I
104TH CONGRESS
1ST SESSION
H. R. 2486
To amend title XVIII of the Social Security Act to preserve and reform
the medicare program.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 17, 1995
Mr. PETERSON of Minnesota introduced the following bill; which was referred
to the Committee on Ways and Means, and in addition to the Committees
on Commerce, the Judiciary, and Rules, for a period to be subsequently
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to preserve
and reform the medicare program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
TITLE XV—MEDICARE
SEC. 15000. SHORT TITLE; REFERENCES IN TITLE; TABLE
OF CONTENTS.
(a) SHORT TITLE OF TITLE.—This title may be cited
as the ‘‘Medicare Preservation Act of 1995’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence shall be considered to be made to that section or
other provision of the Social Security Act.
(c) REFERENCES TO OBRA.—In this title, the terms
‘‘OBRA–1986’’, 
‘‘OBRA–1987’’, 
‘‘OBRA–1989’’,
‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus
Budget Reconciliation Act of 1986 (Public Law 99–509),
the Omnibus Budget Reconciliation Act of 1987 (Public
Law 100–203), the Omnibus Budget Reconciliation Act
of 1989 (Public Law 101–239), the Omnibus Budget Rec-
onciliation Act of 1990 (Public Law 101–508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law
103–66), respectively.
(c) TABLE OF CONTENTS.—The table of contents of
this title is as follows:
TITLE VIII—MEDICARE
Sec. 15000. Short title; references in title; table of contents.
Subtitle A—Medicare Choice Program
PART 1—INCREASING CHOICE UNDER THE MEDICARE PROGRAM
Sec. 15001. Increasing choice under Medicare.
Sec. 15002. Medicare Choice Program.
‘‘PART C—PROVISIONS RELATING TO MEDICARE CHOICE
‘‘Sec. 1851. Requirements for Medicare Choice organizations.
‘‘Sec. 1852. Requirements relating to benefits, provision of services, enroll-
ment, and premiums.
‘‘Sec. 1853. Patient protection standards.
‘‘Sec. 1854. Provider-sponsored organizations.
‘‘Sec. 1855. Payments to Medicare choice organizations.
‘‘Sec. 1856. Establishment of standards for Medicare choice organizations
and products.
‘‘Sec. 1857. Medicare choice certification.
‘‘Sec. 1858. Contracts with Medicare Choice organizations.
‘‘Sec. 1859. Demonstration project for high deductible/medisave products.
Sec. 15003. Reports.
Sec. 15004. Transitional rules for current Medicare HMO program.
PART 2—SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS
ACCOUNTS
Sec. 15011. Medicare Choice MSA’s.
Sec. 15012. Certain rebates excluded from gross income.
PART 3—SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS
Sec. 15021. Application of antitrust rule of reason to provider service networks.
PART 4—COMMISSIONS
Sec. 15031. Medicare payment review commission.
Sec. 15032. Commission on the Effect of the Baby Boom Generation on the
Medicare Program.
PART 5—PREEMPTION OF STATE ANTI-MANAGED CARE LAWS
Sec. 15041. Preemption of State law restrictions on managed care arrange-
ments.
Sec. 15042. Preemption of State laws restricting utilization review programs.
Subtitle B—Provisions Relating to Regulatory Relief
PART 1—PROVISIONS RELATING TO PHYSICIAN FINANCIAL RELATIONSHIPS
Sec. 15101. Repeal of prohibitions based on compensation arrangements.
Sec. 15102. Revision of designated health services subject to prohibition.
Sec. 15103. Delay in implementation until promulgation of regulations.
Sec. 15104. Exceptions to prohibition.
Sec. 15105. Repeal of reporting requirements.
Sec. 15106. Preemption of State law.
Sec. 15107. Effective date.
PART 2—ANTITRUST REFORM
Sec. 15111. Publication of antitrust guidelines on activities of health plans.
Sec. 15112. Issuance of health care certificates of public advantage.
Sec. 15113. Study of impact on competition.
Sec. 15114. Antitrust exemption.
Sec. 15115. Requirements.
Sec. 15116. Definitions.
PART 3—MALPRACTICE REFORM
SUBPART A—UNIFORM STANDARDS FOR MALPRACTICE CLAIMS
Sec. 15121. Applicability.
