943
Subtitle H, Part 4
care benefits are payable under two
or more health plans; and
‘‘(B) 
for 
transferring 
among
health plans appropriate standard
data elements needed for the coordi-
nation of benefits, the sequential
processing of claims, and other data
elements for individuals who have
more than one health plan.
‘‘(6) COORDINATION OF BENEFITS.—If, at
the end of the 5-year period beginning on
the date of the enactment of this section,
the Secretary determines that additional
transaction standards for coordinating
benefits are necessary to reduce adminis-
trative costs or duplicative (or inappro-
priate) payment of claims, the Secretary
shall establish further transaction stand-
ards for the coordination of benefits be-
tween health plans.
‘‘(7) PROTECTION OF TRADE SECRETS.—
Except as otherwise required by law, the
standards adopted under this section
shall not require disclosure of trade se-
crets or confidential commercial informa-
944
Subtitle H, Part 4
tion by an entity operating a medicare in-
formation network.
‘‘(c) TIMETABLES FOR ADOPTION OF STAND-
ARDS.—
‘‘(1) 
INITIAL
STANDARDS.—Not 
later
than 18 months after the date of the en-
actment of this section, the Secretary
shall adopt standards relating to the in-
formation transactions, data elements of
medicare information and security de-
scribed in subsections (a) and (b).
‘‘(2) ADDITIONS AND MODIFICATIONS TO
STANDARDS.—
‘‘(A) IN
GENERAL.—The Secretary
shall review the standards adopted
under this section and shall adopt ad-
ditional or modified standards, that
have been developed or modified by a
standard setting organization, as de-
termined appropriate, but not more
frequently 
than 
once 
every 
months. Any addition or modification
to such standards shall be completed
in a manner which minimizes the dis-
ruption and cost of compliance.
945
Subtitle H, Part 4
‘‘(B) ADDITIONS AND MODIFICATIONS
TO CODE SETS.—
‘‘(i) 
IN
GENERAL.—The 
Sec-
retary shall ensure that proce-
dures exist for the routine main-
tenance, 
testing, 
enhancement,
and expansion of code sets.
‘‘(ii) ADDITIONAL
RULES.—If a
code set is modified under this
paragraph, the modified code set
shall include instructions on how
data elements of medicare infor-
mation that were encoded prior
to the modification may be con-
verted or translated so as to pre-
serve the informational value of
the data elements that existed be-
fore the modification. Any modi-
fication to a code set under this
paragraph shall be implemented
in a manner that minimizes the
disruption and cost of complying
with such modification.
‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—
946
Subtitle H, Part 4
‘‘(1) IN GENERAL.—If a person desires
to conduct any of the information trans-
actions described in subsection (b)(1)
with a health plan as a standard trans-
action, the health plan shall conduct such
standard transaction in a timely manner
and the information transmitted or re-
ceived in connection with such trans-
action shall be in the form of standard
data elements of medicare information.
‘‘(2) SATISFACTION OF REQUIREMENTS.—
A health plan may satisfy the require-
ment imposed on such plan under para-
graph (1) by directly transmitting stand-
ard data elements of medicare informa-
tion or submitting nonstandard data ele-
ments to a medicare information network
service for processing into standard data
elements and transmission.
‘‘(3) TIMETABLES FOR COMPLIANCE WITH
REQUIREMENTS.—Not later than 24 months
after the date on which standards are
adopted under subsections (a) and (b)
with respect to any type of information
transaction or data element of medicare
947
Subtitle H, Part 4
information or with respect to security, a
health plan shall comply with the re-
quirements of this section with respect to
such transaction or data element.
‘‘(4) COMPLIANCE WITH MODIFIED STAND-
ARDS.—If the Secretary adopts a modified
standard under subsection (a) or (b), a
health plan shall be required to comply
with the modified standard at such time
as the Secretary determines appropriate
taking into account the time needed to
comply due to the nature and extent of
the modification. However, the time de-
termined appropriate under the preced-
ing sentence shall be not earlier than the
last day of the 180-day period beginning
on the date such modified standard is
adopted. The Secretary may extend the
time for compliance for small health
plans, if the Secretary determines such
extension is appropriate.
‘‘(e) GENERAL PENALTY
FOR FAILURE
TO
COMPLY
WITH
REQUIREMENTS
AND
STAND-
ARDS.—
‘‘(1) GENERAL PENALTY.—
948
Subtitle H, Part 4
‘‘(A) IN GENERAL.—Except as pro-
vided in paragraph (2), the Secretary
shall impose on any person that vio-
lates a requirement or standard—
‘‘(i) with respect to medicare
information 
transactions, 
data
elements of medicare information,
or security imposed under sub-
section (a) or (b); or
‘‘(ii) with respect to health
plans imposed under subsection
(d);
a penalty of not more than $100 for
each such violation of a specific
standard or requirement, but the
total amount imposed for all such vio-
lations of a specific standard or re-
quirement during the calendar year
shall not exceed $25,000.
