I

105TH CONGRESS

1ST SESSION H. R. 554

To amend title XVIII of the Social Security Act to provide for equalization

of Medicare reimbursement rates to managed care plans to improve

the health of residents of rural areas.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 4, 1997

Mr. RAMSTAD (for himself, Mr. OBERSTAR, Mr. VENTO, Mr. BEREUTER, Mr.

PETRI, Mr. STENHOLM, Mr. EVANS, Mr. HOUGHTON, Mr. UPTON, Mr.

WALSH, Mr. CONDIT, Mr. KLUG, Mr. NUSSLE, Mr. SANDERS, Mr.

CLYBURN, Mr. MCHUGH, Mr. MINGE, Mr. EHLERS, Mr. CAMPBELL, Mr.

GRAHAM, Mr. GUTKNECHT, Mr. LUTHER, Mr. NETHERCUTT, and Mr.

HILL) 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 amend title XVIII of the Social Security Act to provide

for equalization of Medicare reimbursement rates to

managed care plans to improve the health of residents

of rural areas.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION. 1. PAYMENTS TO MEDICARE MANAGED CARE

2 PLANS.

3 (a) IN GENERAL.—Section 1876(a) of the Social Se4 curity Act (42 U.S.C. 1395mm(a)) is amended to read as

5 follows:

6 ‘‘(a)(1)(A) The Secretary shall annually determine,

7 and shall announce (in a manner intended to provide no8 tice to interested parties) not later than August 1 before

9 the calendar year concerned—

10 ‘‘(i) a per capita rate of payment for individuals

11 who are enrolled under this section with an eligible

12 organization which has entered into a risk-sharing

13 contract and who are entitled to benefits under part

14 A and enrolled under part B, and

15 ‘‘(ii) a per capita rate of payment for individ16 uals who are so enrolled with such an organization

17 and who are enrolled under part B only.

18 For purposes of this section, the term ‘‘risk-sharing con19 tract’’ means a contract entered into under subsection (g)

20 and the term ‘‘reasonable cost reimbursement contract’’

21 means a contract entered into under subsection (h).

22 ‘‘(B) The annual per capita rate of payment for each

23 Medicare payment area (as defined in paragraph (5)) shall

24 be equal to the adjusted capitation rate (as defined in

25 paragraph (4)), adjusted by the Secretary for—
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1 ‘‘(i) individuals who are enrolled under this sec2 tion with an eligible organization which has entered

3 into a risk-sharing contract and who are enrolled

4 under part B only; and

5 ‘‘(ii) such risk factors as age, disability status,

6 gender, institutional status, and such other factors

7 as the Secretary determines to be appropriate so as

8 to ensure actuarial equivalence. The Secretary may

9 add to, modify, or substitute for such factors, if such

10 changes will improve the determination of actuarial

11 equivalence.

12 ‘‘(C) In the case of an eligible organization with a

13 risk-sharing contract, the Secretary shall make monthly

14 payments in advance and in accordance with the rate de15 termined under subparagraph (B) and except as provided

16 in subsection (g)(2), to the organization for each individ17 ual enrolled with the organization under this section.

18 ‘‘(D) The Secretary shall establish a separate rate of

19 payment to an eligible organization with respect to any

20 individual determined to have end-stage renal disease and

21 enrolled with the organization. Such rate of payment shall

22 be actuarially equivalent to rates paid to other enrollees

23 in the payment area (or such other area as specified by

24 the Secretary).
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1 ‘‘(E)(i) The amount of payment under this paragraph

2 may be retroactively adjusted to take into account any dif3 ference between the actual number of individuals enrolled

4 in the plan under this section and the number of such

5 individuals estimated to be so enrolled in determining the

6 amount of the advance payment.

7 ‘‘(ii)(I) Subject to subclause (II), the Secretary may

8 make retroactive adjustments under clause (i) to take into

9 account individuals enrolled during the period beginning

10 on the date on which the individual enrolls with an eligible

11 organization (which has a risk-sharing contract under this

12 section) under a health benefit plan operated, sponsored,

13 or contributed to by the individual’s employer or former

14 employer (or the employer or former employer of the indi15 vidual’s spouse) and ending on the date on which the indi16 vidual is enrolled in the plan under this section, except

17 that for purposes of making such retroactive adjustments

18 under this clause, such period may not exceed 90 days.

19 ‘‘(II) No adjustment may be made under subclause

20 (I) with respect to any individual who does not certify that

21 the organization provided the individual with the expla22 nation described in subsection (c)(3)(E) at the time the

23 individual enrolled with the organization.

24 ‘‘(F)(i) At least 45 days before making the announce25 ment under subparagraph (A) for a year, the Secretary
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1 shall provide for notice to eligible organizations of pro2 posed changes to be made in the methodology or benefit

3 coverage assumptions from the methodology and assump4 tions used in the previous announcement and shall provide

5 such organizations an opportunity to comment on such

6 proposed changes.

