I 

108TH CONGRESS 

1ST SESSION H. R. 983

To amend part C of title XVIII of the Social Security Act to consolidate 

and restate the Federal laws relating to the social health maintenance 

organization projects, to make such projects permanent, to require the 

Medicare Payment Advisory Commission to conduct a study on ways 

to expand such projects, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 27, 2003

Mr. GALLEGLY (for himself, Mr. ISSA, Ms. MILLENDER-MCDONALD, Mr. COX, 

Mr. DREIER, and Mr. ROHRABACHER) introduced the following bill; 

which was referred to the Committee on Ways and Means, and in addition to the Committee on Energy and 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 part C of title XVIII of the Social Security Act 

to consolidate and restate the Federal laws relating to 

the social health maintenance organization projects, to 

make such projects permanent, to require the Medicare 

Payment Advisory Commission to conduct a study on 

ways to expand such projects, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

3 ‘‘Seniors Health and Independence Preservation Act of 

4 2003’’. 

5 (b) TABLE OF CONTENTS.—The table of contents of 

6 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Making the social health maintenance organization (SHMO) projects 

permanent. 

Sec. 3. Expansion of SHMO projects into noncontiguous service areas within a 

State. 

Sec. 4. Permanence of SHMO planning grant sites. 

Sec. 5. Procedures for SHMO benefit and payment mechanism changes. 

Sec. 6. Comprehensive MedPAC study on SHMO I and SHMO II cost-effectiveness and potential expansion. 

Sec. 7. SHMO Beneficiary satisfaction survey. 

Sec. 8. Conforming cross-references. 

Sec. 9. Legislative purpose and construction. 

Sec. 10. Repeals.

7 SEC. 2. MAKING THE SOCIAL HEALTH MAINTENANCE ORGA8 NIZATION (SHMO) PROJECTS PERMANENT. 

9 Part C of title XVIII of the Social Security Act (42 

10 U.S.C. 1395w–21 et seq.) is amended by inserting after 

11 section 1857 the following new section: 

12 ‘‘WAIVERS FOR SOCIAL HEALTH MAINTENANCE

13 ORGANIZATIONS

14 ‘‘SEC. 1858. (a) ESTABLISHMENT OF SHMO 

15 PROJECTS.—In the case of a project described in sub16 section (b), the Secretary shall approve, with appropriate 

17 terms and conditions as defined by the Secretary, applica18 tions or protocols submitted for waivers described in sub19 section (c), and the evaluation of such protocols, in order 
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1 to carry out such project. Such approval shall be effected 

2 not later than 30 days after the date on which the applica3 tion or protocol for a waiver is submitted or not later than 

4 30 days after the date of enactment of the Deficit Reduc5 tion Act of 1984 (Public Law 98–369; 98 Stat. 494) in 

6 the case of an application or protocol submitted before the 

7 date of enactment of such Act. Not later than 36 months 

8 after the date of enactment of the Omnibus Budget Rec9 onciliation Act of 1990 (Public Law 101–508; 104 Stat. 

10 1388), the Secretary shall approve applications or proto11 cols described in paragraph (1) for not more than 4 addi12 tional projects described in subsection (b). 

13 ‘‘(b) PROJECTS DESCRIBED.—A project referred to 

14 in subsection (a) is a project—

15 ‘‘(1) to demonstrate—

16 ‘‘(A) the concept of a social health mainte17 nance organization with the organizations as 

18 described in Project No. 18–P–9 7604/1–04 of 

19 the University Health Policy Consortium of 

20 Brandeis University; or 

21 ‘‘(B) in the case of a project conducted as 

22 a result of the amendments made by section 

23 4207(b)(4)(B)(i) of the Omnibus Budget Rec24 onciliation Act of 1990 (Public Law 101–508; 

25 104 Stat. 1388–118), the effectiveness and fea-
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1 sibility of innovative approaches to refining tar2 geting and financing methodologies and benefit 

3 design, including the effectiveness of feasibility 

4 of—

5 ‘‘(i) the benefits of expanded post6 acute and community care case manage7 ment through links between chronic care 

