105TH CONGRESS
2D SESSION
H. R. 4567
AN ACT
To amend titles XI and XVIII of the Social Secu-
rity Act to revise the per beneficiary and per visit
home health payment limits under the medicare
program, to improve access to health care serv-
ices for certain medicare-eligible veterans, to au-
thorize additional exceptions to the imposition of
civil money penalties in cases of payments to
beneficiaries, and to expand the membership of
the Medicare Payment Advisory Commission.
105TH CONGRESS
2D SESSION
H. R. 4567
AN ACT
To amend titles XI and XVIII of the Social Security Act
to revise the per beneficiary and per visit home health
payment limits under the medicare program, to improve
access to health care services for certain medicare-eligible
veterans, to authorize additional exceptions to the imposi-
tion of civil money penalties in cases of payments to
beneficiaries, and to expand the membership of the Medi-
care Payment Advisory Commission.
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 Home Health and Veterans Health Care Im-
provement Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—MEDICARE HOME HEALTH CARE INTERIM PAYMENT
SYSTEM REFINEMENT
Sec. 101. Increase in per beneficiary limits and per visit payment limits for
payment for home health services.
TITLE II—VETERANS MEDICARE ACCESS IMPROVEMENT
Sec. 201. Improvement in veterans’ access to services.
TITLE III—AUTHORIZATION OF ADDITIONAL EXCEPTIONS TO
IMPOSITION OF PENALTIES FOR CERTAIN INDUCEMENTS
Sec. 301. Authorization of additional exceptions to imposition of penalties for
providing inducements to beneficiaries.
TITLE IV—EXPANSION OF MEMBERSHIP OF THE MEDICARE
PAYMENT ADVISORY COMMISSION
Sec. 401. Expansion of membership of MedPAC to 17.
TITLE V—REVENUE OFFSET
Sec. 501. Revenue offset.
TITLE 
I—MEDICARE 
HOME
HEALTH CARE INTERIM PAY-
MENT SYSTEM REFINEMENT
SEC. 101. INCREASE IN PER BENEFICIARY LIMITS AND PER
VISIT PAYMENT LIMITS FOR PAYMENT FOR
HOME HEALTH SERVICES.
(a) INCREASE IN PER BENEFICIARY LIMITS.—Sec-
tion 1861(v)(1)(L) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)) is amended—
(1) in the first sentence of clause (v), by insert-
ing ‘‘subject to clause (viii)(I),’’ before ‘‘the Sec-
retary’’;
(2) in clause (vi)(I), by inserting ‘‘subject to
clauses (viii)(II) and (viii)(III)’’ after ‘‘fiscal year
1994’’; and
(3) by adding at the end the following new
clause:
‘‘(viii)(I) In the case of a provider with a 12-month
cost reporting period ending in fiscal year 1994, if the
limit imposed under clause (v) (determined without regard
to this subclause) for a cost reporting period beginning
during or after fiscal year 1999 is less than the median
described in clause (vi)(I) (but determined as if any ref-
erence in clause (v) to ‘98 percent’ were a reference to
‘100 percent’), the limit otherwise imposed under clause
(v) for such provider and period shall be increased by 1⁄2
of such difference.
‘‘(II) Subject to subclause (IV), for new providers and
those providers without a 12-month cost reporting period
ending in fiscal year 1994, but for which the first cost
reporting period begins before fiscal year 1999, for cost
reporting periods beginning during or after fiscal year
1999, the per beneficiary limitation described in clause
(vi)(I) shall be equal to 50 percent of the median described
in such clause plus 50 percent of the sum of 75 percent
of such median and 25 percent of 98 percent of the stand-
ardized regional average of such costs for the agency’s
census division, described in clause (v)(I). However, in no
case shall the limitation under this subclause be less than
the median described in clause (vi)(I) (determined as if
any reference in clause (v) to ‘98 percent’ were a reference
to ‘100 percent’).
‘‘(III) Subject to subclause (IV), in the case of a new
home health agency for which the first cost reporting pe-
riod begins during or after fiscal year 1999, the limitation
applied under clause (vi)(I) (but only with respect to such
provider) shall be equal to 75 percent of the median de-
scribed in clause (vi)(I).
‘‘(IV) In the case of a new provider or a provider
without a 12-month cost reporting period ending in fiscal
MIUM.—Section 1839 of such Act (42 U.S.C. 1395r) is
amended—
(1) in subsection (a)(3), by inserting ‘‘(except
as provided in subsection (g))’’ after ‘‘year that’’;
and
(2) by adding at the end the following new sub-
section:
‘‘(g) In estimating the benefits and administrative
costs which will be payable from the Federal Supple-
mentary Medical Insurance Trust Fund for a year for pur-
poses of determining the monthly premium rate under
subsection (a)(3), the Secretary shall exclude an estimate
of any benefits and administrative costs attributable to the
application of section 1861(v)(1)(L)(viii) or to the estab-
lishment under section 1861(v)(1)(L)(i)(V) of a per visit
limit at 108 percent of the median (instead of 105 percent
of the median), but only to the extent payment for home
health services under this title is not being made under
section 1895 (relating to prospective payment for home
health services).’’.
