I 
110TH CONGRESS 
1ST SESSION H. R. 3038 
To amend section 1848 of the Social Security Act to establish standards 
for growth in Medicare expenditures for physicians’ services based on 
categories of services. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 12, 2007 
Mr. SESSIONS introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce, and in addition to the Committee on 
Ways and Means, 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 section 1848 of the Social Security Act to estab-
lish standards for growth in Medicare expenditures for 
physicians’ services based on categories of services. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicare Physician Payment Reform Act of 2007’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; table of contents. 
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Sec. 2. Reforming standards for growth in Medicare expenditures for physi-
cians’ and related services. 
Sec. 3. Establishment of update service categories and expenditure measure-
ment categories. 
Sec. 4. Establishing updates for conversion factors for update service cat-
egories. 
Sec. 5. Replacement of sustainable growth rate with service category growth 
rates. 
Sec. 6. Reports to Congress on excess expenditures for part B drugs and clin-
ical diagnostic laboratory tests. 
SEC. 2. REFORMING STANDARDS FOR GROWTH IN MEDI-
CARE EXPENDITURES FOR PHYSICIANS’ AND 
RELATED SERVICES. 
(a) PROVIDING FOR SEPARATE CONVERSION FAC-
TORS FOR SERVICE CATEGORIES.—Subsection (d)(1)(A) 
of section 1848 of the Social Security Act (42 U.S.C. 
1395w–4) is amended— 
(1) by designating the sentence beginning ‘‘The 
conversion factor’’ as clause (i) with the heading 
‘‘YEARS BEFORE 2009’’ and with appropriate inden-
tation; 
(2) by inserting ‘‘and ending with 2008’’ after 
‘‘beginning with 2001’’; and 
(3) by adding at the end the following new 
clause: 
‘‘(ii) 
2009 
AND
SUBSEQUENT 
YEARS.—For years after 2008, the conver-
sion factor for an update service category 
(as defined in subsection (j)(5)) for a year 
shall be the conversion factor established 
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for such category under this subsection for 
the previous year (or in the case of 2009, 
the single conversion factor established 
under this subsection for 2008), multiplied 
by the update established under paragraph 
(8) for such category for the year in-
volved.’’. 
(b) CONFORMING AMENDMENTS.—Such section is 
further amended— 
(1) in subsection (b)(1)(B), by inserting ‘‘appli-
cable’’ before ‘‘conversion factor’’; 
(2) in subsection (d)(1)(D)— 
(A) by inserting ‘‘before 2009’’ after ‘‘for 
a year’’; and 
(B) by adding at the end the following: 
‘‘For 2009 and subsequent years, the separate 
conversion factor for anesthesia services shall 
be determined as follows: 
‘‘(i) For 2009, 46 percent of the sin-
gle conversion factor established under this 
subsection for other physicians’ services for 
2008, multiplied by the update established 
under paragraph (8) for the applicable up-
date service category for 2009. 
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‘‘(ii) For a subsequent year, the con-
version factor established under this sub-
section for the previous year, multiplied by 
the update established under paragraph 
(8) for the applicable update service cat-
egory for the year involved.’’; 
(3) in subsection (d)(1)(E)— 
(A) in clause (i), by inserting ‘‘(or, for 
publications beginning with 2009, the applicable 
conversion factor for each update service cat-
egory)’’ after ‘‘conversion factor’’; 
(B) in clause (i), by striking ‘‘under para-
graph (4)’’ and inserting ‘‘(for each update 
service category for publications beginning with 
2009)’’; 
(C) in clause (i), by striking ‘‘under such 
paragraph’’ and inserting ‘‘(for each update 
service category for publications beginning with 
2008)’’; and 
(D) in clause (ii), by inserting ‘‘(or, for 
years beginning with 2008, the service category 
growth rate and, for years beginning with 2009, 
the applicable conversion factor, for each up-
date service category)’’ after ‘‘sustainable 
growth rate’’; and 
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(4) in subsection (d)(4)— 
(A) in the heading, by inserting ‘‘AND 
ENDING
WITH
2008’’ after ‘‘BEGINNING
WITH 
2001’’; and 
(B) in subparagraph (A), in the matter 
preceding clause (i), by inserting ‘‘and ending 
with 2008’’ after ‘‘beginning with 2001’’. 
