(h)(6)) is amended by striking sub4 paragraph (K).

5 (d) EXPANSION OF RURAL EXCEPTION TO CERTAIN

6 URBAN PROVIDERS.—Section 1877(d)(2) (42 U.S.C.

7 1395nn(d)(2)) is amended—

8 (1) by striking ‘‘in a rural area (as defined in

9 section 1886(d)(2)(D))’’;

10 (2) by striking ‘‘substantially all’’ and inserting

11 ‘‘not less than 75 percent’’; and

12 (3) by striking ‘‘such a rural area’’ and insert13 ing ‘‘a rural area (as defined in section

14 1886(d)(2)(D))’’.

15 (e) PROFITS AND PRODUCTIVITY BONUSES.—Section

16 1877(h)(4)(B)(i) (42 U.S.C. 1395nn(h)(4)(B)(i)) is

17 amended to read as follows:

18 ‘‘(i) PROFITS AND PRODUCTIVITY BO19 NUSES.—A physician in a group practice

20 may be paid—

21 ‘‘(I) a share of overall profits of

22 the group so long as the share is not

23 determined in any manner which is di24 rectly related to the volume or value

25 of referrals by such physician; or
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1 ‘‘(II) a productivity bonus based

2 on services, other than designated

3 health services, personally performed

4 or incident to such personally per5 formed services.’’.

6 (f) EXCEPTION FOR MEDICAID MANAGED CARE EN7 TITIES UNDER THE MEDICAID PROHIBITION.—Section

8 1903(s) (42 U.S.C. 1395nn(s)) is amended by inserting

9 after ‘‘title XVIII’’ the following: ‘‘(unless such service

10 was provided by an organization with a contract with a

11 State to provide services under the State plan under this

12 title (in accordance with subsection (m))’’.

13 (g) EXCLUSION OF INTRAOCULAR LENS, EYE14 GLASSES, AND CONTACT LENSES FROM DESIGNATED

15 HEALTH SERVICES SUBJECT TO PROHIBITIONS.—Section

16 1877(h)(6)(H) (42 U.S.C. 1395nn(h)(6)(H)) is amended

17 by striking the period at the end and inserting the follow18 ing: ‘‘, other than an intraocular lens inserted during or

19 subsequent to cataract surgery, eyeglasses, or contact

20 lenses.’’.

21 (h) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to referrals made on or after April

23 1, 1996.
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1 TITLE III—NATIONAL COMMIS2 SION ON MEDICARE REFORM

3 SEC. 11301. ESTABLISHMENT OF COMMISSION.

4 (a) ESTABLISHMENT.—There is established a Com5 mission to be known as the National Commission on Medi6 care Reform (in this title referred to as the ‘‘Commis7 sion’’).

8 (b) MEMBERSHIP.—

9 (1) COMPOSITION.—The Commission shall be

10 composed of 15 members of whom—

11 (A) five shall be appointed by the Presi12 dent from among officers or employees of the

13 executive branch, private citizens of the United

14 States, or both, of whom not more than 3 shall

15 be of the same political party;

16 (B) five shall be appointed by the majority

17 leader of the Senate from among Members of

18 the Senate, private citizens of the United

19 States, or both, of whom not more than 3 shall

20 be of the same political party; and

21 (C) five shall be appointed by the Speaker

22 of the House of Representatives from among

23 Members of the House of Representatives, pri24 vate citizens of the United States, or both, of
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1 whom not more than 3 shall be of the same po2 litical party;

3 (2) CHAIR.—The President shall designate a

4 Chair from among the members of the Commission.

5 (3) DATE.—The appointments of the members

6 of the Commission shall be made not later than 60

7 days after the date of the enactment of this title.

8 (c) PERIOD OF APPOINTMENT; VACANCIES.—Mem9 bers shall be appointed for the life of the Commission. Any

10 vacancy in the Commission shall not affect its powers, but

11 shall be filled in the same manner as the original appoint12 ment.

13 (d) INITIAL MEETING.—Not later than 30 days after

14 the date on which all members of the Commission have

15 been appointed, the Commission shall hold its first meet16 ing.

17 (e) MEETINGS.—The Commission shall meet at the

18 call of the Chair.

19 (f) QUORUM.—A majority of the members of the

20 Commission shall constitute a quorum, but a lesser num21 ber of members may hold hearings.

22 SEC. 11302. DUTIES OF THE COMMISSION.

23 (a) IN GENERAL.—The Commission shall—

24 (1) review relevant analyses of the current and

25 long-term financial condition of the Federal Hospital
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1 Insurance Trust Fund and the Federal Supple2 mentary Medical Insurance Trust Fund established

3 under title XVIII of the Social Security Act;

4 (2) identify problems that may threaten the

5 long-term solvency of such trust funds;

6 (3) analyze potential solutions to such problems

7 that will both assure the financial integrity of the

8 Medicare program under such title and the provision

9 of appropriate benefits under such program; and

10 (4) provide appropriate recommendations to the

11 Secretary of Health and Human Services, the Presi12 dent, and the Congress.

13 (b) LEGISLATIVE PROPOSAL.—Not later than 1 year

14 after all of the members of the Commission have been ap15 pointed, the Commission shall develop a legislative pro16 posal that carries out the recommendations provided

17 under subsection (a)(4). Such legislative proposal shall be

18 submitted to Congress in the form of an implementing bill

19 which contains the statutory provisions necessary or ap20 propriate to implement the proposal. An implementing bill

21 submitted in accordance with this subsection shall be con22 sidered by Congress under the procedures described in sec23 tion 11306(b).
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1 SEC. 11303. POWERS OF THE COMMISSION.

