I
107TH CONGRESS
2D SESSION
H. R. 4987
To amend title XVIII of the Social Security Act to improve payments for
home health services and for direct graduate medical education, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 21, 2002
Mr. TAUZIN 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 juris-
diction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to improve
payments for home health services and for direct grad-
uate medical education, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
TITLE VI—PROVISIONS
RELATING TO PARTS A AND B
Subtitle A—Home Health Services
SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN
PAYMENT RATES UNDER THE PROSPECTIVE
PAYMENT SYSTEM.
(a) IN GENERAL.—Section 1895(b)(3)(A) (42 U.S.C.
1395fff(b)(3)(A)) is amended to read as follows:
‘‘(A) INITIAL BASIS.—Under such system
the Secretary shall provide for computation of
a standard prospective payment amount (or
amounts) as follows:
‘‘(i) Such amount (or amounts) shall
initially be based on the most current au-
dited cost report data available to the Sec-
retary and shall be computed in a manner
so that the total amounts payable under
the system for fiscal year 2001 shall be
equal to the total amount that would have
been made if the system had not been in
effect and if section 1861(v)(1)(L)(ix) had
not been enacted.
‘‘(ii) For fiscal year 2002 and for the
first quarter of fiscal year 2003, such
amount (or amounts) shall be equal to the
amount (or amounts) determined under
this paragraph for the previous fiscal year,
updated under subparagraph (B).
‘‘(iii) For 2003, such amount (or
amounts) shall be equal to the amount (or
amounts) determined under this paragraph
for fiscal year 2002, updated under sub-
paragraph (B) for 2003.
‘‘(iv) For 2004 and each subsequent
year, such amount (or amounts) shall be
equal to the amount (or amounts) deter-
mined under this paragraph for the pre-
vious year, updated under subparagraph
(B).
Each such amount shall be standardized in a
manner that eliminates the effect of variations
in relative case mix and area wage adjustments
among different home health agencies in a
budget neutral manner consistent with the case
mix and wage level adjustments provided under
paragraph (4)(A). Under the system, the Sec-
retary may recognize regional differences or dif-
ferences based upon whether or not the services
or agency are in an urbanized area.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 501 of the Medicare, Med-
icaid, and SCHIP Benefits Improvement and Protection
Act of 2000 (as enacted into law by section 1(a)(6) of
Public Law 106–554).
SEC. 602. UPDATE IN HOME HEALTH SERVICES.
(a) CHANGE TO CALENDAR YEAR UPDATE.—
(1) IN GENERAL.—Section 1895(b) (42 U.S.C.
1395fff(b)(3)) is amended—
(A) in paragraph (3)(B)(i)—
(i) by striking ‘‘each fiscal year (be-
ginning with fiscal year 2002)’’ and insert-
ing ‘‘fiscal year 2002 and for each subse-
quent year (beginning with 2003)’’; and
(ii) by inserting ‘‘or year’’ after ‘‘the
fiscal year’’;
(B) in paragraph (3)(B)(ii)—
(i) in subclause (II), by striking ‘‘fis-
cal year’’ and inserting ‘‘year’’ and by re-
designating such subclause as subclause
(III); and
(ii) in subclause (I), by striking ‘‘each
of fiscal years 2002 and 2003’’ and insert-
ing the following: ‘‘fiscal year 2002, the
home health market basket percentage in-
crease (as defined in clause (iii)) minus 1.1
percentage points;
‘‘(II) 2003’’;
(C) in paragraph (3)(B)(iii), by inserting
‘‘or year’’ after ‘‘fiscal year’’ each place it ap-
pears;
(D) in paragraph (3)(B)(iv)—
(i) by inserting ‘‘or year’’ after ‘‘fiscal
year’’ each place it appears; and
(ii) by inserting ‘‘or years’’ after ‘‘fis-
cal years’’; and
(E) in paragraph (5), by inserting ‘‘or
year’’ after ‘‘fiscal year’’.
