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(2) BUDGET
NEUTRALITY.—In conducting the
project under this section, the Secretary shall ensure
that the aggregate payments made by the Secretary
do not exceed the amount which the Secretary would
have paid if the project under this section was not
implemented.
(i) WAIVER AUTHORITY.—The Secretary shall waive
compliance with the requirements of title XVIII of the So-
cial Security Act to such extent and for such period as the
Secretary determines is necessary to conduct demonstration
projects.
SEC. 450J. EQUITABLE TREATMENT FOR CHILDREN’S HOS-
PITALS.
(a) IN
GENERAL.—Section 1833(t)(7)(D)(ii) (42
U.S.C. 1395l(t)(7)(D)(ii)) is amended to read as follows:
‘‘(ii) PERMANENT
TREATMENT
FOR
CANCER HOSPITALS AND CHILDREN’S HOS-
PITALS.—
‘‘(I) IN
GENERAL.—Subject to
subclause (II), in the case of a hospital
described in clause (iii) or (v) of sec-
tion 1886(d)(1)(B), for covered OPD
services for which the PPS amount is
less than the pre-BBA amount, the
amount of payment under this sub-
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section shall be increased by the
amount of such difference.
‘‘(II) SPECIAL RULE FOR CERTAIN
CHILDREN’S HOSPITALS.—In the case
of a hospital described in section
1886(d)(1)(B)(iii) that is located in a
State with a reimbursement system
under section 1814(b)(3), but that is
not reimbursed under such system, for
covered OPD services furnished on or
after October 1, 2003, and for which
the PPS amount is less than the great-
er of the pre-BBA amount or the rea-
sonable operating and capital costs
without reductions of the hospital in
providing such services, the amount of
payment under this subsection shall be
increased by the amount of such dif-
ference.’’.
SEC. 450K. TREATMENT OF PHYSICIANS’ SERVICES FUR-
NISHED IN ALASKA.
Section 1848(b) (42 U.S.C. 1395w–4(b)) is amended—
(1) in paragraph (1), in the matter preceding
subparagraph (A), by striking ‘‘paragraph (2)’’ and
inserting ‘‘paragraphs (2) and (4)’’; and
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(2) by adding at the end the following new para-
graph:
‘‘(4) TREATMENT OF PHYSICIANS’ SERVICES FUR-
NISHED IN ALASKA.—
‘‘(A) IN GENERAL.—With respect to physi-
cians’ services furnished in Alaska on or after
January 1, 2004, and before January 1, 2006,
the fee schedule for such services shall be deter-
mined as follows:
‘‘(i) Subject to clause (ii), the payment
amount for a service furnished in a year
shall be an amount equal to—
‘‘(I) in the case of services fur-
nished in calendar year 2004, 90 per-
cent of the VA Alaska fee schedule
amount for the service for fiscal year
2001; and
‘‘(II) in the case of services fur-
nished in calendar year 2005, the
amount determined under subclause (I)
for 2004, increased by the annual up-
date determined under subsection (d)
for the year involved.
‘‘(ii) In the case of a service for which
there was no VA Alaska fee schedule amount
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for fiscal year 2001, the payment amount
shall be an amount equal to the sum of—
‘‘(I) the amount of payment for
the service that would otherwise apply
under this section; plus
‘‘(II) an amount equal to the ap-
plicable percent (as described in sub-
paragraph (C)) of the amount de-
scribed in subclause (I).
‘‘(B) 
VA 
ALASKA
FEE
SCHEDULE
AMOUNT.—For purposes of this paragraph, the
term ‘VA Alaska fee schedule amount’ means the
amount that was paid by the Department of Vet-
erans Affairs in Alaska in fiscal year 2001 for
non-Department of Veterans Affairs physicians’
services associated with either outpatient or in-
patient care provided to individuals eligible for
hospital care or medical services under chapter
17 of title 38, United States Code, at a non-De-
partment facility (as that term is defined in sec-
tion 1701(4) of such title 38.
‘‘(C) APPLICABLE PERCENT.—For purposes
of this paragraph, the term ‘applicable percent’
means the weighted average percentage (based on
claims under this section) by which the fiscal
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year 2001 VA Alaska fee schedule amount for
physicians’ services exceeded the amount of pay-
ment for such services under this section that ap-
plied in Alaska in 2001.’’.
SEC. 450L. DEMONSTRATION PROJECT TO EXAMINE WHAT
WEIGHT LOSS WEIGHT MANAGEMENT SERV-
ICES CAN COST EFFECTIVELY REACH THE
SAME RESULT AS THE NIH DIABETES PRI-
MARY PREVENTION TRIAL STUDY: A 50 PER-
CENT REDUCTION IN THE RISK FOR TYPE 2
DIABETES FOR INDIVIDUALS WHO HAVE IM-
PAIRED 
GLUCOSE 
TOLERANCE 
AND 
ARE
OBESE.
(a) IN GENERAL.—Inasmuch as the NIH Diabetes Pri-
mary Prevention Trial study proved that the risk of type
2 diabetes could be cut in half when the Institute of Medi-
cine definition of successful weight loss (5 percent weight
loss maintained for a year) is achieved by individuals at
risk for type 2 diabetes due to obesity and impaired glucose
tolerance, the Secretary shall conduct a demonstration
project to examine the cost effectiveness and health benefits
of providing group weight loss management services to
achieve the same result for beneficiaries under the medicare
program under title XVIII of the Social Security Act who
are obese and have impaired glucose tolerance.
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(b) LIMITATION.—The cost of the group weight loss
management services provided under subsection (a) shall
not exceed the cost per recipient per year of the medical
nutritional therapy benefit currently available to medicare
beneficiaries.
(c) SCOPE OF SERVICES.—
(1) DURATION.—The project shall be conducted
for a period of 2 fiscal years.
(2) SITES.—The Secretary shall designate the
sites at which to conduct the demonstration program
under this section. In selecting sites under this para-
graph, the Secretary shall give preference to sites lo-
cated in—
(A) rural areas; or
(B) areas that have a high concentration of
Native Americans with type 2 diabetes.
(3) FUNDING.—
(A) IN GENERAL.—Subject to subparagraph
(B), the Secretary shall provide for the transfer
from the Federal Supplementary Insurance
Trust Fund established under section 1841 of
such Act (42 U.S.C. 1395t) of such funds as are
necessary for the costs of carrying out the dem-
onstration program under this section.
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(B) LIMITATION.—The total amount of the
payments that may be made under this section
shall not exceed $2,500,000 for each fiscal year
in which the project is conducted under para-
graph (1).
(d) COVERAGE AS MEDICARE PART B SERVICES.—
(1) IN GENERAL.—Subject to the succeeding pro-
visions of this subsection, medical nutrition therapy
services furnished under the project shall be consid-
ered to be services covered under part B of title XVIII
of the Social Security Act (42 U.S.C. 1395j et seq.).
(2) PAYMENT.—Payment for such services shall
be made at a rate of 80 percent of the lesser of the
actual charge for the services or 85 percent of the fee
schedule amount provided under section 1848 of the
Social Security Act (42 U.S.C. 139w–4) for the same
services if such services were furnished by a physi-
cian.
(3) APPLICATION OF LIMITS OF BILLING.—The
provisions of section 1842(b)(18) of the Social Secu-
rity Act (42 U.S.C. 1395u(b)(18)) shall apply to a
group weight loss management professional furnishing
services under the project in the same manner as they
to a practitioner described in subparagraph (C) of
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such section furnishing services under title XVIII of
such Act.
(e) REPORTS.—The Secretary shall submit to the Com-
mittee on Ways and Means and the Committee on Com-
merce of the House of Representatives and the Committee
on Finance of the Senate interim reports on the project and
a final report on the project not later than the date that
is 6 months after the date on which the project concludes.
The final report shall include an evaluation of the impact
of the use of group weight loss management services as part
of medical nutrition therapy on medicare beneficiaries and
on the medicare program, including any impact on reduc-
ing costs under the program and improving the health of
beneficiaries.
(f) DEFINITIONS.—For purposes of this section:
(1) The term ‘‘obesity’’ means that an individual
has a Body Mass Index (BMI) of 30 and above.
(2) GROUP WEIGHT LOSS MANAGEMENT SERV-
ICES.—The term ‘‘group weight loss management
services’’ means comprehensive services furnished to
individuals who have been diagnosed and referred by
a physician as having impaired glucose tolerance and
who are obese that consist of—
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(A) assessment and treatment based on the
needs of individuals as determined by a group
weight loss management professional; or
(B) a specific program or method that has
demonstrated its efficacy to produce and main-
tain weight loss through results published in
peer-reviewed scientific journals using recognized
research methods and statistical analysis that
provides—
(i) assessment of current body weight
and recording of weight status at each meet-
ing session;
(ii) provision of a healthy eating plan;
(iii) provision of an activity plan;
(iv) provision of a behavior modifica-
tion plan; and
(v) a weekly group support meeting.
(3) GROUP WEIGHT LOSS MANAGEMENT PROFES-
SIONAL.—The term ‘‘group weight loss management
professional’’ means an individual who has completed
training to provide a program or method that has
completed clinical trials and has demonstrated its ef-
ficacy through publications in peer-reviewed scientific
journals who—
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(A)(i) holds a baccalaureate or higher de-
gree granted by a regionally accredited college or
university in the United States (or an equivalent
foreign degree) in nutrition social work, psy-
chology with experience in behavioral modifica-
tion methods to reduce obesity; or
(ii) has completed a curriculum of training
for a specific behavioral based weight manage-
ment program as described in section (4)(A)(2)
and recommended in the NIH Clinical Guide-
lines on Identification, Evaluation, and Treat-
ment of Overweight and Obesity in Adults, chap-
ter 4, section H, parts 1, 2, 3, 4, and pursuant
to guidelines by the Secretary; and
(B)(i) is licensed or certified as a group
weight loss management professional by the
State in which the services are performed; or
(ii) is certified by an organization that
meets such criteria as the Secretary establishes
with—
(I) national organizations representing
consumers such as the American Obesity As-
sociation and the elderly; and
(II) such other organizations as the
Secretary determines appropriate.
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Subtitle C—Provisions Relating to
Parts A and B
SEC. 451. INCREASE FOR HOME HEALTH SERVICES FUR-
NISHED IN A RURAL AREA.
(a) IN GENERAL.—In the case of home health services
furnished in a rural area (as defined in section
1886(d)(2)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(2)(D))) on or after October 1, 2004, and before
October 1, 2006, the Secretary shall increase the payment
amount otherwise made under section 1895 of such Act (42
U.S.C. 1395fff ) for such services by 5 percent.
(b) WAIVING BUDGET NEUTRALITY.—The Secretary
shall not reduce the standard prospective payment amount
(or amounts) under section 1895 of the Social Security Act
(42 U.S.C. 1395fff ) applicable to home health services fur-
nished during a period to offset the increase in payments
resulting from the application of subsection (a).
(c) NO EFFECT ON SUBSEQUENT PERIODS.—The pay-
ment increase provided under subsection (a) for a period
under such subsection—
(1) shall not apply to episodes and visits ending
after such period; and
(2) shall not be taken into account in calculating
the payment amounts applicable for episodes and vis-
its occurring after such period.
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SEC. 452. LIMITATION ON REDUCTION IN AREA WAGE AD-
JUSTMENT FACTORS UNDER THE PROSPEC-
TIVE PAYMENT SYSTEM FOR HOME HEALTH
SERVICES.
Section 1895(b)(4)(C) (42 U.S.C. 1395fff(b)(4)(C)) is
amended—
(1) by striking ‘‘FACTORS.—The Secretary’’ and
inserting ‘‘FACTORS.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), the Secretary’’; and
(2) by adding at the end the following new
clause:
‘‘(ii) LIMITATION
ON
REDUCTION
IN
FISCAL
YEAR
2005
AND
2006.—For fiscal
years 2005 and 2006, the area wage adjust-
ment factor applicable to home health serv-
ices furnished in an area in the fiscal year
may not be more that 3 percent less than
the area wage adjustment factor applicable
to home health services for the area for the
previous year.’’.
SEC. 453. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO
MEDICARE LIMITS ON PHYSICIAN REFER-
RALS.
(a) LIMITS ON PHYSICIAN REFERRALS.—
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(1) OWNERSHIP AND INVESTMENT INTERESTS IN
WHOLE HOSPITALS.—
(A) IN GENERAL.—Section 1877(d)(3) (42
U.S.C. 1395nn(d)(3)) is amended—
(i) by striking ‘‘and’’ at the end of sub-
paragraph (A); and
(ii) by redesignating subparagraph (B)
as subparagraph (C) and inserting after
subparagraph (A) the following:
‘‘(B) the hospital is not a specialty hospital
(as defined in subsection (h)(7)); and’’.
(B) 
DEFINITION.—Section 
1877(h) 
(42
U.S.C. 1395nn(h)) is amended by adding at the
end the following:
‘‘(7) SPECIALTY HOSPITAL.—
‘‘(A) IN
GENERAL.—For purposes of this
section, except as provided in subparagraph (B),
the term ‘specialty hospital’ means a hospital
that is primarily or exclusively engaged in the
care and treatment of one of the following:
‘‘(i) patients with a cardiac condition;
‘‘(ii) patients with an orthopedic con-
dition;
‘‘(iii) patients receiving a surgical pro-
cedure; or
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‘‘(iv) any other specialized category of
patients or cases that the Secretary des-
ignates as inconsistent with the purpose of
permitting physician ownership and invest-
ment interests in a hospital under this sec-
tion.
‘‘(B) EXCEPTION.—For purposes of this sec-
tion, the term ‘specialty hospital’ does not in-
clude any hospital—
‘‘(i) determined by the Secretary—
‘‘(I) to be in operation before
June 12, 2003; or
‘‘(II) under development as of
such date;
‘‘(ii) for which the number of beds and
the number of physician investors at any
time on or after such date is no greater
than the number of such beds or investors as
of such date; and
‘‘(iii) that meets such other require-
ments as the Secretary may specify.’’.
(2) OWNERSHIP AND INVESTMENT INTERESTS IN
A RURAL PROVIDER.—Section 1877(d)(2) (42 U.S.C.
