I

106TH CONGRESS

1ST SESSION H. R. 2115

To establish a demonstration project to authorize the Secretary of Health

and Human Services to selectively contract for the provision of medical

care to Medicare beneficiaries.

IN THE HOUSE OF REPRESENTATIVES

JUNE 9, 1999

Mr. STARK introduced the following bill; which was referred to the Committee

on Ways and Means, and in addition to the Committee on Commerce,

for a period to be subsequently determined by the Speaker, in each case

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To establish a demonstration project to authorize the Secretary of Health and Human Services to selectively contract for the provision of medical care to Medicare beneficiaries.

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.

4 This Act may be cited as the ‘‘Medicare Purchasing

5 Flexibility Act of 1999’’.
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1 SEC. 2. AUTHORITY TO SELECTIVELY CONTRACT UNDER

2 THE MEDICARE PROGRAM.

3 (a) DEMONSTRATION PROJECTS.—

4 (1) IN GENERAL.—The Secretary of Health and

5 Human Services (in this section referred to as the

6 ‘‘Secretary’’) shall conduct demonstration projects

7 under which the Secretary may use any or all of the

8 additional authorities described in subsection (b)

9 that—

10 (A) improves the quality of items and serv11 ices furnished under the medicare program; and

12 (B) reduces expenditures under the medi13 care program for such items and services.

14 (2) DURATION OF PROJECTS.—A demonstration

15 project under this section shall be carried out for a

16 period of five years. The Secretary may provide for

17 the project to be carried out for additional five-year

18 periods.

19 (3) PUBLICATION OF NOTICE OF DEMONSTRA20 TION PROJECTS.—By not later than 90 days after

21 the date of the enactment of this Act and annually

22 thereafter, the Secretary shall publish notice in the

23 Federal Register of the demonstration projects to be

24 carried out under this section. The Secretary shall

25 specify the process for—
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1 (A) the consideration of comments of inter2 ested parties and the public;

3 (B) the process for applications by pro4 viders of services, physicians, and suppliers of

5 items and services to participate in such a dem6 onstration project;

7 (C) the particular additional authorities

8 under subsection (b) that the Secretary con9 siders the highest priority;

10 (D) determination of priorities for approval

11 of demonstration projects based on the poten12 tial of the proposed innovations under the dem13 onstration project to improve health outcomes

14 and be cost effective relative to those services

15 otherwise available under parts A and B of the

16 medicare program.

17 (b) ADDITIONAL AUTHORITIES.—For the purposes of

18 carrying out a demonstration project under subsection (a),

19 the Secretary may employ any of the following new au20 thorities:

21 (1) CASE MANAGEMENT AUTHORITY.—In order

22 to promote cost effective delivery of items and serv23 ices under the medicare program, the Secretary may

24 provide for case management with respect to types

25 of conditions or illnesses identified by the Secretary
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1 as appropriate for case management. The case man2 agement authority under this paragraph may be

3 used alone or in conjunction with the authority

4 under paragraph (2) to bundle payments for items

5 and services furnished under the program.

6 (2) BUNDLED PAYMENTS.—

7 (A) IN GENERAL.—Subject to subpara8 graph (B), in order to promote cost effective

9 delivery of items and services furnished under

10 the medicare program, the Secretary may pro11 vide for bundled payments for the treatment of

12 types of conditions or illnesses identified by the

13 Secretary as appropriate for bundled payments.

14 (B) The authority under subparagraph (A)

15 shall not apply if the Secretary determines that

16 the use of that authority with respect to such

17 condition or illness would substantially impair a

18 medicare beneficiary’s access to items and serv19 ices of adequate quality when medically nec20 essary.

21 (3) CONTRACTING AUTHORITY.—

22 (A) COST EFFECTIVE DELIVERY OF SERV23 ICES.—

24 (i) IN GENERAL.—In order to promote

25 the cost effective delivery of items and
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1 services, the Secretary may enter into con2 tracts with providers of services, suppliers,

3 and physicians furnishing items or services

4 under the medicare program for the provi5 sion of certain items and services (identi6 fied by the Secretary) at a rate of payment

7 that is less than rate otherwise applicable

8 to that item or service under the medicare

9 program.

10 (ii) MAINTAINING QUALITY.—The

11 Secretary shall take such steps as are nec12 essary to ensure the standards and condi13 tions of quality applicable under the medi14 care program to such item or service apply

15 under any contract entered into under

16 clause (i).