(d) REPORTS
ON SUMMARY
OF RESEARCH CON-
DUCTED BY THE SECRETARY ON THE PROSPECTIVE PAY-
MENT SYSTEM.—By not later than January 1, 1999, the
Secretary of Health and Human Services shall submit to
Congress a report on the following matters:
(1) RESEARCH.—A description of any research
paid for by the Secretary on the development of a
prospective payment system for home health services
furnished under the medicare care program under
title XVIII of the Social Security Act, and a sum-
mary of the results of such research.
(2) SCHEDULE FOR IMPLEMENTATION OF SYS-
TEM.—The Secretary’s schedule for the implementa-
tion of the prospective payment system for home
health services under section 1895 of the Social Se-
curity Act (42 U.S.C. 1395fff).
(3) ALTERNATIVE TO 15 PERCENT REDUCTION
IN
LIMITS.—The Secretary’s recommendations for
one or more alternative means to provide for savings
equivalent to the savings estimated to be made by
the mandatory 15 percent reduction in payment lim-
its for such home health services for fiscal year 2000
under section 1895(b)(3)(A) of the Social Security
Act (42 U.S.C. 1395fff(b)(3)(A)), or, in the case the
Secretary does not establish and implement such
prospective payment system, under section 4603(e)
of the Balanced Budget Act of 1997.
(e) MEDPAC REPORTS.—
(1) REVIEW
OF
SECRETARY’S
REPORT.—Not
later than 60 days after the date the Secretary of
Health and Human Services submits to Congress
the report under subsection (d), the Medicare Pay-
ment Advisory Commission (established under sec-
tion 1805 of the Social Security Act (42 U.S.C.
1395b–6)) shall submit to Congress a report describ-
ing the Commission’s analysis of the Secretary’s re-
port, and shall include the Commission’s rec-
ommendations with respect to the matters contained
in such report.
(2) ANNUAL REPORT.—The Commission shall
include in its annual report to Congress for June
1999 an analysis of whether changes in law made by
the Balanced Budget Act of 1997, as modified by
the amendments made by this section, with respect
to payments for home health services furnished
under the medicare program under title XVIII of the
Social Security Act impede access to such services
by individuals entitled to benefits under such pro-
gram.
(f) GAO AUDIT OF RESEARCH EXPENDITURES.—
The Comptroller General of the United States shall con-
duct an audit of sums obligated or expended by the Health
Care Financing Administration for the research described
in subsection (d)(1), and of the data, reports, proposals,
or other information provided by such research.
(g) PROMPT IMPLEMENTATION.—The Secretary of
Health and Human Services shall promptly issue (without
regard to chapter 8 of title 5, United States Code) such
regulations or program memoranda as may be necessary
to effect the amendments made by this section for cost
reporting periods beginning on or after October 1, 1998.
In effecting the amendments made by subsection (a) for
cost reporting periods beginning in fiscal year 1999, the
‘‘median’’ referred to in section 1861(v)(1)(L)(vi)(I) of
the Social Security Act for such periods shall be the na-
tional standardized per beneficiary limitation specified in
Table 3C published in the Federal Register on August 11,
1998, (63 FR 42926) and the ‘‘standardized regional av-
erage 
of 
such 
costs’’ 
referred 
to 
in 
section
1861(v)(1)(L)(v)(I) of such Act for a census division shall
be the sum of the labor and nonlabor components of the
standardized per-beneficiary limitation for that census di-
vision specified in Table 3B published in the Federal Reg-
ister on that date (63 FR 42926) (or in Table 3D as so
published with respect to Puerto Rico and Guam).
TITLE II—VETERANS MEDICARE
ACCESS IMPROVEMENT
SEC. 201. IMPROVEMENT IN VETERANS’ ACCESS TO SERV-
ICES.
(a) IN GENERAL.—Title XVIII of the Social Security
Act, as amended by sections 4603, 4801, and 4015(a) of
the Balanced Budget Act of 1997, is amended by adding
at the end the following:
‘‘IMPROVING VETERANS’ ACCESS TO SERVICES
‘‘SEC. 1897. (a) DEFINITIONS.—In this section:
‘‘(1) ADMINISTERING SECRETARIES.—The term
‘administering Secretaries’ means the Secretary of
Health and Human Services and the Secretary of
Veterans Affairs acting jointly.
‘‘(2) PROGRAM.—The term ‘program’ means
the program established under this section with re-
spect to category A medicare-eligible veterans.
‘‘(3) DEMONSTRATION
PROJECT; PROJECT.—
The terms ‘demonstration project’ and ‘project’
mean the demonstration project carried out under
this section with respect to category C medicare-eli-
gible veterans.
‘‘(4) MEDICARE-ELIGIBLE VETERANS.—
‘‘(A) CATEGORY
A
MEDICARE-ELIGIBLE
VETERAN.—The term ‘category A medicare-eli-
gible veteran’ means an individual—
‘‘(i) who is a veteran (as defined in
section 101(2) of title 38, United States
Code) and is described in paragraph (1) or
(2) of section 1710(a) of title 38, United
States Code;
‘‘(ii) who is entitled to hospital insur-
ance benefits under part A of the medicare
program and is enrolled in the supple-
mentary medical insurance program under
part B of the medicare program; and
‘‘(iii) for whom the medical center of
the Department of Veterans Affairs that is
closest to the individual’s place of resi-
dence is geographically remote or inacces-
sible from such place.