(2) TRANSITION RULE.—The standard prospec-
tive payment amount (or amounts) under section
1895(b)(3) of the Social Security Act for the cal-
endar quarter beginning on October 1, 2002, shall
be such amount (or amounts) for the previous cal-
endar quarter.
(b) CHANGES IN UPDATES FOR 2003, 2004, AND
2005.—Section 
1895(b)(3)(B)(ii) 
(42 
U.S.C.
1395fff(b)(3)(B)(ii)), as amended by subsection (a)(1)(B),
is amended—
(1) in subclause (II), by striking ‘‘the home
health market basket percentage increase (as defined
in clause (iii)) minus 1.1 percentage points’’ and in-
serting ‘‘2.0 percentage points’’;
(2) by striking ‘‘or’’ at the end of subclause
(II);
(3) by redesignating subclause (III) as sub-
clause (V); and
(4) by inserting after subclause (II) the fol-
lowing new subclause:
‘‘(III) 
2004, 
1.1 
percentage
points;
‘‘(IV) 
2005, 
2.7 
percentage
points; or’’.
(c) PAYMENT ADJUSTMENT.—
(1) IN
GENERAL.—Section 1895(b)(5) (42
U.S.C. 1395fff(b)(5)) is amended ‘‘5 percent’’ and
inserting ‘‘3 percent’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to years beginning with
2003.
SEC. 603. OASIS TASK FORCE; SUSPENSION OF CERTAIN
OASIS DATA COLLECTION REQUIREMENTS
PENDING TASK FORCE SUBMITTAL OF RE-
PORT.
(a) ESTABLISHMENT.—The Secretary of Health and
Human Services shall establish and appoint a task force
(to be known as the ‘‘OASIS Task Force’’) to examine
the data collection and reporting requirements under
OASIS. For purposes of this section, the term ‘‘OASIS’’
means the Outcome and Assessment Information Set re-
quired by reason of section 4602(e) of Balanced Budget
Act of 1997 (42 U.S.C. 1395fff note).
(b) COMPOSITION.—The OASIS Task Force shall be
composed of the following:
(1) Staff of the Centers for Medicare & Med-
icaid Services with expertise in post-acute care.
(2) Representatives of home health agencies.
(3) Health care professionals and research and
health care quality experts outside the Federal Gov-
ernment with expertise in post-acute care.
(4) Advocates for individuals requiring home
health services.
(c) DUTIES.—
(1) REVIEW
AND
RECOMMENDATIONS.—The
OASIS Task Force shall review and make rec-
ommendations to the Secretary regarding changes in
OASIS to improve and simplify data collection for
purposes of—
(A) assessing the quality of home health
services; and
(B) providing consistency in classification
of patients into home health resource groups
(HHRGs) for payment under section 1895 of
the Social Security Act (42 U.S.C. 1395fff).
(2) SPECIFIC ITEMS.—In conducting the review
under paragraph (1), the OASIS Task Force shall
specifically examine—
(A) the 41 outcome measures currently in
use;
(B) the timing and frequency of data col-
lection; and
(C) the collection of information on
comorbidities and clinical indicators.
(3) REPORT.—The OASIS Task Force shall
submit a report to the Secretary containing its find-
ings and recommendations for changes in OASIS by
not later than 18 months after the date of the enact-
ment of this Act.
(d) SUNSET.—The OASIS Task Force shall termi-
nate 60 days after the date on which the report is sub-
mitted under subsection (c)(2).
(e) NONAPPLICATION OF FACA.—The provisions of
the Federal Advisory Committee Act shall not apply to
the OASIS Task Force.
(f) SUSPENSION OF OASIS REQUIREMENT FOR COL-
LECTION OF DATA ON NON-MEDICARE AND NON-MED-
ICAID PATIENTS PENDING TASK FORCE REPORT.—
(1) IN GENERAL.—During the period described
in paragraph (2), the Secretary of Health and
Human Services may not require, under section
4602(e) of the Balanced Budget Act of 1997 or oth-
erwise under OASIS, a home health agency to gath-
er or submit information that relates to an indi-
vidual who is not eligible for benefits under either
title XVIII or title XIX of the Social Security Act.