17 (iii) PASSING ON SAVINGS TO BENE18 FICIARIES.—In the case of any savings to

19 the medicare program by reason of a con20 tract entered into under clause (i), the Sec21 retary may provide for such reduction, as

22 the Secretary determines appropriate, in

23 the amount of coinsurance payable by

24 medicare beneficiaries under the medicare
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1 program receiving items and services under

2 such contract.

3 (B) IMPROVING COORDINATION OF SERV4 ICES.—In order to promote better coordination

5 of services available, the Secretary may contract

6 with any of the following:

7 (i) MEDICAID.—The Secretary may

8 enter into contracts for the provision of

9 items and services under the medicare pro10 gram with a State or local government, or

11 with a person who is not a governmental

12 entity, to coordinate the provision of such

13 items and services by such governments or

14 persons with the provision of items and

15 services furnished under the medicare pro16 gram. In determining whether to enter into

17 a contract under this clause, the Secretary

18 shall give priority to coordination of items

19 and services for individuals who are enti20 tled to benefits both under the medicare

21 program and under a State plan under

22 title XIX of such Act.

23 (ii) LOCAL MARKETS.—In order to

24 promote better coordination of utilization

25 of items and services furnished under the
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1 medicare program, the Secretary may

2 enter into contracts, directly or through a

3 third party, for the provision of items and

4 services furnished within a local market.

5 (C) IMPROVING BENEFICIARY HEALTH

6 EDUCATION.—In order to improve knowledge of

7 medicare beneficiaries with respect to health

8 care and to provide for increased control of

9 health care utilization by such beneficiaries, the

10 Secretary may contract with entities or organi11 zations to provide prevention services and man12 agement of demand for particular conditions

13 and illnesses identified by the Secretary as ap14 propriate for such purpose.

15 (D) QUALITY AND COST EFFECTIVE

16 CARE.—In order to promote access to high

17 quality, cost effective care, the Secretary may

18 do the following:

19 (i) INCENTIVES TO BENEFICIARIES.—

20 The Secretary may provide incentives to

21 medicare beneficiaries who utilize providers

22 that demonstrate quality medical outcomes

23 while maintaining cost effectiveness, and

24 who have entered into a contract with the

25 Secretary to provide items and services
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1 under the medicare program to medicare

2 beneficiaries.

3 (ii) SHARING OF PATIENT OUTCOMES

4 INFORMATION.—The Secretary may estab5 lish a mechanism by which information on

6 patient outcomes and patient unitization of

7 services is made available as appropriate,

8 in a manner that protects patient privacy,

9 to all providers of services, physicians, and

10 suppliers of items and services under the

11 medicare program.

12 (c) PROVISION OF ADDITIONAL ITEMS AND SERV13 ICES.—To the extent that a demonstration project carried

14 out under this section utilizing the additional authorities

15 described in subsection (b) results in the provision of items

16 or services not otherwise provided for under the medicare

17 program, such items and services shall be deemed to be

18 covered under such program for purposes of the dem19 onstration project if the provision of such items and serv20 ices conforms with the standards and requirements under

21 such program.

22 (d) LIMITATIONS ON DEMONSTRATION PROJECTS.—

23 (1) NO REDUCTION IN CURRENT MEDICARE

24 BENEFITS.—No demonstration project may be estab25 lished under this section if the establishment of the
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1 demonstration project would result in a reduction in

2 the type or amount of items and services provided

3 for under the medicare program.

4 (2) FREEDOM OF CHOICE OF PROVIDERS.—

5 (A) IN GENERAL.—No demonstration

6 project may be established under this section if

7 the establishment of the demonstration project

8 mandates a greater limitation on the ability of

9 a medicare beneficiary to choose a provider of

10 services, physician, or supplier than those in ef11 fect under the medicare program.

12 (B) BENEFICIARY ELECTION.—Notwith13 standing subparagraph (A), the Secretary may

14 provide for limitation on the ability of a medi15 care beneficiary if the beneficiary makes an

16 election to participate in a demonstration

17 project under such greater limitations, under

18 such conditions established prescribed the Sec19 retary in regulations.

20 (3) LIMITATION ON QUANTITY OF PRO21 VIDERS.—Notwithstanding paragraph (2), the Sec22 retary may establish a demonstration project under

23 this section under which the Secretary, in a limited

24 geographic area (as determined by the Secretary),

25 limits the quantity of providers or services, physi-
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1 cians, or suppliers of items and services furnishing

2 items and services to medicare beneficiaries under

3 a contract. In establishing such a demonstration

4 project, the Secretary shall consider the following

5 factors:

6 (A) The need to maintain medicare bene7 ficiaries’ access to a broad range of providers of

8 services, physicians, and suppliers.