8 case management services and acute care 

9 providers; 

10 ‘‘(ii) refining targeting or reimburse11 ment methodologies; 

12 ‘‘(iii) the establishment and operation 

13 of a rural services delivery system; 

14 ‘‘(iv) integrating acute and chronic 

15 care management for patients with end16 stage renal disease through expanded com17 munity care case management services 

18 (and for purposes of a project conducted 

19 under this clause, any requirement under a 

20 waiver granted under this section that a 

21 project disenroll individuals who develop 

22 end-stage renal disease shall not apply); or 

23 ‘‘(v) the effectiveness of second-gen24 eration sites in reducing the costs of the
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1 commencement and management of health 

2 care service delivery; 

3 ‘‘(2) which provides for the integration of 

4 health and social services under the direct financial 

5 management of a provider of services; 

6 ‘‘(3) under which all services under this title 

7 will be provided by or under arrangements made by 

8 the organization at a fixed annual prepaid capitation 

9 rate for medicare of 100 percent of the adjusted av10 erage per capita cost; and 

11 ‘‘(4) under which services under title XIX will 

12 be provided at a rate approved by the Secretary. 

13 ‘‘(c) WAIVERS.—The waivers referred to in sub14 section (a) are appropriate waivers of—

15 ‘‘(1) certain requirements of this title, pursuant 

16 to section 402(a) of the Social Security Amendments 

17 of 1967 (Public Law 90–248; 81 Stat. 930), as 

18 amended by section 222 of the Social Security 

19 Amendments of 1972 (Public Law 92–603; 86 Stat. 

20 1390); 

21 ‘‘(2) certain requirements of title XIX, pursu22 ant to section 1115; and 

23 ‘‘(3) in the case of a project conducted as a re24 sult of the amendments made by section 

25 4207(b)(4)(B)(i) of the Omnibus Budget Reconcili-
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1 ation Act of 1990 (Public Law 101–508; 104 Stat. 

2 1388–118), any requirements of title XVIII or XIX 

3 that, if imposed, would prohibit such project from 

4 being conducted.

5 ‘‘(d) AGGREGATE LIMIT ON NUMBER OF MEM6 BERS.—The Secretary may not impose a limit on the num7 ber of individuals that may participate in a project con8 ducted under this section, other than an aggregate limit 

9 of not less than 324,000 for all sites. 

10 ‘‘(e) REPORTS.—

11 ‘‘(1) PRELIMINARY REPORT.—The Secretary 

12 shall submit a preliminary report to Congress on the 

13 status of the projects and waivers referred to in sub14 section (a) 45 days after the date of enactment of 

15 the Deficit Reduction Act of 1984 (Public Law 98–

16 369; 98 Stat. 494). 

17 ‘‘(2) INTERIM REPORT.—The Secretary shall 

18 submit an interim report to Congress on the projects 

19 referred to in subsection (a) not later than 42 

20 months after the date of enactment of the Deficit 

21 Reduction Act of 1984 (Public Law 98–369; 98 

22 Stat. 494). 

23 ‘‘(3) SECOND INTERIM REPORT.—The Sec24 retary shall submit a second interim report to Con-
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1 gress on the project referred to in paragraph (1) not 

2 later than March 31, 1993. 

3 ‘‘(4) REPORT ON INTEGRATION AND TRANSI4 TION.—

5 ‘‘(A) IN GENERAL.—The Secretary shall 

6 submit to Congress, by not later than January 

7 1, 1999, a plan for the integration of health 

8 plans offered by social health maintenance or9 ganizations (including SHMO I and SHMO II 

10 sites developed under this section and similar 

11 plans) as an option under the Medicare+Choice 

12 program under this title. 

13 ‘‘(B) PROVISION FOR TRANSITION.—The 

14 plan submitted under subparagraph (A) shall 

15 include a transition for social health mainte16 nance organizations operating under the project 

17 authority under this section. 