SEC. 3. ESTABLISHMENT OF UPDATE SERVICE CATEGORIES 
AND 
EXPENDITURE 
MEASUREMENT 
CAT-
EGORIES. 
(a) UPDATE SERVICE CATEGORIES.—Subsection (j) 
of section 1848 of the Social Security Act (42 U.S.C. 
1395w–4) is amended by adding at the end the following 
new paragraph: 
‘‘(5) UPDATE SERVICE CATEGORIES.—Each of 
the following categories of physicians’ services shall 
be treated as a separate ‘update service category’: 
‘‘(A) Evaluation and management services. 
‘‘(B) Radiology services and diagnostic 
tests (other than clinical diagnostic laboratory 
tests). 
‘‘(C) Procedures that are subject to a 10- 
day or 90-day global period (in this paragraph 
referred to as ‘major procedures’), except that 
the Secretary may reclassify as minor proce-
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dures under subparagraph (E) any procedures 
that would otherwise be included in this cat-
egory if the Secretary determines that such pro-
cedures are not major procedures. 
‘‘(D) Anesthesia services that are paid on 
the basis of the separate conversion factor for 
anesthesia services determined under subsection 
(d)(1)(D). 
‘‘(E) Minor procedures and any other phy-
sicians’ services that are not described in a pre-
ceding clause.’’. 
(b) EXPENDITURE
MEASUREMENT
CATEGORY.— 
Subsection (f)(4) of such section is amended by adding 
at the end the following new subparagraph: 
‘‘(D) EXPENDITURE MEASUREMENT CAT-
EGORY.—The term ‘expenditure measurement 
category’ means each of the update service cat-
egories described in subparagraphs (A) through 
(E) of subsection (j)(5) and, only for purposes 
of reporting, the following additional categories 
of physicians’ services (as defined in subpara-
graph (A)): 
‘‘(i) Clinical diagnostic laboratory 
tests. 
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‘‘(ii) Drugs, biologicals, and radio-
pharmaceuticals for which payment is 
made under this part.’’. 
SEC. 4. ESTABLISHING UPDATES FOR CONVERSION FAC-
TORS FOR UPDATE SERVICE CATEGORIES. 
Section 1848(d) of the Social Security Act (42 U.S.C. 
1395w–4(d)) is amended— 
(1) in paragraph (4)(C)(iii), by inserting ‘‘AND 
ENDING WITH 2008’’ and ‘‘and ending with 2008’’ 
after ‘‘BEGINNING WITH 2000’’ and after ‘‘beginning 
with 2000’’, respectively; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(8) UPDATES
FOR
UPDATE
SERVICE
CAT-
EGORIES FOR YEARS AFTER 2008.— 
‘‘(A) IN GENERAL.—Unless otherwise pro-
vided by law, subject to the budget neutrality 
factor determined by the Secretary under sub-
section (c)(2)(B)(ii), the update to the conver-
sion factor for an update service category (as 
defined in subsection (j)(5)) for a year begin-
ning with 2009 is equal to the product of— 
‘‘(i) 1 plus the Secretary’s estimate of 
the percentage increase in the MEI (as de-
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fined in section 1842(i)(3)) for the year; 
and 
‘‘(ii) 1 plus the Secretary’s estimate of 
the update adjustment factor for the up-
date service category for the year. 
‘‘(B) UPDATE ADJUSTMENT FACTORS.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A)(ii), subject to clause 
(iv), the ‘update adjustment factor’ for an 
update service category for a year is equal 
(as estimated by the Secretary) to the sum 
of— 
‘‘(I) the prior year adjustment 
component under clause (ii) for the 
category and year; and 
‘‘(II) the cumulative adjustment 
component under clause (iii) for the 
category and year. 
