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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 445 Introduced in Senate (IS)]

106th CONGRESS
  1st Session
                                 S. 445

    To amend title XVIII of the Social Security Act to require the 
  Secretary of Veterans Affairs and the Secretary of Health and Human 
Services to carry out a demonstration project to provide the Department 
  of Veterans Affairs with Medicare reimbursement for Medicare health-
     care services provided to certain Medicare-eligible veterans.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           February 23, 1999

 Mr. Jeffords (for himself, Mr. Specter, Mr. Rockefeller, Mr. McCain, 
 Mr. Thurmond, Mr. Murkowski, Mr. Campbell, Mr. Craig, Mr. Hutchinson, 
  Ms. Snowe, Mr. Daschle, Mr. Graham, Mr. Akaka, Mr. Wellstone, Mrs. 
  Murray, Mr. Hollings, Mr. Leahy, Mr. Cleland, Ms. Landrieu, and Mr. 
   Johnson) introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
    To amend title XVIII of the Social Security Act to require the 
  Secretary of Veterans Affairs and the Secretary of Health and Human 
Services to carry out a demonstration project to provide the Department 
  of Veterans Affairs with Medicare reimbursement for Medicare health-
     care services provided to certain Medicare-eligible veterans.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Veterans' Equal Access to Medicare 
Act''.

SEC. 2. MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR VETERANS.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is 
amended by adding at the end the following:

        ``medicare subvention demonstration project for veterans

    ``Sec. 1897. (a) Definitions.--In this section:
            ``(1) Administering secretaries.--The term `administering 
        Secretaries' means the Secretary and the Secretary of Veterans 
        Affairs acting jointly.
            ``(2) Demonstration project; project.--The terms 
        `demonstration project' and `project' mean the demonstration 
        project carried out under this section.
            ``(3) Demonstration site.--The term `demonstration site' 
        means a Veterans Affairs medical facility, including a group of 
        Veterans Affairs medical facilities that provide hospital care 
        or medical services as part of a service network or similar 
        organization.
            ``(4) Military retiree.--The term `military retiree' means 
        a member or former member of the Armed Forces who is entitled 
        to retired pay.
            ``(5) Targeted medicare-eligible veteran.--The term 
        `targeted Medicare-eligible veteran' means an individual who--
                    ``(A) is a veteran (as defined in section 101(2) of 
                title 38, United States Code) and is described in 
                section 1710(a)(3) of title 38, United States Code;
                    ``(B) has attained age 65;
                    ``(C) is entitled to benefits under part A of this 
                title; and
                    ``(D)(i) is enrolled for benefits under part B of 
                this title; and
                    ``(ii) if such individual attained age 65 before 
                the date of enactment of the Veterans' Equal Access to 
                Medicare Act, was so enrolled on such date.
            ``(6) Trust funds.--The term `trust funds' means the 
        Federal Hospital Insurance Trust Fund established in section 
        1817 and the Federal Supplementary Medical Insurance Trust Fund 
        established in section 1841.
            ``(7) Veterans affairs medical facility.--The term 
        `Veterans Affairs medical facility' means a medical facility as 
        defined in section 8101 of title 38, United States Code.
    ``(b) Demonstration Project.--
            ``(1) In general.--
                    ``(A) Establishment.--The administering Secretaries 
                are authorized to establish a demonstration project 
                (under an agreement entered into by the administering 
                Secretaries) under which the Secretary shall reimburse 
                the Secretary of Veterans Affairs, from the trust 
                funds, for Medicare health care services furnished to 
                certain targeted Medicare-eligible veterans at a 
                demonstration site.