‘‘(B) CATEGORY
C
MEDICARE-ELIGIBLE
VETERAN.—The term ‘category C medicare-eli-
gible veteran’ means an individual who—
‘‘(i) is a veteran (as defined in section
101(2) of title 38, United States Code)
and is described in section 1710(a)(3) of
title 38, United States Code; and
‘‘(ii) is entitled to hospital insurance
benefits under part A of the medicare pro-
gram and is enrolled in the supplementary
medical insurance program under part B
of the medicare program.
‘‘(5) MEDICARE HEALTH CARE SERVICES.—The
term ‘medicare health care services’ means items or
services covered under part A or B of this title.
‘‘(6) TRUST FUNDS.—The term ‘trust funds’
means the Federal Hospital Insurance Trust Fund
established in section 1817 and the Federal Supple-
mentary Medical Insurance Trust Fund established
in section 1841.
‘‘(b) PROGRAM AND DEMONSTRATION PROJECT.—
‘‘(1) IN GENERAL.—
‘‘(A) ESTABLISHMENT.—The administer-
ing Secretaries are authorized to establish—
‘‘(i) a program (under an agreement
entered into by the administering Secretar-
ies) under which the Secretary of Health
and Human Services shall reimburse the
Secretary of Veterans Affairs, from the
trust funds, for medicare health care serv-
ices furnished to category A medicare-eligi-
ble veterans; and
‘‘(ii) a demonstration project (under
such an agreement) under which the Sec-
retary of Health and Human Services shall
reimburse the Secretary of Veterans Af-
fairs, from the trust funds, for medicare
health care services furnished to category
C medicare-eligible veterans.
‘‘(B) AGREEMENT.—The agreement en-
tered into under subparagraph (A) shall include
at a minimum—
‘‘(i) a description of the benefits to be
provided to the participants of the program
and the demonstration project established
under this section;
‘‘(ii) a description of the eligibility
rules for participation in the program and
demonstration project, including any cost
sharing requirements;
‘‘(iii) a description of the process for
enrolling veterans for participation in the
program, which process may, to the extent
practicable, be administered in the same or
similar manner to the registration process
established to implement section 1705 of
title 38, United States Code;
‘‘(iv) a description of how the pro-
gram and the demonstration project will
satisfy the requirements under this title;
‘‘(v) a description of the sites selected
under paragraph (2);
‘‘(vi) a description of how reimburse-
ment requirements under subsection (g)
and maintenance of effort requirements
under subsection (h) will be implemented
in the program and in the demonstration
project;
‘‘(vii) a statement that all data of the
Department of Veterans Affairs and of the
Department of Health and Human Serv-
ices that the administering Secretaries de-
termine is necessary to conduct independ-
ent estimates and audits of the mainte-
nance of effort requirement, the annual
reconciliation, and related matters required
under the program and the demonstration
project shall be available to the administer-
ing Secretaries;
‘‘(viii) a description of any require-
ment that the Secretary of Health and
Human Services waives pursuant to sub-
section (d);
‘‘(ix) a requirement that the Secretary
of Veterans Affairs undertake and main-
tain outreach and marketing activities,
consistent with capacity limits under the
program, for category A medicare-eligible
veterans;
‘‘(x) a description of how the admin-
istering Secretaries shall conduct the data
matching program under subparagraph
(F), including the frequency of updates to
the comparisons performed under subpara-
graph (F)(ii); and
‘‘(xi) a statement by the Secretary of
Veterans Affairs that the type or amount
of health care services furnished under
chapter 17 of title 38, United States Code,
to veterans who are entitled to benefits
under part A or enrolled under part B, or
both, shall not be reduced by reason of the
program or project.
‘‘(C) COST-SHARING UNDER DEMONSTRA-
TION PROJECT.—Notwithstanding any provision
of title 38, United States Code, in order—
‘‘(i) to maintain and broaden access
to services,
‘‘(ii) to encourage appropriate use of
services, and
‘‘(iii) to control costs,
the Secretary of Veterans Affairs may establish
enrollment fees and copayment requirements
under the demonstration project under this sec-
tion consistent with subsection (d)(1). Such fees
and requirements may vary based on income.
‘‘(D) HEALTH CARE BENEFITS.—The ad-
ministering Secretaries shall prescribe the mini-
mum health care benefits to be provided under
the program and demonstration project to
medicare-eligible veterans enrolled in the pro-
gram or project. Those benefits shall include at
least all medicare health care services covered
under this title.
‘‘(E) ESTABLISHMENT OF SERVICE NET-
WORKS.—
‘‘(i) USE
OF
VA
OUTPATIENT
CLIN-
ICS.—The Secretary of Veterans Affairs, to
the extent practicable, shall use outpatient
clinics of the Department of Veterans Af-
fairs in providing services under the pro-
gram.