‘‘(ii) PRIOR YEAR ADJUSTMENT COM-
PONENT.—The prior year adjustment com-
ponent under this clause for an update 
service category for a year is determined 
by— 
‘‘(I) computing the difference 
(which may be positive or negative) 
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between the amount of allowed ex-
penditures (as determined under sub-
paragraph (C)) for the corresponding 
expenditure measurement category for 
the preceding year (beginning with 
2008), as determined under clause 
(v), and the amount of actual expendi-
tures for such corresponding expendi-
ture measurement category for that 
year; 
‘‘(II) dividing that difference by 
the amount of actual expenditures for 
such expenditure measurement cat-
egory for that year; and 
‘‘(III) multiplying that quotient 
by 0.75. 
‘‘(iii) 
CUMULATIVE
ADJUSTMENT 
COMPONENT.—The cumulative adjustment 
component under this clause for an update 
service category for a year is determined 
by— 
‘‘(I) computing the difference 
(which may be positive or negative) 
between the amount of allowed ex-
penditures for the corresponding ex-
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penditure measurement category from 
January 1, 2008, through the end of 
for the preceding year, as determined 
under clause (iv), and the amount of 
actual expenditures for such expendi-
ture measurement category for such 
period; 
‘‘(II) dividing that difference by 
the amount of actual expenditures for 
such expenditure measurement cat-
egory for such preceding year as in-
creased by the service category growth 
rate under subsection (f) for the year 
for which the update adjustment fac-
tor is to be determined; and 
‘‘(III) multiplying that quotient 
by 0.33. 
‘‘(iv) RESTRICTION
ON
UPDATE
AD-
JUSTMENT FACTORS.—An update adjust-
ment factor determined under subpara-
graph (B) for an update service category 
for a year— 
‘‘(I) may not reduce the update 
by more than 0.03 or, if greater, the 
percentage increase in the MEI (as 
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defined in section 1842(i)(3)) for the 
year (divided by 100); and 
‘‘(II) may not increase the up-
date by more than 0.01. 
‘‘(v) CORRESPONDING
EXPENDITURE 
MEASUREMENT CATEGORY.—For purposes 
of this subparagraph, the term ‘cor-
responding expenditure measurement cat-
egory’ means, with respect to an update 
service category, the expenditure measure-
ment category (as defined in subsection 
(f)(4)(D)) that includes the services that 
are included in the update measurement 
category. 
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), the allowed expenditures for an ex-
penditure measurement category (as de-
fined in subsection (f)(4)(D)) for a year 
(beginning with 2008) is equal to— 
‘‘(I) for 2008, the actual expendi-
tures for services in such category for 
2007, increased by the service cat-
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egory growth rate for such category 
under subsection (f) for 2008; and 
‘‘(II) for a year after 2008, the 
amount of allowed expenditures for 
such category for the preceding year, 
increased by the service category 
growth rate determined under sub-
section (f) for the year involved. 
‘‘(ii) ADJUSTMENTS TO ALLOWED EX-
PENDITURES.—The Secretary shall, as a 
part of the annual rule making process for 
making changes in the fee schedule estab-
lished under this section, propose and im-
plement adjustments to allowed expendi-
tures by expenditure measurement cat-
egory to take into account changes in tech-
nology and practice patterns, such as 
changes in the site of service. 
‘‘(iii) RECALCULATION
OF
ALLOWED 
EXPENDITURES.—For purposes of deter-
mining the update adjustment factor for 
an update service category for a year (be-
ginning with 2009), the Secretary shall re-
compute the allowed expenditures for pre-
vious periods beginning on or after Janu-
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ary 1, 2008, consistent with subsection 
(f)(3)(D).’’. 