9 (B) The need to maintain enough viable

10 providers of services, physicians, and suppliers

11 in the geographic area to assure an effective

12 procurement process.

13 (e) AUTHORITY TO COLLECT DATA.—The Secretary

14 may require providers of services, physicians, and sup15 pliers of items and services furnishing services to medicare

16 beneficiaries under a demonstration project under this sec17 tion to submit such information that the Secretary con18 siders necessary for—

19 (1) the evaluation of demonstration projects

20 carried out under this section;

21 (2) the improvement of such demonstration

22 projects;

23 (3) the establishment of additional demonstra24 tion projects under this section; and
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1 (4) the feasibility of integrating components of

2 such demonstration projects into the medicare pro3 gram.

4 (f) IMPLEMENTATION OF DEMONSTRATION PROJECT

5 RESULTS.—The Secretary may issue regulations to imple6 ment, on a permanent basis, the components of a dem7 onstration project that is beneficial to the medicare pro8 gram if a report under subsection (g)(2)(F) contains an

9 evaluation that a demonstration project under this

10 section—

11 (1) reduces expenditures under the medicare

12 program; or

13 (2) does not increase expenditures under the

14 medicare program and increases the quality of

15 health care services furnished to medicare bene16 ficiaries and satisfaction of beneficiaries and health

17 care providers.

18 (g) REPORT TO CONGRESS.—

19 (1) IN GENERAL.—Not less frequently than an20 nually after the Secretary implements demonstration

21 projects under this section, the Secretary shall sub22 mit to Congress a report regarding the demonstra23 tion projects conducted under this section.

24 (2) CONTENTS OF REPORT.—The report in

25 paragraph (1) shall include the following:
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1 (A) A description of the demonstration

2 projects conducted under this section.

3 (B) A description of any demonstration

4 project under consideration by the Secretary for

5 approval.

6 (C) A description of the methods by which

7 any demonstration project meets the applicable

8 standards for additional authority under sub9 section (b).

10 (D) A description of the measures imple11 mented under the demonstration project to pro12 tect the health and welfare of medicare bene13 ficiaries participating in or to whom items and

14 services are furnished under the demonstration

15 project. Such description shall include informa16 tion with respect to standards for participation

17 of providers or services, physicians, and sup18 pliers of items and services applicable under the

19 demonstration project.

20 (E) A description of the methods by which

21 the Secretary shall assure the financial account22 ability of funds expended under the demonstra23 tion projects with respect to items and services

24 furnished under the project.

25 (F) An evaluation of—
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1 (i) the cost-effectiveness of the dem2 onstration projects;

3 (ii) the quality of the health care serv4 ices provided to target individuals under

5 the demonstration projects; and

6 (iii) beneficiary and health care pro7 vider satisfaction under the demonstration

8 project.

9 (G) Any other information regarding the

10 demonstration projects conducted under this

11 section that the Secretary determines to be ap12 propriate.

13 (3) MEDPAC REVIEW.—The Medicare Payment

14 Advisory Commission shall review such report and

15 submit to Congress its comments on such report not

16 later than 60 days after the date of the report is

17 submitted to Congress. Such comments shall include

18 the effectiveness and appropriateness of the ap19 proved and proposed demonstration projects, and

20 recommendations to Congress with respect to modi21 fications to the authority under this section that the

22 commission determines appropriate.

23 (h) WAIVER AUTHORITY.—The Secretary shall waive

24 compliance with the requirements of the medicare pro-
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1 gram to such extent and for such period as the Secretary

2 determines is necessary to conduct demonstration projects.

3 (i) FUNDING.—

4 (1) IN GENERAL.—The Secretary shall provide

5 for the transfer from the Federal Hospital Insurance

6 Trust Fund and the Federal Supplementary Insur7 ance Trust Fund under title XVIII of the Social Se8 curity Act (42 U.S.C. 1395i, 1395t), in such propor9 tions as the Secretary determines to be appropriate,

10 of such funds as are necessary for the costs of car11 rying out the demonstration projects under this sec12 tion.

13 (2) LIMITATION.—In conducting demonstration

14 projects under this section, the Secretary shall en15 sure that the aggregate payments made by the Sec16 retary do not exceed the amount which the Secretary

17 would have paid if the demonstration projects under

18 this section were not implemented.