‘‘(ii) AUTHORITY TO CONTRACT FOR
SERVICES.—The Secretary of Veterans Af-
fairs may enter into contracts and arrange-
ments with entities (such as private practi-
tioners, providers of services, preferred
provider organizations, and health care
plans) for the provision of services for
which the Secretary of Health and Human
Services is responsible under the program
or project under this section and shall take
into account the existence of qualified
practitioners and providers in the areas in
which the program or project is being con-
ducted. Under such contracts and arrange-
ments, such Secretary of Health and
Human Services may require the entities
to furnish such information as such Sec-
retary may require to carry out this sec-
tion.
‘‘(F) DATA MATCH.—
‘‘(i) 
ESTABLISHMENT
OF
DATA
MATCHING
PROGRAM.—The administering
Secretaries shall establish a data matching
program under which there is an exchange
of information of the Department of Veter-
ans Affairs and of the Department of
Health and Human Services as is nec-
essary to identify veterans who are entitled
to benefits under part A or enrolled under
part B, or both, in order to carry out this
section. The provisions of section 552a of
title 5, United States Code, shall apply
with respect to such matching program
only to the extent the administering Sec-
retaries find it feasible and appropriate in
carrying out this section in a timely and
efficient manner.
‘‘(ii) 
PERFORMANCE
OF
DATA
MATCH.—The administering Secretaries,
using the data matching program estab-
lished under clause (i), shall perform a
comparison in order to identify veterans
who are entitled to benefits under part A
or enrolled under part B, or both. To the
extent such Secretaries deem appropriate
to carry out this section, the comparison
and identification may distinguish among
such veterans by category of veterans, by
entitlement to benefits under this title, or
by other characteristics.
‘‘(iii) DEADLINE
FOR
FIRST
DATA
MATCH.—The 
administering 
Secretaries
shall first perform a comparison under
clause (ii) by not later than October 31,
1998.
‘‘(iv) CERTIFICATION
BY
INSPECTOR
GENERAL.—
‘‘(I) IN GENERAL.—The admin-
istering Secretaries may not conduct
the program unless the Inspector Gen-
eral of the Department of Health and
Human Services certifies to Congress
that the administering Secretaries
have established the data matching
program under clause (i) and have
performed a comparison under clause
(ii).
‘‘(II) DEADLINE
FOR
CERTIFI-
CATION.—Not later than December
15, 1998, the Inspector General of the
Department of Health and Human
Services shall submit a report to Con-
gress 
containing 
the 
certification
under subclause (I) or the denial of
such certification.
‘‘(2) NUMBER
OF
SITES.—The program and
demonstration project shall be conducted in geo-
graphic service areas of the Department of Veterans
Affairs, designated jointly by the administering Sec-
retaries after review of all such areas, as follows:
‘‘(A) PROGRAM SITES.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the program shall be
conducted in not more than 3 such areas
with respect to category A medicare-eligi-
ble veterans.
‘‘(ii) ADDITIONAL PROGRAM SITES.—
Subject to the certification required under
subsection (h)(1)(B)(iii), for a year begin-
ning on or after January 1, 2003, the pro-
gram shall be conducted in such areas as
are designated jointly by the administering
Secretaries after review of all such areas.
‘‘(B) PROJECT SITES.—
‘‘(i) IN
GENERAL.—The demonstra-
tion project shall be conducted in not more
than 3 such areas with respect to category
C medicare-eligible veterans.
‘‘(ii) MANDATORY SITE.—At least one
of the areas designated under clause (i)
shall encompass the catchment area of a
military medical facility which was closed
pursuant to either the Defense Base Clo-
sure and Realignment Act of 1990 (part A
of title XXIX of Public Law 101–510; 10
U.S.C. 2687 note) or title II of the De-
fense Authorization Amendments and Base
Closure and Realignment Act (Public Law
100–526; 10 U.S.C. 2687 note).
‘‘(3) RESTRICTION.—Funds from the program
or demonstration project shall not be used for—
‘‘(A) the construction of any treatment fa-
cility of the Department of Veterans Affairs; or
‘‘(B) the renovation, expansion, or other
construction at such a facility.
‘‘(4) DURATION.—The administering Secretar-
ies shall conduct and implement the program and
the demonstration project as follows:
‘‘(A) PROGRAM.—
‘‘(i) IN GENERAL.—The program shall
begin on January 1, 2000, in the sites des-
ignated under paragraph (2)(A)(i) and,
subject to subsection (h)(1)(B)(iii)(II), for
a year beginning on or after January 1,
2003, the program may be conducted in
such additional sites designated under
paragraph (2)(A)(ii).
‘‘(ii) LIMITATION
ON
NUMBER
OF
VETERANS COVERED UNDER CERTAIN CIR-
CUMSTANCES.—If for a year beginning on
or after January 1, 2003, the program is
conducted only in the sites designated
under paragraph (2)(A)(i), medicare health
care services may not be provided under
the program to a number of category-A
medicare-eligible veterans that exceeds the
aggregate number of such veterans covered
under the program as of December 31,
2002.
‘‘(B) 
PROJECT.—The 
demonstration
project shall begin on January 1, 1999, and
end on December 31, 2001.
