I 
109TH CONGRESS 
1ST SESSION 
H. R. 868 
To amend title XVIII of the Social Security Act to improve the provision 
of items and services provided to Medicare beneficiaries residing in rural 
areas. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 16, 2005 
Mr. SMITH of Washington (for himself, Mr. BAIRD, Mr. DICKS, Mr. INSLEE, 
Mr. LARSEN of Washington, and Mr. MCDERMOTT) introduced the fol-
lowing 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 consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend title XVIII of the Social Security Act to improve 
the provision of items and services provided to Medicare 
beneficiaries residing in rural areas. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘MediFair Act of 
2005’’. 
SEC. 2. FINDINGS. 
Congress makes the following findings:
(1) Regional inequities in medicare reimburse-
ment have created barriers to care for seniors and 
the disabled. 
(2) The regional inequities in medicare reim-
bursement penalize States that have cost-effective 
health care delivery systems and reward those States 
with high utilization rates and that provide ineffi-
cient care. 
(3) Over a lifetime, those inequities can mean 
as much as a $50,000 difference in the cost of care 
provided per beneficiary. 
(4) Regional inequities have resulted in creating 
very different medicare programs for seniors and the 
disabled based on where they live. 
(5) Because the MedicareAdvantage rate is 
based on the fee-for-service reimbursement rate, re-
gional inequities have allowed some medicare bene-
ficiaries access to plans with significantly more bene-
fits including prescription drugs. Beneficiaries in 
States with lower reimbursement rates have not ben-
efited to the same degree as beneficiaries in other 
parts of the country. 
(6) Regional inequities in medicare reimburse-
ment have created an unfair competitive advantage 
for hospitals and other health care providers in
States that receive above average payments. Higher 
payments mean that those providers can pay higher 
salaries in a tight, competitive market. 
(7) Regional inequities in medicare reimburse-
ment can limit timely access to new technology for 
beneficiaries in States with lower reimbursement 
rates. 
(8) Regional inequities in medicare reimburse-
ment, if left unchecked, will reduce access to medi-
care services and impact healthy outcomes for bene-
ficiaries. 
(9) Regional inequities in medicare reimburse-
ment are not just a rural versus urban problem. 
Many States with large urban centers are at the bot-
tom of the national average for per beneficiary costs. 
SEC. 3. IMPROVING FAIRNESS OF PAYMENTS TO PRO-
VIDERS UNDER THE MEDICARE FEE-FOR- 
SERVICE PROGRAM. 
Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended by adding at the end the fol-
lowing new section: 
‘‘IMPROVING PAYMENT EQUITY UNDER THE ORIGINAL 
MEDICARE FEE-FOR-SERVICE PROGRAM 
‘‘SEC. 1898. (a) IN GENERAL.—Notwithstanding any 
other provision of law, the Secretary shall establish a sys-
tem for making adjustments to the amount of payment
made to entities and individuals for items and services 
provided under the original medicare fee-for-service pro-
gram under parts A and B. 
‘‘(b) SYSTEM REQUIREMENTS.— 
‘‘(1) INCREASE FOR STATES BELOW THE NA-
TIONAL
AVERAGE.—Under the system established 
under subsection (a), if a State average per bene-
ficiary amount for a year is less than the national 
average per beneficiary amount for such year, then 
the Secretary (beginning in 2006) shall increase the 
amount of applicable payments in such a manner as 
will result (as estimated by the Secretary) in the 
State average per beneficiary amount for the subse-
quent year being equal to the national average per 
beneficiary amount for such subsequent year. 
‘‘(2) REDUCTION FOR CERTAIN STATES ABOVE 
THE
NATIONAL
AVERAGE
TO
ENHANCE
QUALITY 
CARE AND MAINTAIN BUDGET NEUTRALITY.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
ensure that the increase in payments under 
paragraph (1) does not cause the estimated 
amount of expenditures under this title for a 
year to increase or decrease from the estimated 
amount of expenditures under this title that 
would have been made in such year if this sec-
tion had not been enacted by reducing the 
amount of applicable payments in each State 
that the Secretary determines has— 
‘‘(i) a State average per beneficiary 
amount for a year that is greater than the 
national average per beneficiary amount 
for such year; and 
‘‘(ii) healthy outcome measurements 
or quality care measurements that indicate 
that a reduction in applicable payments 
would encourage more efficient use of, and 
reduce overuse of, items and services for 
which payment is made under this title. 
‘‘(B) LIMITATION.—The Secretary shall 
not reduce applicable payments under subpara-
graph (A) to a State that— 
‘‘(i) has a State average per bene-
ficiary amount for a year that is greater 
than the national average per beneficiary 
amount for such year; and 
‘‘(ii) has healthy outcome measure-
ments or quality care measurements that 
indicate that the applicable payments are 
being used to improve the access of bene-
ficiaries to quality care.
‘‘(3) DETERMINATION OF AVERAGES.— 
‘‘(A) STATE AVERAGE PER BENEFICIARY 
AMOUNT.—Each year (beginning in 2005), the 
Secretary shall determine a State average per 
beneficiary amount for each State which shall 
be equal to the Secretary’s estimate of the aver-
age amount of expenditures under the original 
medicare fee-for-service program under parts A 
and B for the year for a beneficiary enrolled 
under such parts that resides in the State. 
‘‘(B) NATIONAL
AVERAGE
PER
BENE-
FICIARY
AMOUNT.—Each year (beginning in 
2005), the Secretary shall determine the na-
tional average per beneficiary amount which 
shall be equal to the average of the State aver-
age per beneficiary amount determined under 
subparagraph (A) for the year. 
‘‘(4) DEFINITIONS.—In this section: 
‘‘(A) APPLICABLE PAYMENTS.—The term 
‘applicable payments’ means payments made to 
entities and individuals for items and services 
provided under the original medicare fee-for- 
service program under parts A and B to bene-
ficiaries enrolled under such parts that reside in 
the State.
‘‘(B) STATE.—The term ‘State’ has the 
meaning given such term in section 210(h). 
‘‘(c) BENEFICIARIES HELD HARMLESS.—The provi-
sions of this section shall not affect— 
‘‘(1) the entitlement to items and services of a 
beneficiary under this title, including the scope of 
such items and services; or 
‘‘(2) any liability of the beneficiary with respect 
to such items and services. 
‘‘(d) REGULATIONS.— 
‘‘(1) IN GENERAL.—The Secretary, in consulta-
tion with the Medicare Payment Advisory Commis-
sion, shall promulgate regulations to carry out this 
section. 
‘‘(2) PROTECTING
RURAL
COMMUNITIES.—In 
promulgating the regulations pursuant to paragraph 
(1), the Secretary shall give special consideration to 
rural areas.’’. 
SEC. 4. MEDPAC RECOMMENDATIONS ON HEALTHY OUT-
COMES AND QUALITY CARE. 
(a) RECOMMENDATIONS.—The Medicare Payment 
Advisory Commission established under section 1805 of 
the Social Security Act (42 U.S.C. 1395b–6) shall develop 
recommendations on policies and practices that, if imple-
mented, would encourage—
(1) healthy outcomes and quality care under the 
medicare program in States with respect to which 
payments are reduced under section 1897(b)(2) of 
such Act (as added by section 3); and 
(2) the efficient use of payments made under 
the medicare program in such States. 
(b) SUBMISSION.—Not later than the date that is 9 
months after the date of enactment of this Act, the Com-
mission shall submit to Congress the recommendations de-
veloped under subsection (a). 
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