19 (j) DEFINITIONS.—In this section:

20 (1) MEDICARE BENEFICIARY.—The term

21 ‘‘medicare beneficiary’’ means an individual entitled

22 to benefits under part A of the medicare program,

23 and enrolled under part B of such program, or a

24 person enrolled only under part B of such program.
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1 (2) MEDICARE PROGRAM.—The term ‘‘medicare

2 program’’ means the program established under title

3 XVIII of the Social Security Act (42 U.S.C. 1395 et

4 seq.).

5 (3) PROVIDER OF SERVICES.—The term ‘‘pro6 vider of services’’ has the meaning given that term

7 under section 1861(u) of the Social Security Act (42

8 U.S.C. 1395x(u)).

9 (4) PHYSICIAN.—The term ‘‘physician’’ has the

10 meaning given that term under section 1861(r) of

11 such Act (42 U.S.C. 1395x(r)).

12 SEC. 3. LEGISLATIVE PROPOSALS TO CHANGE PAYMENT

13 METHODOLOGY FOR CERTAIN SERVICES.

14 (a) PROPOSAL TO IMPOSE SUSTAINABLE GROWTH

15 RATE LIMITATIONS ON PAYMENT FOR CERTAIN MEDI16 CARE ITEMS AND SERVICES.—In the case of unusual in17 creases in costs to the medicare program (as determined

18 by the Secretary of Health and Human Services) attrib19 utable to unjustified increases in the amount or intensity

20 of items and services furnished under the program, the

21 Secretary shall modify the payment update and/or meth22 odology with respect to such items and services from the

23 update and/or methodology which resulted in such unusual

24 increases in costs to an update and/or methodology that

25 imposes a sustainable growth rate for such items and serv-
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1 ices similar to the sustainable growth rate applied with

2 respect to payment for physicians services under section

3 1848(f) of the Social Security Act (42 U.S.C. 1395w–

4 4(f)).

5 (b) AUTHORITY TO VARY BY REGION.—Any sustain6 able growth rate recommended by the Secretary may pro7 vide for the determination of such rate on a uniform na8 tional basis, by Metropolitan Statistical Area, by State,

9 or by any other region that the Secretary determines ap10 propriate.

11 SECTION 4. AUTHORITY TO NEGOTIATE PAYMENT RATES

12 IN CERTAIN AREAS.

13 (a) AUTHORITY TO NEGOTIATE.—In the case of a

14 service area (as determined by the Secretary of Health

15 and Human Services) in which payments made by the Sec16 retary to a health care provider during a fiscal year for

17 items and services furnished under the medicare program

18 represent the largest single source of payment to the

19 health care provider for such items and services in that

20 area, the Secretary may negotiate a preferred customer

21 rate with such health care provider for such items and

22 services under the medicare program.

23 (b) MANDATE TO NEGOTIATE.—In the case of a

24 service area described in subsection (a) where payment

25 rates under the medicare program for items and services
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1 furnished exceed the rates charged by such health care

2 provider for such items and services for which payment

3 is made other than under the medicare program, the Sec4 retary shall negotiate a preferred customer rate with such

5 health care provider for such items and services under the

6 medicare program.

7 (c) ADJUSTMENT.—In negotiating a preferred cus8 tomer rate under subsection (a), the Secretary shall take

9 into account costs uniquely associated with the provision

10 of items and services under the medicare program.

11 (d) WAIVER AUTHORITY.—The Secretary may waive

12 such requirements of title XVIII of the Social Security Act

13 as may be necessary for the purposes of carrying out this

14 Act.

15 (e) DEFINITIONS.—In this section:

16 (1) MEDICARE PROGRAM.—The term ‘‘medicare

17 program’’ means the program established under title

18 XVIII of the Social Security Act (42 U.S.C. 1395 et

19 seq.).

20 (2) PREFERRED CUSTOMER RATE.—The term

21 ‘‘preferred customer rate’’ means, with respect to

22 payment to a provider of services, physician, or sup23 plier for an item or service furnished under the

24 medicare program, a rate lower than the rate gen-
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1 erally charged in the service area for such item or

2 service.

3 (3) HEALTH CARE PROVIDER.—The term

4 ‘‘health care provider’’ means a provider of services,

5 a physician, or a supplier who furnishes items or

6 services for which payment is made under the medi7 care program.

8 (4) PROVIDER OF SERVICES.—The term ‘‘pro9 vider of services’’ has the meaning given that term

10 under section 1861(u) of the Social Security Act (42

11 U.S.C. 1395x(u)).

12 (5) PHYSICIAN.—The term ‘‘physician’’ has the

13 meaning given that term under section 1861(r) of

14 such Act (42 U.S.C. 1395x(r)).