1395nn(d)(2)) is amended to read as follows:
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‘‘(2) RURAL
PROVIDERS.—In the case of des-
ignated health services furnished in a rural area (as
defined in section 1886(d)(2)(D)) by an entity, if—
‘‘(A) substantially all of the designated
health services furnished by the entity are fur-
nished to individuals residing in such a rural
area;
‘‘(B) the entity is not a specialty hospital
(as defined in subsection (h)(7)); and
‘‘(C) the Secretary determines, with respect
to such entity, that such services would not be
available in such area but for the ownership or
investment interest.’’.
(b) EFFECTIVE DATE.—Subject to paragraph (2), the
amendments made by this section shall apply to referrals
made for designated health services on or after January 1,
2004.
(c) APPLICATION
OF EXCEPTION
FOR HOSPITALS
UNDER
DEVELOPMENT.—For 
purposes 
of 
section
1877(h)(7)(B)(i)(II) of the Social Security Act, as added
by subsection (a)(1)(B), in determining whether a hospital
is under development as of June 12, 2003, the Secretary
shall consider—
(1) whether architectural plans have been com-
pleted, funding has been received, zoning requirements
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have been met, and necessary approvals from appro-
priate State agencies have been received; and
(2) any other evidence the Secretary determines
would indicate whether a hospital is under develop-
ment as of such date.
SEC. 454. DEMONSTRATION PROGRAM FOR SUBSTITUTE
ADULT DAY SERVICES.
(a) ESTABLISHMENT.—The Secretary shall establish a
demonstration program (in this section referred to as the
‘‘demonstration program’’) under which the Secretary pro-
vides eligible medicare beneficiaries with coverage under the
medicare program of substitute adult day services furnished
by an adult day services facility.
(b) PAYMENT RATE FOR SUBSTITUTE ADULT DAY
SERVICES.—
(1) PAYMENT RATE.—For purposes of making
payments to an adult day services facility for sub-
stitute adult day services under the demonstration
program, the following rules shall apply:
(A) ESTIMATION OF PAYMENT AMOUNT.—
The Secretary shall estimate the amount that
would otherwise be payable to a home health
agency under section 1895 of the Social Security
Act (42 U.S.C. 1395fff) for all home health serv-
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ices described in subsection (i)(4)(B)(i) under the
plan of care.
(B) AMOUNT
OF
PAYMENT.—Subject to
paragraph (3)(B), the total amount payable for
substitute adult day services under the plan of
care is equal to 95 percent of the amount esti-
mated to be payable under subparagraph (A).
(2) LIMITATION ON BALANCE BILLING.—Under
the demonstration program, an adult day services fa-
cility shall accept as payment in full for substitute
adult day services (including those services described
in clauses (ii) through (iv) of subsection (i)(4)(B))
furnished by the facility to an eligible medicare bene-
ficiary the amount of payment provided under the
demonstration program for home health services con-
sisting of substitute adult services.
(3) ADJUSTMENT IN CASE OF OVERUTILIZATION
OF SUBSTITUTE ADULT DAY SERVICES TO ENSURE
BUDGET NEUTRALITY.—The Secretary shall monitor
the expenditures under the demonstration program
and under title XVIII of the Social Security Act for
home health services. If the Secretary estimates that
the total expenditures under the demonstration pro-
gram and under such title XVIII for home health
services for a period determined by the Secretary ex-
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ceed expenditures that would have been made under
such title XVIII for home health services for such pe-
riod if the demonstration program had not been con-
ducted, the Secretary shall adjust the rate of payment
to adult day services facilities under paragraph
(1)(B) in order to eliminate such excess.
(c) DEMONSTRATION PROGRAM SITES.—The dem-
onstration program shall be conducted in not more than
3 sites selected by the Secretary.
(d) DURATION; IMPLEMENTATION.—
(1) DURATION.—The Secretary shall conduct the
demonstration program for a period of 3 years.
(2) IMPLEMENTATION.—The Secretary may not
implement the demonstration program before October
1, 2004.
(e) VOLUNTARY PARTICIPATION.—Participation of eli-
gible medicare beneficiaries in the demonstration program
shall be voluntary.
(f) WAIVER AUTHORITY.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary may waive such require-
ments of titles XI and XVIII of the Social Security
Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
necessary for the purposes of carrying out the dem-
onstration program.
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(2) MAY NOT WAIVE ELIGIBILITY REQUIREMENTS
FOR HOME HEALTH SERVICES.—The Secretary may
not waive the beneficiary eligibility requirements for
home health services under title XVIII of the Social
Security Act.
(g) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall conduct
an evaluation of the clinical and cost effectiveness of
the demonstration program.
(2) REPORT.—Not later than 30 months after the
commencement of the demonstration program, the
Secretary shall submit to Congress a report on the
evaluation conducted under paragraph (1) and shall
include in the report the following:
(A) An analysis of the patient outcomes and
costs of furnishing care to the eligible medicare
beneficiaries participating in the demonstration
program as compared to such outcomes and costs
to such beneficiaries receiving only home health
services under title XVIII of the Social Security
Act for the same health conditions.
(B) Such recommendations regarding the
extension, expansion, or termination of the pro-
gram as the Secretary determines appropriate.
(i) DEFINITIONS.—In this section:
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(1) ADULT DAY SERVICES FACILITY.—
(A) IN GENERAL.—Except as provided in
subparagraphs (B) and (C), the term ‘‘adult day
services facility’’ means a public agency or pri-
vate organization, or a subdivision of such an
agency or organization, that—
(i) is engaged in providing skilled
nursing services and other therapeutic serv-
ices directly or under arrangement with a
home health agency;
(ii) provides the items and services de-
scribed in paragraph (4)(B); and
(iii) meets the requirements of para-
graphs (2) through (8) of subsection (o).
(B) INCLUSION.—Notwithstanding subpara-
graph (A), the term ‘‘adult day services facility’’
shall include a home health agency in which the
items and services described in clauses (ii)
through (iv) of paragraph (4)(B) are provided—
(i) by an adult day services program
that is licensed or certified by a State, or
accredited, to furnish such items and serv-
ices in the State; and
(ii) under arrangements with that pro-
gram made by such agency.
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(C) WAIVER OF SURETY BOND.—The Sec-
retary may waive the requirement of a surety
bond under section 1861(o)(7) of the Social Secu-
rity Act (42 U.S.C. 1395x(o)(7)) in the case of
an agency or organization that provides a com-
parable surety bond under State law.
(2) ELIGIBLE
MEDICARE
BENEFICIARY.—The
term ‘‘eligible medicare beneficiary’’ means an indi-
vidual eligible for home health services under title
XVIII of the Social Security Act.
(3) HOME HEALTH AGENCY.—The term ‘‘home
health agency’’ has the meaning given such term in
section 1861(o) of the Social Security Act (42 U.S.C.
1395x(o)).
(4) SUBSTITUTE ADULT DAY SERVICES.—
(A) IN
GENERAL.—The term ‘‘substitute
adult day services’’ means the items and services
described in subparagraph (B) that are fur-
nished to an individual by an adult day services
facility as a part of a plan under section
1861(m) of the Social Security Act (42 U.S.C.
1395x(m)) that substitutes such services for some
or all of the items and services described in sub-
paragraph (B)(i) furnished by a home health
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agency under the plan, as determined by the
physician establishing the plan.
(B) ITEMS AND SERVICES DESCRIBED.—The
items and services described in this subpara-
graph are the following items and services:
(i) Items and services described in
paragraphs (1) through (7) of such section
1861(m).
(ii) Meals.
(iii) A program of supervised activities
designed to promote physical and mental
health and furnished to the individual by
the adult day services facility in a group
setting for a period of not fewer than 4 and
not greater than 12 hours per day.
(iv) A medication management pro-
gram (as defined in subparagraph (C)).
(C) MEDICATION MANAGEMENT PROGRAM.—
For purposes of subparagraph (B)(iv), the term
‘‘medication management program’’ means a
program of services, including medicine screen-
ing and patient and health care provider edu-
cation programs, that provides services to
minimize—
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(i) unnecessary or inappropriate use of
prescription drugs; and
(ii) adverse events due to unintended
prescription drug-to-drug interactions.
SEC. 455. MEDPAC STUDY ON MEDICARE PAYMENTS AND
EFFICIENCIES IN THE HEALTH CARE SYSTEM.
Not later than 18 months after the date of enactment
of this Act, the Medicare Payment Advisory Commission
established under section 1805 of the Social Security Act
(42 U.S.C. 1395b–6) shall provide Congress with rec-
ommendations to recognize and reward, within payment
methodologies for physicians and hospitals established
under the medicare program under title XVIII of the Social
Security Act, efficiencies, and the lower utilization of serv-
ices created by the practice of medicine in historically effi-
cient and low-cost areas. Measures of efficiency recognized
in accordance with the preceding sentence shall include—
(1) shorter hospital stays than the national aver-
age;
(2) fewer physician visits than the national av-
erage;
(3) fewer laboratory tests than the national aver-
age;
(4) a greater utilization of hospice services than
the national average; and
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(5) the efficacy of disease management and pre-
ventive health services.
SEC. 456. MEDICARE COVERAGE OF KIDNEY DISEASE EDU-
CATION SERVICES.
(a) COVERAGE
OF
KIDNEY
DISEASE
EDUCATION
SERVICES.—
(1) IN GENERAL.—Section 1861 of the Social Se-
curity Act (42 U.S.C.1395x) is amended—
(A) in subsection (s)(2)—
(i) in subparagraph (U), by striking
‘‘and’’ at the end;
(ii) in subparagraph (V)(iii), by add-
ing ‘‘and’’ at the end; and
(iii) by adding at the end the following
new subparagraph:
‘‘(W) kidney disease education services (as de-
fined in subsection (ww));’’; and
(B) by adding at the end the following new
subsection:
‘‘Kidney Disease Education Services
‘‘(ww)(1) The term ‘kidney disease education services’
means educational services that are—
‘‘(A) furnished to an individual with kidney dis-
ease who, according to accepted clinical guidelines
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identified by the Secretary, will require dialysis or a
kidney transplant;
‘‘(B) furnished, upon the referral of the physi-
cian managing the individual’s kidney condition, by
a qualified person (as defined in paragraph (2)); and
‘‘(C) designed—
‘‘(i) to provide comprehensive information
regarding—
‘‘(I) the management of comorbidities;
‘‘(II) the prevention of uremic com-
plications; and
‘‘(III) each option for renal replace-
ment therapy (including peritoneal dialysis,
hemodialysis (including vascular access op-
tions), and transplantation); and
‘‘(ii) to ensure that the individual has the
opportunity to actively participate in the choice
of therapy.
‘‘(2) The term ‘qualified person’ means—
‘‘(A) a physician (as described in subsection
(r)(1));
‘‘(B) an individual who—
‘‘(i) is—
‘‘(I) a registered nurse;
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‘‘(II) a registered dietitian or nutrition
professional 
(as 
defined 
in 
subsection
(vv)(2));
‘‘(III) a clinical social worker (as de-
fined in subsection (hh)(1));
‘‘(IV) a physician assistant, nurse
practitioner, or clinical nurse specialist (as
those terms are defined in subsection
(aa)(5)); or
‘‘(V) a transplant coordinator; and
‘‘(ii) meets such requirements related to ex-
perience and other qualifications that the Sec-
retary finds necessary and appropriate for fur-
nishing the services described in paragraph (1);
or
‘‘(C) a renal dialysis facility subject to the re-
quirements of section 1881(b)(1) with personnel
who—
‘‘(i) provide the services described in para-
graph (1); and
‘‘(ii) meet the requirements of subparagraph
(A) or (B).
‘‘(3) The Secretary shall develop the requirements
under paragraph (2)(B)(ii) after consulting with physi-
cians, health educators, professional organizations, accred-
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iting organizations, kidney patient organizations, dialysis
facilities, transplant centers, network organizations de-
scribed in section 1881(c)(2), and other knowledgeable per-
sons.
‘‘(4) In promulgating regulations to carry out this sub-
section, the Secretary shall ensure that such regulations en-
sure that each beneficiary who is entitled to kidney disease
education services under this title receives such services in
a timely manner that ensures that the beneficiary receives
the maximum benefit of those services.
‘‘(5) The Secretary shall monitor the implementation
of this subsection to ensure that beneficiaries who are eligi-
ble for kidney disease education services receive such serv-
ices in the manner described in paragraph (4).’’.
(2) PAYMENT
UNDER
PHYSICIAN
FEE
SCHED-
ULE.—Section 1848(j)(3) of such Act (42 U.S.C.
1395w–4(j)(3)) is amended by inserting ‘‘, (2)(W)’’,
after ‘‘(2)(S)’’.
(3) PAYMENT TO RENAL DIALYSIS FACILITIES.—
Section 1881(b) of such Act (42 U.S.C. 1395rr(b)), as
amended by section 433(b)(5), is further amended by
adding at the end the following new paragraph:
‘‘(13) For purposes of paragraph (7), the single
composite weighted formulas determined under such
paragraph shall not take into account the amount of
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payment for kidney disease education services (as de-
fined in section 1861(ww)). Instead, payment for such
services shall be made to the renal dialysis facility on
an assignment-related basis under section 1848.’’.
(4) ANNUAL REPORT TO CONGRESS.—Not later
than April 1, 2004, and annually thereafter, the Sec-
retary of Health and Human Services shall submit to
Congress a report on the number of medicare bene-
ficiaries who are entitled to kidney disease education
services (as defined in section 1861(ww) of the Social
Security Act, as added by paragraph (1)) under title
XVIII of such Act and who receive such services, to-
gether with such recommendations for legislative and
administrative action as the Secretary determines to
be appropriate to fulfill the legislative intent that re-
sulted in the enactment of that subsection.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after January
1, 2004.
SEC. 457. FRONTIER EXTENDED STAY CLINIC DEMONSTRA-
TION PROJECT.
(a) 
AUTHORITY
TO
CONDUCT
DEMONSTRATION
PROJECT.—The Secretary shall waive such provisions of the
medicare program established under title XVIII of the So-
cial Security Act (42 U.S.C. 1395 et seq.) as are necessary
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to conduct a demonstration project under which frontier ex-
tended stay clinics described in subsection (b) in isolated
rural areas are treated as providers of items and services
under the medicare program.