‘‘(C) IMPLEMENTATION.—The administer-
ing Secretaries may implement the program
and demonstration project through the publica-
tion of regulations that take effect on an in-
terim basis, after notice and pending oppor-
tunity for public comment.
‘‘(5) REPORTS.—
‘‘(A) PROGRAM.—By not later than Sep-
tember 1, 1999, the administering Secretaries
shall submit a copy of the agreement entered
into under paragraph (1) with respect to the
program to Congress.
‘‘(B) PROJECT.—By not later than No-
vember 1, 1998, the administering Secretaries
shall submit a copy of the agreement entered
into under paragraph (1) with respect to the
project to Congress.
‘‘(6) REPORT ON MAINTENANCE OF LEVEL OF
HEALTH CARE SERVICES.—
‘‘(A) IN GENERAL.—The Secretary of Vet-
erans Affairs may not implement the program
at a site designated under paragraph (2)(A) un-
less, by not later than 90 days before the date
of the implementation, the Secretary of Veter-
ans Affairs submits to Congress and to the
Comptroller General of the United States a re-
port that contains the information described in
subparagraph (B). The Secretary of Veterans
Affairs shall periodically update the report
under this paragraph as appropriate.
‘‘(B) INFORMATION DESCRIBED.—For pur-
poses of subparagraph (A), the information de-
scribed in this subparagraph is a description of
the operation of the program at the site and of
the steps to be taken by the Secretary of Veter-
ans Affairs to prevent the reduction of the type
or amount of health care services furnished
under chapter 17 of title 38, United States
Code, to veterans who are entitled to benefits
under part A or enrolled under part B, or both,
within the geographic service area of the De-
partment of Veterans Affairs in which the site
is located by reason of the program or project.
‘‘(c) CREDITING OF PAYMENTS.—A payment received
by the Secretary of Veterans Affairs under the program
or demonstration project shall be credited to the applicable
Department of Veterans Affairs medical care appropria-
tion (and within that appropriation). Any such payment
received during a fiscal year for services provided during
a prior fiscal year may be obligated by the Secretary of
Veterans Affairs during the fiscal year during which the
payment is received.
‘‘(d) APPLICATION
OF CERTAIN MEDICARE RE-
QUIREMENTS.—
‘‘(1) AUTHORITY.—
‘‘(A) IN
GENERAL.—Except as provided
under subparagraph (B), the program and the
demonstration project shall meet all require-
ments of Medicare+Choice plans under part C
and regulations pertaining thereto, and other
requirements for receiving medicare payments,
except that the prohibition of payments to Fed-
eral providers of services under sections 1814(c)
and 1835(d), and paragraphs (2) and (3) of
section 1862(a) shall not apply.
‘‘(B) WAIVER.—Except as provided in
paragraph (2), the Secretary of Health and
Human Services is authorized to waive any re-
quirement described under subparagraph (A),
or approve equivalent or alternative ways of
meeting such a requirement, but only if such
waiver or approval—
‘‘(i) reflects the unique status of the
Department of Veterans Affairs as an
agency of the Federal Government; and
‘‘(ii) is necessary to carry out the pro-
gram or demonstration project.
‘‘(2) BENEFICIARY PROTECTIONS AND OTHER
MATTERS.—The program and the demonstration
project shall comply with the requirements of part C
of this title that relate to beneficiary protections and
other matters, including such requirements relating
to the following areas, to the extent not inconsistent
with subsection (b)(1)(B)(iii):
‘‘(A) Enrollment and disenrollment.
‘‘(B) Nondiscrimination.
‘‘(C) Information provided to beneficiaries.
‘‘(D) Cost-sharing limitations.
‘‘(E) Appeal and grievance procedures.
‘‘(F) Provider participation.
‘‘(G) Access to services.
‘‘(H) Quality assurance and external re-
view.
‘‘(I) Advance directives.
‘‘(J) Other areas of beneficiary protections
that the administering Secretaries determine
are applicable to such program or project.
‘‘(e) INSPECTOR GENERAL.—Nothing in the agree-
ment entered into under subsection (b) shall limit the In-
spector General of the Department of Health and Human
Services from investigating any matters regarding the ex-
penditure of funds under this title for the program and
demonstration project, including compliance with the pro-
visions of this title and all other relevant laws.
‘‘(f) VOLUNTARY PARTICIPATION.—Participation of a
category A medicare-eligible veteran in the program or
category C medicare-eligible veteran in the demonstration
project shall be voluntary.
‘‘(g) PAYMENTS BASED
ON REGULAR MEDICARE
PAYMENT RATES.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, the Secretary of Health
and Human Services shall reimburse the Secretary
of Veterans Affairs for services provided under the
program or demonstration project at a rate equal to
percent 
of 
the 
amount 
paid 
to 
a
Medicare+Choice organization under part C of this
title with respect to such an enrollee. In cases in
which a payment amount may not otherwise be read-
ily computed, the Secretary of Health and Human
Services shall establish rules for computing equiva-
lent or comparable payment amounts.