15 (f) Section 1842(b)(8) is amended to strike ‘‘15 per16 cent’’ each place it appears and substitute ‘‘30 percent’’.

17 SEC. 5. BASING MEDICARE PAYMENT FOR HOSPITAL OUT18 PATIENT DEPARTMENT SERVICES ON PAY19 MENT RATES FOR SIMILAR SERVICES PRO20 VIDED OUTSIDE THE HOSPITAL SETTING.

21 (a) IN GENERAL.—Section 1833(t)(1) of the Social

22 Security Act (42 U.S.C. 1395l(t)(1)) is amended—

23 (1) in subparagraph (A), by inserting

24 ‘‘subject to subparagraph (C),’’ after ‘‘1999,’’,

25 and
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1 (2) by adding at the end the following new

2 subparagraph:

3 ‘‘(C) USE OF RATES IN NON-HOSPITAL

4 SETTINGS.—With respect to covered OPD serv5 ices furnished on or after January 1, 2001, if

6 payment may be made under this part for simi7 lar services (such as physicians’ services) fur8 nished outside the hospital setting, in accord9 ance with regulations of the Secretary, the total

10 amount of payment under this part for such

11 covered OPD services (including any facility-re12 lated component to such services) shall be de13 termined on the same basis on which payment

14 may be made for such similar services furnished

15 outside the hospital setting.’’.

16 (b) CONFORMING AMENDMENT.—The fifth sentence

17 of section 1866(a)(2)(A) of such Act (42 U.S.C.

18 1395cc(a)(2)(A)) is amended by inserting ‘‘, or in the case

19 described in section 1833(t)(1)(C), the coinsurance

20 amount that would otherwise apply with respect to the

21 provision of the similar services referred to in such sec22 tion’’ before the period at the end.
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1 SEC. 6. MEDICARE PAYMENTS FOR INPATIENT HOSPITAL

2 SERVICES INVOLVING EMERGENCY CARE.

3 (a) MEDPAC REPORT ON DRG WEIGHTING FAC4 TORS.—The Medicare Payment Advisory Commission

5 shall submit a report to Congress and the Secretary of

6 Health and Human Services, by January 1, 2000, on

7 whether the DRG weighting factors under section

8 1886(d)(4)(B) of the Social Security Act for diagnosis-re9 lated groups associated with emergency care are adequate

10 to cover the costs of emergency room use within discharges

11 classified within such groups.

12 (b) ADJUSTMENT OF WEIGHTING FACTORS.—Taking

13 into account the report submitted under subsection (a),

14 the Secretary of Health and Human Services shall make

15 appropriate adjustments in the DRG weighting factors de16 scribed in subsection (a) for discharges occurring on or

17 after January 1, 2001, as may be appropriate to ensure

18 that hospital emergency room costs attributable to medi19 care patients are appropriately covered.

20 SEC. 7. PROMOTING THE USE OF COST EFFECTIVE MEDI21 CARE NONINSTITUTIONAL SERVICES

22 THROUGH WAIVER OF BENEFIT LIMITA23 TIONS.

24 (a) IN GENERAL.—If the Secretary of Health and

25 Human Services estimates that treatment in a non-hos26 pital or non-institutional setting under the medicare pro-
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1 gram under title XVIII of the Social Security Act is likely

2 to provide similar or better quality care and outcomes at

3 a lower cost to the program, the Secretary of Health and

4 Human Services may waive requirements described in sub5 section (b) which discourage or prevent treatment in such

6 a setting.

7 (b) REQUIREMENTS WAIVABLE.—

8 (1) IN GENERAL.—Subject to paragraph (2),

9 the requirements that may be waived include the fol10 lowing:

11 (A) The requirement, for the receipt of

12 benefits for extended care services, that the

13 services be post-hospital extended care services.

14 (B) Cost sharing (including deductibles,

15 coinsurance, and copayments) that may be ap16 plicable.

17 (2) NONWAIVABLE PROVISIONS.—The Secretary

18 of Health and Human Services may not under this

19 section provide for coverage of services for which no

20 payment is otherwise provided under the medicare

21 program.

22 (c) LIMITATION.—The Secretary may not provide for

23 such a waiver in the case of an individual unless there

24 are satisfactory assurances that the medicare beneficiary

25 has not received (and is not likely to receive) medicare
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1 benefits for hospital services for the treatment with re2 spect to which the waiver applies.

Æ