‘‘(B) PROCEDURES.—The provisions
of section 1128A (other than sub-
sections (a) and (b) and the second
sentence of subsection (f)) shall apply
to the imposition of a civil money
penalty under this paragraph in the
949
Subtitle H, Part 4
same manner as such provisions
apply to the imposition of a penalty
under such section 1128A.
‘‘(C) DENIAL OF PAYMENT.—Except
as provided in paragraph (2), the Sec-
retary may deny payment under this
title for an item or service furnished
by a person if the person fails to com-
ply with an applicable requirement
or standard for medicare information
relating to that item or service.
‘‘(2) LIMITATIONS.—
‘‘(A) NONCOMPLIANCE
NOT
DISCOV-
ERED.—A penalty may not be imposed
under paragraph (1) if it is estab-
lished to the satisfaction of the Sec-
retary that the person liable for the
penalty did not know, and by exercis-
ing reasonable diligence would not
have known, that such person failed
to comply with the requirement or
standard described in paragraph (1).
‘‘(B) FAILURES DUE TO REASONABLE
CAUSE.—
950
Subtitle H, Part 4
‘‘(i) IN
GENERAL.—Except as
provided in clause (ii), a penalty
may not be imposed under para-
graph (1) if—
‘‘(I) the failure to comply
was due to reasonable cause
and not to willful neglect; and
‘‘(II) the failure to comply
is corrected during the 30-day
period beginning on the first
date the person liable for the
penalty knew, or by exercis-
ing 
reasonable 
diligence
would have known, that the
failure to comply occurred.
‘‘(ii) EXTENSION OF PERIOD.—
‘‘(I) NO PENALTY.—The pe-
riod referred to in clause
(i)(II) may be extended as de-
termined appropriate by the
Secretary based on the nature
and extent of the failure to
comply.
‘‘(II) 
ASSISTANCE.—If 
the
Secretary determines that a
951
Subtitle H, Part 4
health plan failed to comply
because such plan was unable
to comply, the Secretary may
provide technical assistance
to such plan during the pe-
riod described in clause (i)(II).
Such assistance shall be pro-
vided in any manner deter-
mined appropriate by the Sec-
retary.
‘‘(C) REDUCTION.—In the case of a
failure to comply which is due to rea-
sonable cause and not to willful ne-
glect, any penalty under paragraph
(1) that is not entirely waived under
subparagraph (B) may be waived to
the extent that the payment of such
penalty would be excessive relative to
the compliance failure involved.
‘‘(f) EFFECT ON STATE LAW.—
‘‘(1) GENERAL EFFECT.—
‘‘(A) GENERAL
RULE.—Except as
provided in subparagraph (B), a pro-
vision, 
requirement, 
or 
standard
under this section shall supersede
952
Subtitle H, Part 4
any contrary provision of State law,
including a provision of State law
that requires medical or health plan
records (including billing informa-
tion) to be maintained or transmitted
in written rather than electronic
form.
‘‘(B) EXCEPTIONS.—A provision, re-
quirement, or standard under this
section shall not supersede a contrary
provision of State law if the Secretary
determines that the provision of State
law should be continued for any rea-
son, including for reasons relating to
prevention of fraud and abuse or reg-
ulation of controlled substances.
‘‘(2) PUBLIC HEALTH REPORTING.—Noth-
ing in this section shall be construed to
invalidate or limit the authority, power,
or procedures established under any law
providing for the reporting of disease or
injury, child abuse, birth, or death, public
health surveillance, or public health in-
vestigation or intervention.
953
Subtitle H, Part 4
‘‘(g) 
MEDICARE
INFORMATION
ADVISORY
COMMITTEE.—
‘‘(1) ESTABLISHMENT.—There is estab-
lished a committee to be known as the
Medicare Information Advisory Commit-
tee (in this subsection referred to as the
‘committee’).
‘‘(2) DUTIES.—The committee shall—
‘‘(A) advise the Secretary in the
development of standards under this
section; and
‘‘(B) be generally responsible for
advising the Secretary and the Con-
gress on the status and the future of
the medicare information network.