(2) PERIOD OF SUSPENSION.—The period de-
scribed in this paragraph—
(A) begins on January 1, 2003, and
(B) ends on the last day of the 2nd month
beginning after the date the report is submitted
under subsection (c)(2).
SEC. 604. MEDPAC STUDY ON MEDICARE MARGINS OF
HOME HEALTH AGENCIES.
(a) STUDY.—The Medicare Payment Advisory Com-
mission shall conduct a study of payment margins of home
health agencies under the home health prospective pay-
ment system under section 1895 of the Social Security Act
(42 U.S.C. 1395fff). Such study shall examine whether
systematic differences in payment margins are related to
differences in case mix (as measured by home health re-
source groups (HHRGs)) among such agencies. The study
shall use the partial or full-year cost reports filed by home
health agencies.
(b) REPORT.—Not later than 2 years after the date
of the enactment of this Act, the Commission shall submit
to Congress a report on the study under subsection (a).
SEC. 605. REVIEW OF APPLICATION OF ABSENCE OF INFRE-
QUENT OR SHORT DURATION IN ESTAB-
LISHING HOME CONFINEMENT FOR PUR-
POSES OF ELIGIBILITY FOR HOME HEALTH
SERVICES.
(a) REVIEW.—The Secretary shall review the stand-
ards used, by fiscal intermediaries in paying for home
health services under title XVIII of the Social Security
Act, in allowing infrequent or short duration absences
from the home (described in the penultimate sentence of
section 1835(a) of the Social Security Act) for individuals
eligible to receive home health services under such title.
In conducting such review, the Secretary shall specifically
examine how the infrequent or short duration absence pro-
vision applies to individuals who have, under the home
health plan of care established by the individual’s treating
physician, permanent and severe disabilities that require
technological assistance or the assistance of another per-
son, or both, to leave such individual’s home, and where
such condition is expected to persist for at least a year,
and who continue to receive home health services covered
under such title.
(b) REPORT.—Not later than 6 months after the date
of the enactment of this Act, the Secretary shall report
to Congress on the review conducted under subsection (a)
and shall include in the report such findings and rec-
ommendations for changes in guidance or regulations re-
specting the treatment of infrequent or short duration ab-
sences as the Secretary determines to be appropriate.
Subtitle B—Direct Graduate
Medical Education
SEC. 611. EXTENSION OF UPDATE LIMITATION ON HIGH
COST PROGRAMS.
Section 
1886(h)(2)(D)(iv) 
(42 
U.S.C.
1395ww(h)(2)(D)(iv)) is amended—
(1) in subclause (I)—
(A) by striking ‘‘AND 2002’’ and inserting
‘‘THROUGH 2012’’;
(B) by striking ‘‘during fiscal year 2001 or
fiscal year 2002’’ and inserting ‘‘during the pe-
riod beginning with fiscal year 2001 and ending
with fiscal year 2012’’; and
(C) by striking ‘‘subject to subclause
(III),’’;
(2) by striking subclause (II); and
(3) in subclause (III)—
(A) by redesignating such subclause as
subclause (II); and
(B) by striking ‘‘or (II)’’.
SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSI-
TIONS.
(a) IN GENERAL.—Section 1886(h)(4) (42 U.S.C.
1395ww(h)(4)) is amended—
(1) in subparagraph (F), by inserting ‘‘subject
to subparagraph (I),’’ after ‘‘October 1, 1997,’’;
(2) in subparagraph (H), by inserting ‘‘subject
to subparagraph (I),’’ after ‘‘subparagraphs (F) and
(G),’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(I) REDISTRIBUTION
OF
UNUSED
RESI-
DENT POSITIONS.—
‘‘(i) REDUCTION IN LIMIT BASED ON
UNUSED POSITIONS.—
‘‘(I) IN
GENERAL.—If a hos-
pital’s resident level (as defined in
clause (iii)(I)) is less than the other-
wise applicable resident limit (as de-
fined in clause (iii)(II)) for each of
the reference periods (as defined in
subclause (II)), effective for cost re-
porting periods beginning on or after
January 1, 2003, the otherwise appli-
cable resident limit shall be reduced
by 75 percent of the difference be-
tween such limit and the reference
resident level specified in subclause
(III) (or subclause (IV) if applicable).