7 ‘‘(ii) In each announcement made under subpara8 graph (A) for a year, the Secretary shall include an expla9 nation of the assumptions (including any benefit coverage

10 assumptions) and changes in methodology used in the an11 nouncement in sufficient detail so that eligible organiza12 tions can compute per capita rates of payment for individ13 uals located in each county (or equivalent medicare pay14 ment area) which is in whole or in part within the service

15 area of such an organization.

16 ‘‘(2) With respect to any eligible organization which

17 has entered into a reasonable cost reimbursement con18 tract, payments shall be made to such plan in accordance

19 with subsection (h)(2) rather than paragraph (1).

20 ‘‘(3) Subject to subsections (c)(2)(B)(ii) and (c)(7),

21 payments under a contract to an eligible organization

22 under paragraph (1) or (2) shall be instead of the amounts

23 which (in the absence of the contract) would be otherwise

24 payable, pursuant to sections 1814(b) and 1833(a), for
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1 services furnished by or through the organization to indi2 viduals enrolled with the organization under this section.

3 ‘‘(4)(A) For purposes of this section, the ‘adjusted

4 capitation rate’ for a medicare payment area (as defined

5 in paragraph (5)) is equal to the greatest of the following:

6 ‘‘(i) The sum of—

7 ‘‘(I) the area-specific percentage for the

8 year (as specified under subparagraph (B) for

9 the year) of the area-specific adjusted capita10 tion rate for the year for the medicare payment

11 area, as determined under subparagraph (C),

12 and

13 ‘‘(II) the national percentage (as specified

14 under subparagraph (B) for the year) of the

15 input-price-adjusted national adjusted capita16 tion rate for the year, as determined under sub17 paragraph (D),

18 multiplied by a budget neutrality adjustment factor

19 determined under subparagraph (E).

20 ‘‘(ii) An amount equal to—

21 ‘‘(I) in the case of 1998, 80 percent of the

22 input-price-adjusted national adjusted capita23 tion rate for the year, as determined under sub24 paragraph (D); and
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1 ‘‘(II) in the case of a succeeding year, the

2 amount specified in this clause for the preced3 ing year increased by the national average per

4 capita growth percentage specified under sub5 paragraph (F) for that succeeding year.

6 ‘‘(iii) An amount equal to—

7 ‘‘(I) in the case of 1998, 102 percent of

8 the annual per capita rate of payment for 1997

9 for the medicare payment area (determined

10 under this subsection), as in effect on the day

11 before the date of enactment of this subclause;

12 and

13 ‘‘(II) in the case of a subsequent year, 102

14 percent of the adjusted capitation rate under

15 this subsection for the area for the previous

16 year.

17 ‘‘(B) For purposes of subparagraph (A)(i)—

18 ‘‘(i) for 1998, the ‘area-specific percentage’ is

19 90 percent and the ‘national percentage’ is 10 per20 cent,

21 ‘‘(ii) for 1999, the ‘area-specific percentage’ is

22 85 percent and the ‘national percentage’ is 15 per23 cent,
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1 ‘‘(iii) for 2000, the ‘area-specific percentage’ is

2 80 percent and the ‘national percentage’ is 20 per3 cent,

4 ‘‘(iv) for 2001, the ‘area-specific percentage’ is

5 75 percent and the ‘national percentage’ is 25 per6 cent, and

7 ‘‘(v) for a year after 2001, the ‘area-specific

8 percentage’ is 70 percent and the ‘national percent9 age’ is 30 percent.

10 ‘‘(C) For purposes of subparagraph (A)(i), the area11 specific adjusted capitation rate for a medicare payment

12 area—

13 ‘‘(i) for 1998, is the average of the annual per

14 capita rates of payment for the area for 1994

15 through 1997, after adjusting the 1994 and 1995

16 rates of payment to 1997 dollars, increased by the

17 national average per capita growth percentage for

18 1997 (as defined in subparagraph (F)); or

19 ‘‘(ii) for a subsequent year, is the area-specific

20 adjusted capitation rate for the previous year deter21 mined under this subparagraph for the area, in22 creased by the national average per capita growth

23 percentage for such subsequent year.

24 ‘‘(D)(i) For purposes of subparagraph (A)(i) and

25 subparagraph (A)(ii), the input-price-adjusted national
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1 adjusted capitation rate for a medicare payment area for

2 a year is equal to the sum, for all the types of medicare

3 services (as classified by the Secretary), of the product

4 (for each such type of service) of—

5 ‘‘(I) the national standardized adjusted capita6 tion rate (determined under clause (ii)) for the year,

7 ‘‘(II) the proportion of such rate for the year

8 which is attributable to such type of services, and

9 ‘‘(III) an index that reflects (for that year and

10 that type of services) the relative input price of such

11 services in the area compared to the national aver12 age input price of such services.

13 In applying subclause (III), the Secretary shall, subject

14 to clause (iii), apply those indices under this title that are

15 used in applying (or updating) national payment rates for

16 specific areas and localities.