(b) CLINICS DESCRIBED.—A frontier extended stay
clinic is described in this subsection if the clinic—
(1) is located in a community where the closest
short-term acute care hospital or critical access hos-
pital is at least 75 miles away from the community
or is inaccessible by public road; and
(2) is designed to address the needs of—
(A) seriously or critically ill or injured pa-
tients who, due to adverse weather conditions or
other reasons, cannot be transferred quickly to
acute care referral centers; or
(B) patients who need monitoring and ob-
servation for a limited period of time.
(c) DEFINITIONS.—In this section, the terms ‘‘hos-
pital’’ and ‘‘critical access hospital’’ have the meanings
given such terms in subsections (e) and (mm), respectively,
of section 1861 of the Social Security Act (42 U.S.C.
1395x).
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SEC. 458. IMPROVEMENTS IN NATIONAL COVERAGE DETER-
MINATION 
PROCESS 
TO 
RESPOND 
TO
CHANGES IN TECHNOLOGY.
(a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is
amended—
(A) in the third sentence of subsection (a)
by inserting ‘‘consistent with subsection (j)’’
after ‘‘the Secretary shall ensure’’; and
(B) by adding at the end the following new
subsection:
‘‘(j) NATIONAL COVERAGE DETERMINATION PROC-
ESS.—
‘‘(1) TIMEFRAME FOR DECISIONS ON REQUESTS
FOR NATIONAL COVERAGE DETERMINATIONS.—In the
case of a request for a national coverage determina-
tion that—
‘‘(A) does not require a technology assess-
ment from an outside entity or deliberation from
the Medicare Coverage Advisory Committee, the
decision on the request shall be made not later
than 6 months after the date of the request; or
‘‘(B) requires such an assessment or delib-
eration and in which a clinical trial is not re-
quested, the decision on the request shall be made
not later than 9 months after the date of the re-
quest.
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‘‘(2) PROCESS
FOR
PUBLIC
COMMENT
IN
NA-
TIONAL COVERAGE DETERMINATIONS.—At the end of
the 6-month period (with respect to a request under
paragraph (1)(A)) or 9-month period (with respect to
a request under paragraph (1)(B)) that begins on the
date a request for a national coverage determination
is made, the Secretary shall—
‘‘(A) make a draft of proposed decision on
the request available to the public through the
Medicare Internet site of the Department of
Health and Human Services or other appro-
priate means;
‘‘(B) provide a 30-day period for public
comment on such draft;
‘‘(C) make a final decision on the request
within 60 days of the conclusion of the 30-day
period referred to under subparagraph (B);
‘‘(D) include in such final decision sum-
maries of the public comments received and re-
sponses thereto;
‘‘(E) make available to the public the clin-
ical evidence and other data used in making
such a decision when the decision differs from
the recommendations of the Medicare Coverage
Advisory Committee; and
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‘‘(F) in the case of a decision to grant the
coverage determination, assign a temporary or
permanent code and implement the coverage de-
cision at the end of the 60-day period referred to
in subparagraph (C).
‘‘(3) NATIONAL COVERAGE DETERMINATION DE-
FINED.—For purposes of this subsection, the term ‘na-
tional coverage determination’ has the meaning given
such term in section 1869(f)(1)(B).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to national coverage determinations as
of January 1, 2004.
SEC. 459. INCREASE IN MEDICARE PAYMENT FOR CERTAIN
HOME HEALTH SERVICES.
(a) IN GENERAL.—Section 1895 of the Social Security
Act (42 U.S.C. 1395fff) is amended by adding at the end
the following:
‘‘(f) INCREASE
IN PAYMENT
FOR SERVICES FUR-
NISHED IN A RURAL AREA.—
‘‘(1) IN GENERAL.—In the case of home health
services furnished in a rural area (as defined in sec-
tion 1886(d)(2)(D)) on or after October 1, 2004 and
before October 1, 2006, the Secretary shall increase
the payment amount otherwise made under this sec-
tion for such services by 10 percent.
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‘‘(2) WAIVER
OF
BUDGET
NEUTRALITY.—The
Secretary shall not reduce the standard prospective
payment amount (or amounts) under this section ap-
plicable to home health services furnished during any
period to offset the increase in payments resulting
from the application of paragraph (1).’’.
(b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of the
Social Security Act (42 U.S.C. 1395fff(b)(5)) is amended
by adding at the end the following: ‘‘Notwithstanding this
paragraph, the total amount of the additional payments or
payment adjustments made under this paragraph may not
exceed, with respect to fiscal year 2004, 3 percent, and, with
respect to fiscal years 2005 and 2006, 4 percent, of the total
payments projected or estimated to be made based on the
prospective payment system under this subsection in the
year involved.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after October
1, 2003.
SEC. 460. FRONTIER EXTENDED STAY CLINIC DEMONSTRA-
TION PROJECT.
(a) 
AUTHORITY
TO
CONDUCT
DEMONSTRATION
PROJECT.—The Secretary shall waive such provisions of the
medicare program established under title XVIII of the So-
cial Security Act (42 U.S.C. 1395 et seq.) as are necessary
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to conduct a demonstration project under which frontier ex-
tended stay clinics described in subsection (b) in isolated
rural areas are treated as providers of items and services
under the medicare program.
(b) CLINICS DESCRIBED.—A frontier extended stay
clinic is described in this subsection if the clinic—
(1) is located in a community where the closest
short-term acute care hospital or critical access hos-
pital is at least 75 miles away from the community
or is inaccessible by public road; and
(2) is designed to address the needs of—
(A) seriously or critically ill or injured pa-
tients who, due to adverse weather conditions or
other reasons, cannot be transferred quickly to
acute care referral centers; or
(B) patients who need monitoring and ob-
servation for a limited period of time.
(c) DEFINITIONS.—In this section, the terms ‘‘hos-
pital’’ and ‘‘critical access hospital’’ have the meanings
given such terms in subsections (e) and (mm), respectively,
of section 1861 of the Social Security Act (42 U.S.C.
1395x).
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SEC. 461. MEDICARE SECONDARY PAYOR (MSP) PROVI-
SIONS.
(a) TECHNICAL
AMENDMENT
CONCERNING
SEC-
RETARY’S AUTHORITY TO MAKE CONDITIONAL PAYMENT
WHEN CERTAIN PRIMARY PLANS DO NOT PAY PROMPT-
LY.—
(1) IN GENERAL.—Section 1862(b)(2) (42 U.S.C.
1395y(b)(2)) is amended—
(A) in subparagraph (A)(ii), by striking
‘‘promptly (as determined in accordance with
regulations)’’;
(B) in subparagraph (B)—
(i) by redesignating clauses (i) through
(iii) as clauses (ii) through (iv), respec-
tively; and
(ii) by inserting before clause (ii), as
so redesignated, the following new clause:
‘‘(i) AUTHORITY
TO
MAKE
CONDI-
TIONAL
PAYMENT.—The 
Secretary 
may
make payment under this title with respect
to an item or service if a primary plan de-
scribed in subparagraph (A)(ii) has not
made or cannot reasonably be expected to
make payment with respect to such item or
service promptly (as determined in accord-
ance with regulations). Any such payment
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by the Secretary shall be conditioned on re-
imbursement to the appropriate Trust Fund
in accordance with the succeeding provi-
sions of this subsection.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall be effective as if included in
the enactment of title III of the Medicare and Med-
icaid Budget Reconciliation Amendments of 1984
(Public Law 98-369).
(b) CLARIFYING AMENDMENTS TO CONDITIONAL PAY-
MENT
PROVISIONS.—Section 
1862(b)(2) 
(42 
U.S.C.
1395y(b)(2)) is further amended—
(1) in subparagraph (A), in the matter following
clause (ii), by inserting the following sentence at the
end: ‘‘An entity that engages in a business, trade, or
profession shall be deemed to have a self-insured plan
if it carries its own risk (whether by a failure to ob-
tain insurance, or otherwise) in whole or in part.’’;
(2) in subparagraph (B)(ii), as redesignated by
subsection (a)(2)(B)—
(A) by striking the first sentence and insert-
ing the following: ‘‘A primary plan, and an enti-
ty that receives payment from a primary plan,
shall reimburse the appropriate Trust Fund for
any payment made by the Secretary under this
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title with respect to an item or service if it is
demonstrated that such primary plan has or had
a responsibility to make payment with respect to
such item or service. A primary plan’s responsi-
bility for such payment may be demonstrated by
a judgment, a payment conditioned upon the re-
cipient’s compromise, waiver, or release (whether
or not there is a determination or admission of
liability) of payment for items or services in-
cluded in a claim against the primary plan or
the primary plan’s insured, or by other means.’’;
and
(B) in the final sentence, by striking ‘‘on
the date such notice or other information is re-
ceived’’ and inserting ‘‘on the date notice of, or
information related to, a primary plan’s respon-
sibility for such payment or other information is
received’’; and
(3) in subparagraph (B)(iii), , as redesignated
by subsection (a)(2)(B), by striking the first sentence
and inserting the following: ‘‘In order to recover pay-
ment made under this title for an item or service, the
United States may bring an action against any or all
entities that are or were required or responsible (di-
rectly, as an insurer or self-insurer, as a third-party
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administrator, as an employer that sponsors or con-
tributes to a group health plan, or large group health
plan, or otherwise) to make payment with respect to
the same item or service (or any portion thereof)
under a primary plan. The United States may, in ac-
cordance with paragraph (3)(A) collect double dam-
ages against any such entity. In addition, the United
States may recover under this clause from any entity
that has received payment from a primary plan or
from the proceeds of a primary plan’s payment to
any entity.’’.
(c) CLERICAL AMENDMENTS.—Section 1862(b) (42
U.S.C. 1395y(b)) is amended—
(1) in paragraph (1)(A), by moving the indenta-
tion of clauses (ii) through (v) 2 ems to the left; and
(2) in paragraph (3)(A), by striking ‘‘such’’ be-
fore ‘‘paragraphs’’.
SEC. 462. MEDICARE PANCREATIC ISLET CELL TRANSPLANT
DEMONSTRATION PROJECT.
(a) ESTABLISHMENT.—In order to test the appro-
priateness of pancreatic islet cell transplantation, not later
than 120 days after the date of the enactment of this Act,
the Secretary shall establish a demonstration project which
the Secretary, provides for payment under the medicare
program under title XVIII of the Social Security Act for
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pancreatic islet cell transplantation and related items and
services in the case of medicare beneficiaries who have type
I (juvenile) diabetes and have end stage renal disease.
(b) DURATION OF PROJECT.—The authority of the Sec-
retary to conduct the demonstration project under this sec-
tion shall terminate on the date that is 5 years after the
date of the establishment of the project.
(c) EVALUATION AND REPORT.—The Secretary shall
conduct an evaluation of the outcomes of the demonstration
project. Not later than 120 days after the date of the termi-
nation of the demonstration project under subsection (b),
the Secretary shall submit to Congress a report on the
project, including recommendations for such legislative and
administrative action as the Secretary deems appropriate.
(d) PAYMENT METHODOLOGY.—The Secretary shall es-
tablish an appropriate payment methodology for the provi-
sion of items and services under the demonstration project,
which may include a payment methodology that bundles,
to the maximum extent feasible, payment for all such items
and services.
SEC. 463. INCREASE IN MEDICARE PAYMENT FOR CERTAIN
HOME HEALTH SERVICES.
(a) IN GENERAL.—Section 1895 of the Social Security
Act (42 U.S.C. 1395fff) is amended by adding at the end
the following:
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‘‘(f) INCREASE
IN PAYMENT
FOR SERVICES FUR-
NISHED IN A RURAL AREA.—
‘‘(1) IN GENERAL.—In the case of home health
services furnished in a rural area (as defined in sec-
tion 1886(d)(2)(D)) on or after October 1, 2004, and
before October 1, 2006, the Secretary shall increase
the payment amount otherwise made under this sec-
tion for such services by 10 percent.
‘‘(2) WAIVER
OF
BUDGET
NEUTRALITY.—The
Secretary shall not reduce the standard prospective
payment amount (or amounts) under this section ap-
plicable to home health services furnished during any
period to offset the increase in payments resulting
from the application of paragraph (1).’’.
(b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of the
Social Security Act (42 U.S. C. 1395fff(b)(5)) is amended
by adding at the end the following: ‘‘Notwithstanding this
paragraph, the total amount of the additional payments or
payment adjustments made under this paragraph may not
exceed, with respect to fiscal year 2004, 3 percent, and, with
respect to fiscal years 2005 and 2006, 4 percent, of the total
payments projected or estimated to be made based on the
prospective payment system under this subsection in the
year involved.’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after October
1, 2003.
SEC. 464. SENSE OF THE SENATE CONCERNING MEDICARE
PAYMENT UPDATE FOR PHYSICIANS AND
OTHER HEALTH PROFESSIONALS.
(a) FINDINGS.—The Senate makes the following find-
ings:
(1) The formula by which medicare payments
are updated each year for services furnished by physi-
cians and other health professionals is fundamentally
flawed.
(2) The flawed physician payment update for-
mula is causing a continuing physician payment cri-
sis, and, without congressional action, medicare pay-
ment rates for physicians and other practitioners are
predicted to fall by 4.2 percent in 2004.
(3) A physician payment cut in 2004 would the
fifth cut since 1991, and would be on top of a 5.4 per-
cent cut in 2002, with additional cuts estimated for
2005, 2006, and 2007. From 1991 through 2003, pay-
ment rates for physicians and health professionals fell
14 percent behind practice cost inflation as measured
by medicare’s own conservative estimates.
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(4) The sustainable growth rate (SGR) expendi-
ture target, which is the basis for the physician pay-
ment update, is linked to the gross domestic product
and penalizes physicians and other practitioners for
volume increases that they cannot control and that
the government actively promotes through new cov-
erage decisions, quality improvement activities, and
other initiatives that, while beneficial to patients, are
not reflected in the SGR.
(b) SENSE OF THE SENATE.—It is the sense of the Sen-
ate that medicare beneficiary access to quality care may
be compromised if Congress does not take action to prevent
cuts in 2004 and the following years that result from the
SGR formula.
TITLE 
V—MEDICARE 
APPEALS,
REGULATORY, 
AND 
CON-
TRACTING IMPROVEMENTS
Subtitle A—Regulatory Reform
SEC. 501. RULES FOR THE PUBLICATION OF A FINAL REGU-
LATION BASED ON THE PREVIOUS PUBLICA-
TION OF AN INTERIM FINAL REGULATION.