‘‘(II) REFERENCE PERIODS DE-
FINED.—In this clause, the term ‘ref-
erence periods’ means, for a hospital,
the 3 most recent consecutive cost re-
porting periods of the hospital for
which cost reports have been settled
(or, if not, submitted) on or before
September 30, 2001.
‘‘(III) 
REFERENCE
RESIDENT
LEVEL.—Subject to subclause (IV),
the reference resident level specified in
this subclause for a hospital is the
highest resident level for the hospital
during any of the reference periods.
‘‘(IV) ADJUSTMENT PROCESS.—
Upon the timely request of a hospital,
the Secretary may adjust the ref-
erence resident level for a hospital to
be the resident level for the hospital
for the cost reporting period that in-
cludes July 1, 2002.
‘‘(ii) REDISTRIBUTION.—
‘‘(I) IN
GENERAL.—The Sec-
retary is authorized to increase the
otherwise applicable resident limits for
hospitals by an aggregate number es-
timated by the Secretary that does
not exceed the aggregate reduction in
such limits attributable to clause (i)
(without taking into account any ad-
justment under subclause (IV) of such
clause).
‘‘(II) EFFECTIVE DATE.—No in-
crease under subclause (I) shall be
permitted or taken into account for a
hospital for any portion of a cost re-
porting period that occurs before July
1, 2003, or before the date of the hos-
pital’s application for an increase
under this clause. No such increase
shall be permitted for a hospital un-
less the hospital has applied to the
Secretary for such increase by Decem-
ber 31, 2004.
‘‘(III) CONSIDERATIONS
IN
RE-
DISTRIBUTION.—In determining for
which hospitals the increase in the
otherwise applicable resident limit is
provided under subclause (I), the Sec-
retary shall take into account the
need for such an increase by specialty
and location involved, consistent with
subclause (IV).
‘‘(IV) PRIORITY FOR RURAL AND
SMALL
URBAN
AREAS.—In 
deter-
mining for which hospitals and resi-
dency training programs an increase
in the otherwise applicable resident
limit is provided under subclause (I),
the Secretary shall first distribute the
increase to programs of hospitals lo-
cated in rural areas or in urban areas
that are not large urban areas (as de-
fined for purposes of subsection (d))
on a first-come-first-served basis (as
determined by the Secretary) based on
a demonstration that the hospital will
fill the positions made available under
this clause and not to exceed an in-
crease of 25 full-time equivalent posi-
tions with respect to any hospital.
‘‘(V) APPLICATION OF LOCALITY
ADJUSTED
NATIONAL
AVERAGE
PER
RESIDENT AMOUNT.—With respect to
additional residency positions in a
hospital attributable to the increase
provided under this clause, notwith-
standing any other provision of this
subsection, the approved FTE resi-
dent amount is deemed to be equal to
the locality adjusted national average
per resident amount computed under
subparagraph (E) for that hospital.
‘‘(VI) CONSTRUCTION.—Nothing
in this clause shall be construed as
permitting the redistribution of reduc-
tions in residency positions attrib-
utable to voluntary reduction pro-
grams under paragraph (6) or as af-
fecting the ability of a hospital to es-
tablish new medical residency training
programs under subparagraph (H).
‘‘(iii) RESIDENT
LEVEL
AND
LIMIT
DEFINED.—In this subparagraph:
‘‘(I) 
RESIDENT
LEVEL.—The
term ‘resident level’ means, with re-
spect to a hospital, the total number
of full-time equivalent residents, be-
fore the application of weighting fac-
tors (as determined under this para-
graph), in the fields of allopathic and
osteopathic medicine for the hospital.
‘‘(II) OTHERWISE
APPLICABLE
RESIDENT
LIMIT.—The term ‘other-
wise applicable resident limit’ means,
with respect to a hospital, the limit
otherwise applicable under subpara-
graphs (F)(i) and (H) on the resident
level for the hospital determined with-
out regard to this subparagraph.’’.
