II

105TH CONGRESS

2D SESSION S. 1788

To amend titles XI and XVIII of the Social Security Act to combat waste,

fraud, and abuse in the medicare program.

IN THE SENATE OF THE UNITED STATES

MARCH 17, 1998

Mr. MOYNIHAN introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend titles XI and XVIII of the Social Security Act

to combat waste, fraud, and abuse in the medicare program.

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

3 SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU4 RITY ACT; TABLE OF CONTENTS.

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

6 ‘‘Medicare Fraud and Overpayment Act of 1998’’.

7 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex8 cept as otherwise specifically provided, whenever in this

9 Act an amendment is expressed in terms of an amendment

10 to or repeal of a section or other provision, the reference
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1 shall be considered to be made to that section or other

2 provision of the Social Security Act.

3 (c) TABLE OF CONTENTS.—The table of contents of

4 this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; table of contents.

Sec. 2. No mark-up for drugs, biologicals, or parenteral nutrients.

Sec. 3. Mental health partial hospitalization services.

Sec. 4. Information requirements.

Sec. 5. Eliminate overpayments for epogen.

Sec. 6. Centers of excellence.

Sec. 7. Repeal of clarification concerning levels of knowledge required for imposition of civil monetary penalties.

Sec. 8. Repeal of expanded exception for risk-sharing contract to anti-kickback

provisions.

Sec. 9. Limiting the use of automatic stays and discharge in bankruptcy proceedings for provider liability for health care fraud.

Sec. 10. Administrative fees for medicare overpayment collection.

5 SEC. 2. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN6 TERAL NUTRIENTS.

7 (a) IN GENERAL.—Section 1842(o) (42 U.S.C.

8 1395u(o)), as added by section 4556(a) of the Balanced

9 Budget Act of 1997, is amended to read as follows:

10 ‘‘(o)(1) If a physician’s, supplier’s, or any other per11 son’s bill or request for payment for services includes a

12 charge for a drug, biological, or parenteral nutrient for

13 which payment may be made under this part and the drug,

14 biological, or parenteral nutrient is not paid on a cost or

15 prospective payment basis as otherwise provided in this

16 part, the payment amount established in this subsection

17 for the drug, biological, or parenteral nutrient shall be the

18 lowest of the following:
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1 ‘‘(A) The actual acquisition cost, as defined in

2 paragraph (2), to the person submitting the claim

3 for payment for the drug, biological, or parenteral

4 nutrient.

5 ‘‘(B) 95 percent of the average wholesale price

6 of such drug, biological, or parenteral nutrient, as

7 determined by the Secretary.

8 ‘‘(C) For payments for drugs, biologicals, or

9 parenteral nutrients furnished on or after January

10 1, 2000, the median actual acquisition cost of all

11 claims for payment for such drugs, biologicals, or

12 parenteral nutrients for the 12-month period begin13 ning July 1, 1998 (and adjusted, as the Secretary

14 determines appropriate, to reflect changes in the

15 cost of such drugs, biologicals, or parenteral nutri16 ents due to inflation, and such other factors as the

17 Secretary determines appropriate).

18 ‘‘(D) The amount otherwise determined under

19 this part.

20 ‘‘(2) For purposes of paragraph (1)(A), the term ‘ac21 tual acquisition cost’ means, with respect to such drugs,

22 biologicals, or parenteral nutrients the cost of the drugs,

23 biologicals, or parenteral nutrients based on the most eco24 nomical case size in inventory on the date of dispensing

25 or, if less, the most economical case size purchased within
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1 six months of the date of dispensing whether or not that

2 specific drug, biological, or nutrient was furnished to an

3 individual whether or not enrolled under this part. Such

4 term includes appropriate adjustments, as determined by

5 the Secretary, for all discounts, rebates, or any other bene6 fit in cash or in kind (including travel, equipment, or free

7 products). The Secretary shall include an additional pay8 ment for administrative, storage, and handling costs.