(a) IN
GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)) is amended by adding at the end the following
new paragraph:
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‘‘(3)(A) With respect to the publication of a final regu-
lation based on the previous publication of an interim final
regulation—
‘‘(i) subject to subparagraph (B), the Secretary
shall publish the final regulation within the 12-month
period that begins on the date of publication of the
interim final regulation;
‘‘(ii) if a final regulation is not published by the
deadline established under this paragraph, the in-
terim final regulation shall not continue in effect un-
less the Secretary publishes a notice described in sub-
paragraph (B) by such deadline; and
‘‘(iii) the final regulation shall include responses
to comments submitted in response to the interim
final regulation.
‘‘(B) If the Secretary determines before the deadline
otherwise established in this paragraph that there is good
cause, specified in a notice published before such deadline,
for delaying the deadline otherwise applicable under this
paragraph, the deadline otherwise established under this
paragraph shall be extended for such period (not to exceed
12 months) as the Secretary specifies in such notice.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of enactment of this
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Act and shall apply to interim final regulations published
on or after such date.
(c) STATUS OF PENDING INTERIM FINAL REGULA-
TIONS.—Not later than 6 months after the date of enactment
of this Act, the Secretary shall publish a notice in the Fed-
eral Register that provides the status of each interim final
regulation that was published on or before the date of enact-
ment of this Act and for which no final regulation has been
published. Such notice shall include the date by which the
Secretary plans to publish the final regulation that is based
on the interim final regulation.
SEC. 502. COMPLIANCE WITH CHANGES IN REGULATIONS
AND POLICIES.
(a) NO RETROACTIVE APPLICATION OF SUBSTANTIVE
CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh) is amended by adding at the end the fol-
lowing new subsection:
‘‘(d)(1)(A) A substantive change in regulations, man-
ual instructions, interpretative rules, statements of policy,
or guidelines of general applicability under this title shall
not be applied (by extrapolation or otherwise) retroactively
to items and services furnished before the effective date of
the change, unless the Secretary determines that—
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‘‘(i) such retroactive application is necessary to
comply with statutory requirements; or
‘‘(ii) failure to apply the change retroactively
would be contrary to the public interest.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to substantive changes
issued on or after the date of enactment of this Act.
(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE
CHANGES AFTER NOTICE.—
(1) IN GENERAL.—Section 1871(d)(1), as added
by subsection (a), is amended by adding at the end
the following:
‘‘(B) A compliance action may be made against a pro-
vider of services, physician, practitioner, or other supplier
with respect to noncompliance with such a substantive
change only for items and services furnished on or after
the effective date of the change.
‘‘(C)(i) Except as provided in clause (ii), a substantive
change may not take effect before the date that is the end
of the 30-day period that begins on the date that the Sec-
retary has issued or published, as the case may be, the sub-
stantive change.
‘‘(ii) The Secretary may provide for a substantive
change to take effect on a date that precedes the end of the
30-day period under clause (i) if the Secretary finds that
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waiver of such 30-day period is necessary to comply with
statutory requirements or that the application of such 30-
day period is contrary to the public interest. If the Sec-
retary provides for an earlier effective date pursuant to this
clause, the Secretary shall include in the issuance or publi-
cation of the substantive change a finding described in the
first sentence, and a brief statement of the reasons for such
finding.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to compliance actions un-
dertaken on or after the date of enactment of this Act.
SEC. 503. REPORT ON LEGAL AND REGULATORY INCONSIST-
ENCIES.
Section 1871 (42 U.S.C. 1395hh), as amended by sec-
tion 502(a)(1), is amended by adding at the end the fol-
lowing new subsection:
‘‘(e)(1) Not later than 2 years after the date of enact-
ment of this subsection, and every 3 years thereafter, the
Secretary shall submit to Congress a report with respect
to the administration of this title and areas of inconsistency
or conflict among the various provisions under law and reg-
ulation.
‘‘(2) In preparing a report under paragraph (1), the
Secretary shall collect—
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‘‘(A) information from beneficiaries, providers of
services, physicians, practitioners, and other suppliers
with respect to such areas of inconsistency and con-
flict; and
‘‘(B) information from medicare contractors that
tracks the nature of all communications and cor-
respondence.
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such inconsist-
ency or conflicts, and recommendations for legislation or
administrative action that the Secretary determines appro-
priate to further reduce such inconsistency or conflicts.’’.
SEC. 504. STREAMLINING AND SIMPLIFICATION OF MEDI-
CARE REGULATIONS.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall conduct an analysis of the regula-
tions issued under title XVIII of the Social Security Act
and related laws in order to determine how such regulations
may be streamlined and simplified to increase the efficiency
and effectiveness of the medicare program without harming
beneficiaries or providers and to decrease the burdens the
medicare payment systems impose on both beneficiaries and
providers.
(b) REDUCTION
IN REGULATIONS.—The Secretary,
after completion of the analysis under subsection (a), shall
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direct the rewriting of the regulations described in sub-
section (a) in such a manner as to—
(1) reduce the number of words comprising all
regulations by at least two-thirds by October 1, 2004,
and
(2) ensure the simple, effective, and efficient op-
eration of the medicare program.
(c) APPLICATION OF THE PAPERWORK REDUCTION
ACT.—The Secretary shall apply the provisions of chapter
35 of title 44, United States Code (commonly known as the
‘‘Paperwork Reduction Act’’) to the provisions of this Act
to ensure that any regulations issued to implement this Act
are written in plain language, are streamlined, promote the
maximum efficiency and effectiveness of the medicare and
medicaid programs without harming beneficiaries or pro-
viders, and minimize the burdens the payment systems af-
fected by this Act impose on both beneficiaries and pro-
viders.
(d) FEASIBILITY.—If the Secretary determines that the
two-thirds reduction in words by October 1, 2004 required
in subsection (b)(1) is not feasible, he shall inform Congress
in writing by July 1, 2004 of the reasons for its
unfeasibility. He shall then establish a feasible reduction
to be achieved by January 1, 2005.
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Subtitle B—Appeals Process Reform
SEC. 511. SUBMISSION OF PLAN FOR TRANSFER OF RE-
SPONSIBILITY FOR MEDICARE APPEALS.
(a) SUBMISSION OF TRANSITION PLAN.—
(1) IN GENERAL.—Not later than April 1, 2004,
the Commissioner of Social Security and the Sec-
retary shall develop and transmit to Congress and the
Comptroller General of the United States a plan
under which the functions of administrative law
judges responsible for hearing cases under title XVIII
of the Social Security Act (and related provisions in
title XI of such Act) are transferred from the responsi-
bility of the Commissioner and the Social Security
Administration to the Secretary and the Department
of Health and Human Services.
(2) CONTENTS.—The plan shall include informa-
tion on the following:
(A) WORKLOAD.—The number of such ad-
ministrative law judges and support staff re-
quired now and in the future to hear and decide
such cases in a timely manner, taking into ac-
count the current and anticipated claims volume,
appeals, number of beneficiaries, and statutory
changes.
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(B) COST PROJECTIONS AND FINANCING.—
Funding levels required for fiscal year 2005 and
subsequent fiscal years to carry out the functions
transferred under the plan and how such transfer
should be financed.
(C) TRANSITION TIMETABLE.—A timetable
for the transition.
(D) REGULATIONS.—The establishment of
specific regulations to govern the appeals process.
(E) CASE TRACKING.—The development of a
unified case tracking system that will facilitate
the maintenance and transfer of case specific
data across both the fee-for-service and managed
care components of the medicare program.
(F) FEASIBILITY
OF
PRECEDENTIAL
AU-
THORITY.—The feasibility of developing a proc-
ess to give decisions of the Departmental Appeals
Board in the Department of Health and Human
Services addressing broad legal issues binding,
precedential authority.
(G) ACCESS
TO
ADMINISTRATIVE
LAW
JUDGES.—The feasibility of—
(i) filing appeals with administrative
law judges electronically; and
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(ii) conducting hearings using tele- or
video-conference technologies.
(H) INDEPENDENCE
OF
ADMINISTRATIVE
LAW JUDGES.—The steps that should be taken to
ensure the independence of administrative law
judges, including ensuring that such judges are
in an office that is functionally and operation-
ally separate from the Centers for Medicare &
Medicaid Services and the Center for Medicare
Choices.
(I) GEOGRAPHIC DISTRIBUTION.—The steps
that should be taken to provide for an appro-
priate geographic distribution of administrative
law judges throughout the United States to en-
sure timely access to such judges.
(J) HIRING.—The steps that should be taken
to hire administrative law judges (and support
staff).
(K) PERFORMANCE
STANDARDS.—The es-
tablishment of performance standards for admin-
istrative law judges with respect to timelines for
decisions in cases under title XVIII of the Social
Security Act.
(L) SHARED RESOURCES.—The feasibility
of the Secretary entering into such arrangements
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with the Commissioner of Social Security as
may be appropriate with respect to transferred
functions under the plan to share office space,
support staff, and other resources, with appro-
priate reimbursement.
(M) TRAINING.—The training that should
be provided to administrative law judges with
respect to laws and regulations under title XVIII
of the Social Security Act.
(3) ADDITIONAL INFORMATION.—The plan may
also include recommendations for further congres-
sional action, including modifications to the require-
ments and deadlines established under section 1869 of
the Social Security Act (as amended by sections 521
and 522 of BIPA (114 Stat. 2763A–534) and this
Act).
(b) GAO EVALUATION.—The Comptroller General of
the United States shall—
(1) evaluate the plan submitted under subsection
(a); and
(2) not later than 6 months after such submis-
sion, submit to Congress, the Commissioner of Social
Security, and the Secretary a report on such evalua-
tion.
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(c) SUBMISSION OF GAO REPORT REQUIRED BEFORE
PLAN IMPLEMENTATION.—The Commissioner of Social Se-
curity and the Secretary may not implement the plan devel-
oped under subsection (a) before the date that is 6 months
after the date the report required under subsection (b)(2)
is submitted to the Commissioner and the Secretary.
SEC. 512. EXPEDITED ACCESS TO JUDICIAL REVIEW.
(a) IN
GENERAL.—Section 1869(b) (42 U.S.C.
1395ff(b)) is amended—
(1) in paragraph (1)(A), by inserting ‘‘, subject
to paragraph (2),’’ before ‘‘to judicial review of the
Secretary’s final decision’’; and
(2) by adding at the end the following new para-
graph:
‘‘(2) EXPEDITED
ACCESS
TO
JUDICIAL
RE-
VIEW.—
‘‘(A) IN GENERAL.—The Secretary shall es-
tablish a process under which a provider of serv-
ices or supplier that furnishes an item or service
or a beneficiary who has filed an appeal under
paragraph (1) (other than an appeal filed under
paragraph (1)(F)(i)) may obtain access to judi-
cial review when a review entity (described in
subparagraph (D)), on its own motion or at the
request of the appellant, determines that the De-
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partmental Appeals Board does not have the au-
thority to decide the question of law or regula-
tion relevant to the matters in controversy and
that there is no material issue of fact in dispute.
The appellant may make such request only once
with respect to a question of law or regulation
for a specific matter in dispute in a case of an
appeal.
‘‘(B) PROMPT DETERMINATIONS.—If, after
or coincident with appropriately filing a request
for an administrative hearing, the appellant re-
quests a determination by the appropriate review
entity that the Departmental Appeals Board does
not have the authority to decide the question of
law or regulations relevant to the matters in con-
troversy and that there is no material issue of
fact in dispute, and if such request is accom-
panied by the documents and materials as the
appropriate review entity shall require for pur-
poses of making such determination, such review
entity shall make a determination on the request
in writing within 60 days after the date such re-
view entity receives the request and such accom-
panying documents and materials. Such a deter-
mination by such review entity shall be consid-
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ered a final decision and not subject to review by
the Secretary.
‘‘(C) ACCESS TO JUDICIAL REVIEW.—
‘‘(i) IN GENERAL.—If the appropriate
review entity—
‘‘(I) determines that there are no
material issues of fact in dispute and
that the only issues to be adjudicated
are ones of law or regulation that the
Departmental Appeals Board does not
have authority to decide; or
‘‘(II) fails to make such deter-
mination within the period provided
under subparagraph (B);
then the appellant may bring a civil action
as described in this subparagraph.
‘‘(ii) DEADLINE
FOR
FILING.—Such
action shall be filed, in the case described
in—
‘‘(I) clause (i)(I), within 60 days
of the date of the determination de-
scribed in such clause; or
‘‘(II) clause (i)(II), within 60
days of the end of the period provided
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under subparagraph (B) for the deter-
mination.
‘‘(iii) VENUE.—Such action shall be
brought in the district court of the United
States for the judicial district in which the
appellant is located (or, in the case of an
action brought jointly by more than 1 ap-
plicant, the judicial district in which the
greatest number of applicants are located)
or in the District Court for the District of
Columbia.
‘‘(iv) INTEREST ON ANY AMOUNTS IN
CONTROVERSY.—Where a provider of serv-
ices or supplier is granted judicial review
pursuant to this paragraph, the amount in
controversy (if any) shall be subject to an-
nual interest beginning on the first day of
the first month beginning after the 60-day
period as determined pursuant to clause (ii)
and equal to the rate of interest on obliga-
tions issued for purchase by the Federal
Supplementary Medical Insurance Trust
Fund for the month in which the civil ac-
tion authorized under this paragraph is
commenced, to be awarded by the reviewing
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court in favor of the prevailing party. No
interest awarded pursuant to the preceding
sentence shall be deemed income or cost for
the purposes of determining reimbursement
due providers of services, physicians, practi-
tioners, and other suppliers under this Act.
(D) REVIEW
ENTITY
DEFINED.—For pur-
poses of this subsection, the term ‘review entity’
means an entity of up to 3 qualified reviewers
drawn from existing appeals levels other than the
redetermination level.
(b) APPLICATION TO PROVIDER AGREEMENT DETER-
MINATIONS.—Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1))
is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) An institution or agency described in subpara-
graph (A) that has filed for a hearing under subparagraph
(A) shall have expedited access to judicial review under this
subparagraph in the same manner as providers of services,
suppliers, and beneficiaries may obtain expedited access to
judicial review under the process established under section
1869(b)(2). Nothing in this subparagraph shall be construed
to affect the application of any remedy imposed under sec-
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tion 1819 during the pendency of an appeal under this sub-
paragraph.’’.