Sec. 15122. Requirement for initial resolution of action through alternative dis-
pute resolution.
Sec. 15123. Optional application of practice guidelines.
Sec. 15124. Treatment of noneconomic and punitive damages.
Sec. 15125. Periodic payments for future losses.
Sec. 15126. Treatment of attorney’s fees and other costs.
Sec. 15127. Uniform statute of limitations.
Sec. 15128. Special provision for certain obstetric services.
Sec. 15129. Jurisdiction of Federal courts.
Sec. 15130. Preemption.
SUBPART B—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION
(ADR) SYSTEMS
Sec. 15131. Basic requirements.
Sec. 15132. Certification of State systems; applicability of alternative Federal
system.
Sec. 15133. Reports on implementation and effectiveness of alternative dispute
resolution systems.
SUBPART C—DEFINITIONS
Sec. 15141. Definitions.
PART 4—PAYMENT AREAS FOR PHYSICIANS’ SERVICES UNDER MEDICARE
Sec. 15151. Modification of payment areas used to determine payments for
physicians’ services under medicare.
Subtitle C—Medicare Payments to Health Care Providers
PART 1—PROVISIONS AFFECTING ALL PROVIDERS
Sec. 15201. One-year freeze in payments to providers.
PART 2—PROVISIONS AFFECTING DOCTORS
Sec. 15211. Updating fees for physicians’ services.
Sec. 15212. Use of real GDP to adjust for volume and intensity.
PART 3—PROVISIONS AFFECTING HOSPITALS
Sec. 15221. Reduction in update for inpatient hospital services.
Sec. 15222. Elimination of formula-driven overpayments for certain outpatient
hospital services.
Sec. 15223. Establishment of prospective payment system for outpatient serv-
ices.
Sec. 15224. Reduction in medicare payments to hospitals for inpatient capital-
related costs.
Sec. 15225. Moratorium on PPS exemption for long-term care hospitals.
Sec. 15226. Elimination of certain additional payments for outlier cases.
PART 4—PROVISIONS AFFECTING OTHER PROVIDERS
Sec. 15231. Revision of payment methodology for home health services.
Sec. 15232. Limitation of home health coverage under part A.
Sec. 15233. Reduction in fee schedule for durable medical equipment.
Sec. 15234. Nursing home billing.
Sec. 15235. Freeze in payments for clinical diagnostic laboratory tests.
PART 5—GRADUATE MEDICAL EDUCATION AND TEACHING HOSPITALS
Sec. 15241. Teaching Hospital and Graduate Medical Education Trust Fund.
‘‘TITLE XXI—TEACHING HOSPITAL AND GRADUATE MEDICAL
EDUCATION TRUST FUND
‘‘PART A—ESTABLISHMENT OF FUND
‘‘Sec. 2101. Establishment of fund.
‘‘PART B—PAYMENTS TO TEACHING HOSPITALS
‘‘Sec. 2111. Formula payments to teaching hospitals.
Sec. 15242. Reduction in payment adjustments for indirect medical education.
Subtitle D—Provisions Relating to Medicare Beneficiaries
Sec. 15301. Extending medicare part B premium.
Sec. 15302. Relating medicare part B premium to income for certain high in-
come individuals.
Sec. 15303. Expanded coverage of preventive benefits.
Subtitle E—Medicare Fraud Reduction
Sec. 15401. Increasing beneficiary awareness of fraud and abuse.
Sec. 15402. Beneficiary incentives to report fraud and abuse.
Sec. 15403. Elimination of home health overpayments.
Sec. 15404. Skilled nursing facilities.
Sec. 15405. Direct spending for anti-fraud activities under medicare.
Sec. 15406. Fraud reduction demonstration project.
Sec. 15407. Report on competitive pricing.
Subtitle F—Improving Access to Health Care
PART 1—IMPROVING ACCESS TO HEALTH CARE IN RURAL AREAS
Sec. 15501. Community rural health network grants.
Sec. 15502. Provider incentives.
Sec. 15503. Modifications to the National Health Service Corps.
Sec. 15504. Creation of hospital-affiliated primary care centers.
Sec. 15505. Establishment of rural emergency access care hospitals.
Sec. 15506. Medical education.
Sec. 15507. Telemedicine payment methodology.
Sec. 15508. Demonstration project to increase choice in rural areas.