9 ‘‘(3)(A) No payment shall be made under this part

10 for drugs, biologicals, or parenteral nutrients to a person

11 whose bill or request for payment for such drugs,

12 biologicals, or parenteral nutrients does not include a

13 statement of the person’s actual acquisition cost.

14 ‘‘(B) A person may not bill an individual enrolled

15 under this part—

16 ‘‘(i) any amount other than the payment

17 amount specified in paragraph (1), (4), or (5) (plus

18 any applicable deductible and coinsurance amounts),

19 or

20 ‘‘(ii) any amount for such drugs, biologicals, or

21 parenteral nutrients for which payment may not be

22 made pursuant to subparagraph (A).

23 ‘‘(C) If a person knowingly and willfully in repeated

24 cases bills one or more individuals in violation of subpara-
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1 graph (B), the Secretary may apply sanctions against that

2 person in accordance with subsection (j)(2).

3 ‘‘(4) The Secretary may pay a reasonable dispensing

4 fee (less the applicable deductible and coinsurance

5 amounts) for drugs or biologicals to a licensed pharmacy

6 approved to dispense drugs or biologicals under this part,

7 if payment for such drugs or biologicals is made to the

8 pharmacy.

9 ‘‘(5) The Secretary shall pay a reasonable amount

10 (less the applicable deductible and coinsurance amounts)

11 for the services associated with the furnishing of paren12 teral nutrients for which payment is determined under this

13 subsection.’’.

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

15 subsection (a) apply to drugs, biologicals, and parenteral

16 nutrients furnished on or after January 1, 1999.

17 (c) ELIMINATION OF REPORT ON AVERAGE WHOLE18 SALE PRICE.—Section 4556 of the Balanced Budget Act

19 of 1997 is amended—

20 (1) by striking subsection (c); and

21 (2) by redesignating subsection (d) as sub22 section (c).
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1 SEC. 3. MENTAL HEALTH PARTIAL HOSPITALIZATION SERV2 ICES.

3 (a) LIMITATION ON LOCATION OF PROVISION OF

4 SERVICES.—

5 (1) IN GENERAL.—Section 1861(ff)(2) (42

6 U.S.C. 1395x(ff)(2)) is amended in the matter fol7 lowing subparagraph (I)—

8 (A) by striking ‘‘and furnished’’ and in9 serting ‘‘furnished’’; and

10 (B) by inserting before the period the fol11 lowing: ‘‘, and furnished other than in a skilled

12 nursing facility or in an individual’s home or

13 other residential setting’’.

14 (2) EFFECTIVE DATE.—The amendments made

15 by paragraph (1) shall apply to partial hospitaliza16 tion services furnished on or after the first day of

17 the sixth month beginning after the date of the en18 actment of this Act.

19 (b) QUALIFICATIONS FOR COMMUNITY MENTAL

20 HEALTH CENTERS.—Section 1861(ff)(3)(B) (42 U.S.C.

21 1395x(ff)(3)(B)) is amended by striking ‘‘entity’’ and all

22 that follows and inserting the following: ‘‘entity that—

23 ‘‘(i) provides the mental health services de24 scribed in paragraph (1) of section 1913(c) of the

25 Public Health Service Act;
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1 ‘‘(ii) meets applicable licensing or certification

2 requirements for community mental health centers

3 in the State in which it is located; and

4 ‘‘(iii) meets such additional standards as the

5 Secretary shall specify to ensure (I) the health and

6 safety of individuals being furnished such services,

7 (II) the effective or efficient furnishing of such serv8 ices, and (III) the compliance of such entity with the

9 criteria described in such section.’’.