(b) NO APPLICATION OF INCREASE TO IME.—Sec-
tion 1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)) is
amended by adding at the end the following: ‘‘The provi-
sions of clause (i) of subparagraph (I) of subsection (h)(4)
shall apply with respect to the first sentence of this clause
in the same manner as it applies with respect to subpara-
graph (F) of such subsection, but the provisions of clause
(ii) of such subparagraph shall not apply.’’.
(c) REPORT
ON
EXTENSION
OF
APPLICATIONS
UNDER REDISTRIBUTION PROGRAM.—Not later than July
1, 2004, the Secretary shall submit to Congress a report
containing recommendations regarding whether to extend
the deadline for applications for an increase in resident
limits under section 1886(h)(4)(I)(ii)(II) of the Social Se-
curity Act (as added by subsection (a)).
Subtitle C—Other Provisions
SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVI-
SORY COMMISSION (MEDPAC).
(a) EXAMINATION OF BUDGET CONSEQUENCES.—
Section 1805(b) (42 U.S.C. 1395b–6(b)) is amended by
adding at the end the following new paragraph:
‘‘(8) 
EXAMINATION
OF
BUDGET
CON-
SEQUENCES.—Before making any recommendations,
the Commission shall examine the budget con-
sequences of such recommendations, directly or
through consultation with appropriate expert enti-
ties.’’.
(b) CONSIDERATION OF EFFICIENT PROVISION OF
SERVICES.—Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b–
6(b)(2)(B)(i)) is amended by inserting ‘‘the efficient provi-
sion of’’ after ‘‘expenditures for’’.
(c) ADDITIONAL REPORTS.—
(1) DATA NEEDS AND SOURCES.—The Medicare
Payment Advisory Commission shall conduct a
study, and submit a report to Congress by not later
than June 1, 2003, on the need for current data,
and sources of current data available, to determine
the solvency and financial circumstances of hospitals
and other medicare providers of services.
(2) USE
OF
TAX-RELATED
RETURNS.—Using
return information provided under Form 990 of the
Internal Revenue Service, the Commission shall sub-
mit to Congress, by not later than June 1, 2003, a
report on the following:
(A) Investments and capital financing of
hospitals participating under the medicare pro-
gram and related foundations.
(B) Access to capital financing for private
and for not-for-profit hospitals.
SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MAN-
AGEMENT FOR CERTAIN MEDICARE BENE-
FICIARIES WITH DIABETES.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall conduct a demonstration project
under this section (in this section referred to as the
‘‘project’’) to demonstrate the impact on costs and health
outcomes of applying disease management to certain medi-
care beneficiaries with diagnosed diabetes. In no case may
the number of participants in the project exceed 30,000
at any time.
(b) VOLUNTARY PARTICIPATION.—
(1) ELIGIBILITY.—Medicare beneficiaries are
eligible to participate in the project only if—
(A) they are Hispanic, as determined by
the Secretary;
(B) they meet specific medical criteria
demonstrating the appropriate diagnosis and
the advanced nature of their disease;
(C) their physicians approve of participa-
tion in the project; and
(D) 
they 
are 
not 
enrolled 
in 
a
Medicare+Choice plan.
(2) BENEFITS.—A medicare beneficiary who is
enrolled in the project shall be eligible—
(A) for disease management services re-
lated to their diabetes; and
(B) for payment for all costs for prescrip-
tion drugs without regard to whether or not
they relate to the diabetes, except that the
project may provide for modest cost-sharing
with respect to prescription drug coverage.
(c) CONTRACTS WITH DISEASE MANAGEMENT ORGA-
NIZATIONS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall carry out the project through
contracts with up to three disease management orga-
nizations. The Secretary shall not enter into such a
contract with an organization unless the organiza-
tion demonstrates that it can produce improved
health outcomes and reduce aggregate medicare ex-
penditures consistent with paragraph (2).