2 (a) HEARINGS.—The Commission may hold such

3 hearings, sit and act at such times and places, take such

4 testimony, and receive such evidence as the Commission

5 considers advisable to carry out the purposes of this title.

6 (b) INFORMATION FROM FEDERAL AGENCIES.—The

7 Commission may secure directly from any Federal depart8 ment or agency such information as the Commission con9 siders necessary to carry out the provisions of this title.

10 Upon request of the Chair of the Commission, the head

11 of such department or agency shall furnish such informa12 tion to the Commission.

13 (c) POSTAL SERVICES.—The Commission may use

14 the United States mails in the same manner and under

15 the same conditions as other departments and agencies of

16 the Federal Government.

17 (d) GIFTS.—The Commission may accept, use, and

18 dispose of gifts or donations of services or property.

19 SEC. 11304. COMMISSION PERSONNEL MATTERS.

20 (a) COMPENSATION OF MEMBERS.—All members of

21 the Commission shall serve without any additional com22 pensation for their work on the Commission.

23 (b) TRAVEL EXPENSES.—The members of the Com24 mission appointed from among private citizens of the

25 United States shall be allowed travel expenses, including

26 per diem in lieu of subsistence, at rates authorized for em-
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1 ployees of agencies under subchapter I of chapter 57 of

2 title 5, United States Code, while away from their homes

3 or regular places of business in the performance of services

4 for the Commission.

5 (c) STAFF.—

6 (1) IN GENERAL.—The Chair of the Commis7 sion may, without regard to the civil service laws

8 and regulations, appoint and terminate an executive

9 director and such other additional personnel as may

10 be necessary to enable the Commission to perform

11 its duties.

12 (2) COMPENSATION.—The Chair of the Com13 mission may fix the compensation of the executive

14 director and other personnel without regard to the

15 provisions of chapter 51 and subchapter III of chap16 ter 53 of title 5, United States Code, relating to

17 classification of positions and General Schedule pay

18 rates, except that the rate of pay for the executive

19 director and other personnel may not exceed the rate

20 payable for level V of the Executive Schedule under

21 section 5316 of such title.

22 (d) DETAIL OF GOVERNMENT EMPLOYEES.—Any

23 Federal Government employee may be detailed to the

24 Commission without reimbursement, and such detail shall
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1 be without interruption or loss of civil service status or

2 privilege.

3 (e) PROCUREMENT OF TEMPORARY AND INTERMIT4 TENT SERVICES.—The Chair of the Commission may pro5 cure temporary and intermittent services under section

6 3109(b) of title 5, United States Code, at rates for individ7 uals which do not exceed the daily equivalent of the annual

8 rate of basic pay prescribed for level V of the Executive

9 Schedule under section 5316 of such title.

10 SEC. 11305. TERMINATION OF THE COMMISSION.

11 The Commission shall terminate 30 days after the

12 date on which the Commission submits its legislative pro13 posal to Congress under section 11302(b).

14 SEC. 11306. CONGRESSIONAL CONSIDERATION OF COMMIS15 SION PROPOSALS.

16 (a) IN GENERAL.—The implementing bill described

17 in section 11302(b) shall be considered by Congress under

18 the procedures for consideration described in subsection

19 (b).

20 (b) INTRODUCTION AND REFERRAL.—

21 (1) IN GENERAL.—On the day on which the im22 plementing bill described in subsection (a) is trans23 mitted to the House of Representatives and the Sen24 ate, such bill shall be introduced (by request) in the

25 House of Representatives by the majority leader of
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1 the House, for himself or herself and the minority

2 leader of the House, or by Members of the House

3 designated by the majority leader and minority lead4 er of the House and shall be introduced (by request)

5 in the Senate by the majority leader of the Senate,

6 for himself or herself and the minority leader of the

7 Senate, or by Members of the Senate designated by

8 the majority leader and minority leader of the Sen9 ate. If either House is not in session on the day on

10 which the implementing bill is transmitted, the bill

11 shall be introduced in the House, as provided in the

12 preceding sentence, on the first day thereafter on

13 which the House is in session. The implementing bill

14 introduced in the House of Representatives and the

15 Senate shall be referred to the appropriate commit16 tees of each House.

17 (2) AMENDMENTS PROHIBITED.—No amend18 ment to an implementing bill shall be in order in ei19 ther the House of Representatives or the Senate and

20 no motion to suspend the application of this sub21 section shall be in order in either House, nor shall

22 it be in order in either House for the Presiding Offi23 cer to entertain a request to suspend the application

24 of this subsection by unanimous consent.
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1 (c) DISCHARGE.—If the committee to which an im2 plementing bill described in subsection (a) is referred has

3 not reported such implementing bill (or an identical imple4 menting bill) by the close of the 30th day after its intro5 duction, such committee shall be, at the end of such pe6 riod, discharged from further consideration of such imple7 menting bill, and such implementing bill shall be placed

8 on the appropriate calendar of the House involved.