10 SEC. 4. INFORMATION REQUIREMENTS.

11 (a) INFORMATION FROM GROUP HEALTH PLANS.—

12 Section 1862(b) is amended by adding at the end the fol13 lowing:

14 ‘‘(7) INFORMATION FROM GROUP HEALTH

15 PLANS.—

16 ‘‘(A) PROVISION OF INFORMATION BY

17 GROUP HEALTH PLANS.—The administrator of

18 a group health plan subject to the requirements

19 of paragraph (1) shall provide to the Secretary

20 such of the information elements described in

21 subparagraph (C) as the Secretary specifies,

22 and in such manner and at such times as the

23 Secretary may specify (but not more frequently

24 than four times per year), with respect to each
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1 individual covered under the plan who is enti2 tled to any benefits under this title.

3 ‘‘(B) PROVISION OF INFORMATION BY EM4 PLOYERS AND EMPLOYEE ORGANIZATIONS.—An

5 employer (or employee organization) that main6 tains or participates in a group health plan sub7 ject to the requirements of paragraph (1) shall

8 provide to the administrator of the plan such of

9 the information elements required to be pro10 vided under subparagraph (A), and in such

11 manner and at such times as the Secretary may

12 specify, at a frequency consistent with that re13 quired under subparagraph (A) with respect to

14 each individual described in subparagraph (A)

15 who is covered under the plan by reason of em16 ployment with that employer or membership in

17 the organization.

18 ‘‘(C) INFORMATION ELEMENTS.—The in19 formation elements described in this subpara20 graph are the following:

21 ‘‘(i) ELEMENTS CONCERNING THE IN22 DIVIDUAL.—

23 ‘‘(I) The individual’s name.

24 ‘‘(II) The individual’s date of

25 birth.
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1 ‘‘(III) The individual’s sex.

2 ‘‘(IV) The individual’s social se3 curity insurance number.

4 ‘‘(V) The number assigned by the

5 Secretary to the individual for claims

6 under this title.

7 ‘‘(VI) The family relationship of

8 the individual to the person who has

9 or had current or employment status

10 with the employer.

11 ‘‘(ii) ELEMENTS CONCERNING THE

12 FAMILY MEMBER WITH CURRENT OR

13 FORMER EMPLOYMENT STATUS.—

14 ‘‘(I) The name of the person in

15 the individual’s family who has cur16 rent or former employment status

17 with the employer.

18 ‘‘(II) That person’s social secu19 rity insurance number.

20 ‘‘(III) The number or other iden21 tifier assigned by the plan to that per22 son.

23 ‘‘(IV) The periods of coverage for

24 that person under the plan.
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1 ‘‘(V) The employment status of

2 that person (current or former) dur3 ing those periods of coverage.

4 ‘‘(VI) The classes (of that per5 son’s family members) covered under

6 the plan.

7 ‘‘(iii) PLAN ELEMENTS.—

8 ‘‘(I) The items and services cov9 ered under the plan.

10 ‘‘(II) The name and address to

11 which claims under the plan are to be

12 sent.

13 ‘‘(iv) ELEMENTS CONCERNING THE

14 EMPLOYER.—

15 ‘‘(I) The employer’s name.

16 ‘‘(II) The employer’s address.

17 ‘‘(III) The employer identifica18 tion number of the employer.

19 ‘‘(D) USE OF IDENTIFIERS.—The adminis20 trator of a group health plan shall utilize a

21 unique identifier for the plan in providing infor22 mation under subparagraph (A) and in other

23 transactions, as may be specified by the Sec24 retary, related to the provisions of this sub25 section. The Secretary may provide to the ad-
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1 ministrator the unique identifier described in

2 the preceding sentence.

3 ‘‘(E) PENALTY FOR NONCOMPLIANCE.—

4 Any entity that knowingly and willfully fails to

5 comply with a requirement imposed by the pre6 vious subparagraphs shall be subject to a civil

7 money penalty not to exceed $1,000 for each in8 cident of such failure. The provisions of section

9 1128A (other than subsections (a) and (b))

10 shall apply to a civil money penalty under the

11 previous sentence in the same manner as those

12 provisions apply to a penalty or proceeding

13 under section 1128A(a).’’.

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall take effect 180 days after the date

16 of enactment of this Act.