18 ‘‘(C) PAYMENT POLICY.—The report shall 

19 also include recommendations on appropriate 

20 payment levels for plans offered by such organi21 zations, including an analysis of the application 

22 of risk adjustment factors appropriate to the 

23 population served by such organizations. 

24 ‘‘(5) HHS REPORT.—The Secretary shall sub25 mit a report on the projects conducted under this 
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1 section not later than the date that is 21 months 

2 after the date on which the Secretary submits to 

3 Congress the report described in paragraph (4). 

4 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 

5 are authorized to be appropriated $3,500,000 for the costs 

6 of technical assistance and evaluation related to projects 

7 conducted as a result of the amendments made by section 

8 4207(b)(4)(B) of the Omnibus Budget Reconciliation Act 

9 of 1990 (Public Law 101–508; 104 Stat. 1388–118).’’. 

10 SEC. 3. EXPANSION OF SHMO PROJECTS INTO NONCONTIG11 UOUS SERVICE AREAS WITHIN A STATE. 

12 Not later than the date that is 90 days after the date 

13 of enactment of this Act, the Secretary shall promulgate 

14 a regulation that permits each social health maintenance 

15 organization participating in a project conducted under 

16 section 1858 of the Social Security Act (as added by sec17 tion 2) to expand the service area of such organization 

18 to include areas within the State served by the organiza19 tion that are not contiguous to any other service area of 

20 the organization. 

21 SEC. 4. PERMANENCE OF SHMO PLANNING GRANT SITES. 

22 (a) ORIGINAL SHMO II DEMONSTRATIONS.—The 5 

23 organizations authorized by section 4207(b)(4)(B) of the 

24 Omnibus Budget Reconciliation Act of 1990 (Public Law 

25 101–508; 104 Stat. 1388–118) to demonstrate the con-
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1 cept of social health maintenance organizations that were 

2 approved by the Secretary of Health and Human Services 

3 in 1995 shall be permitted to participate in the program 

4 under section 1858 of the Social Security Act (as added 

5 by section 2). 

6 (b) SHMO II DUAL-ELIGIBLE PLANNING GRANTS.—

7 Each entity that received a planning grant in 1998 under 

8 the 1997 Grants Program for Reforming Service Delivery 

9 for Dual Eligible Beneficiaries to develop a Second Gen10 eration Social HMO Demonstration Program shall be per11 mitted to participate in the program under section 1858 

12 of the Social Security Act (as added by section 2). 

13 SEC. 5. PROCEDURES FOR SHMO BENEFIT AND PAYMENT 

14 MECHANISM CHANGES. 

15 (a) CONGRESSIONAL NOTIFICATION OF BENEFIT

16 CHANGES.—The Secretary of Health and Human Services 

17 shall notify the appropriate committees of Congress prior 

18 to making any change to the benefits available under a 

19 project under section 1858 of the Social Security Act (as 

20 added by section 2). 

21 (b) RULEMAKING REQUIREMENT FOR PAYMENT

22 MECHANISM CHANGES.—The Secretary may not change 

23 the payment mechanism applicable with respect to any so24 cial health maintenance organization project under section
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1 1858 of the Social Security Act (as added by section 2), 

2 except by regulation. 

3 SEC. 6. COMPREHENSIVE MEDPAC STUDY ON SHMO I AND 

4 SHMO II COST-EFFECTIVENESS AND POTEN5 TIAL EXPANSION. 

6 (a) STUDY.—

7 (1) IN GENERAL.—The Medicare Payment Ad8 visory Commission established under section 1805 of 

9 the Social Security Act (42 U.S.C. 1395b–6) (in this 

10 section referred to as the ‘‘Commission’’) shall con11 duct a study on the cost-effectiveness of the projects 

12 and the potential expansion of such projects. 