                    ``(B) Agreement.--The agreement entered into under 
                subparagraph (A) shall include at a minimum--
                            ``(i) a description of the benefits to be 
                        provided to the participants in the 
                        demonstration project established under this 
                        section;
                            ``(ii) a description of the eligibility 
                        rules for participation in the demonstration 
                        project, including any terms and 
conditions established under subparagraph (C) and any cost-sharing 
required under subparagraph (D);
                            ``(iii) a description of how the 
                        demonstration project will satisfy the 
                        requirements under this title (including 
                        beneficiary protections and quality assurance 
                        mechanisms);
                            ``(iv) a description of the demonstration 
                        sites selected under paragraph (2);
                            ``(v) a description of how reimbursement 
                        and maintenance of effort requirements under 
                        subsection (h) will be implemented in the 
                        demonstration project;
                            ``(vi) a statement that the Secretary shall 
                        have access to all data of the Department of 
                        Veterans Affairs that the Secretary determines 
                        is necessary to conduct independent estimates 
                        and audits of the maintenance of effort 
                        requirement, the annual reconciliation, and 
                        related matters required under the 
                        demonstration project;
                            ``(vii) a description of any requirement 
                        that the Secretary waives pursuant to 
                        subsection (d); and
                            ``(viii) a certification, provided after 
                        review by the administering Secretaries, that 
                        any entity that is receiving payments by reason 
                        of the demonstration project has sufficient--
                                    ``(I) resources and expertise to 
                                provide, consistent with payments under 
                                subsection (h), the full range of 
                                benefits required to be provided to 
                                beneficiaries under the project; and
                                    ``(II) information and billing 
                                systems in place to ensure the accurate 
                                and timely submission of claims for 
                                benefits and to ensure that providers 
                                of services, physicians, and other 
                                health care professionals are 
                                reimbursed by the entity in a timely 
                                and accurate manner.
                    ``(C) Voluntary participation.--Participation of 
                targeted Medicare-eligible veterans in the 
                demonstration project shall be voluntary, subject to 
                the capacity of participating demonstration sites and 
                the funding limitations specified in subsection (h), 
                and shall be subject to such terms and conditions as 
                the administering Secretaries may establish. In the 
                case of a demonstration site described in paragraph 
                (2)(C)(i), targeted Medicare-eligible veterans who are 
                military retirees shall be given preference for 
                participating in the project conducted at that site.
                    ``(D) Cost-sharing.--The Secretary of Veterans 
                Affairs may establish cost-sharing requirements for 
                veterans participating in the demonstration project. If 
                such cost-sharing requirements are established, those 
                requirements shall be the same as the requirements that 
                apply to targeted Medicare-eligible patients at medical 
                centers that are not Veterans Affairs medical 
                facilities.
                    ``(E) Data match.--
                            ``(i) Establishment of data matching 
                        program.--The administering Secretaries shall 
                        establish a data matching program under which 
                        there is an exchange of information of the 
                        Department of Veterans Affairs and of the 
                        Department of Health and Human Services as is 
                        necessary to identify veterans (as defined in 
                        section 101(2) of title 38, United States Code) 
                        who are entitled to benefits under part A or 
                        enrolled under part B, or both, in order to 
                        carry out this section. The provisions of 
                        section 552a of title 5, United States Code, 
                        shall apply with respect to such matching 
                        program only to the extent the administering 
                        Secretaries find it feasible and appropriate in 
                        carrying out this section in a timely and 
                        efficient manner.
                            ``(ii) Performance of data match.--The 
                        administering Secretaries, using the data 
                        matching program established under clause (i), 
                        shall perform a comparison in order to identify 
                        veterans who are entitled to benefits under 
                        part A or enrolled under part B, or both. To 
                        the extent such Secretaries deem appropriate to 
                        carry out this section, the comparison and 
                        identification may distinguish among such 
                        veterans by category of veterans, by 
                        entitlement to benefits under this title, or by 
                        other characteristics.
                            ``(iii) Deadline for first data match.--Not 
                        later than October 31, 1999, the administering 
Secretaries shall first perform a comparison under clause (ii).
                            ``(iv) Certification by inspector 
                        general.--
                                    ``(I) In general.--The 
                                administering Secretaries may not 
                                conduct the program unless the 
                                Inspector General of the Department of 
                                Health and Human Services certifies to 
                                Congress that the administering 
                                Secretaries have established the data 
                                matching program under clause (i) and 
                                have performed a comparison under 
                                clause (ii).
                                    ``(II) Deadline for 
                                certification.--Not later than December 
                                15, 1999, the Inspector General of the 
                                Department of Health and Human Services 
                                shall submit a report to Congress 
                                containing the certification under 
                                subclause (I) or the denial of such 
                                certification.
            ``(2) Number of demonstration sites.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), and subsection (g)(1)(D)(ii), the administering 
                Secretaries shall establish a plan for the selection of 
                up to 10 demonstration sites located in geographically 
                dispersed locations to participate in the project.