(c) GAO STUDY AND REPORT ON ACCESS TO JUDICIAL
REVIEW.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on the access of
medicare beneficiaries and health care providers to
judicial review of actions of the Secretary and the De-
partment of Health and Human Services with respect
to items and services under title XVIII of the Social
Security Act subsequent to February 29, 2000, the
date of the decision of Shalala, Secretary of Health
and Human Services, et al. v. Illinois Council on
Long Term Care, Inc. (529 U.S. 1 (2000)).
(2) REPORT.—Not later than 1 year after the
date of enactment of this Act, the Comptroller General
shall submit to Congress a report on the study con-
ducted under paragraph (1) together with such rec-
ommendations as the Comptroller General determines
to be appropriate.
(d) 
CONFORMING
AMENDMENT.—Section
1869(b)(1)(F)(ii) (42 U.S.C. 1395ff(b)(1)(F)(ii)) is amend-
ed to read as follows:
‘‘(ii) REFERENCE TO EXPEDITED AC-
CESS TO JUDICIAL REVIEW.—For the provi-
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sion relating to expedited access to judicial
review, see paragraph (2).’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to appeals filed on or after October 1,
2004.
SEC. 513. EXPEDITED REVIEW OF CERTAIN PROVIDER
AGREEMENT DETERMINATIONS.
(a) TERMINATION AND CERTAIN OTHER IMMEDIATE
REMEDIES.—
(1) IN GENERAL.—The Secretary shall develop
and implement a process to expedite proceedings
under sections 1866(h) of the Social Security Act (42
U.S.C. 1395cc(h)) in which—
(A) the remedy of termination of participa-
tion has been imposed;
(B) a sanction described in clause (i) or
(iii) of section 1819(h)(2)(B) of such Act (42
U.S.C. 1395i–3(h)(2)(B)) has been imposed, but
only if such sanction has been imposed on an
immediate basis; or
(C) the Secretary has required a skilled
nursing facility to suspend operations of a nurse
aide training program.
(2) PRIORITY
FOR
CASES
OF
TERMINATION.—
Under the process described in paragraph (1), pri-
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ority shall be provided in cases of termination de-
scribed in subparagraph (A) of such paragraph.
(b) INCREASED FINANCIAL SUPPORT.—In addition to
any amounts otherwise appropriated, to reduce by 50 per-
cent the average time for administrative determinations on
appeals under section 1866(h) of the Social Security Act
(42 U.S.C. 1395cc(h)), there are authorized to be appro-
priated (in appropriate part from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary Med-
ical Insurance Trust Fund) to the Secretary such sums for
fiscal year 2004 and each subsequent fiscal year as may
be necessary to increase the number of administrative law
judges (and their staffs) at the Departmental Appeals Board
of the Department of Health and Human Services and to
educate such judges and staff on long-term care issues.
SEC. 514. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) TIMEFRAMES
FOR
THE COMPLETION
OF
THE
RECORD.—Section 1869(b) (42 U.S.C. 1395ff(b)), as
amended by section 512(a)(2), is amended by adding at the
end the following new paragraph:
‘‘(3) TIMELY COMPLETION OF THE RECORD.—
‘‘(A) DEADLINE.—Subject to subparagraph
(B), the deadline to complete the record in a
hearing before an administrative law judge or a
review by the Departmental Appeals Board is 90
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days after the date the request for the review or
hearing is filed.
‘‘(B) EXTENSIONS FOR GOOD CAUSE.—The
person filing a request under subparagraph (A)
may request an extension of such deadline for
good cause. The administrative law judge, in the
case of a hearing, and the Departmental Appeals
Board, in the case of a review, may extend such
deadline based upon a finding of good cause to
a date specified by the judge or Board, as the
case may be.
‘‘(C) DELAY IN DECISION DEADLINES UNTIL
COMPLETION OF RECORD.—Notwithstanding any
other provision of this section, the deadlines oth-
erwise established under subsection (d) for the
making of determinations in hearings or review
under this section are 90 days after the date on
which the record is complete.
‘‘(D) COMPLETE RECORD DESCRIBED.—For
purposes of this paragraph, a record is complete
when the administrative law judge, in the case
of a hearing, or the Departmental Appeals
Board, in the case of a review, has received—
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‘‘(i) written or testimonial evidence, or
both, submitted by the person filing the re-
quest,
‘‘(ii) written or oral argument, or both,
‘‘(iii) the decision of, and the record
for, the prior level of appeal, and
‘‘(iv) such other evidence as such judge
or Board, as the case may be, determines is
required to make a determination on the re-
quest.’’.
(b) USE OF PATIENTS’ MEDICAL RECORDS.—Section
1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) is amended
by inserting ‘‘(including the medical records of the indi-
vidual involved)’’ after ‘‘clinical experience’’.
(c) NOTICE
REQUIREMENTS
FOR
MEDICARE
AP-
PEALS.—
(1) INITIAL
DETERMINATIONS
AND
REDETER-
MINATIONS.—Section 1869(a) (42 U.S.C. 1395ff(a)) is
amended by adding at the end the following new
paragraph:
‘‘(4) REQUIREMENTS OF NOTICE OF DETERMINA-
TIONS AND REDETERMINATIONS.—A written notice of
a determination on an initial determination or on a
redetermination, insofar as such determination or re-
determination results in a denial of a claim for bene-
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fits, shall be provided in printed form and written in
a manner to be understood by the beneficiary and
shall include—
‘‘(A) the reasons for the determination, in-
cluding, as appropriate—
‘‘(i) upon request in the case of an ini-
tial determination, the provision of the pol-
icy, manual, or regulation that resulted in
the denial; and
‘‘(ii) in the case of a redetermination,
a summary of the clinical or scientific evi-
dence used in making the determination (as
appropriate);
‘‘(B) the procedures for obtaining addi-
tional information concerning the determination
or redetermination; and
‘‘(C) notification of the right to seek a rede-
termination or otherwise appeal the determina-
tion and instructions on how to initiate such a
redetermination or appeal under this section.’’.
(2) RECONSIDERATIONS.—Section 1869(c)(3)(E)
(42 U.S.C. 1395ff(c)(3)(E)) is amended to read as fol-
lows:
‘‘(E) EXPLANATION OF DECISION.—Any de-
cision with respect to a reconsideration of a
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qualified independent contractor shall be in
writing in a manner to be understood by the
beneficiary and shall include—
‘‘(i) to the extent appropriate, a de-
tailed explanation of the decision as well as
a discussion of the pertinent facts and ap-
plicable regulations applied in making such
decision;
‘‘(ii) a notification of the right to ap-
peal such determination and instructions on
how to initiate such appeal under this sec-
tion; and
‘‘(iii) in the case of a determination of
whether an item or service is reasonable and
necessary for the diagnosis or treatment of
illness 
or 
injury 
(under 
section
1862(a)(1)(A)) an explanation of the med-
ical or scientific rationale for the decision.’’.
(3) APPEALS.—Section 1869(d) (42 U.S.C.
1395ff(d)) is amended—
(A) in the heading, by inserting ‘‘; NOTICE’’
after ‘‘SECRETARY’’; and
(B) by adding at the end the following new
paragraph:
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‘‘(4) NOTICE.—Notice of the decision of an ad-
ministrative law judge shall be in writing in a man-
ner to be understood by the beneficiary and shall
include—
‘‘(A) the specific reasons for the determina-
tion (including, to the extent appropriate, a
summary of the clinical or scientific evidence
used in making the determination);
‘‘(B) the procedures for obtaining addi-
tional information concerning the decision; and
‘‘(C) notification of the right to appeal the
decision and instructions on how to initiate such
an appeal under this section.’’.
(4) PREPARATION OF RECORD FOR APPEAL.—
Section 1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) is
amended by striking ‘‘such information as is required
for an appeal’’ and inserting ‘‘the record for the ap-
peal’’.
(d) QUALIFIED INDEPENDENT CONTRACTORS.—
(1) ELIGIBILITY REQUIREMENTS OF QUALIFIED
INDEPENDENT
CONTRACTORS.—Section 1869(c) (42
U.S.C. 1395ff(c)) is amended—
(A) in paragraph (2)—
(i) by inserting ‘‘(except in the case of
a utilization and quality control peer re-
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view organization, as defined in section
1152)’’ after ‘‘means an entity or organiza-
tion that’’; and
(ii) by striking the period at the end
and inserting the following: ‘‘and meets the
following requirements:
‘‘(A) GENERAL REQUIREMENTS.—
‘‘(i) The entity or organization has
(directly or through contracts or other ar-
rangements) sufficient medical, legal, and
other expertise (including knowledge of the
program under this title) and sufficient
staffing to carry out duties of a qualified
independent contractor under this section
on a timely basis.
‘‘(ii) The entity or organization has
provided assurances that it will conduct ac-
tivities consistent with the applicable re-
quirements of this section, including that it
will not conduct any activities in a case
unless the independence requirements of
subparagraph (B) are met with respect to
the case.
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‘‘(iii) The entity or organization meets
such other requirements as the Secretary
provides by regulation.
‘‘(B) INDEPENDENCE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), an entity or organization meets the
independence requirements of this subpara-
graph with respect to any case if the
entity—
‘‘(I) is not a related party (as de-
fined in subsection (g)(5));
‘‘(II) does not have a material fa-
milial, financial, or professional rela-
tionship with such a party in relation
to such case; and
‘‘(III) does not otherwise have a
conflict of interest with such a party
(as determined under regulations).
‘‘(ii) 
EXCEPTION
FOR
COMPENSA-
TION.—Nothing in clause (i) shall be con-
strued to prohibit receipt by a qualified
independent contractor of compensation
from the Secretary for the conduct of activi-
ties under this section if the compensation
is provided consistent with clause (iii).
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‘‘(iii) LIMITATIONS
ON
ENTITY
COM-
PENSATION.—Compensation provided by the
Secretary to a qualified independent con-
tractor in connection with reviews under
this section shall not be contingent on any
decision rendered by the contractor or by
any reviewing professional.’’; and
(B) in paragraph (3)(A), by striking ‘‘, and
shall have sufficient training and expertise in
medical science and legal matters to make recon-
siderations under this subsection’’.
(2) ELIGIBILITY
REQUIREMENTS
FOR
REVIEW-
ERS.—Section 1869 (42 U.S.C. 1395ff) is amended—
(A) by amending subsection (c)(3)(D) to
read as follows:
‘‘(D) QUALIFICATIONS OF REVIEWERS.—The
requirements of subsection (g) shall be met (relat-
ing 
to 
qualifications 
of 
reviewing 
profes-
sionals).’’; and
(B) by adding at the end the following new
subsection:
‘‘(g) QUALIFICATIONS OF REVIEWERS.—
‘‘(1) IN GENERAL.—In reviewing determinations
under this section, a qualified independent contractor
shall assure that—
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‘‘(A) each individual conducting a review
shall meet the qualifications of paragraph (2);
‘‘(B) compensation provided by the con-
tractor to each such reviewer is consistent with
paragraph (3); and
‘‘(C) in the case of a review by a panel de-
scribed in subsection (c)(3)(B) composed of phy-
sicians or other health care professionals (each in
this subsection referred to as a ‘reviewing profes-
sional’), each reviewing professional meets the
qualifications described in paragraph (4).
‘‘(2) INDEPENDENCE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each individual conducting a review
in a case shall—
‘‘(i) not be a related party (as defined
in paragraph (5));
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with
such a party in the case under review; and
‘‘(iii) not otherwise have a conflict of
interest with such a party (as determined
under regulations).
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to—
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‘‘(i) prohibit an individual, solely on
the basis of affiliation with a fiscal inter-
mediary, carrier, or other contractor, from
serving as a reviewing professional if—
‘‘(I) a nonaffiliated individual is
not reasonably available;
‘‘(II) the affiliated individual is
not involved in the provision of items
or services in the case under review;
‘‘(III) the fact of such an affili-
ation is disclosed to the Secretary and
the beneficiary (or authorized rep-
resentative) and neither party objects;
and
‘‘(IV) the affiliated individual is
not an employee of the intermediary,
carrier, or contractor and does not pro-
vide services exclusively or primarily
to or on behalf of such intermediary,
carrier, or contractor;
‘‘(ii) prohibit an individual who has
staff privileges at the institution where the
treatment involved takes place from serving
as a reviewer merely on the basis of such af-
filiation if the affiliation is disclosed to the
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Secretary and the beneficiary (or authorized
representative), and neither party objects; or
‘‘(iii) prohibit receipt of compensation
by a reviewing professional from a con-
tractor if the compensation is provided con-
sistent with paragraph (3).
‘‘(3) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by a qualified inde-
pendent contractor to a reviewer in connection with
a review under this section shall not be contingent on
the decision rendered by the reviewer.
‘‘(4) LICENSURE AND EXPERTISE.—Each review-
ing professional shall be a physician (allopathic or
osteopathic) or health care professional who—
‘‘(A) is appropriately credentialed or li-
censed in 1 or more States to deliver health care
services; and
‘‘(B) has medical expertise in the field of
practice that is appropriate for the items or serv-
ices at issue.
‘‘(5) RELATED PARTY DEFINED.—For purposes
of this section, the term ‘related party’ means, with
respect to a case under this title involving an indi-
vidual beneficiary, any of the following:
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‘‘(A) The Secretary, the medicare adminis-
trative contractor involved, or any fiduciary, of-
ficer, director, or employee of the Department of
Health and Human Services, or of such con-
tractor.
‘‘(B) The individual (or authorized rep-
resentative).
‘‘(C) The health care professional that pro-
vides the items or services involved in the case.
‘‘(D) The institution at which the items or
services (or treatment) involved in the case are
provided.
‘‘(E) The manufacturer of any drug or
other item that is included in the items or serv-
ices involved in the case.
‘‘(F) Any other party determined under any
regulations to have a substantial interest in the
case involved.’’.
(3) NUMBER OF QUALIFIED INDEPENDENT CON-
TRACTORS.—Section 
1869(c)(4) 
(42 
U.S.C.
1395ff(c)(4)) is amended by striking ‘‘12’’ and insert-
ing ‘‘4’’.
(e) IMPLEMENTATION OF CERTAIN BIPA REFORMS.—
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tion 1869(c)(3)(C)(iii) of the Social Security Act
shall be made by peer review organizations until
qualified independent contractors are available for
such expedited reconsiderations.’’.