17 SEC. 5. ELIMINATE OVERPAYMENTS FOR EPOGEN.

18 Section 1881(b)(11)(B)(ii) (42 U.S.C.

19 1395rr(b)(11)(B)(ii)) is amended—

20 (1) in subclause (I)—

21 (A) by striking ‘‘provided during 1994’’

22 and inserting ‘‘provided before fiscal year

23 1999’’; and

24 (B) by striking ‘‘and’’ at the end;
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1 (2) by redesignating subclause (II) as subclause

2 (III);

3 (3) by inserting after subclause (I) the follow4 ing new subclause:

5 ‘‘(II) for erythropoietin provided during

6 fiscal year 1999, in an amount equal to $9 per

7 thousand units (rounded to the nearest 100

8 units), and’’; and

9 (4) in subclause (III), as so redesignated, by

10 striking ‘‘year’’ each place it occurs and inserting

11 ‘‘fiscal year’’.

12 SEC. 6. CENTERS OF EXCELLENCE.

13 (a) IN GENERAL.—Title XVIII is amended by insert14 ing after section 1896 the following new section:

15 ‘‘CENTERS OF EXCELLENCE

16 ‘‘SEC. 1897. (a) IN GENERAL.—The Secretary shall

17 use a competitive process to contract with specific hos18 pitals or other entities for furnishing services related to

19 surgical procedures, and for furnished services (unrelated

20 to surgical procedures) to hospital inpatients that the Sec21 retary determines to be appropriate. Such services may in22 clude any services covered under this title that the Sec23 retary determines to be appropriate, including post-hos24 pital services.

25 ‘‘(b) QUALITY STANDARDS.—Only entities that meet

26 quality standards established by the Secretary shall be eli-
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1 gible to contract under this section. In considering quality,

2 the Secretary shall take into account the quality, experi3 ence, and quantity of services of physicians who provide

4 services in more than one entity. Contracting entities shall

5 implement a quality improvement plan approved by the

6 Secretary.

7 ‘‘(c) PAYMENT.—Payment under this section shall be

8 made on the basis of negotiated all-inclusive rates. The

9 amount of payment made by the Secretary to an entity

10 under this title for services covered under a contract shall

11 be less than the aggregate amount of the payments that

12 the Secretary would have otherwise made for the services.

13 ‘‘(d) CONTRACT PERIOD.—A contract period shall be

14 3 years (subject to renewal), as long as the entity contin15 ues to meet quality and other contractual standards.

16 ‘‘(e) INCENTIVES FOR USE OF CENTERS.—The Sec17 retary may permit entities under a contract under this sec18 tion to furnish additional services or waive beneficiary

19 cost-sharing, subject to the approval of the Secretary.

20 ‘‘(f) LIMIT ON NUMBER OF CENTERS.—The Sec21 retary shall limit the number of centers in a geographic

22 area to the number needed to meet projected demand for

23 contracted services.’’.

24 (b) EFFECTIVE DATES.—
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1 (1) The amendment made by subsection (a) ap2 plies to services furnished on or after October 1,

3 1998.

4 (2) By October 1, 1998, the Secretary shall

5 enter into contracts under the amendment made by

6 subsection (a) for coronary artery by-pass surgery

7 and other heart procedures, knee replacement sur8 gery, and hip replacement surgery, in geographic

9 areas nationwide such that at least 20 percent of the

10 projected number of those procedures can be pro11 vided under such contracts.

12 SEC. 7. REPEAL OF CLARIFICATION CONCERNING LEVELS

13 OF KNOWLEDGE REQUIRED FOR IMPOSITION

14 OF CIVIL MONETARY PENALTIES.

15 (a) ELIMINATION OF ‘‘KNOWING’’ STANDARD.—Sec16 tion 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended by

17 striking ‘‘knowingly’’ in paragraphs (1), (2), and (3).