9 (d) CONSIDERATION.—

10 (1) IN GENERAL.—On or after the third day

11 after the date on which the committee to which such

12 an implementing bill is referred has reported, or has

13 been discharged (under subsection (c)) from further

14 consideration of, such an implementing bill, it is in

15 order (even though a previous motion to the same

16 effect has been disagreed to) for any Member of the

17 respective House to move to proceed to the consider18 ation of the implementing bill. A Member may make

19 the motion only on the day after the calendar day

20 on which the Member announces to the House con21 cerned the Member’s intention to make the motion,

22 except that, in the case of the House of Representa23 tives, the motion may be made without such prior

24 announcement if the motion is made by direction of

25 the committee to which the implementing bill was re-
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1 ferred. All points of order against the implementing

2 bill (and against consideration of the implementing

3 bill) are waived. The motion is highly privileged in

4 the House of Representatives and is privileged in the

5 Senate and is not debatable. The motion is not sub6 ject to amendment, or to a motion to postpone, or

7 to a motion to proceed to the consideration of other

8 business. A motion to reconsider the vote by which

9 the motion is agreed to or disagreed to shall not be

10 in order. If a motion to proceed to the consideration

11 of the implementing bill is agreed to, the respective

12 House shall immediately proceed to consideration of

13 the implementing bill without intervening motion,

14 order, or other business, and the implementing bill

15 shall remain the unfinished business of the respec16 tive House until disposed of.

17 (2) DEBATE.—Debate on the implementing bill,

18 and on all debatable motions and appeals in connec19 tion therewith, shall be limited to not more than 30

20 hours, which shall be divided equally between those

21 favoring and those opposing the implementing bill.

22 An amendment to the implementing bill is not in

23 order. A motion to further limit debate is in order

24 and not debatable. A motion to postpone, or a mo25 tion to proceed to the consideration of other busi-
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1 ness, or a motion to recommit the implementing bill

2 is not in order. A motion to reconsider the vote by

3 which the implementing bill is agreed to or disagreed

4 to is not in order.

5 (3) VOTE ON FINAL PASSAGE.—Immediately

6 following the conclusion of the debate on an imple7 menting bill described in subsection (a), and a single

8 quorum call at the conclusion of the debate if re9 quested in accordance with the rules of the appro10 priate House, the vote on final passage of the imple11 menting bill shall occur.

12 (4) APPEALS.—Appeals from the decisions of

13 the Chair relating to the application of the rules of

14 the Senate or the House of Representatives, as the

15 case may be, to the procedure relating to an imple16 menting bill described in subsection (a) shall be de17 cided without debate.

18 (e) CONSIDERATION BY OTHER HOUSE.—

19 (1) IN GENERAL.—If, before the passage by one

20 House of an implementing bill of that House de21 scribed in subsection (a), that House receives from

22 the other House an implementing bill described in

23 subsection (a), then the following procedures shall

24 apply:
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1 (A) The implementing bill of the other

2 House shall not be referred to a committee and

3 may not be considered in the House receiving it

4 except in the case of final passage as provided

5 in subparagraph (B)(ii).

6 (B) With respect to an implementing bill

7 described in subsection (a) of the House receiv8 ing the implementing bill—

9 (i) the procedure in that House shall

10 be the same as if no implementing bill had

11 been received from the other House; but

12 (ii) the vote on final passage shall be

13 on the implementing bill of the other

14 House.

15 (2) IMPLEMENTING BILL IN RECEIVING

16 HOUSE.—Upon disposition of the implementing bill

17 received from the other House, it shall no longer be

18 in order to consider the implementing bill that origi19 nated in the receiving House.

20 (f) RULES OF THE SENATE AND HOUSE OF REP21 RESENTATIVES.—This section is enacted by Congress—

22 (1) as an exercise of the rulemaking power of

23 the Senate and House of Representatives, respec24 tively, and as such it is deemed a part of the rules

25 of each House, respectively, but applicable only with
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1 respect to the procedure to be followed in that

2 House in the case of an implementing bill described

3 in subsection (a), and it supersedes other rules only

4 to the extent that it is inconsistent with such rules;

5 and

6 (2) with full recognition of the constitutional

7 right of either House to change the rules (so far as

8 relating to the procedure of that House) at any time,

9 in the same manner, and to the same extent as in

10 the case of any other rule of that House.

11 SEC. 11307. AUTHORIZATION OF APPROPRIATIONS.

12 There are authorized to be appropriated such sums

13 as are necessary to carry out the purposes of the Commis14 sion.

Æ