(2) CONFORMING AMENDMENTS.—Section 521(c)
of BIPA (114 Stat. 2763A–543) and section
1869(c)(3)(C)(iii)(III) of the Social Security Act (42
U.S.C. 1395ff(c)(3)(C)(iii)(III)), as added by section
521 of BIPA, are repealed.
(f) EFFECTIVE DATE.—The amendments made by this
section shall be effective as if included in the enactment of
the respective provisions of subtitle C of title V of BIPA,
114 Stat. 2763A–534.
(g) TRANSITION.—In applying section 1869(g) of the
Social Security Act (as added by subsection (d)(2)), any
reference to a medicare administrative contractor shall be
deemed to include a reference to a fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h)
and a carrier under section 1842 of such Act (42 U.S.C.
1395u).
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SEC. 515. HEARING RIGHTS RELATED TO DECISIONS BY
THE SECRETARY TO DENY OR NOT RENEW A
MEDICARE ENROLLMENT AGREEMENT; CON-
SULTATION BEFORE CHANGING PROVIDER
ENROLLMENT FORMS.
(a) HEARING RIGHTS.—
(1) IN
GENERAL.—Section 1866 (42 U.S.C.
1395cc) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) HEARING RIGHTS IN CASES OF DENIAL OR NON-
RENEWAL.—The Secretary shall establish by regulation pro-
cedures under which—
‘‘(1) there are deadlines for actions on applica-
tions for enrollment (and, if applicable, renewal of
enrollment); and
‘‘(2) providers of services, physicians, practi-
tioners, and suppliers whose application to enroll (or,
if applicable, to renew enrollment) are denied are
provided a mechanism to appeal such denial and a
deadline for consideration of such appeals.’’.
(2) EFFECTIVE DATE.—The Secretary shall pro-
vide for the establishment of the procedures under the
amendment made by paragraph (1) within 18 months
after the date of enactment of this Act.
(b) CONSULTATION BEFORE CHANGING PROVIDER EN-
ROLLMENT FORMS.—Section 1871 (42 U.S.C. 1395hh), as
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amended by sections 502 and 503, is amended by adding
at the end the following new subsection:
‘‘(f) The Secretary shall consult with providers of serv-
ices, physicians, practitioners, and suppliers before making
changes in the provider enrollment forms required of such
providers, physicians, practitioners, and suppliers to be eli-
gible to submit claims for which payment may be made
under this title.’’.
SEC. 516. APPEALS BY PROVIDERS WHEN THERE IS NO
OTHER PARTY AVAILABLE.
(a) IN GENERAL.—Section 1870 (42 U.S.C. 1395gg)
is amended by adding at the end the following new sub-
section:
‘‘(h) Notwithstanding subsection (f) or any other pro-
vision of law, the Secretary shall permit a provider of serv-
ices, physician, practitioner, or other supplier to appeal
any determination of the Secretary under this title relating
to services rendered under this title to an individual who
subsequently dies if there is no other party available to ap-
peal such determination.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date of enactment of this
Act and shall apply to items and services furnished on or
after such date.
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SEC. 517. PROVIDER ACCESS TO REVIEW OF LOCAL COV-
ERAGE DETERMINATIONS.
(a) PROVIDER ACCESS TO REVIEW OF LOCAL COV-
ERAGE DETERMINATIONS.—Section 1869(f)(5) (42 U.S.C.
1395ff(f)(5)) is amended to read as follows:
‘‘(5) AGGRIEVED PARTY DEFINED.—In this sec-
tion, the term ‘aggrieved party’ means—
‘‘(A) with respect to a national coverage de-
termination, an individual entitled to benefits
under part A, or enrolled under part B, or both,
who is in need of the items or services that are
the subject of the coverage determination; and
‘‘(B) with respect to a local coverage
determination—
‘‘(i) an individual who is entitled to
benefits under part A, or enrolled under
part B, or both, who is adversely affected by
such a determination; or
‘‘(ii) a provider of services, physician,
practitioner, or supplier that is adversely
affected by such a determination.’’.
(b) CLARIFICATION OF LOCAL COVERAGE DETERMINA-
TION
DEFINITION.—Section 1869(f)(2)(B) (42 U.S.C.
1395ff(f)(2)(B)) is amended by inserting ‘‘, including,
where appropriate, the specific requirements and clinical
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indications relating to the medical necessity of an item or
service’’ before the period at the end.
(c) REQUEST FOR LOCAL COVERAGE DETERMINATIONS
BY PROVIDERS.—Section 1869 (42 U.S.C. 1395ff), as
amended by section 514(d)(2)(B), is amended by adding at
the end the following new subsection:
‘‘(h) REQUEST FOR LOCAL COVERAGE DETERMINA-
TIONS BY PROVIDERS.—
‘‘(1) ESTABLISHMENT
OF
PROCESS.—The Sec-
retary shall establish a process under which a pro-
vider of services, physician, practitioner, or supplier
who certifies that they meet the requirements estab-
lished in paragraph (3) may request a local coverage
determination in accordance with the succeeding pro-
visions of this subsection.
‘‘(2) PROVIDER LOCAL COVERAGE DETERMINA-
TION
REQUEST
DEFINED.—In this subsection, the
term ‘provider local coverage determination request’
means a request, filed with the Secretary, at such
time and in such form and manner as the Secretary
may specify, that the Secretary, pursuant to para-
graph (4)(A), require a fiscal intermediary, carrier,
or program safeguard contractor to make or revise a
local coverage determination under this section with
respect to an item or service.
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‘‘(3) 
REQUEST
REQUIREMENTS.—Under 
the
process established under paragraph (1), by not later
than 30 days after the date on which a provider local
coverage determination request is filed under para-
graph (1), the Secretary shall determine whether such
request establishes that—
‘‘(A) there have been at least 5 reversals of
redeterminations made by a fiscal intermediary
or carrier after a hearing before an administra-
tive law judge on claims submitted by the pro-
vider in at least 2 different cases before an ad-
ministrative law judge;
‘‘(B) each reversal described in subpara-
graph (A) involves substantially similar mate-
rial facts;
‘‘(C) each reversal described in subpara-
graph (A) involves the same medical necessity
issue; and
‘‘(D) at least 50 percent of the total number
of claims submitted by such provider within the
past year involving the substantially similar
material facts described in subparagraph (B)
and the same medical necessity issue described in
subparagraph (C) have been denied and have
been reversed by an administrative law judge.
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‘‘(4) APPROVAL OR REJECTION OF REQUEST.—
‘‘(A) APPROVAL OF REQUEST.—If the Sec-
retary 
determines 
that 
subparagraphs 
(A)
through (D) of paragraph (3) have been satisfied,
the Secretary shall require the fiscal inter-
mediary, carrier, or program safeguard con-
tractor identified in the provider local coverage
determination request, to make or revise a local
coverage determination with respect to the item
or service that is the subject of the request not
later than the date that is 210 days after the
date on which the Secretary makes the deter-
mination. Such fiscal intermediary, carrier, or
program safeguard contractor shall retain the
discretion to determine whether or not, and/or
the circumstances under which, to cover the item
or service for which a local coverage determina-
tion is requested. Nothing in this subsection shall
be construed to require a fiscal intermediary,
carrier or program safeguard contractor to de-
velop a local coverage determination that is in-
consistent with any national coverage determina-
tion, or any coverage provision in this title or in
regulation, manual, or interpretive guidance of
the Secretary.
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‘‘(B) REJECTION OF REQUEST.—If the Sec-
retary 
determines 
that 
subparagraphs 
(A)
through (D) of paragraph (3) have not been sat-
isfied, the Secretary shall reject the provider
local coverage determination request and shall
notify the provider of services, physician, practi-
tioner, or supplier that filed the request of the
reason for such rejection and no further pro-
ceedings in relation to such request shall be con-
ducted.’’.
(d) STUDY AND REPORT ON THE USE OF CONTRAC-
TORS TO MONITOR MEDICARE APPEALS.—
(1) STUDY.—The Secretary shall conduct a study
on the feasibility and advisability of requiring fiscal
intermediaries and carriers to monitor and track—
(A) the subject matter and status of claims
denied by the fiscal intermediary or carrier (as
applicable) that are appealed under section 1869
of the Social Security Act (42 U.S.C. 1395ff), as
added by section 522 of BIPA (114 Stat. 2763A–
543) and amended by this Act; and
(B) any final determination made with re-
spect to such claims.
(2) REPORT.—Not later than the date that is 1
year after the date of enactment of this Act, the Sec-
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retary shall submit to Congress a report on the study
conducted under paragraph (1) together with such
recommendations for legislation and administrative
action as the Commission determines appropriate.
(e) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated such sums as are necessary
to carry out the amendments made by subsections (a), (b),
and (c).
(f) EFFECTIVE DATES.—
(1) PROVIDER
ACCESS
TO
REVIEW
OF
LOCAL
COVERAGE
DETERMINATIONS.—The 
amendments
made by subsections (a) and (b) shall apply to—
(A) any review of any local coverage deter-
mination filed on or after October 1, 2003;
(B) any request to make such a determina-
tion made on or after such date; or
(C) any local coverage determination made
on or after such date.
(2) PROVIDER LOCAL COVERAGE DETERMINATION
REQUESTS.—The amendment made by subsection (c)
shall apply with respect to provider local coverage de-
termination requests (as defined in section 1869(h)(2)
of the Social Security Act, as added by subsection (c))
filed on or after the date of enactment of this Act.
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SEC. 518. REVISIONS TO APPEALS TIMEFRAMES.
Section 1869 (42 U.S.C. 1395ff) is amended—
(1) in subsection (a)(3)(C)(ii), by striking ‘‘30-
day period’’ each place it appears and inserting ‘‘60-
day period’’;
(2) in subsection (c)(3)(C)(i), by striking ‘‘30-
day period’’ and inserting ‘‘60-day period’’;
(3) in subsection (d)(1)(A), by striking ‘‘90-day
period’’ and inserting ‘‘120-day period’’; and
(4) in subsection (d)(2)(A), by striking ‘‘90-day
period’’ and inserting ‘‘120-day period’’.
SEC. 519. ELIMINATION OF REQUIREMENT TO USE SOCIAL
SECURITY 
ADMINISTRATION 
ADMINISTRA-
TIVE LAW JUDGES.
The first sentence of section 1869(f)(2)(A)(i) (42
U.S.C. 1395ff(f)(2)(A)(i)) is amended by striking ‘‘of the
Social Security Administration’’.
SEC. 520. ELIMINATION OF REQUIREMENT FOR DE NOVO
REVIEW BY THE DEPARTMENTAL APPEALS
BOARD.
Section 1869(d)(2) (42 U.S.C. 1395ff(d)(2)) is amend-
ed to read as follows:
‘‘(2) 
DEPARTMENTAL
APPEALS
BOARD
RE-
VIEW.—The Departmental Appeals Board of the De-
partment of Health and Human Services shall con-
duct and conclude a review of the decision on a hear-
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ing described in paragraph (1) and make a decision
or remand the case to the administrative law judge
for reconsideration by not later than the end of the
90-day period beginning on the date a request for re-
view has been timely filed.’’.
Subtitle C—Contracting Reform
SEC. 521. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION.
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by in-
serting after section 1874 the following new section:
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE
CONTRACTORS
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) AUTHORITY TO ENTER INTO CONTRACTS.—
The Secretary may enter into contracts with any eli-
gible entity to serve as a medicare administrative
contractor with respect to the performance of any or
all of the functions described in paragraph (4) or
parts of those functions (or, to the extent provided in
a contract, to secure performance thereof by other en-
tities).
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is el-
igible to enter into a contract with respect to the per-
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formance of a particular function described in para-
graph (4) only if—
‘‘(A) the entity has demonstrated capability
to carry out such function;
‘‘(B) the entity complies with such conflict
of interest standards as are generally applicable
to Federal acquisition and procurement;
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and
‘‘(D) the entity meets such other require-
ments as the Secretary may impose.
‘‘(3) MEDICARE
ADMINISTRATIVE
CONTRACTOR
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN GENERAL.—The term ‘medicare ad-
ministrative contractor’ means an agency, orga-
nization, or other person with a contract under
this section.
‘‘(B) APPROPRIATE MEDICARE ADMINISTRA-
TIVE CONTRACTOR.—With respect to the perform-
ance of a particular function in relation to an
individual entitled to benefits under part A or
enrolled under part B, or both, a specific pro-
vider of services, physician, practitioner, facility,
or supplier (or class of such providers of services,
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physicians, practitioners, facilities, or suppliers),
the ‘appropriate’ medicare administrative con-
tractor is the medicare administrative contractor
that has a contract under this section with re-
spect to the performance of that function in rela-
tion to that individual, provider of services, phy-
sician, practitioner, facility, or supplier or class
of provider of services, physician, practitioner,
facility, or supplier.
‘‘(4) FUNCTIONS DESCRIBED.—The functions re-
ferred to in paragraphs (1) and (2) are payment
functions (including the function of developing local
coverage determinations, as defined in section
1869(f)(2)(B)), provider services functions, and bene-
ficiary services functions as follows:
‘‘(A) 
DETERMINATION
OF
PAYMENT
AMOUNTS.—Determining (subject to the provi-
sions of section 1878 and to such review by the
Secretary as may be provided for by the con-
tracts) the amount of the payments required pur-
suant to this title to be made to providers of
services, physicians, practitioners, facilities, sup-
pliers, and individuals.
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A) (including
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receipt, disbursement, and accounting for funds
in making such payments).
‘‘(C) BENEFICIARY EDUCATION AND ASSIST-
ANCE.—Serving as a center for, and commu-
nicating to individuals entitled to benefits under
part A or enrolled under part B, or both, with
respect to education and outreach for those indi-
viduals, and assistance with specific issues, con-
cerns, or problems of those individuals.
‘‘(D) 
PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to institu-
tions, agencies, and other persons to enable them
to establish and maintain fiscal records nec-
essary for purposes of this title and otherwise to
qualify as providers of services, physicians, prac-
titioners, facilities, or suppliers.
‘‘(E) COMMUNICATION WITH PROVIDERS.—
Serving as a center for, and communicating to
providers of services, physicians, practitioners,
facilities, and suppliers, any information or in-
structions furnished to the medicare administra-
tive contractor by the Secretary, and serving as
a channel of communication from such pro-
viders, physicians, practitioners, facilities, and
suppliers to the Secretary.