18 (b) ELIMINATION OF STATUTORY DEFINITION OF

19 ‘‘SHOULD KNOW’’.—Section 1128A(i) (42 U.S.C. 1320a–

20 7a(i)) is amended by striking paragraph (7).

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

22 this section shall apply to acts or omissions occurring on

23 or after the date of the enactment of this Act.
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1 SEC. 8. REPEAL OF EXPANDED EXCEPTION FOR RISK-SHAR2 ING CONTRACT TO ANTI-KICKBACK PROVI3 SIONS.

4 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.

5 1320a–7b(b)(3)) is amended—

6 (1) by adding ‘‘and’’ at the end of subpara7 graph (D);

8 (2) by striking ‘‘; and’’ at the end of subpara9 graph (E) and inserting a period; and

10 (3) by striking subparagraph (F).

11 (b) ELIMINATION OF REPORT.—Subsection (b) of

12 section 216 of the Health Insurance Portability and Ac13 countability Act of 1996 is repealed.

14 (c) EFFECTIVE DATES.—(1) The amendments made

15 by subsection (a) shall apply to remuneration provided on

16 or after the date of the enactment of this Act, regardless

17 of whether it is pursuant to an agreement or arrangement

18 entered into before such date.

19 (2) Subsection (b) shall take effect on the date of the

20 enactment of this Act.

21 SEC. 9. LIMITING THE USE OF AUTOMATIC STAYS AND DIS22 CHARGE IN BANKRUPTCY PROCEEDINGS FOR

23 PROVIDER LIABILITY FOR HEALTH CARE

24 FRAUD.

25 (a) NONAPPLICABILITY OF AUTOMATIC STAY PROVI26 SIONS.—
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1 (1) IN EXCLUSION PROCEEDINGS.—Section

2 1128 (42 U.S.C. 1320a–7), as amended by section

3 4303(a) of the Balanced Budget Act of 1997, is

4 amended by adding at the end the following new

5 subsection:

6 ‘‘(k) NONAPPLICABILITY OF BANKRUPTCY STAY.—

7 An exclusion imposed under this section or a proceeding

8 seeking an exclusion under this section is not subject to

9 the automatic stay under section 362(a) of title 11, United

10 States Code.’’.

11 (2) IN CIVIL MONEY PENALTY PROCEEDINGS.—

12 Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is

13 amended by adding at the end the following: ‘‘An ex14 clusion, penalty, or assessment imposed under this

15 section or a proceeding that seeks an exclusion, pen16 alty, or assessment under this section, is not subject

17 to the automatic stay under section 362(a) of title

18 11, United States Code. Notwithstanding any other

19 provision of law, amounts made payable under this

20 section are not dischargeable under any provision of

21 such title.’’.

22 (3) IN RECOUPMENT UNDER PART A OF MEDI23 CARE.—Section 1815(d) (42 U.S.C. 1395g(d)) is

24 amended—

25 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’, and
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1 (B) by adding at the end the following:

2 ‘‘(2) The recoupment of an overpayment under this

3 section is not subject to the automatic stay under section

4 362(a) of title 11, United States Code. Notwithstanding

5 any other provision of law, amounts due to the Secretary

6 under this section are not dischargeable under any provi7 sion of such title.’’.

8 (4) IN RECOUPMENT UNDER PART B OF MEDI9 CARE.—Section 1833(j) (42 U.S.C. 1395l(j)) is

10 amended—

11 (A) by inserting ‘‘(1)’’ after‘‘(j)’’, and

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

13 ‘‘(2) The recoupment of an overpayment under this

14 section is not subject to the automatic stay under section

15 362(a) of title 11, United States Code. Notwithstanding

16 any other provision of law, amounts due to the Secretary

17 under this section are not dischargeable under any provi18 sion of such title.’’.