PART 2—MEDICARE SUBVENTION
Sec. 15511. Medicare program payments for health care services provided in
the military health services system.
Subtitle G—Other Provisions
Sec. 15601. Extension and expansion of existing secondary payer requirements.
Sec. 15602. Clarification of medicare coverage of items and services associated
with certain medical devices approved for investigational use.
Sec. 15603. Additional exclusion from coverage.
Subtitle H—Monitoring Achievement of Medicare Reform Goals
Sec. 15701. Establishment of budgetary and program goals.
Sec. 15702. Medicare Reform Commission.
Subtitle A Part 1
Subtitle I—Lock-Box Provisions for Medicare Part B Savings From Growth
Reductions
Sec. 15801. Establishment of Medicare Growth Reduction Trust Fund for part
B savings.
Subtitle A—Medicare Choice
Program
PART 1—INCREASING CHOICE UNDER THE
MEDICARE PROGRAM
SEC. 15001. INCREASING CHOICE UNDER MEDICARE.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1804 the following new section:
‘‘PROVIDING FOR CHOICE OF COVERAGE
‘‘SEC. 1805. (a) CHOICE OF COVERAGE.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, every individual who is entitled to bene-
fits under part A and enrolled under part B shall
elect to receive benefits under this title through one
of the following:
‘‘(A) THROUGH
FEE-FOR-SERVICE
SYS-
TEM.—Through the provisions of parts A and
B.
‘‘(B) THROUGH
A
MEDICARE
CHOICE
PRODUCT.—Through a Medicare Choice prod-
uct (as defined in paragraph (2)), which may
be—
‘‘(i) a product offered by a provider-
sponsored organization,
Subtitle A Part 1
‘‘(ii) a product offered by an organiza-
tion that is a union, Taft-Hartley plan, or
association, or
‘‘(iii) a product providing for benefits
on a fee-for-service or other basis.
Such a product may be a high deductible/
medisave product (and a contribution into a
Medicare 
Choice 
medical 
savings 
account
(MSA)) under the demonstration project pro-
vided under section 1859.
‘‘(2) MEDICARE CHOICE PRODUCT DEFINED.—
For purposes this section and part C, the term
‘Medicare Choice product’ means health benefits cov-
erage offered under a policy, contract, or plan by a
Medicare Choice organization (as defined in section
1851(a)) pursuant to and in accordance with a con-
tract under section 1858.
‘‘(3) TERMINOLOGY RELATING TO OPTIONS.—
For purposes of this section and part C—
‘‘(A) NON-MEDICARE-CHOICE OPTION.—An
individual who has made the election described
in paragraph (1)(A) is considered to have elect-
ed the ‘Non-Medicare Choice option’.
‘‘(B) MEDICARE CHOICE OPTION.—An in-
dividual who has made the election described in
Subtitle A Part 1
paragraph (1)(B) to obtain coverage through a
Medicare Choice product is considered to have
elected the ‘Medicare Choice option’ for that
product.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE
REQUIREMENT.—Except as
the Secretary may otherwise provide, an individual is
eligible to elect a Medicare Choice product offered by
a Medicare Choice organization only if the organiza-
tion in relation to the product serves the geographic
area in which the individual resides.
‘‘(2) AFFILIATION
REQUIREMENTS
FOR
CER-
TAIN PRODUCTS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), an individual is eligible to elect a
Medicare Choice product offered by a limited
enrollment Medicare Choice organization (as de-
fined in section 1852(c)(4)(D)) only if—
‘‘(i) the individual is eligible under
section 1852(c)(4) to make such election,
and
‘‘(ii) in the case of a Medicare Choice
organization that is a union sponsor or
Taft-Hartley sponsor (as defined in section
1852(c)(4)), the individual elected under
Subtitle A Part 1
this section a Medicare Choice product of-
fered by the sponsor during the first en-
rollment period in which the individual was
eligible to make such election with respect
to such sponsor.
‘‘(B) 
NO
REELECTION
AFTER
DISENROLLMENT
FOR
CERTAIN
PRODUCTS.—
An individual is not eligible to elect a Medicare
Choice product offered by a Medicare Choice
organization that is a union sponsor or Taft-
Hartley sponsor if the individual previously had
elected a Medicare Choice product offered by
the organization and had subsequently discon-
tinued to elect such a product offered by the or-
ganization.