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‘‘(F) PROVIDER EDUCATION AND TECHNICAL
ASSISTANCE.—Performing 
the 
functions 
de-
scribed in subsections (e) and (f), relating to
education, training, and technical assistance to
providers of services, physicians, practitioners,
facilities, and suppliers.
‘‘(G) ADDITIONAL FUNCTIONS.—Performing
such other functions, including (subject to para-
graph (5)) functions under the Medicare Integ-
rity Program under section 1893, as are nec-
essary to carry out the purposes of this title.
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION OF ACTIVITIES.—In
entering into contracts under this section, the
Secretary shall assure that activities of medicare
administrative contractors do not duplicate ac-
tivities carried out under contracts entered into
under the Medicare Integrity Program under sec-
tion 1893. The previous sentence shall not apply
with respect to the activity described in section
1893(b)(5) (relating to prior authorization of
certain items of durable medical equipment
under section 1834(a)(15)).
‘‘(B) CONSTRUCTION.—An entity shall not
be treated as a medicare administrative con-
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tractor merely by reason of having entered into
a contract with the Secretary under section
1893.
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION
REGULATION.—Except to the extent inconsistent with
a specific requirement of this title, the Federal Acqui-
sition Regulation applies to contracts under this title.
‘‘(b) CONTRACTING REQUIREMENTS.—
‘‘(1) USE OF COMPETITIVE PROCEDURES.—
‘‘(A) IN GENERAL.—Except as provided in
laws with general applicability to Federal acqui-
sition and procurement, the Federal Acquisition
Regulation, or in subparagraph (B), the Sec-
retary shall use competitive procedures when en-
tering into contracts with medicare administra-
tive contractors under this section.
‘‘(B) RENEWAL OF CONTRACTS.—The Sec-
retary may renew a contract with a medicare
administrative contractor under this section
from term to term without regard to section 5 of
title 41, United States Code, or any other provi-
sion of law requiring competition, if the medi-
care administrative contractor has met or ex-
ceeded the performance requirements applicable
with respect to the contract and contractor, ex-
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cept that the Secretary shall provide for the ap-
plication of competitive procedures under such a
contract not less frequently than once every 6
years.
‘‘(C) TRANSFER OF FUNCTIONS.—The Sec-
retary may transfer functions among medicare
administrative contractors without regard to any
provision of law requiring competition. The Sec-
retary shall ensure that performance quality is
considered in such transfers. The Secretary shall
provide notice (whether in the Federal Register
or otherwise) of any such transfer (including a
description of the functions so transferred and
contact information for the contractors involved)
to providers of services, physicians, practitioners,
facilities, and suppliers affected by the transfer.
‘‘(D) INCENTIVES FOR QUALITY.—The Sec-
retary may provide incentives for medicare ad-
ministrative contractors to provide quality serv-
ice and to promote efficiency.
‘‘(2) COMPLIANCE
WITH
REQUIREMENTS.—No
contract under this section shall be entered into with
any medicare administrative contractor unless the
Secretary finds that such medicare administrative
contractor will perform its obligations under the con-
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tract efficiently and effectively and will meet such re-
quirements as to financial responsibility, legal au-
thority, and other matters as the Secretary finds per-
tinent.
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT OF SPECIFIC PERFORM-
ANCE REQUIREMENTS.—The Secretary shall de-
velop contract performance requirements to carry
out the specific requirements applicable under
this title to a function described in subsection
(a)(4) and shall develop standards for measuring
the extent to which a contractor has met such re-
quirements. In developing such performance re-
quirements and standards for measurement, the
Secretary shall consult with providers of services,
organizations 
representative 
of 
beneficiaries
under this title, and organizations and agencies
performing functions necessary to carry out the
purposes of this section with respect to such per-
formance requirements. The Secretary shall make
such performance requirements and measurement
standards available to the public.
‘‘(B) 
CONSIDERATIONS.—The 
Secretary
shall include, as 1 of the standards, provider and
beneficiary satisfaction levels.
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‘‘(C) INCLUSION IN CONTRACTS.—All con-
tractor performance requirements shall be set
forth in the contract between the Secretary and
the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements published under subparagraph
(A), but may include additional perform-
ance requirements;
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract; and
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the
contract.
‘‘(4) INFORMATION
REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medicare
administrative contractor under this section unless
the contractor agrees—
‘‘(A) to furnish to the Secretary such timely
information and reports as the Secretary may
find necessary in performing his functions under
this title; and
‘‘(B) to maintain such records and afford
such access thereto as the Secretary finds nec-
essary to assure the correctness and verification
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of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title.
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section may
require the medicare administrative contractor, and
any of its officers or employees certifying payments or
disbursing funds pursuant to the contract, or other-
wise participating in carrying out the contract, to
give surety bond to the United States in such amount
as the Secretary may deem appropriate.
‘‘(6) RETAINING DIVERSITY OF LOCAL COVERAGE
DETERMINATIONS.—A contract with a medicare ad-
ministrative contractor under this section to perform
the function of developing local coverage determina-
tions (as defined in section 1869(f)(2)(B)) shall pro-
vide that the contractor shall—
‘‘(A) designate at least 1 different indi-
vidual to serve as medical director for each State
for which such contract performs such function;
‘‘(B) utilize such medical director in the
performance of such function; and
‘‘(C) appoint a contractor advisory com-
mittee with respect to each such State to provide
a formal mechanism for physicians in the State
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to be informed of, and participate in, the devel-
opment of a local coverage determination in an
advisory capacity.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—Subject to subsection (a)(6),
a contract with any medicare administrative con-
tractor under this section may contain such terms
and conditions as the Secretary finds necessary or ap-
propriate and may provide for advances of funds to
the medicare administrative contractor for the mak-
ing of payments by it under subsection (a)(4)(B).
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN
DATA COLLECTION.—The Secretary may not require,
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
trative contractor match data obtained other than in
its activities under this title with data used in the ad-
ministration of this title for purposes of identifying
situations in which the provisions of section 1862(b)
may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMIN-
ISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as
a certifying officer shall, in the absence of the reckless
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disregard of the individual’s obligations or the intent
by that individual to defraud the United States, be
liable with respect to any payments certified by the
individual under this section.
‘‘(2) DISBURSING OFFICER.—No disbursing offi-
cer shall, in the absence of the reckless disregard of the
officer’s obligations or the intent by that officer to de-
fraud the United States, be liable with respect to any
payment by such officer under this section if it was
based upon an authorization (which meets the appli-
cable requirements for such internal controls estab-
lished by the Comptroller General) of a certifying offi-
cer designated as provided in paragraph (1) of this
subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE
CONTRACTOR.—No 
medicare 
administrative 
con-
tractor shall be liable to the United States for a pay-
ment by a certifying or disbursing officer unless, in
connection with such a payment, the medicare ad-
ministrative contractor acted with reckless disregard
of its obligations under its medicare administrative
contract or with intent to defraud the United States.
‘‘(4) RELATIONSHIP TO FALSE CLAIMS ACT.—
Nothing in this subsection shall be construed to limit
liability for conduct that would constitute a violation
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of sections 3729 through 3731 of title 31, United
States Code (commonly known as the ‘‘False Claims
Act’’).
‘‘(5) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of law and subject to the suc-
ceeding provisions of this paragraph, in the case
of a medicare administrative contractor (or a
person who is a director, officer, or employee of
such a contractor or who is engaged by the con-
tractor to participate directly in the claims ad-
ministration process) who is made a party to
any judicial or administrative proceeding aris-
ing from, or relating directly to, the claims ad-
ministration process under this title, the Sec-
retary may, to the extent specified in the con-
tract with the contractor, indemnify the con-
tractor (and such persons).
‘‘(B) CONDITIONS.—The Secretary may not
provide indemnification under subparagraph (A)
insofar as the liability for such costs arises di-
rectly from conduct that is determined by the
Secretary to be criminal in nature, fraudulent,
or grossly negligent.
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‘‘(C) SCOPE OF INDEMNIFICATION.—Indem-
nification by the Secretary under subparagraph
(A) may include payment of judgments, settle-
ments (subject to subparagraph (D)), awards,
and costs (including reasonable legal expenses).
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person described
in subparagraph (A) may not propose to nego-
tiate a settlement or compromise of a proceeding
described in such subparagraph without the
prior written approval of the Secretary to nego-
tiate a settlement. Any indemnification under
subparagraph (A) with respect to amounts paid
under a settlement are conditioned upon the Sec-
retary’s prior written approval of the final set-
tlement.
‘‘(E) 
CONSTRUCTION.—Nothing 
in 
this
paragraph shall be construed—
‘‘(i) to change any common law immu-
nity that may be available to a medicare
administrative contractor or person de-
scribed in subparagraph (A); or
‘‘(ii) to permit the payment of costs
not otherwise allowable, reasonable, or allo-
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cable under the Federal Acquisition Regula-
tions.’’.
(2) CONSIDERATION OF INCORPORATION OF CUR-
RENT LAW STANDARDS.—In developing contract per-
formance requirements under section 1874A(b) of the
Social Security Act (as added by paragraph (1)) the
Secretary shall consider inclusion of the performance
standards described in sections 1816(f)(2) of such Act
(relating to timely processing of reconsiderations and
applications 
for 
exemptions) 
and 
section
1842(b)(2)(B) of such Act (relating to timely review
of determinations and fair hearing requests), as such
sections were in effect before the date of enactment of
this Act.
(b) CONFORMING AMENDMENTS TO SECTION 1816 (RE-
LATING TO FISCAL INTERMEDIARIES).—Section 1816 (42
U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART
A’’.
(2) Subsection (a) is amended to read as follows:
‘‘(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.’’.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended—
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(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and
(3)(A), by striking ‘‘agreement under this sec-
tion’’ and inserting ‘‘contract under section
1874A that provides for making payments under
this part’’.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended—
(A) by striking ‘‘An agreement with an
agency or organization under this section’’ and
inserting ‘‘A contract with a medicare adminis-
trative contractor under section 1874A with re-
spect to the administration of this part’’; and
(B) by striking ‘‘such agency or organiza-
tion’’ and inserting ‘‘such medicare administra-
tive contractor’’ each place it appears.
(7) Subsection (l) is repealed.
(c) CONFORMING AMENDMENTS TO SECTION 1842 (RE-
LATING TO CARRIERS).—Section 1842 (42 U.S.C. 1395u)
is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART
B’’.
(2) Subsection (a) is amended to read as follows:
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‘‘(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.’’.
(3) Subsection (b) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and
(B);
(ii) in subparagraph (C), by striking
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and
(iii) by striking subparagraphs (D)
and (E);
(C) in paragraph (3)—
(i) in the matter before subparagraph
(A), by striking ‘‘Each such contract shall
provide that the carrier’’ and inserting
‘‘The Secretary’’;
(ii) by striking ‘‘will’’ the first place it
appears in each of subparagraphs (A), (B),
(F), (G), (H), and (L) and inserting
‘‘shall’’;
(iii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the pol-
icyholders and subscribers of the carrier’’
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and inserting ‘‘to the policyholders and sub-
scribers of the medicare administrative con-
tractor’’;
(iv) by striking subparagraphs (C),
(D), and (E);
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes deter-
minations or payments with respect to
physicians’ services,’’; and
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’;
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking
the semicolon and inserting a period;
(viii) in the first sentence, after sub-
paragraph (L), by striking ‘‘and shall con-
tain’’ and all that follows through the pe-
riod; and
(ix) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’
after ‘‘carrier,’’;
(D) by striking paragraph (5);
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(E) in paragraph (6)(D)(iv), by striking
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and
(F) in paragraph (7), by striking ‘‘the car-
rier’’ and inserting ‘‘the Secretary’’ each place it
appears.
(4) Subsection (c) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2), by striking ‘‘contract
under this section which provides for the dis-
bursement of funds, as described in subsection
(a)(1)(B),’’ and inserting ‘‘contract under section
1874A that provides for making payments under
this part’’;
(C) in paragraph (3)(A), by striking ‘‘sub-
section 
(a)(1)(B)’’ 
and 
inserting 
‘‘section
1874A(a)(3)(B)’’;
(D) in paragraph (4), by striking ‘‘carrier’’
and inserting ‘‘medicare administrative con-
tractor’’;
(E) in paragraph (5), by striking ‘‘contract
under this section which provides for the dis-
bursement of funds, as described in subsection
(a)(1)(B), shall require the carrier’’ and ‘‘carrier
responses’’ and inserting ‘‘contract under section
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1874A that provides for making payments under
this part shall require the medicare administra-
tive contractor’’ and ‘‘contractor responses’’, re-
spectively; and
(F) by striking paragraph (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’.
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having
an agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘The Secretary’’;
and
(ii) by striking ‘‘Each such carrier’’
and inserting ‘‘The Secretary’’;
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract
under section 1874A that provides for mak-
ing payments under this part’’; and
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(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’;
(C) in paragraph (3)(B)—
(i) by striking ‘‘a carrier’’ and insert-
ing ‘‘a medicare administrative contractor’’
each place it appears; and
(ii) by striking ‘‘the carrier’’ and in-
serting ‘‘the contractor’’ each place it ap-
pears; and
(D) in paragraphs (5)(A) and (5)(B)(iii),
by striking ‘‘carriers’’ and inserting ‘‘medicare
administrative contractors’’ each place it ap-
pears.
(8) Subsection (l) is amended—
(A) in paragraph (1)(A)(iii), by striking
‘‘carrier’’ and inserting ‘‘medicare administra-
tive contractor’’; and
(B) in paragraph (2), by striking ‘‘carrier’’
and inserting ‘‘medicare administrative con-
tractor’’.
(9) Subsection (p)(3)(A) is amended by striking
‘‘carrier’’ and inserting ‘‘medicare administrative
contractor’’.
(10) Subsection (q)(1)(A) is amended by striking
‘‘carrier’’.
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(d) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made
by this section shall take effect on October 1,
2005, and the Secretary is authorized to take
such steps before such date as may be necessary
to implement such amendments on a timely
basis.
(B) CONSTRUCTION
FOR
CURRENT
CON-
TRACTS.—Such amendments shall not apply to
contracts in effect before the date specified under
subparagraph (A) that continue to retain the
terms and conditions in effect on such date (ex-
cept as otherwise provided under this title, other
than under this section) until such date as the
contract is let out for competitive bidding under
such amendments.