                    ``(B) Criteria.--The administering Secretaries 
                shall favor selection of those demonstration sites that 
                consideration of the following factors indicate are 
                suited to serve targeted Medicare-eligible veterans:
                            ``(i) There is a high potential demand by 
                        targeted Medicare-eligible veterans for the 
                        services to be provided at the demonstration 
                        site.
                            ``(ii) The demonstration site has 
                        sufficient capability in billing and accounting 
                        to participate in the project.
                            ``(iii) The demonstration site can 
                        demonstrate favorable indicators of quality of 
                        care, including patient satisfaction.
                            ``(iv) The demonstration site delivers a 
                        range of services required by targeted 
                        Medicare-eligible veterans.
                            ``(v) The demonstration site meets other 
                        relevant factors identified in the plan.
                    ``(C) Required demonstration sites.--At least 1 of 
                each of the following demonstration sites shall be 
                selected for inclusion in the demonstration project:
                            ``(i) Demonstration site near closed 
                        base.--A demonstration site that is in the same 
                        catchment area as a military treatment facility 
                        referred to in section 1074(a) of title 10, 
                        United States Code, which was closed pursuant 
                        to either--
                                    ``(I) the Defense Base Closure and 
                                Realignment Act of 1990 (part A of 
                                title XXIX of Public Law 101-510; 10 
                                U.S.C. 2687 note); or
                                    ``(II) title II of the Defense 
                                Authorization Amendments and Base 
                                Closure and Realignment Act (Public Law 
                                100-526; 10 U.S.C. 2687 note).
                            ``(ii) Demonstration site in a rural 
                        area.--A demonstration site that serves a 
                        predominantly rural population.
            ``(3) Restriction.--No new buildings may be built or 
        existing buildings expanded with funds from the demonstration 
        project.
            ``(4) Duration.--The administering Secretaries shall 
        conduct the demonstration project during the 3-year period 
        beginning on January 1, 2000.
    ``(c) Crediting of Payments.--A payment received by the Secretary 
of Veterans Affairs under the demonstration project shall be credited 
to the applicable Department of Veterans Affairs medical appropriation 
and (within that appropriation) to funds that have been allotted to the 
demonstration site that furnished the services for which the payment is 
made. Any such payment received during a fiscal year for services 
provided during a prior fiscal year may be obligated by the Secretary 
of Veterans Affairs during the fiscal year during which the payment is 
received.
    ``(d) Authority To Waive Certain Medicare Requirements.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary may, to the extent necessary to carry out the 
        demonstration project, waive any requirement under this title.
            ``(2) Beneficiary protections for managed care plans.--In 
        the case of a managed care plan established by the Secretary of 
        Veterans Affairs pursuant to subsection (g), such plan shall 
        comply with the requirements of part C of this title that 
        relate to beneficiary protections and other matters, including 
        such requirements relating to the following areas:
                    ``(A) Enrollment and disenrollment.
                    ``(B) Nondiscrimination.
                    ``(C) Information provided to beneficiaries.
                    ``(D) Cost-sharing limitations.
                    ``(E) Appeal and grievance procedures.
                    ``(F) Provider participation.
                    ``(G) Access to services.
                    ``(H) Quality assurance and external review.
                    ``(I) Advance directives.
                    ``(J) Other areas of beneficiary protections that 
                the Secretary determines are applicable to such 
                project.
            ``(3) Description of waiver.--If the Secretary waives any 
        requirement pursuant to paragraph (1), the Secretary shall 
        include a description of such waiver in the agreement described 
        in subsection (b)(1)(B).
    ``(e) Inspector General.--Nothing in the agreement entered into 
under subsection (b) shall limit the Inspector General of the 
Department of Health and Human Services from investigating any matters 
regarding the expenditure of funds under this title for the 
demonstration project, including compliance with the provisions of this 
title and all other relevant laws.
    ``(f) Report.--At least 60 days prior to the commencement of the 
demonstration project, the administering Secretaries shall submit a 
copy of the agreement entered into under subsection (b) to the 
committees of jurisdiction in Congress.
    ``(g) Managed Health Care.--
            ``(1) Managed health care plans.--
                    ``(A) In general.--The Secretary of Veterans 
                Affairs may establish and operate managed health care 
                plans at demonstration sites.
                    ``(B) Requirements.--Any managed health care plan 
                established in accordance with subparagraph (A) shall 
                be operated by or through a Veterans Affairs medical 
                facility, or a group of Veterans Affairs medical 
                facilities, and may include the provision of health 
                care services by public and private entities under 
                arrangements made between the Department of Veterans 
                Affairs and the other public or private entity 
                concerned. Any such managed health care plan shall be 
                established and operated in conformance with standards 
                prescribed by the administering Secretaries.