19 (5) IN COLLECTION OF OVERDUE PAYMENTS ON

20 SCHOLARSHIPS AND LOANS.—Section 1892(a)(4)

21 (42 U.S.C. 1395ccc(a)(4)) is amended by adding at

22 the end the following:

23 ‘‘(5) An exclusion imposed under paragraph

24 (2)(C)(ii) or (3)(B) is not subject to the automatic
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1 stay under section 362(a) of title 11, United States

2 Code.’’.

3 (b) NONDISCHARGABILITY.—

4 (1) IN CIVIL MONEY PENALTY PROCEEDINGS.—

5 Section 1128A(a) (42 U.S.C. 1320a–7a(a)), as

6 amended by subsection (a)(2), is further amended by

7 adding at the end the following: ‘‘Notwithstanding

8 any other provision of law, amounts made payable

9 under this section are not dischargeable under any

10 provision of such title.’’.

11 (2) IN RECOUPMENT UNDER PART A OF MEDI12 CARE.—Section 1815(d) (42 U.S.C. 1395g(d)(2)),

13 as amended by subsection (a)(3), is further amended

14 by adding at the end the following:

15 ‘‘(3) Notwithstanding any other provision of law,

16 amounts due to the Secretary under this section are not

17 dischargeable under any provision of such title.’’.

18 (3) IN RECOUPMENT UNDER PART B OF MEDI19 CARE.—Section 1833(j) (42 U.S.C. 1395l(j)), as

20 amended by subsection (a)(4), is further amended by

21 adding at the end the following: ‘‘Notwithstanding

22 any other provision of law, amounts due to the Sec23 retary under this section are not dischargeable under

24 any provision of such title.’’.

25 (c) EFFECTIVE DATES.—
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1 (1) The amendments made by subsection (a)

2 shall apply to bankruptcy petitions filed after the

3 date of the enactment of this Act.

4 (2) The amendments made by subsection (b)

5 shall apply on and after the date of the enactment

6 of this Act to any proceeding which has not been

7 completed as of such date.

8 SEC. 10. ADMINISTRATIVE FEES FOR MEDICARE OVERPAY9 MENT COLLECTION.

10 (a) ADMINISTRATIVE FEES FOR PROVIDERS OF

11 SERVICES UNDER PART A.—Section 1815(d) (42 U.S.C.

12 1395g(d)), as amended by section 9(a)(3), is amended by

13 adding at the end the following new paragraph:

14 ‘‘(3)(A) Except as provided in subparagraph (B), if

15 the payment of the excess described in paragraph (1) is

16 not made (or effected by offset) within 30 days of the date

17 of the determination, an administrative fee of 1 percent

18 of the outstanding balance of the excess (after application

19 of paragraph (1)), or such lower amount as an Adminis20 trative Law Judge may determine upon an appeal of the

21 initial determination of the excess, shall be imposed on the

22 provider, for deposit into the Trust Fund under this part.

23 ‘‘(B) The administrative fee shall be imposed under

24 subparagraph (A) on a provider of services paid on a pro25 spective basis only if such provider’s cost report with re-
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1 spect to the payment determined to be in excess of the

2 payment due under this part indicates that the provider’s

3 projected costs exceeded its actual costs by 30 percent or

4 more.’’.

5 (b) ADMINISTRATIVE FEES FOR PROVIDERS OF

6 SERVICES OR OTHER PERSONS UNDER PART B.—Section

7 1833(j) (42 U.S.C. 1395l(j)), as amended by section

8 9(a)(4), is amended by adding at the end the following

9 new paragraph:

10 ‘‘(3) If the excess described in paragraph (1) is not

11 made (or effected by offset) within 30 days of the date

12 of the determination, an administrative fee of 1 percent

13 of the outstanding balance of the excess (after application

14 of paragraph (1)), or such lower amount as an Adminis15 trative Law Judge may determine upon an appeal of the

16 initial determination of the excess, shall be imposed on the

17 provider, or other person receiving the excess, for deposit

18 into the Trust Fund under this part.’’.

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

20 this section shall apply to final determinations made on

21 or after the date of enactment of this Act.

Æ