13 (2) COST-EFFECTIVENESS.—

14 (A) IN GENERAL.—In determining the 

15 cost-effectiveness of the projects under the 

16 study conducted under paragraph (1), the Com17 mission shall take into account—

18 (i) the extent to which the per bene19 ficiary costs to the medicare program for 

20 enrollees in a social health maintenance or21 ganization do not exceed the average per 

22 beneficiary costs to the medicare program 

23 for a comparable case mix of beneficiaries 

24 who are enrolled in the original medicare 

25 fee-for-service program; 
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1 (ii) the actuarial value of items and 

2 services available to beneficiaries enrolled 

3 in a social health maintenance organization 

4 but not available to beneficiaries enrolled 

5 in the original medicare fee-for-service pro6 gram; and 

7 (iii) the extent to which social health 

8 maintenance organizations reduced expend9 itures under the medicaid program under 

10 title XIX of the Social Security Act by—

11 (I) preventing individuals from 

12 being eligible for medical assistance 

13 under such program as medically 

14 needy individuals through the applica15 tion of spend-down requirements for 

16 income and resources; or 

17 (II) reducing the number of nurs18 ing home bed days associated with 

19 stays of 60 days or longer for med20 icaid beneficiaries. 

21 (B) COMPARABLE CASE MIX.—In evalu22 ating a comparable case mix of beneficiaries for 

23 purposes of clause (i)(I), the Commission shall 

24 take into account the following factors: 

25 (i) Age. 
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1 (ii) Gender. 

2 (iii) Diagnoses. 

3 (iv) Functional status. 

4 (v) Any other available demographic 

5 or illness factor deemed appropriate by the 

6 Commission. 

7 (C) DATA.—In determining the cost-effec8 tiveness of social health maintenance organiza9 tions under this subsection, the Commission 

10 shall evaluate data from social health mainte11 nance organizations for the period beginning on 

12 January 1, 1997, and ending on the first De13 cember 31 occurring after the date of enact14 ment of this Act. 

15 (b) REPORT.—

16 (1) IN GENERAL.—Not later than the date that 

17 is 24 months after the date of enactment of this Act, 

18 the Commission shall submit to the Secretary of 

19 Health and Human Services and to the appropriate 

20 committees of Congress a report on the study con21 ducted under subsection (a)(1). 

22 (2) CONTENTS.—The report submitted under 

23 paragraph (1) shall contain—
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1 (A) a statement regarding whether the 

2 Commission finds social health maintenance or3 ganizations to be cost-effective; 

4 (B) recommendations regarding whether 

5 the projects should be expanded to include addi6 tional sites and whether additional social health 

7 maintenance organizations should be permitted 

8 to participate in the projects; 

9 (C) recommendations on whether to modify 

10 or eliminate the aggregate limit on number of 

11 members under section 1858(d) of the Social 

12 Security Act (as added by section 2); and 

13 (D) if the Commission recommends expan14 sion or replication of the projects, recommenda15 tions on the appropriate implementation of such 

16 expansion. 

17 (c) DEFINITIONS.—In this section: 

18 (1) PROJECT.—The term ‘‘project’’ means a 

19 project conducted under section 1858 of the Social 

20 Security Act (as added by section 2) other than a 

21 project described in subsection (b)(1)(B)(iv) of such 

22 section. 

23 (2) MEDICARE PROGRAM.—The term ‘‘medicare 

24 program’’ means the health benefits program under 

25 title XVIII of the Social Security Act. 
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1 (3) ORIGINAL MEDICARE FEE-FOR-SERVICE

2 PROGRAM.—The term ‘‘original medicare fee-for3 service program’’ means the program under parts A 

4 and B of the medicare program. 

5 (4) SOCIAL HEALTH MAINTENANCE ORGANIZA6 TION.—The term ‘‘social health maintenance organi7 zation’’ means an organization participating in a 

8 SHMO I project described in subparagraph (A) of 

9 section 1858(b)(1) of the Social Security Act (as 

10 added by section 2) or a SHMO II project described 

11 in subparagraph (B) of such section (other than a 

12 project described in clause (iv) of such subpara13 graph). 