‘‘(2) EXCLUSION
OF
CERTAIN
AMOUNTS.—In
computing the amount of payment under paragraph
(1), the following shall be excluded:
‘‘(A) SPECIAL
PAYMENTS.—Any amount
attributable to an adjustment under subpara-
graphs (B) and (F) of section 1886(d)(5) and
subsection (h) of such section.
‘‘(B) PERCENTAGE
OF
CAPITAL
PAY-
MENTS.—An amount determined by the admin-
istering Secretaries for amounts attributable to
payments for capital-related costs under sub-
section (g) of such section.
‘‘(3) PERIODIC
PAYMENTS
FROM
MEDICARE
TRUST
FUNDS.—Payments under this subsection
shall be made—
‘‘(A) on a periodic basis consistent with
the periodicity of payments under this title; and
‘‘(B) in appropriate part, as determined by
the Secretary of Health and Human Services,
from the trust funds.
‘‘(4) CAP ON REIMBURSEMENT AMOUNTS.—The
aggregate amount to be reimbursed under this sub-
section pursuant to the agreement entered into be-
tween the administering Secretaries under sub-
section (b) is as follows:
‘‘(A) PROGRAM.—With respect to category
A medicare-eligible veterans, such aggregate
amount shall not exceed—
‘‘(i) for 2000, a total of $50,000,000;
‘‘(ii) for 2001, a total of $75,000,000;
and
‘‘(iii) subject to subparagraph (B), for
2002 and each succeeding year, a total of
$100,000,000.
‘‘(B) EXPANSION OF PROGRAM.—If for a
year beginning on or after January 1, 2003, the
program is conducted in sites designated under
subsection (b)(2)(A)(ii), the limitation under
subparagraph (A)(iii) shall not apply to the pro-
gram for such a year.
‘‘(C) PROJECT.—With respect to category
C medicare-eligible veterans, such aggregate
amount shall not exceed a total of $50,000,000
for each of calendar years 1999 through 2001.
‘‘(h) MAINTENANCE OF EFFORT.—
‘‘(1) MONITORING EFFECT OF PROGRAM AND
DEMONSTRATION PROJECT ON COSTS TO MEDICARE
PROGRAM.—
‘‘(A) IN
GENERAL.—The administering
Secretaries, in consultation with the Comptrol-
ler General of the United States, shall closely
monitor the expenditures made under this title
for category A and C medicare-eligible veterans
compared to the expenditures that would have
been made for such veterans if the program and
demonstration project had not been conducted.
The agreement entered into by the administer-
ing Secretaries under subsection (b) shall re-
quire the Department of Veterans Affairs to
maintain overall the level of effort for services
covered under this title to such categories of
veterans by reference to a base year as deter-
mined by the administering Secretaries.
‘‘(B) DETERMINATION
OF
MEASURE
OF
COSTS
OF
MEDICARE
HEALTH
CARE
SERV-
ICES.—
‘‘(i) IMPROVEMENT OF INFORMATION
MANAGEMENT
SYSTEM.—Not later than
October 1, 2001, the Secretary of Veterans
Affairs shall improve its information man-
agement system such that, for a year be-
ginning on or after January 1, 2002, the
Secretary of Veterans Affairs is able to
identify costs incurred by the Department
of Veterans Affairs in providing medicare
health care services to medicare-eligible
veterans for purposes of meeting the re-
quirements with respect to maintenance of
effort under an agreement under sub-
section (b)(1)(A).
‘‘(ii) IDENTIFICATION
OF
MEDICARE
HEALTH CARE SERVICES.—The Secretary
of Health and Human Services shall pro-
vide such assistance as is necessary for the
Secretary of Veterans Affairs to determine
which health care services furnished by the
Secretary of Veterans Affairs qualify as
medicare health care services.
‘‘(iii) CERTIFICATION BY HHS INSPEC-
TOR GENERAL.—
‘‘(I) REQUEST
FOR
CERTIFI-
CATION.—The Secretary of Veterans
Affairs may request the Inspector
General of the Department of Health
and Human Services to make a cer-
tification to Congress that the Sec-
retary of Veterans Affairs has im-
proved its management system under
clause (i) such that the Secretary of
Veterans Affairs is able to identify the
costs described in such clause in a
reasonably reliable and accurate man-
ner.
‘‘(II) REQUIREMENT FOR EXPAN-
SION
OF
PROGRAM.—The program
may be conducted in the additional
sites under paragraph (2)(A)(ii) and
cover such additional category A
medicare eligible veterans in such ad-
ditional sites only if the Inspector
General of the Department of Health
and Human Services has made the
certification described in subclause
(I).
‘‘(III) DEADLINE
FOR
CERTIFI-
CATION.—Not later than the date that
is the earlier of the date that is 60
days after the Secretary of Veterans
Affairs requests a certification under
subclause (I) or June 1, 2002, the In-
spector General of the Department of
Health and Human Services shall sub-
mit a report to Congress containing
the certification under subclause (I)
or the denial of such certification.