‘‘(3) MEMBERSHIP.—
‘‘(A) IN GENERAL.—The committee
shall consist of 9 members of whom—
‘‘(i) 3 shall be appointed by
the President;
‘‘(ii) 3 shall be appointed by
the Speaker of the House of Rep-
resentatives 
after 
consultation
with the minority leader of the
House of Representatives; and
954
Subtitle H, Part 4
‘‘(iii) 3 shall be appointed by
the President pro tempore of the
Senate after consultation with the
minority leader of the Senate.
The appointments of the members
shall be made not later than 60 days
after the date of the enactment of this
section. The President shall designate
1 member as the Chair.
‘‘(B) EXPERTISE.—The membership
of the committee shall consist of indi-
viduals who are of recognized stand-
ing and distinction in the areas of in-
formation 
systems, 
information
networking 
and 
integration,
consumer health, or health care fi-
nancial management, and who pos-
sess the demonstrated capacity to dis-
charge the duties imposed on the
committee.
‘‘(C) TERMS.—Each member of the
committee shall be appointed for a
term of 5 years, except that the mem-
bers first appointed shall serve stag-
gered terms such that the terms of
955
Subtitle H, Part 4
not more than 3 members expire at
one time.
‘‘(D) INITIAL
MEETING.—Not later
than 30 days after the date on which
a majority of the members have been
appointed, the committee shall hold
its first meeting.
‘‘(4) REPORTS.—Not later than 1 year
after the date of the enactment of this
section, and annually thereafter, the com-
mittee shall submit to Congress and the
Secretary a report regarding—
‘‘(A) the extent to which entities
using the medicare information net-
work 
are 
meeting 
the 
standards
adopted under this section and work-
ing together to form an integrated
network that meets the needs of its
users;
‘‘(B) the extent to which such en-
tities are meeting the security stand-
ards established pursuant to this sec-
tion and the types of penalties as-
sessed for noncompliance with such
standards;
956
Subtitle H, Part 4
‘‘(C) any problems that exist with
respect to implementation of the med-
icare information network; and
‘‘(D) the extent to which time-
tables under this section are being
met.
Reports made under this subsection shall
be made available to health care provid-
ers, health plans, and other entities that
use the medicare information network to
exchange medicare information.
‘‘(h) DEFINITIONS.—For purposes of this
section:
‘‘(1) CODE
SET.—The term ‘code set’
means any set of codes used for encoding
data elements, such as tables of terms,
enrollment information, and encounter
data.
‘‘(2) COORDINATION OF BENEFITS.—The
term ‘coordination of benefits’ means de-
termining and coordinating the financial
obligations of health plans when health
care benefits are payable under such a
plan and under this title (including
under a MedicarePlus product).
957
Subtitle H, Part 4
‘‘(3) 
MEDICARE
INFORMATION.—The
term ‘medicare information’ means any
information that relates to the enroll-
ment of individuals under this title (in-
cluding information relating to elections
of MedicarePlus products under section
1805) and the provision of health benefits
(including benefits provided under such
products) under this title.
‘‘(4) 
MEDICARE
INFORMATION
NET-
WORK.—The term ‘medicare information
network’ means the medicare informa-
tion system that is formed through the
application 
of 
the 
requirements 
and
standards established under this section.
‘‘(5) MEDICARE
INFORMATION
NETWORK
SERVICE.—The term ‘medicare informa-
tion network service’ means a public or
private entity that—
‘‘(A) processes or facilitates the
processing of nonstandard data ele-
ments of medicare information into
standard data elements;
958
Subtitle H, Part 4
‘‘(B) provides the means by which
persons may meet the requirements
of this section; or
‘‘(C) provides specific information
processing services.
‘‘(6) HEALTH PLAN.—The term ‘health
plan’ means a plan which provides, or
pays the cost of, health benefits. Such
term includes the following, or any com-
bination thereof:
‘‘(A) Part A or part B of this title,
and includes a MedicarePlus product.
‘‘(B) The medicaid program under
title XIX and the MediGrant program
under title XXI.
‘‘(C) A medicare supplemental pol-
icy (as defined in section 1882(g)(1)).
‘‘(D) Worker’s compensation or
similar insurance.
‘‘(E) Automobile or automobile
medical-payment insurance.
‘‘(F) A long-term care policy, other
than a fixed indemnity policy.
959
Subtitle H, Part 4
‘‘(G) 
The 
Federal 
Employees
Health Benefit Plan under chapter 89
of title 5, United States Code.
‘‘(H) An employee welfare benefit
plan, as defined in section 3(1) of the
Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1002(1)), but
only to the extent the plan is estab-
lished or maintained for the purpose
of providing health benefits.