14 SEC. 7. SHMO BENEFICIARY SATISFACTION SURVEY. 

15 (a) SURVEY.—

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

17 Human Services shall conduct a comparative quali18 tative survey of the satisfaction of medicare bene19 ficiaries enrolled in—

20 (A) the original medicare fee-for-service 

21 program under parts A and B of title XVIII of 

22 the Social Security Act; 

23 (B) a Medicare+Choice plan under part C 

24 of title XVIII of such Act; and
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1 (C) a social health maintenance organiza2 tion under section 1858 of such Act (as added 

3 by section 2). 

4 (2) CONSIDERATIONS.—In determining bene5 ficiary satisfaction, the Secretary of Health and 

6 Human Services shall take into account—

7 (A) the differences in the program or plan 

8 benefit structure; 

9 (B) the extent to which the program or 

10 plan benefit structure enables beneficiaries to 

11 avoid or delay institutionalization; 

12 (C) the amount of out-of-pocket costs 

13 saved by beneficiaries under the program or 

14 plan for traditional and expanded care services; 

15 (D) the access to services by beneficiaries 

16 under the program or plan; and 

17 (E) the satisfaction level of family mem18 bers and caregivers of beneficiaries enrolled in 

19 the program or plan. 

20 (b) PUBLICATION OF RESULTS AND SUBMISSION TO

21 CONGRESS.—Not later than the date that is 24 months 

22 after the date of enactment of this Act, the Secretary of 

23 Health and Human Services shall post the results of the 

24 survey conducted under subsection (a)(1) on an Internet 
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1 website and shall submit such results to the appropriate 

2 committees of Congress. 

3 SEC. 8. CONFORMING CROSS-REFERENCES. 

4 (a) SOCIAL SECURITY ACT.—

5 (1) The last sentence of section 1853(a)(1)(B) 

6 of the Social Security Act (42 U.S.C. 1395w–

7 23(a)(1)(B)), as added by section 605(a) of the 

8 Medicare, Medicaid, and SCHIP Benefits Improve9 ment and Protection Act of 2000 (114 Stat. 2763A–

10 556), is amended by striking ‘‘(established by sec11 tion 2355 of the Deficit Reduction Act of 1984, as 

12 amended by section 13567(b) of the Omnibus Budg13 et Reconciliation Act of 1993)’’ and inserting ‘‘(es14 tablished by section 1858)’’. 

15 (2) Section 1882(g)(1) of the Social Security 

16 Act (42 U.S.C. 1395ss(g)(1)) is amended by striking 

17 ‘‘section 2355 of the Deficit Reduction Act of 1984’’ 

18 and inserting ‘‘section 1858’’. 

19 (b) MEDICARE, MEDICAID, AND SCHIP BENEFITS

20 IMPROVEMENT AND PROTECTION ACT OF 2000.—Section 

21 542(b)(2)(B)(iv) of the Medicare, Medicaid, and SCHIP 

22 Benefits Improvement and Protection Act of 2000 (114 

23 Stat. 2763A–551), as enacted into law by section 1(a)(6) 

24 of Public Law 106–554, is amended by striking ‘‘section 

25 4018(b) of the Omnibus Budget Reconciliation Act of 
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1 1987 (Public Law 100–203)’’ and inserting ‘‘section 1858 

2 of the Social Security Act’’. 

3 SEC. 9. LEGISLATIVE PURPOSE AND CONSTRUCTION. 

4 (a) PRINCIPAL SUBSTANTIVE CHANGES TO MAKE

5 SHMO PROJECTS PERMANENT.—

6 (1) IN GENERAL.—Except as provided in para7 graphs (2) and (3), section 2—

8 (A) restates, without substantive change, 

9 laws enacted before January 24, 2002, that 

10 were replaced by that section; 

11 (B) may not be construed as making a 

12 substantive change in the laws replaced; and 

13 (C) is superseded by any law that is en14 acted after January 24, 2002, that is incon15 sistent with such section or that supersedes 

16 that section to the extent of the inconsistency. 

17 (2) PERMANENCY.—Section 2 extends the so18 cial health maintenance organization projects for an 

19 indefinite time period (beyond the date that is 30 

20 months after the date that the Secretary submits to 

21 Congress the report described in section 1858(e)(4) 

22 of the Social Security Act, as added by section 2). 