(2) 
CONTRACT
PROVISIONS.—Under 
such
contracts—
(A) such an organization shall be required
to provide for prescription drug coverage de-
scribed in subsection (b)(2)(B);
(B) such an organization shall be paid a
fee negotiated and established by the Secretary
in a manner so that (taking into account sav-
ings in expenditures under parts A and B of
the medicare program under title XVIII of the
Social Security Act) there will be no net in-
crease, and to the extent practicable, there will
be a net reduction in expenditures under the
medicare program as a result of the project;
and
(C) such an organization shall guarantee,
through an appropriate arrangement with a re-
insurance company or otherwise, the prohibition
on net increases in expenditures described in
subparagraph (B).
(3) PAYMENTS.—Payments to such organiza-
tions shall be made in appropriate proportion from
the Trust Funds established under title XVIII of the
Social Security Act.
(4) WORKING GROUP.—The Secretary shall es-
tablish within the Department of Health and
Human Services a working group consisting of em-
ployees of the Department to carry out the fol-
lowing:
(A) To oversee the project.
(B) To establish policy and criteria for
medicare disease management programs within
the Department, including the establishment of
policy and criteria for such programs.
(C) To identify targeted medical conditions
and targeted individuals.
(D) To select areas in which such pro-
grams are carried out.
(E) To monitor health outcomes under
such programs.
(F) To measure the effectiveness of such
programs in meeting any budget neutrality re-
quirements.
(G) Otherwise to serve as a central focal
point within the Department for dissemination
of information on medicare disease management
programs.
(d) APPLICATION
OF MEDIGAP PROTECTIONS
TO
DEMONSTRATION PROJECT ENROLLEES.—(1) Subject to
paragraph (2), the provisions of section 1882(s)(3) (other
than clauses (i) through (iv) of subparagraph (B)) and
1882(s)(4) of the Social Security Act shall apply to enroll-
ment (and termination of enrollment) in the demonstra-
tion project under this section, in the same manner as they
apply to enrollment (and termination of enrollment) with
a Medicare+Choice organization in a Medicare+Choice
plan.
(2) In applying paragraph (1)—
(A) any reference in clause (v) or (vi) of section
1882(s)(3)(B) of such Act to 12 months is deemed
a reference to the period of the demonstration
project; and
(B) the notification required under section
1882(s)(3)(D) of such Act shall be provided in a
manner specified by the Secretary of Health and
Human Services.
(e) DURATION.—The project shall last for not longer
than 3 years.
(f) WAIVER.—The Secretary of Health and Human
Services shall waive such provisions of title XVIII of the
Social Security Act as may be necessary to provide for
payment for services under the project in accordance with
subsection (c)(3).
(g) REPORT.—The Secretary of Health and Human
Services shall submit to Congress an interim report on the
project not later than 2 years after the date it is first im-
plemented and a final report on the project not later than
6 months after the date of its completion. Such reports
shall include information on the impact of the project on
costs and health outcomes and recommendations on the
cost-effectiveness of extending or expanding the project.
(h) GAO STUDY ON DISEASE MANAGEMENT PRO-
GRAMS.—The Comptroller General of the United States
shall conduct a study that compares disease management
programs under title XVIII of the Social Security Act with
such programs conducted in the private sector, including
the prevalence of such programs and programs for case
management. The study shall identify the cost-effective-
ness of such programs and any savings achieved by such
programs. The Comptroller General shall submit a report
on such study to Congress by not later than 18 months
after the date of the enactment of this Act.
SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT
DAY CARE SERVICES.
(a) ESTABLISHMENT.—Subject to the succeeding
provisions of this section, the Secretary of Health and
Human Services shall establish a demonstration project
(in this section referred to as the ‘‘demonstration project’’)
under which the Secretary shall, as part of a plan of an
episode of care for home health services established for
a medicare beneficiary, permit a home health agency, di-
rectly or under arrangements with a medical adult day
care facility, to provide medical adult day care services as
a substitute for a portion of home health services that
would otherwise be provided in the beneficiary’s home.