SEC. 5. REPLACEMENT OF SUSTAINABLE GROWTH RATE 
WITH SERVICE CATEGORY GROWTH RATES. 
(a) IN GENERAL.—Section 1848(f) of the Social Se-
curity Act (42 U.S.C. 1395w–4(f)) is amended— 
(1) in the heading, by inserting ‘‘AND SERVICE 
CATEGORY GROWTH RATES’’ after ‘‘SUSTAINABLE 
GROWTH RATE’’; 
(2) in paragraph (1)— 
(A) in subparagraph (A), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (B)— 
(i) by inserting ‘‘before 2008’’ after 
‘‘each succeeding year’’, and 
(ii) by striking the period at the end 
and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) November 1 of each succeeding year 
after 2007 the growth rate (in this subsection 
referred to as ‘service category growth rate’) for 
each expenditure measurement category for 
such succeeding year and each of the preceding 
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2 years (or in the case of 2009, the preceding 
year).’’; 
(3) in paragraph (2)— 
(A) in the heading, by striking ‘‘RATE’’ 
and inserting ‘‘RATES’’; 
(B) by redesignating subparagraphs (A) 
through (E) and as clauses (i) through (v), re-
spectively, and by designating the sentence be-
ginning ‘‘The sustainable growth rate’’ as a 
subparagraph (A) with the heading ‘‘SUSTAIN-
ABLE
GROWTH
RATE
FOR
PERIODS
BEFORE 
2008’’ and with appropriate indentation for the 
subparagraph and its redesignated clauses; 
(C) by inserting ‘‘and before 2008’’ after 
‘‘beginning with 2000’’; and 
(D) by adding at the end the following new 
subparagraph: 
‘‘(B) SERVICE CATEGORY GROWTH RATES 
FOR YEARS BEGINNING WITH 2008.—The service 
category growth rate for an expenditure meas-
urement category for a year beginning with 
2008 shall be equal to the product of— 
‘‘(i) 1 plus the Secretary’s estimate of 
the weighted average percentage increase 
(divided by 100) in the fees for services in 
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the category for the applicable period in-
volved; 
‘‘(ii) 1 plus the Secretary’s estimate of 
the percentage change (divided by 100) in 
the average number of individuals enrolled 
under this part (other than Medicare Ad-
vantage plan enrollees) from the previous 
fiscal year to the applicable period in-
volved; 
‘‘(iii) 1 plus— 
‘‘(I) 5.1 percentage points (di-
vided by 100) in the case of the serv-
ice category specified in subsection 
(j)(5)(A); and 
‘‘(II) 2.1 percentage points (di-
vided by 100) in the case of all other 
categories; and 
‘‘(iv) 1 plus the Secretary’s estimate 
of the percentage change (divided by 100) 
in expenditures for services in the category 
in the fiscal year (compared with the pre-
vious fiscal year) which will result from 
changes in law and regulations, taking into 
account all national coverage determina-
tions (as defined in section 1869(f)(1)(B)) 
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and any local coverage determinations (as 
defined in section 1869(f)(2)(B)) with a 
significant impact on expenditures for phy-
sicians’ services, but without taking into 
account estimated changes in expenditures 
resulting from the update adjustment fac-
tor determined under subsection (d)(8)(B), 
minus 1 and multiplied by 100.’’; and 
(4) in paragraph (3)— 
(A) in the matter preceding subparagraph 
(A), by striking ‘‘the sustainable growth rates’’ 
and inserting ‘‘and ending with 2008 and under 
subsection (d)(8)(B) beginning with 2009, the 
growth rates’’; 
(B) in subparagraph (C)— 
(i) in the heading, by inserting ‘‘AND 
BEFORE 2009’’ after ‘‘SUCCEEDING YEARS’’; 
and 
(ii) in the matter before clause (i), by 
inserting ‘‘and before 2009’’ after ‘‘after 
2002’’; and 
(C) by inserting after subparagraph (C) 
the following new subparagraph: 
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