‘‘(C) MAINTENANCE
OF
LEVEL
OF
EF-
FORT.—
‘‘(i) REPORT BY SECRETARY OF VET-
ERANS AFFAIRS ON BASIS FOR CALCULA-
TION.—Not later than the date that is 60
days after the date on which the admin-
istering Secretaries enter into an agree-
ment under subsection (b)(1)(A), the Sec-
retary of Veterans Affairs shall submit a
report to Congress and the Comptroller
General of the United States explaining
the methodology used and basis for cal-
culating the level of effort of the Depart-
ment of Veterans Affairs under the pro-
gram and project.
‘‘(ii) REPORT BY COMPTROLLER GEN-
ERAL.—Not later than the date that is 180
days after the date described in clause (i),
the Comptroller General of the United
States shall submit to Congress and the
administering Secretaries a report setting
forth the Comptroller General’s findings,
conclusion, and recommendations with re-
spect to the report submitted by the Sec-
retary of Veterans Affairs under clause (i).
‘‘(iii) RESPONSE
BY
SECRETARY
OF
VETERANS
AFFAIRS.—The Secretary of
Veterans Affairs shall submit to Congress
not later than 60 days after the date de-
scribed in clause (ii) a report setting forth
such Secretary’s response to the report
submitted by the Comptroller General
under clause (ii).
‘‘(D) ANNUAL REPORT BY THE COMPTROL-
LER GENERAL.—Not later than December 31 of
each year during which the program and dem-
onstration project is conducted, the Comptroller
General of the United States shall submit to
the administering Secretaries and to Congress a
report on the extent, if any, to which the costs
of the Secretary of Health and Human Services
under the medicare program under this title in-
creased during the preceding fiscal year as a re-
sult of the program or demonstration project.
‘‘(2) REQUIRED
RESPONSE
IN
CASE
OF
IN-
CREASE IN COSTS.—
‘‘(A) IN GENERAL.—If the administering
Secretaries find, based on paragraph (1), that
the expenditures under the medicare program
under this title increased (or are expected to in-
crease) during a fiscal year because of the pro-
gram or demonstration project, the administer-
ing Secretaries shall take such steps as may be
needed—
‘‘(i) to recoup for the medicare pro-
gram the amount of such increase in ex-
penditures; and
‘‘(ii) to prevent any such increase in
the future.
‘‘(B) STEPS.—Such steps—
‘‘(i) under subparagraph (A)(i) shall
include payment of the amount of such in-
creased expenditures by the Secretary of
Veterans Affairs from the current medical
care appropriation for the Department of
Veterans Affairs to the trust funds; and
‘‘(ii) under subparagraph (A)(ii) shall
include lowering the amount of payment
under the program or project under sub-
section (g)(1), and may include, in the case
of the demonstration project, suspending
or terminating the project (in whole or in
part).
‘‘(i) EVALUATION AND REPORTS.—
‘‘(1) INDEPENDENT EVALUATION BY GAO.—
‘‘(A) IN GENERAL.—The Comptroller Gen-
eral of the United States shall conduct an eval-
uation of the program and an evaluation of the
demonstration project, and shall submit annual
reports on the program and demonstration
project to the administering Secretaries and to
Congress.
‘‘(B) FIRST REPORT.—The first report for
the program or demonstration project under
subparagraph (A) shall be submitted not later
than 12 months after the date on which the
Secretary of Veterans Affairs first provides
services under the program or project, respec-
tively.
‘‘(C) FINAL REPORT ON DEMONSTRATION
PROJECT.—A final report shall be submitted
with respect to the demonstration project not
later than 31⁄2 years after the date of the first
report on the project under subparagraph (B).
‘‘(D) CONTENTS.—The evaluation and re-
ports under this paragraph for the program or
demonstration project shall include an assess-
ment, based on the agreement entered into
under subsection (b), of the following:
‘‘(i) Any savings or costs to the medi-
care program under this title resulting
from the program or project.
‘‘(ii) The cost to the Department of
Veterans Affairs of providing care to cat-
egory A medicare-eligible veterans under
the program or to category C medicare-eli-
gible veterans under the demonstration
project, respectively.
‘‘(iii) An analysis of how such pro-
gram or project affects the overall acces-
sibility of medical care through the De-
partment of Veterans Affairs, and a de-
scription of the unintended effects (if any)
upon the patient enrollment system under
section 1705 of title 38, United States
Code.
‘‘(iv) Compliance by the Department
of Veterans Affairs with the requirements
under this title.
‘‘(v) The number of category A medi-
care-eligible veterans or category C medi-
care-eligible veterans, respectively, opting
to participate in the program or project in-
stead of receiving health benefits through
another health insurance plan (including
benefits under this title).
‘‘(vi) A list of the health insurance
plans and programs that were the primary
payers for medicare-eligible veterans dur-
ing the year prior to their participation in
the program or project, respectively, and
the distribution of their previous enroll-
ment in such plans and programs.
‘‘(vii) Any impact of the program or
project, respectively, on private health care
providers and beneficiaries under this title
that are not enrolled in the program or
project.
‘‘(viii) An assessment of the access to
care and quality of care for medicare-eligi-
ble veterans under the program or project,
respectively.
‘‘(ix) An analysis of whether, and in
what manner, easier access to medical cen-
ters of the Department of Veterans Affairs
affects the number of category A medicare-
eligible veterans or C medicare-eligible vet-
erans, 
respectively, 
receiving 
medicare
health care services.