                    ``(C) Minimum benefits.--The administering 
                Secretaries shall prescribe the minimum health care 
                benefits to be provided under a managed health care 
                plan to veterans enrolled in the plan, which benefits 
                shall include at least all health care services covered 
                under the Medicare program under this title.
                    ``(D) Inclusion in number of demonstration sites.--
                            ``(i) In general.--Subject to clause (ii), 
                        if the Secretary of Veterans Affairs elects to 
                        establish a managed health care plan under this 
                        section, the establishment of such plan is a 
                        selected demonstration site for purposes of 
                        applying the numerical limitation under 
                        subsection (b)(2).
                            ``(ii) Limitation.--The Secretary of 
                        Veterans Affairs shall not establish more than 
                        4 managed health care plans under this section.
            ``(2) Demonstration site requirements.--The Secretary of 
        Veterans Affairs may establish a managed health care plan under 
        paragraph (1) using 1 or more demonstration sites and other 
        public or private entities only after the Secretary of Veterans 
        Affairs submits to Congress a report setting forth a plan for 
        the use of such sites and entities. The plan may not be 
        implemented until the Secretary of Veterans Affairs has 
        received from the Inspector General of the Department of 
        Veterans Affairs, and has forwarded to Congress, certification 
        of each of the following:
                    ``(A) The cost accounting system of the Veterans 
                Health Administration (currently known as the Decision 
                Support System) is operational and is providing 
                reliable cost information on care delivered on an 
                inpatient and outpatient basis at such sites and 
                entities.
                    ``(B) The demonstration sites and entities have 
                developed a credible plan (on the basis of market 
                surveys, data from the Decision Support System, 
                actuarial analysis, or other appropriate methods and 
                taking into account the level of payment under 
                subsection (h) and the costs of providing covered 
                services at the sites and entities) to minimize, to the 
                extent feasible, the risk that appropriated funds 
                allocated to the sites and entities will be required to 
                meet the obligation of the sites and entities to 
                targeted Medicare-eligible veterans under the 
                demonstration project.
                    ``(C) The demonstration sites and entities 
                collectively have available capacity to provide the 
                contracted benefits package to a sufficient number of 
                targeted Medicare-eligible veterans.
                    ``(D) The Veterans Affairs medical facility 
                administering the health plan has sufficient systems 
                and safeguards in place to minimize any risk that 
                instituting the managed care model will result in 
                reducing the quality of care delivered to participants 
                in the demonstration project or to other veterans 
                receiving care under paragraph (1) or (2) of section 
                1710(a) of title 38, United States Code.
            ``(3) Reserves.--The Secretary of Veterans Affairs shall 
        maintain such reserves as may be necessary to ensure against 
        the risk that appropriated funds, allocated to demonstration 
        sites and public or private entities participating in the 
        demonstration project through a managed health care plan under 
        this section, will be required to meet the obligations of those 
        sites and entities to targeted Medicare-eligible veterans.
    ``(h) Payments Based on Regular Medicare Payment Rates.--
            ``(1) Payments.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this subsection, the Secretary shall 
                reimburse the Secretary of Veterans Affairs for 
                services provided under the demonstration project at 
                the following rates:
                            ``(i) Noncapitation.--Except as provided in 
                        clause (ii) and subject to subparagraphs (B) 
                        and (D), at a rate equal to 95 percent of the 
                        amounts that otherwise would be payable under 
                        this title on a noncapitated basis for such 
                        services if the demonstration site was not part 
                        of this demonstration project, was 
                        participating in the Medicare program, and 
                        imposed charges for such services.
                            ``(ii) Capitation.--Subject to 
                        subparagraphs (B) and (D), in the case of 
                        services provided to an enrollee under a 
                        managed health care plan established under 
                        subsection (g), at a rate equal to 95 percent 
                        of the amount paid to a Medicare+Choice 
                        organization under part C with respect to such 
                        an enrollee.
                            ``(iii) Other cases.--In cases in which a 
                        payment amount may not otherwise be readily 
                        computed under clauses (i) or (ii), the 
                        Secretaries shall establish rules for computing 
                        equivalent or comparable payment amounts.