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process through which elections described in
subsection (a) are made and changed, including the
form and manner in which such elections are made
and changed. Such elections shall be made or
changed only during coverage election periods speci-
fied under subsection (e) and shall become effective
as provided in subsection (f).
Subtitle A Part 1
‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec-
retary shall establish the process of electing coverage
under this section during the transition period (as
defined in subsection (e)(1)(B)) in such an expedited
manner as will permit such an election for Medicare
Choice products in an area as soon as such products
become available in that area.
‘‘(3) 
COORDINATION
THROUGH
MEDICARE
CHOICE ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a Med-
icare Choice product offered by a Medicare
Choice organization to make such election
through the filing of an appropriate election
form with the organization.
‘‘(B) 
DISENROLLMENT.—Such 
process
shall permit an individual, who has elected a
Medicare Choice product offered by a Medicare
Choice organization and who wishes to termi-
nate such election, to terminate such election
through the filing of an appropriate election
form with the organization.
‘‘(4) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
Subtitle A Part 1
‘‘(i) IN GENERAL.—Subject to clause
(ii), an individual who fails to make an
election during an initial election period
under subsection (e)(1) is deemed to have
chosen the Non-Medicare Choice option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary shall establish
procedures under which individuals who
are enrolled with a Medicare Choice orga-
nization at the time of the initial election
period and who fail to elect to receive cov-
erage other than through the organization
are deemed to have elected an appropriate
Medicare Choice product offered by the or-
ganization.
‘‘(B) CONTINUING PERIODS.—An individ-
ual who has made (or deemed to have made) an
election under this section is considered to have
continued to make such election until such time
as—
‘‘(i) the individual changes the elec-
tion under this section, or
‘‘(ii) a Medicare Choice product is dis-
continued, if the individual had elected
Subtitle A Part 1
such product at the time of the discontinu-
ation.
‘‘(5) AGREEMENTS WITH COMMISSIONER OF SO-
CIAL SECURITY TO PROMOTE EFFICIENT ADMINIS-
TRATION.—In order to promote the efficient admin-
istration of this section and the Medicare Choice
program under part C, the Secretary may enter into
an agreement with the Commissioner of Social Secu-
rity under which the Commissioner performs admin-
istrative responsibilities relating to enrollment and
disenrollment in Medicare Choice products under
this section.
‘‘(d) PROVISION OF BENEFICIARY INFORMATION TO
PROMOTE INFORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to disseminate
broadly information to medicare beneficiaries (and
prospective medicare beneficiaries) on the coverage
options provided under this section in order to pro-
mote an active, informed selection among such op-
tions. Such information shall be made available on
such a timely basis (such as 6 months before the
date an individual would first attain eligibility for
medicare on the basis of age) as to permit individ-
Subtitle A Part 1
uals to elect the Medicare Choice option during the
initial election period described in subsection (e)(1).
‘‘(2) USE
OF
NONFEDERAL
ENTITIES.—The
Secretary shall, to the maximum extent feasible,
enter into contracts with appropriate non-Federal
entities to carry out activities under this subsection.
‘‘(3) SPECIFIC
ACTIVITIES.—In carrying out
this subsection, the Secretary shall provide for at
least the following activities in all areas in which
Medicare Choice products are offered:
‘‘(A) INFORMATION BOOKLET.—
‘‘(i) IN
GENERAL.—The Secretary
shall publish an information booklet and
disseminate the booklet to all individuals
eligible to elect the Medicare Choice option
under this section during coverage election
periods.
‘‘(ii) INFORMATION
INCLUDED.—The
booklet shall include information presented
in plain English and in a standardized for-
mat regarding—
‘‘(I) the benefits (including cost-
sharing) and premiums for the var-
ious Medicare Choice products in the
areas involved;
Subtitle A Part 1
‘‘(II) the quality of such prod-
ucts, including consumer satisfaction
information; and
‘‘(III) rights and responsibilities
of medicare beneficiaries under such
products.
‘‘(iii) 
PERIODIC
UPDATING.—The
booklet shall be updated on a regular basis
(not less often than once every 12 months)
to reflect changes in the availability of
Medicare Choice products and the benefits
and premiums for such products.
‘‘(B) TOLL-FREE NUMBER.—The Secretary
shall maintain a toll-free number for inquiries
regarding Medicare Choice options and the op-
eration of part C.