‘‘(7) INDIVIDUALLY
IDENTIFIABLE
MEDI-
CARE
INFORMATION.—The term ‘individ-
ually identifiable medicare information’
means medicare enrollment information,
including demographic information col-
lected from an individual, that—
‘‘(A) is created or received by a
health care provider, health plan, em-
ployer, or medicare information net-
work service, and
‘‘(B) identifies an individual.
‘‘(8) 
STANDARD
SETTING
ORGANIZA-
TION.—The term ‘standard setting organi-
zation’ means a standard setting organi-
960
Subtitle H, Part 5
zation accredited by the American Na-
tional Standards Institute.
‘‘(9) 
STANDARD
TRANSACTION.—The
term ‘standard transaction’ means, when
referring to an information transaction
or to data elements of medicare informa-
tion, any transaction that meets the re-
quirements and implementation speci-
fications adopted by the Secretary under
subsections (a) and (b).’’.
PART 5—OTHER PROVISIONS RELATING TO
PARTS A AND B
SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF
ITEMS AND SERVICES ASSOCIATED WITH
CERTAIN MEDICAL DEVICES APPROVED FOR
INVESTIGATIONAL USE.
(a) COVERAGE.—Nothing in title XVIII of
the Social Security Act may be construed to
prohibit coverage under part A or part B of
the medicare program of items and services
associated with the use of a medical device in
the furnishing of inpatient or outpatient hos-
pital services (including outpatient diagnostic
imaging services) for which payment may be
made under the program solely on the
961
Subtitle H, Part 5
grounds that the device is not an approved
device, if—
(1) the device is an investigational de-
vice; and
(2) the device is used instead of either
an approved device or a covered proce-
dure.
(b) CLARIFICATION OF PAYMENT AMOUNT.—
Notwithstanding any other provision of title
XVIII of the Social Security Act, the amount
of payment made under the medicare pro-
gram for any item or service associated with
the use of an investigational device in the fur-
nishing of inpatient or outpatient hospital
services (including outpatient diagnostic im-
aging services) for which payment may be
made under the program may not exceed the
amount of the payment which would have
been made under the program for the item or
service if the item or service were associated
with the use of an approved device or a cov-
ered procedure.
(c) DEFINITIONS.—In this section—
(1) the term ‘‘approved device’’ means
a medical device (or devices) which has
962
Subtitle H, Part 5
been approved for marketing under pre-
market approval under the Federal Food,
Drug, and Cosmetic Act or cleared for
marketing under a 510(k) notice under
such Act; and
(2) the term ‘‘investigational device’’
means—
(A) a medical device or devices
(other than a device described in
paragraph (1)) approved for inves-
tigational use under section 520(g) of
the Federal Food, Drug, and Cosmetic
Act, or
(B) a product authorized for use
under section 505(i) of the Federal
Food, Drug, and Cosmetic Act which
includes the use of a medical device
(or devices) or an investigational
combination product under section
503(g) of such Act which includes a
device (or devices) authorized for use
under section 505(i) of such Act.
963
Subtitle H, Part 5
SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.
(a) IN GENERAL.—Section 1862(a) (42 U.S.C.
1395y(a)), as amended by section 15525(a)(2)
and section 15701(c)(2)(C), is amended—
(1) by striking ‘‘or’’ at the end of para-
graph (16),
(2) by striking the period at the end
of paragraph (17) and inserting ‘‘; or’’,
and
(3) by inserting after paragraph (17)
the following new paragraph:
‘‘(18) where such expenses are for
items or services, or to assist in the pur-
chase, in whole or in part, of health bene-
fit coverage that includes items or serv-
ices, for the purpose of causing, or assist-
ing in causing, the death, suicide, eutha-
nasia, or mercy killing of a person.’’.
(b) EFFECTIVE
DATE.—The amendments
made by subsection (a) shall apply to payment
for items and services furnished on or after
the date of the enactment of this Act.
SEC. 15743. COMPETITIVE BIDDING FOR CERTAIN ITEMS
AND SERVICES.
(a) ESTABLISHMENT
OF DEMONSTRATION.—
Not later than 1 year after the date of the en-
964
Subtitle H, Part 5
actment of this Act, the Secretary of Health
and Human Services shall establish and oper-
ate over a 2-year period a demonstration
project in 2 geographic regions selected by
the Secretary under which (notwithstanding
any provision of title XVIII of the Social Secu-
rity Act to the contrary) the amount of pay-
ment made under the medicare program for
a selected item or service furnished in the re-
gion shall be equal to the price determined
pursuant to a competitive bidding process
which meets the requirements of subsection
(b).