‘‘(x) Any impact of the program or
project, respectively, on the access to care
for category A medicare-eligible veterans
or C medicare-eligible veterans, respec-
tively, who did not enroll in the program or
project and for other individuals entitled to
benefits under this title.
‘‘(xi) A description of the difficulties
(if any) experienced by the Department of
Veterans Affairs in managing the program
or project, respectively.
‘‘(xii) Any additional elements speci-
fied in the agreement entered into under
subsection (b).
‘‘(xiii) Any additional elements that
the Comptroller General of the United
States determines is appropriate to assess
regarding the program or project, respec-
tively.
‘‘(2) REPORTS BY SECRETARIES ON PROGRAM
AND DEMONSTRATION PROJECT WITH RESPECT TO
MEDICARE-ELIGIBLE VETERANS.—
‘‘(A) 
DEMONSTRATION
PROJECT.—Not
later than 6 months after the date of the sub-
mission of the final report by the Comptroller
General of the United States on the demonstra-
tion project under paragraph (1)(C), the admin-
istering Secretaries shall submit to Congress a
report containing their recommendation as to—
‘‘(i) whether there is a cost to the
health care program under this title in
conducting the demonstration project;
‘‘(ii) whether to extend the dem-
onstration project or make the project per-
manent; and
‘‘(iii) whether the terms and condi-
tions of the project should otherwise be
continued (or modified) with respect to
medicare-eligible veterans.
‘‘(B) PROGRAM.—Not later than 6 months
after the date of the submission of the report
by the Comptroller General of the United
States on the third year of the operation of the
program, the administering Secretaries shall
submit to Congress a report containing their
recommendation as to—
‘‘(i) whether there is a cost to the
health care program under this title in
conducting the program under this section;
‘‘(ii) whether to discontinue the pro-
gram with respect to category A medicare-
eligible veterans; and
‘‘(iii) whether the terms and condi-
tions of the program should otherwise be
continued (or modified) with respect to
medicare-eligible veterans.
‘‘(j) 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) shall apply to enrollment (and termination of
enrollment) in the demonstration project, 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 sec-
tion 1882(s)(3)(B) to 12 months is deemed a ref-
erence to 36 months; and
‘‘(B) the notification required under section
1882(s)(3)(D) shall be provided in a manner speci-
fied by the Secretary of Veterans Affairs.’’.
(b) REPEAL OF PLAN REQUIREMENT.—Subsection
(b) of section 4015 of the Balanced Budget Act of 1997
(relating to an implementation plan for Veterans sub-
vention) is repealed.
(c) REPORT TO CONGRESS ON A METHOD TO IN-
CLUDE THE COSTS OF VETERANS AFFAIRS AND MILI-
TARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENE-
FICIARIES IN THE CALCULATION OF MEDICARE+CHOICE
PAYMENT RATES.—The Secretary of Health and Human
Services shall report to the Congress by not later than
January 1, 2001, on a method to phase-in the costs of
military facility services furnished by the Department of
Veterans Affairs or the Department of Defense to medi-
care-eligible beneficiaries in the calculation of an area’s
Medicare+Choice capitation payment. Such report shall
include on a county-by- county basis—
(1) the actual or estimated cost of such services
to medicare-eligible beneficiaries;
(2) the change in Medicare+Choice capitation
payment rates if such costs are included in the cal-
culation of payment rates;
(3) one or more proposals for the implementa-
tion of payment adjustments to Medicare+Choice
plans in counties where the payment rate has been
affected due to the failure to calculate the cost of
such services to medicare-eligible beneficiaries; and
(4) 
a 
system 
to 
ensure 
that 
when 
a
Medicare+Choice enrollee receives covered services
through a facility of the Department of Veterans Af-
fairs or the Department of Defense there is an ap-
propriate payment recovery to the medicare pro-
gram.
TITLE III—AUTHORIZATION OF
ADDITIONAL EXCEPTIONS TO
IMPOSITION OF PENALTIES
FOR CERTAIN INDUCEMENTS
SEC. 301. AUTHORIZATION OF ADDITIONAL EXCEPTIONS TO
IMPOSITION OF PENALTIES FOR PROVIDING
INDUCEMENTS TO BENEFICIARIES.
(a) IN GENERAL.—Subparagraph (B) of section
1128A(i)(6) of the Social Security Act (42 U.S.C. 1320a–
7a(i)(6)) is amended to read as follows:
‘‘(B) any permissible practice described in
any subparagraph of section 1128B(b)(3) or in
regulations issued by the Secretary;’’.
(b) EXTENSION
OF ADVISORY OPINION AUTHOR-
ITY.—Section 1128D(b)(2)(A) of such Act (42 U.S.C.
1320a–7d(b)(2)(A)) is amended by inserting ‘‘or section
1128A(i)(6)’’ after ‘‘1128B(b)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
(d) INTERIM FINAL RULEMAKING AUTHORITY.—The
Secretary of Health and Human Services may promulgate
regulations that take effect on an interim basis, after no-
tice and pending opportunity for public comment, in order