‘‘(C) GENERAL
INFORMATION
IN
MEDI-
CARE HANDBOOK.—The Secretary shall include
information about the Medicare Choice option
provided under this section in the annual notice
of medicare benefits under section 1804.
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL
CHOICE
UPON
ELIGIBILITY
TO
MAKE ELECTION.—
Subtitle A Part 1
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who first becomes entitled to benefits
under part A and enrolled under part B after
the beginning of the transition period (as de-
fined in subparagraph (B)), the individual shall
make the election under this section during a
period (of a duration and beginning at a time
specified by the Secretary) at the first time the
individual both is entitled to benefits under part
A and enrolled under part B. Such period shall
be specified in a manner so that, in the case of
an individual who elects a Medicare Choice
product during the period, coverage under the
product becomes effective as of the first date on
which the individual may receive such coverage.
‘‘(B) TRANSITION
PERIOD
DEFINED.—In
this subsection, the term ‘transition period’
means, with respect to an individual in an area,
the period beginning on the first day of the first
month in which a Medicare Choice product is
first made available to individuals in the area
and ending with the month preceding the begin-
ning of the first annual, coordinated election
period under paragraph (3).
Subtitle A Part 1
‘‘(2) DURING TRANSITION PERIOD.—Subject to
paragraph (6)—
‘‘(A) CONTINUOUS
OPEN
ENROLLMENT
INTO
A
MEDICARE
CHOICE
OPTION.—During
the transition period, an individual who is eligi-
ble to make an election under this section and
who has elected the non-Medicare Choice option
may change such election to a Medicare Choice
option at any time.
‘‘(B) OPEN DISENROLLMENT BEFORE END
OF TRANSITION PERIOD.—During the transition
period, an individual who has elected a Medi-
care Choice option for a Medicare Choice prod-
uct may change such election to another Medi-
care Choice product or to the non-Medicare
Choice option.
‘‘(3) ANNUAL, COORDINATED
ELECTION
PE-
RIOD.—
‘‘(A) IN GENERAL.—Subject to paragraph
(5), each individual who is eligible to make an
election under this section may change such
election during annual, coordinated election pe-
riods.
‘‘(B) ANNUAL, COORDINATED
ELECTION
PERIOD.—For purposes of this section, the
Subtitle A Part 1
term ‘annual, coordinated election period’
means, with respect to a calendar year (begin-
ning with 1998), the month of October before
such year.
‘‘(C) MEDICARE
CHOICE
HEALTH
FAIR
DURING OCTOBER, 1996.—In the month of Octo-
ber, 1996, the Secretary shall provide for a na-
tionally coordinated educational and publicity
campaign to inform individuals, who are eligible
to elect Medicare Choice products, about such
products and the election process provided
under this section (including the annual, coordi-
nated election periods that occur in subsequent
years).
‘‘(4) SPECIAL
90-DAY
DISENROLLMENT
OP-
TION.—
‘‘(A) IN GENERAL.—In the case of the first
time an individual elects a Medicare Choice op-
tion under this section, the individual may dis-
continue such election through the filing of an
appropriate notice during the 90-day period be-
ginning on the first day on which the individ-
ual’s coverage under the Medicare Choice prod-
uct under such option becomes effective.
Subtitle A Part 1
‘‘(B) EFFECT
OF
DISCONTINUATION
OF
ELECTION.—An individual who discontinues an
election under this paragraph shall be deemed
at the time of such discontinuation to have
elected the Non-Medicare Choice option.
‘‘(5) SPECIAL ELECTION PERIODS.—An individ-
ual may discontinue an election of a Medicare
Choice product offered by a Medicare Choice organi-
zation other than during an annual, coordinated
election period and make a new election under this
section if—
‘‘(A) the organization’s or product’s certifi-
cation under part C has been terminated or the
organization has terminated or otherwise dis-
continued providing the product;
‘‘(B) in the case of an individual who has
elected a Medicare Choice product offered by a
Medicare Choice organization, the individual is
no longer eligible to elect the product because
of a change in the individual’s place of resi-
dence or other change in circumstances (speci-
fied by the Secretary, but not including termi-
nation of membership in a qualified association
in the case of a product offered by a qualified
association or termination of the individual’s