(b) REQUIREMENTS FOR COMPETITIVE BID-
DING PROCESS.—The competitive bidding proc-
ess used under the demonstration project
under this section shall meet such require-
ments as the Secretary may impose to ensure
the cost-effective delivery to medicare bene-
ficiaries in the project region of items and
services of high quality.
(c) DETERMINATION OF SELECTED ITEMS OR
SERVICES.—The Secretary shall select items
and services to be subject to the demonstra-
tion project under this section if the Sec-
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Subtitle I
retary determines that the use of competitive
bidding with respect to the item or service
under the project will be appropriate and
cost-effective. In determining the items or
services to be selected, the Secretary shall
consult with an advisory taskforce which in-
cludes representatives of providers and sup-
pliers of items and services (including small
business providers and suppliers) in each geo-
graphic region in which the project will be ef-
fective.
Subtitle I—Clinical Laboratories
SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORA-
TORIES.
Section 353(d) of the Public Health Serv-
ice Act (42 U.S.C. 263a(d)) is amended—
(1) by redesignating paragraphs (2),
(3), and (4) as paragraphs (3), (4), and (5)
and by adding after paragraph (1) the fol-
lowing:
‘‘(4) EXEMPTION
OF
PHYSICIAN
OFFICE
LABORATORIES.—
‘‘(A) IN GENERAL.—Except as pro-
vided in subparagraph (B), a clinical
laboratory in a physician’s office (in-
966
Subtitle I
cluding an office of a group of physi-
cians) which is directed by a physi-
cian and in which examinations and
procedures are either performed by a
physician or by individuals super-
vised by a physician solely as an ad-
junct to other services provided by
the physician’s office is exempt from
this section.
‘‘(B) EXCEPTION.—A clinical lab-
oratory described in subparagraph
(A) is not exempt from this section
when it performs a pap smear (Papa-
nicolaou Smear) analysis.
‘‘(C) DEFINITION.—For purposes of
subparagraph (A), the term ‘physi-
cian’ has the same meaning as is pre-
scribed for such term by section
1861(r) of the Social Security Act (42
U.S.C. 1395x(r)).’’;
(2) in paragraph (3) (as so redesig-
nated) by striking ‘‘(3)’’ and inserting
‘‘(4)’’; and
967
Subtitle J
(3) in paragraphs (4) and (5) (as so re-
designated) by striking ‘‘(2)’’ and insert-
ing ‘‘(3)’’.
Subtitle 
J—Lock-Box 
Provisions
for Medicare Part B Savings
from Growth Reductions
SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH RE-
DUCTION TRUST FUND FOR PART B SAVINGS.
Part B of title XVIII is amended by insert-
ing after section 1841 the following new sec-
tion:
‘‘MEDICARE GROWTH REDUCTION TRUST FUND
‘‘SEC. 1841A. (a)(1) There is hereby created
on the books of the Treasury of the United
States a trust fund to be known as the ‘Fed-
eral Medicare Growth Reduction Trust Fund’
(in this section referred to as the ‘Trust
Fund’). The Trust Fund shall consist of such
gifts and bequests as may be made as pro-
vided in section 201(i)(1) and amounts appro-
priated under paragraph (2).
‘‘(2) There are hereby appropriated to the
Trust Fund, out of any amounts in the Treas-
ury not otherwise appropriated, amounts
equivalent to 100 percent of the Secretary’s
estimate of the reductions in outlays under
968
Subtitle J
this part that are attributable to the Medicare
Preservation Act of 1995. The amounts appro-
priated by the preceding sentence shall be
transferred from time to time (not less fre-
quently than monthly) from the general fund
in the Treasury to the Trust Fund.
‘‘(3)(A) Subject to subparagraph (B), with
respect to monies transferred to the Trust
Fund, no transfers, authorizations of appro-
priations, or appropriations are permitted.
‘‘(B) Beginning with fiscal year 2003, the
Secretary may expend funds in the Trust
Fund to carry out this title, but only to the ex-
tent 
provided 
by 
Congress 
in 
advance
through a specific amendment to this section.
‘‘(b) The provisions of subsections (b)
through (e) of section 1841 shall apply to the
Trust Fund in the same manner as they apply
to the Federal Supplementary Medical Insur-
ance Trust Fund, except that the Board of
Trustees and Managing Trustee of the Trust
Fund shall be composed of the members of the
Board of Trustees and the Managing Trustee,
respectively, of the Federal Supplementary
Medical Insurance Trust Fund.’’.
969
Subtitle J
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Subtitle J
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