                    ``(B) Exclusion of certain amounts.--In computing 
                the amount of payment under subparagraph (A), the 
                following shall be excluded:
                            ``(i) Disproportionate share hospital 
                        adjustment.--Any amount attributable to an 
                        adjustment under section 1886(d)(5)(F) of the 
                        Social Security Act (42 U.S.C. 
                        1395ww(d)(5)(F)).
                            ``(ii) Direct graduate medical education 
                        payments.--Any amount attributable to a payment 
                        under subsection (h) of such section.
                            ``(iii) Percentage of indirect medical 
                        education adjustment.--40 percent of any amount 
                        attributable to the adjustment under subsection 
                        (d)(5)(B) of such section.
                            ``(iv) Percentage of capital payments.--67 
                        percent of any amounts attributable to payments 
                        for capital-related costs under subsection (g) 
                        of such section.
                    ``(C) Periodic payments from medicare trust 
                funds.--Payments under this subsection shall be made--
                            ``(i) on a periodic basis consistent with 
                        the periodicity of payments under this title; 
                        and
                            ``(ii) in appropriate part, as determined 
                        by the Secretary, from the trust funds.
                    ``(D) Annual limit on medicare payments.--The 
                amount paid to the Department of Veterans Affairs under 
                this subsection for any year for the demonstration 
                project may not exceed $50,000,000.
            ``(2) Reduction in payment for va failure to maintain 
        effort.--
                    ``(A) In general.--To avoid shifting onto the 
                Medicare program under this title costs previously 
                assumed by the Department of Veterans Affairs for the 
                provision of Medicare-covered services to targeted 
                Medicare-eligible veterans, the payment amount under 
                this subsection for the project for a fiscal year shall 
                be reduced by the amount (if any) by which--
                            ``(i) the amount of the VA effort level for 
                        targeted veterans (as defined in subparagraph 
                        (B)) for the fiscal year ending in such year, 
                        is less than
                            ``(ii) the amount of the VA effort level 
                        for targeted veterans for fiscal year 1998.
                    ``(B) VA effort level for targeted veterans 
                defined.--For purposes of subparagraph (A), the term 
                `VA effort level for targeted veterans' means, for a 
                fiscal year, the amount, as estimated by the 
                administering Secretaries, that would have been 
                expended under the Medicare program under this title 
                for VA-provided Medicare-covered services for targeted 
                veterans (as defined in subparagraph (C)) for that 
                fiscal year if benefits were available under the 
                Medicare program for those services. Such amount does 
                not include expenditures attributable to services for 
                which reimbursement is made under the demonstration 
                project.
                    ``(C) VA-provided medicare-covered services for 
                targeted veterans.--For purposes of subparagraph (B), 
                the term `VA-provided Medicare-covered services for 
                targeted veterans' means, for a fiscal year, items and 
                services--
                            ``(i) that are provided during the fiscal 
                        year by the Department of Veterans Affairs to 
                        targeted Medicare-eligible veterans;
                            ``(ii) that constitute hospital care and 
                        medical services under chapter 17 of title 38, 
                        United States Code; and
                            ``(iii) for which benefits would be 
                        available under the Medicare program under this 
                        title if they were provided other than by a 
                        Federal provider of services that does not 
                        charge for those services.
            ``(3) Assuring no increase in cost to medicare program.--
                    ``(A) Monitoring effect of demonstration program on 
                costs to medicare program.--
                            ``(i) In general.--The Secretaries, in 
                        consultation with the Comptroller General, 
                        shall closely monitor the expenditures made 
                        under the Medicare program for targeted 
                        Medicare-eligible veterans during the period of 
                        the demonstration project compared to the 
                        expenditures that would have been made for such 
                        veterans during that period if the 
                        demonstration project had not been conducted.
                            ``(ii) Annual report by the comptroller 
                        general.--Not later than December 31 of each 
                        year during which the demonstration project is 
                        conducted, the Comptroller General shall submit 
                        to the Secretaries and the appropriate 
                        committees of Congress a report on the extent, 
                        if any, to which the costs of the Secretary 
                        under the Medicare program under this title 
                        increased during the preceding fiscal year as a 
                        result of the demonstration project.