(b) PAYMENT.—
(1) IN GENERAL.—The amount of payment for
an episode of care for home health services, a por-
tion of which consists of substitute medical adult
day care services, under the demonstration project
shall be made at a rate equal to 95 percent of the
amount that would otherwise apply for such home
health services under section 1895 of the Social Se-
curity Act (42 U.S.C. 1395fff). In no case may a
home health agency, or a medical adult day care fa-
cility under arrangements with a home health agen-
cy, separately charge a beneficiary for medical adult
day care services furnished under the plan of care.
(2) BUDGET
NEUTRALITY
FOR
DEMONSTRA-
TION PROJECT.—Notwithstanding any other provi-
sion of law, the Secretary shall provide for an appro-
priate reduction in the aggregate amount of addi-
tional payments made under section 1895 of the So-
cial Security Act (42 U.S.C. 1395fff) to reflect any
increase in amounts expended from the Trust Funds
as a result of the demonstration project conducted
under this section.
(c) DEMONSTRATION PROJECT SITES.—The project
established under this section shall be conducted in not
more than 5 sites in States selected by the Secretary that
license or certify providers of services that furnish medical
adult day care services.
(d) DURATION.—The Secretary shall conduct the
demonstration project for a period of 3 years.
(e) VOLUNTARY PARTICIPATION.—Participation of
medicare beneficiaries in the demonstration project shall
be voluntary. The total number of such beneficiaries that
may participate in the project at any given time may not
exceed 15,000.
(f) PREFERENCE IN SELECTING AGENCIES.—In se-
lecting home health agencies to participate under the dem-
onstration project, the Secretary shall give preference to
those agencies that—
(1) are currently licensed or certified to furnish
medical adult day care services; and
(2) have furnished medical adult day care serv-
ices to medicare beneficiaries for a continuous 2-year
period before the beginning of the demonstration
project.
(g) WAIVER AUTHORITY.—The Secretary may waive
such requirements of title XVIII of the Social Security Act
as may be necessary for the purposes of carrying out the
demonstration project, other than waiving the requirement
that an individual be homebound in order to be eligible
for benefits for home health services.
(h) EVALUATION AND REPORT.—The Secretary shall
conduct an evaluation of the clinical and cost effectiveness
of the demonstration project. Not later than 30 months
after the commencement of the project, the Secretary shall
submit to Congress a report on the evaluation, and shall
include in the report the following:
(1) An analysis of the patient outcomes and
costs of furnishing care to the medicare beneficiaries
participating in the project as compared to such out-
comes and costs to beneficiaries receiving only home
health services for the same health conditions.
(2) Such recommendations regarding the exten-
sion, expansion, or termination of the project as the
Secretary determines appropriate.
(i) DEFINITIONS.—In this section:
(1) HOME HEALTH AGENCY.—The term ‘‘home
health agency’’ has the meaning given such term in
section 1861(o) of the Social Security Act (42
U.S.C. 1395x(o)).
(2) MEDICAL ADULT DAY CARE FACILITY.—The
term ‘‘medical adult day care facility’’ means a facil-
ity that—
(A) has been licensed or certified by a
State to furnish medical adult day care services
in the State for a continuous 2-year period;
(B) is engaged in providing skilled nursing
services and other therapeutic services directly
or under arrangement with a home health agen-
cy;
(C) meets such standards established by
the Secretary to assure quality of care and such
other requirements as the Secretary finds nec-
essary in the interest of the health and safety
of individuals who are furnished services in the
facility; and
(D) provides medical adult day care serv-
ices.
(3) MEDICAL
ADULT
DAY
CARE
SERVICES.—
The term ‘‘medical adult day care services’’ means—
(A) home health service items and services
described in paragraphs (1) through (7) of sec-
tion 1861(m) furnished in a medical adult day
care facility;
(B) a program of supervised activities fur-
nished in a group setting in the facility that—
(i) meet such criteria as the Secretary
determines appropriate; and
(ii) is designed to promote physical
and mental health of the individuals; and
(C) such other services as the Secretary
may specify.
(4) 
MEDICARE
BENEFICIARY.—The 
term
‘‘medicare beneficiary’’ means an individual entitled
to benefits under part A of this title, enrolled under
part B of this title, or both.
Æ