23 (3) MODIFICATION OF CERTAIN REPORTING RE24 QUIREMENTS.—
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1 (A) The report required to be submitted by 

2 the Secretary of Health and Human Services 

3 under section 1858(e)(5) of the Social Security 

4 Act (as added by section 2) is the same report 

5 as is required under the first sentence of sec6 tion 4018 of the Omnibus Budget Reconcili7 ation Act of 1987 (Public Law 100–203; 101 

8 Stat. 1330–65), except that such report is no 

9 longer characterized as a final report. 

10 (B) The Medicare Payment Advisory Com11 mission established under section 1805 of the 

12 Social Security Act (42 U.S.C. 1395b–6) shall 

13 not be required to submit the report described 

14 in the second sentence of section 4018 of the 

15 Omnibus Budget Reconciliation Act of 1987 

16 (Public Law 100–203; 101 Stat. 1330–65). 

17 (b) REFERENCES.—A reference to a law replaced by 

18 section 2, including a reference in a regulation, order, or 

19 other law, is deemed to refer to the corresponding provi20 sion enacted by this Act. 

21 (c) CONTINUING EFFECT.—An order, rule, or regula22 tion in effect under a law replaced by section 2 shall con23 tinue in effect under the corresponding provision enacted 

24 by this Act until repealed, amended, or superseded.
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1 (d) ACTIONS UNDER PRIOR LAW.—An action taken 

2 under a law replaced by section 2 is deemed to have been 

3 taken under the corresponding provision enacted by this 

4 Act. 

5 (e) INFERENCES.—No inference of legislative con6 struction may be drawn by reason of a heading of a provi7 sion. 

8 (f ) SEVERABILITY.—If a provision enacted by this 

9 Act is— 

10 (1) held invalid, each valid provision that is sev11 erable from the invalid provision shall remain in ef12 fect; and 

13 (2) held invalid with respect to any application, 

14 the provision shall remain valid with respect to each 

15 valid application that is severable from the invalid 

16 application. 

17 SEC. 10. REPEALS. 

18 (a) INFERENCES OF REPEAL.—The repeal of a law 

19 by this Act may not be construed as a legislative inference 

20 that the provision was or was not in effect before its re21 peal. 

22 (b) LAWS REPEALED.—Except for rights and duties 

23 that matured, penalties that were incurred, and pro24 ceedings that were begun before the date of enactment of 
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1 this Act, the following provisions (and amendments made 

2 by such provisions) are repealed: 

3 (1) Section 2355 of the Deficit Reduction Act 

4 of 1984 (Public Law 98–369; 98 Stat. 1103). 

5 (2) Section 4018(b) of the Omnibus Budget 

6 Reconciliation Act of 1987 (Public Law 100–203; 

7 101 Stat. 1330–65). 

8 (3) Section 4207(b)(4) of the Omnibus Budget 

9 Reconciliation Act of 1990 (Public Law 101–508; 

10 104 Stat. 1388–118). 

11 (4) Section 13567 of the Omnibus Budget Rec12 onciliation Act of 1993 (Public Law 103–66; 107 

13 Stat. 607). 

14 (5) Paragraphs (6) through (8) of section 

15 160(d) of the Social Security Act Amendments of 

16 1994 (Public Law 103–432; 108 Stat. 4443). 

17 (6) Section 4014 of the Balanced Budget Act 

18 of 1997 (Public Law 105–33; 111 Stat. 336). 

19 (7) Section 531 of the Medicare, Medicaid, and 

20 SCHIP Balanced Budget Refinement Act of 1999 

21 (Appendix F of Public Law 106–113; 113 Stat. 

22 1501A–388). 

23 (8) Section 631 of the Medicare, Medicaid, and 

24 SCHIP Benefits Improvement and Protection Act of 
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1 2000 (Appendix F of Public Law 106–554; 114 

2 Stat. 2763A–566).

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