17 ‘‘(ii) In clause (i)(I), the ‘national standardized ad18 justed capitation rate’ for a year is equal to—

19 ‘‘(I) the sum (for all medicare payment areas)

20 of the product of (aa) the area-specific adjusted

21 capitation rate for that year for the area under sub22 paragraph (C), and (bb) the average number of

23 standardized medicare beneficiaries residing in that

24 area in the year; divided by
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1 ‘‘(II) the total average number of standardized

2 medicare beneficiaries residing in all the medicare

3 payment areas for that year.

4 ‘‘(iii) In applying this subparagraph for 1998—

5 ‘‘(I) medicare services shall be divided into 2

6 types of services: part A services and part B serv7 ices;

8 ‘‘(II) the proportions described in clause (i)(II)

9 for such types of services shall be—

10 ‘‘(aa) for part A services, the ratio (ex11 pressed as a percentage) of the national average

12 annual per capita rate of payment for part A

13 for 1997 to the total average annual per capita

14 rate of payment for parts A and B for 1997,

15 and

16 ‘‘(bb) for part B services, 100 percent

17 minus the ratio described in item (aa);

18 ‘‘(III) for part A services, 70 percent of pay19 ments attributable to such services shall be adjusted

20 by the index used under section 1886(d)(3)(E) to

21 adjust payment rates for relative hospital wage levels

22 for hospitals located in the payment area involved;

23 and

24 ‘‘(IV) for part B services—
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1 ‘‘(aa) 66 percent of payments attributable

2 to such services shall be adjusted by the index

3 of the geographic area factors under section

4 1848(e) used to adjust payment rates for physi5 cians’ services furnished in the payment area,

6 and

7 ‘‘(bb) of the remaining 34 percent of the

8 amount of such payments, 70 percent shall be

9 adjusted by the index described in subclause

10 (III).

11 The Secretary may continue to apply the rules described

12 in this clause (or similar rules) for 1999.

13 ‘‘(E) For each year, the Secretary shall compute a

14 budget neutrality adjustment factor so that the aggregate

15 of the payments under this section shall be equal to the

16 aggregate payments that would have been made under this

17 section if the area-specific percentage for the year had

18 been 100 percent and the national percentage had been

19 0 percent.

20 ‘‘(F) In this section, the ‘national average per capita

21 growth percentage’ is equal to the percentage growth in

22 medicare fee-for-service per capita expenditures, which the

23 Secretary shall project for each year.
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1 ‘‘(5)(A) In this section, except as provided in sub2 paragraph (C), the term ‘medicare payment area’ means

3 a county, or equivalent area specified by the Secretary.

4 ‘‘(B) In the case of individuals who are determined

5 to have end stage renal disease, the medicare payment

6 area shall be specified by the Secretary.

7 ‘‘(C)(i) Upon written request of the Chief Executive

8 Officer of a State for a contract year (beginning after

9 1997) made at least 7 months before the beginning of the

10 year, the Secretary shall adjust the system under which

11 medicare payment areas in the State are otherwise deter12 mined under subparagraph (A) to a system which—

13 ‘‘(I) has a single statewide medicare payment

14 area,

15 ‘‘(II) is a metropolitan based system described

16 in clause (iii), or

17 ‘‘(III) which consolidates into a single medicare

18 payment area noncontiguous counties (or equivalent

19 areas described in subparagraph (A)) within a State.

20 Such adjustment shall be effective for payments for

21 months beginning with January of the year following the

22 year in which the request is received.

23 ‘‘(ii) In the case of a State requesting an adjustment

24 under this subparagraph, the Secretary shall adjust the

25 payment rates otherwise established under this section for
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1 medicare payment areas in the State in a manner so that

2 the aggregate of the payments under this section in the

3 State shall be equal to the aggregate payments that would

4 have been made under this section for medicare payment

5 areas in the State in the absence of the adjustment under

6 this subparagraph.

7 ‘‘(iii) The metropolitan based system described in this

8 clause is one in which—

9 ‘‘(I) all the portions of each metropolitan statis10 tical area in the State or in the case of a consoli11 dated metropolitan statistical area, all of the por12 tions of each primary metropolitan statistical area

13 within the consolidated area within the State, are

14 treated as a single medicare payment area, and

15 ‘‘(II) all areas in the State that do not fall

16 within a metropolitan statistical area are treated as

17 a single medicare payment area.

18 ‘‘(iv) In clause (iii), the terms ‘metropolitan statis19 tical area’, ‘consolidated metropolitan statistical area’, and

20 ‘primary metropolitan statistical area’ mean any area des21 ignated as such by the Secretary of Commerce.

22 ‘‘(6) Subject to subsections (c)(2)(B)(ii) and (c)(7),

23 if an individual is enrolled under this section with an eligi24 ble organization having a risk-sharing contract, only the

25 eligible organization shall be entitled to receive payments
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1 from the Secretary under this title for services furnished

2 to the individual.’’.

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

4 subsection (a) shall take effect on October 1, 1997.

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