                    ``(B) Required response in case of increase in 
                costs.--
                            ``(i) In general.--If the administering 
                        Secretaries find, based on subparagraph (A), 
                        that the expenditures under the Medicare 
                        program under this title increased (or are 
                        expected to increase) during a fiscal year 
                        because of the demonstration project, the 
                        administering Secretaries shall take such steps 
                        as may be needed--
                                    ``(I) to recoup for the Medicare 
                                program the amount of such increase in 
                                expenditures; and
                                    ``(II) to prevent any such increase 
                                in the future.
                            ``(ii) Steps.--Such steps--
                                    ``(I) under clause (i)(I), shall 
                                include payment of the amount of such 
                                increased expenditures by the Secretary 
                                of Veterans Affairs from the current 
                                medical care appropriation of the 
                                Department of Veterans Affairs to the 
                                trust funds; and
                                    ``(II) under clause (i)(II), shall 
                                include suspending or terminating the 
                                demonstration project (in whole or in 
                                part) or lowering the amount of payment 
                                under paragraph (1)(A).
    ``(i) Evaluation and Reports.--
            ``(1) Independent evaluation.--
                    ``(A) In general.--The administering Secretaries 
                shall arrange for an independent entity with expertise 
                in the evaluation of health care services to conduct an 
                evaluation of the demonstration project.
                    ``(B) Contents.--The evaluation conducted under 
                subparagraph (A) shall include an assessment, based on 
                the agreement entered into under subsection (b), of the 
                following:
                            ``(i) The cost to the Department of 
                        Veterans Affairs of providing care to veterans 
                        under the project.
                            ``(ii) Compliance of participating 
                        demonstration sites with applicable measures of 
                        quality of care, compared to such compliance 
                        for other Medicare-participating medical 
                        centers that are not Veterans Affairs medical 
                        facilities.
                            ``(iii) A comparison of the costs of 
                        participation of the demonstration sites in the 
                        program with the reimbursements provided for 
                        services of such sites.
                            ``(iv) Any savings or costs to the Medicare 
                        program under this title from the project.
                            ``(v) Any change in access to care or 
                        quality of care for targeted Medicare-eligible 
                        veterans participating in the project.
                            ``(vi) Any effect of the project on the 
                        access to care and quality of care for targeted 
                        Medicare-eligible veterans not participating in 
                        the project and other veterans not 
                        participating in the project.
                            ``(vii) The provision of services under 
                        managed health care plans under subsection (g), 
                        including the circumstances (if any) under 
                        which the Secretary of Veterans Affairs uses 
                        reserves described in paragraph (3) of such 
                        subsection and the Secretary of Veterans 
                        Affairs' response to such circumstances 
                        (including the termination of managed health 
                        care plans requiring the use of such reserves).
                            ``(viii) Any effect that the demonstration 
                        project has on the enrollment in 
                        Medicare+Choice plans offered by 
                        Medicare+Choice organizations under part C of 
                        this title in the established site areas.
                            ``(ix) Any additional elements that the 
                        independent entity determines is appropriate to 
                        assess regarding the demonstration project.
                    ``(C) Annual reports.--The independent entity 
                conducting the evaluation under subparagraph (A) shall 
                submit reports on such evaluation to the administering 
                Secretaries and to the committees of jurisdiction in 
                the Congress as follows:
                            ``(i) Initial report.--The entity shall 
                        submit the initial report not later than 12 
                        months after the date on which the 
                        demonstration project begins operation.
                            ``(ii) Second annual report.--The entity 
                        shall submit the second annual report not later 
                        than 30 months after the date on which the 
                        demonstration project begins operation.
                            ``(iii) Final report.--The entity shall 
                        submit the final report not later than 3\1/2\ 
                        years after the date on which the demonstration 
                        project begins operation.
            ``(2) Report on extension and expansion of demonstration 
        project.--Not later than 3\1/2\ years after the date on which 
        the demonstration project begins operation, the administering 
        Secretaries shall submit to Congress a report containing--
                    ``(A) their recommendation as to--
                            ``(i) whether to extend the demonstration 
                        project or make the project permanent;
                            ``(ii) whether to expand the project to 
                        cover additional demonstration sites and to 
                        increase the maximum amount of reimbursement 
                        (or the maximum amount of reimbursement 
                        permitted for managed health care plans under 
                        this section) under the project in any year; 
                        and
                            ``(iii) whether the terms and conditions of 
                        the project should be continued (or modified) 
                        if the project is extended or expanded; and
                    ``(B) a detailed description of any costs 
                associated with their recommendation made pursuant to 
                clauses (i) and (ii) of subparagraph (A).''.
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