(C) DEADLINE
FOR
COMPETITIVE
BID-
DING.—The Secretary shall provide for the let-
ting by competitive bidding of all contracts for
functions of medicare administrative contractors
for annual contract periods that begin on or
after October 1, 2011.
(2) GENERAL TRANSITION RULES.—
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continue to apply notwithstanding the amendments
made by this section, and any reference in such provi-
sions to an agreement or contract shall be deemed to
include agreements and contracts entered into pursu-
ant to paragraph (2)(A).
(e) REFERENCES.—On and after the effective date pro-
vided under subsection (d)(1), any reference to a fiscal
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction,
interpretative rule, statement of policy, or guideline issued
to carry out such titles) shall be deemed a reference to an
appropriate medicare administrative contractor (as pro-
vided under section 1874A of the Social Security Act).
(f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO-
POSAL.—Not later than 6 months after the date of enact-
ment of this Act, the Secretary shall submit to the appro-
priate committees of Congress a legislative proposal pro-
viding for such technical and conforming amendments in
the law as are required by the provisions of this section.
(g) REPORTS ON IMPLEMENTATION.—
(1) PROPOSAL FOR IMPLEMENTATION.—At least
1 year before the date specified in subsection
(d)(1)(A), the Secretary shall submit a report to Con-
gress and the Comptroller General of the United
States that describes a plan for an appropriate tran-
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sition. The Comptroller General shall conduct an
evaluation of such plan and shall submit to Congress,
not later than 6 months after the date the report is
received, a report on such evaluation and shall in-
clude in such report such recommendations as the
Comptroller General deems appropriate.
(2) STATUS
OF
IMPLEMENTATION.—The Sec-
retary shall submit a report to Congress not later
than October 1, 2008, that describes the status of im-
plementation of such amendments and that includes
a description of the following:
(A) The number of contracts that have been
competitively bid as of such date.
(B) The distribution of functions among
contracts and contractors.
(C) A timeline for complete transition to
full competition.
(D) A detailed description of how the Sec-
retary has modified oversight and management
of medicare contractors to adapt to full competi-
tion.
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Subtitle D—Education and
Outreach Improvements
SEC. 531. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE.
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—The Social Security Act is
amended by inserting after section 1888 the following
new section:
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUND-
ING.—The Secretary shall coordinate the educational activi-
ties provided through medicare contractors (as defined in
subsection (e), including under section 1893) in order to
maximize the effectiveness of Federal education efforts for
providers of services, physicians, practitioners, and sup-
pliers.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall take effect on the date of enact-
ment of this Act.
(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE.—
(1) IN GENERAL.—Section 1874A, as added by
section 521(a)(1), is amended by adding at the end
the following new subsection:
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‘‘(e) INCENTIVES TO IMPROVE CONTRACTOR PERFORM-
ANCE IN PROVIDER EDUCATION AND OUTREACH.—
‘‘(1) METHODOLOGY TO MEASURE CONTRACTOR
ERROR RATES.—In order to give medicare contractors
(as defined in paragraph (3)) an incentive to imple-
ment effective education and outreach programs for
providers of services, physicians, practitioners, and
suppliers, the Secretary shall develop and implement
by October 1, 2004, a methodology to measure the spe-
cific claims payment error rates of such contractors
in the processing or reviewing of medicare claims.
‘‘(2) GAO 
REVIEW
OF
METHODOLOGY.—The
Comptroller General of the United States shall review,
and make recommendations to the Secretary, regard-
ing the adequacy of such methodology.
‘‘(3) MEDICARE
CONTRACTOR
DEFINED.—For
purposes of this subsection, the term ‘medicare con-
tractor’ includes a medicare administrative con-
tractor, a fiscal intermediary with a contract under
section 1816, and a carrier with a contract under sec-
tion 1842.’’.
(2) REPORT.—The Secretary shall submit to
Congress a report that describes how the Secretary in-
tends to use the methodology developed under section
1874A(e)(1) of the Social Security Act, as added by
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paragraph (1), in assessing medicare contractor per-
formance in implementing effective education and
outreach programs, including whether to use such
methodology as a basis for performance bonuses.
(c) IMPROVED PROVIDER EDUCATION
AND TRAIN-
ING.—
(1) INCREASED FUNDING FOR ENHANCED EDU-
CATION AND TRAINING THROUGH MEDICARE INTEG-
RITY
PROGRAM.—Section 1817(k)(4) (42 U.S.C.
1395i(k)(4)) is amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs
(B) and (C)’’;
(B) in subparagraph (B), by striking ‘‘The
amount appropriated’’ and inserting ‘‘Subject to
subparagraph (C), the amount appropriated’’;
and
(C) by adding at the end the following new
subparagraph:
‘‘(C) ENHANCED PROVIDER EDUCATION AND
TRAINING.—
‘‘(i) IN GENERAL.—In addition to the
amount appropriated under subparagraph
(B), the amount appropriated under sub-
paragraph (A) for a fiscal year (beginning
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with fiscal year 2004) is increased by
$35,000,000.
‘‘(ii) USE.—The funds made available
under this subparagraph shall be used only
to increase the conduct by medicare contrac-
tors of education and training of providers
of services, physicians, practitioners, and
suppliers regarding billing, coding, and
other appropriate items and may also be
used to improve the accuracy, consistency,
and timeliness of contractor responses to
written and phone inquiries from providers
of services, physicians, practitioners, and
suppliers.’’.
(2) TAILORING EDUCATION AND TRAINING FOR
SMALL PROVIDERS OR SUPPLIERS.—
(A) IN GENERAL.—Section 1889, as added
by subsection (a), is amended by adding at the
end the following new subsection:
‘‘(b) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it
shall take into consideration the special needs of small
providers of services or suppliers (as defined in para-
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graph (2)). Such education and training activities for
small providers of services and suppliers may include
the provision of technical assistance (such as review
of billing systems and internal controls to determine
program compliance and to suggest more efficient and
effective means of achieving such compliance).
‘‘(2) SMALL
PROVIDER
OF
SERVICES
OR
SUP-
PLIER.—In this subsection, the term ‘small provider
of services or supplier’ means—
‘‘(A) an institutional provider of services
with fewer than 25 full-time-equivalent employ-
ees; or
‘‘(B) a physician, practitioner, or supplier
with fewer than 10 full-time-equivalent employ-
ees.’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall take effect on
January 1, 2004.
(d) 
ADDITIONAL
PROVIDER
EDUCATION
PROVI-
SIONS.—
(1) IN GENERAL.—Section 1889, as added by
subsection (a) and as amended by subsection (c)(2),
is amended by adding at the end the following new
subsections:
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‘‘(c) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor
may not use a record of attendance at (or failure to attend)
educational activities or other information gathered during
an educational program conducted under this section or
otherwise by the Secretary to select or track providers of
services, physicians, practitioners, or suppliers for the pur-
pose of conducting any type of audit or prepayment review.
‘‘(d) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure
by a medicare contractor—
‘‘(1) of the screens used for identifying claims
that will be subject to medical review; or
‘‘(2) of information that would compromise
pending law enforcement activities or reveal findings
of law enforcement-related audits.
‘‘(e) DEFINITIONS.—For purposes of this section and
section 1817(k)(4)(C), the term ‘medicare contractor’ in-
cludes the following:
‘‘(1) A medicare administrative contractor with
a contract under section 1874A, a fiscal intermediary
with a contract under section 1816, and a carrier
with a contract under section 1842.
‘‘(2) An eligible entity with a contract under sec-
tion 1893.
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Such term does not include, with respect to activities of a
specific provider of services, physician, practitioner, or sup-
plier an entity that has no authority under this title or
title XI with respect to such activities and such provider
of services, physician, practitioner, or supplier.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall take effect on the date of enact-
ment of this Act.
SEC. 532. ACCESS TO AND PROMPT RESPONSES FROM MEDI-
CARE CONTRACTORS.
(a) IN GENERAL.—Section 1874A, as added by section
521(a)(1) and as amended by section 531(b)(1), is amended
by adding at the end the following new subsection:
‘‘(f) COMMUNICATING WITH BENEFICIARIES AND PRO-
VIDERS.—
‘‘(1) COMMUNICATION PROCESS.—The Secretary
shall develop a process for medicare contractors to
communicate with beneficiaries and with providers of
services, physicians, practitioners, and suppliers
under this title.
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each
medicare contractor (as defined in paragraph (5))
shall provide general written responses (which may be
through electronic transmission) in a clear, concise,
and accurate manner to inquiries by beneficiaries,
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providers of services, physicians, practitioners, and
suppliers concerning the programs under this title
within 45 business days of the date of receipt of such
inquiries.
‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Sec-
retary shall ensure that medicare contractors provide
a toll-free telephone number at which beneficiaries,
providers, physicians, practitioners, and suppliers
may obtain information regarding billing, coding,
claims, coverage, and other appropriate information
under this title.
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
‘‘(A) IN
GENERAL.—Each medicare con-
tractor shall, consistent with standards developed
by the Secretary under subparagraph (B)—
‘‘(i) maintain a system for identifying
who provides the information referred to in
paragraphs (2) and (3); and
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so
provided.
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN GENERAL.—The Secretary shall
establish (and publish in the Federal Reg-
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ister) standards regarding the accuracy,
consistency, and timeliness of the informa-
tion provided in response to inquiries under
this subsection. Such standards shall be con-
sistent with the performance requirements
established under subsection (b)(3).
‘‘(ii) 
EVALUATION.—In 
conducting
evaluations of individual medicare contrac-
tors, the Secretary shall consider the results
of the monitoring conducted under subpara-
graph (A) taking into account as perform-
ance requirements the standards established
under clause (i). The Secretary shall, in
consultation 
with 
organizations 
rep-
resenting providers of services, suppliers,
and individuals entitled to benefits under
part A or enrolled under part B, or both, es-
tablish standards relating to the accuracy,
consistency, and timeliness of the informa-
tion so provided.
‘‘(C) DIRECT MONITORING.—Nothing in this
paragraph shall be construed as preventing the
Secretary from directly monitoring the accuracy,
consistency, and timeliness of the information so
provided.
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‘‘(5) MEDICARE
CONTRACTOR
DEFINED.—For
purposes of this subsection, the term ‘medicare con-
tractor’ has the meaning given such term in sub-
section (e)(3).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect October 1, 2004.
(c) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated such sums as are necessary
to carry out section 1874A(f) of the Social Security Act,
as added by subsection (a).
SEC. 533. RELIANCE ON GUIDANCE.
(a) IN GENERAL.—Section 1871(d), as added by sec-
tion 502(a), is amended by adding at the end the following
new paragraph:
‘‘(2) If—
‘‘(A) a provider of services, physician, practi-
tioner, or other supplier follows written guidance
provided—
‘‘(i) by the Secretary; or
‘‘(ii) by a medicare contractor (as defined
in section 1889(e) and whether in the form of a
written response to a written inquiry under sec-
tion 1874A(f)(1) or otherwise) acting within the
scope of the contractor’s contract authority,
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in response to a written inquiry with respect to the
furnishing of items or services or the submission of a
claim for benefits for such items or services;
‘‘(B) the Secretary determines that—
‘‘(i) the provider of services, physician,
practitioner, or supplier has accurately presented
the circumstances relating to such items, services,
and claim to the Secretary or the contractor in
the written guidance; and
‘‘(ii) there is no indication of fraud or
abuse committed by the provider of services, phy-
sician, practitioner, or supplier against the pro-
gram under this title; and
‘‘(C) the guidance was in error;
the provider of services, physician, practitioner, or supplier
shall not be subject to any penalty or interest under this
title (or the provisions of title XI insofar as they relate to
this title) relating to the provision of such items or service
or such claim if the provider of services, physician, practi-
tioner, or supplier reasonably relied on such guidance. In
applying this paragraph with respect to guidance in the
form of general responses to frequently asked questions, the
Secretary retains authority to determine the extent to which
such general responses apply to the particular cir-
cumstances of individual claims.’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to penalties imposed on or after the
date of enactment of this Act.
SEC. 534. MEDICARE PROVIDER OMBUDSMAN.
(a) MEDICARE PROVIDER OMBUDSMAN.—Section 1868
(42 U.S.C. 1395ee) is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’;
(2) by inserting ‘‘PRACTICING PHYSICIANS ADVI-
SORY COUNCIL.—(1)’’ after ‘‘(a)’’;
(3) in paragraph (1), as so redesignated under
paragraph (2), by striking ‘‘in this section’’ and in-
serting ‘‘in this subsection’’;
(4) by redesignating subsections (b) and (c) as
paragraphs (2) and (3), respectively; and
(5) by adding at the end the following new sub-
section:
‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—
‘‘(1) IN GENERAL.—By not later than 1 year
after the date of enactment of the Prescription Drug
and Medicare Improvement Act of 2003, the Secretary
shall appoint a Medicare Provider Ombudsman.
‘‘(2) DUTIES.—The Medicare Provider Ombuds-
man shall—
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‘‘(A) provide assistance, on a confidential
basis, to entities and individuals providing items
and services, including covered drugs under part
D, under this title with respect to complaints,
grievances, and requests for information con-
cerning the programs under this title (including
provisions of title XI insofar as they relate to
this title and are not administered by the Office
of the Inspector General of the Department of
Health and Human Services) and in the resolu-
tion of unclear or conflicting guidance given by
the Secretary and medicare contractors to such
providers of services and suppliers regarding
such programs and provisions and requirements
under this title and such provisions; and
‘‘(B) submit recommendations to the Sec-
retary for improvement in the administration of
this title and such provisions, including—
‘‘(i) recommendations to respond to re-
curring patterns of confusion in this title
and 
such 
provisions 
(including 
rec-
ommendations regarding suspending impo-
sition of sanctions where there is wide-
spread confusion in program administra-
tion), and
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‘‘(ii) recommendations to provide for
an appropriate and consistent response (in-
cluding not providing for audits) in cases of
self-identified overpayments by providers of
services and suppliers.
‘‘(3) STAFF.—The Secretary shall provide the
Medicare Provider Ombudsman with appropriate
staff.’’.
(b) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the Fed-
eral Hospital Insurance Trust Fund and the Federal Sup-
plementary Medical Insurance Trust Fund (including the
Prescription Drug Account)) to carry out the provisions of
subsection (b) of section 1868 of the Social Security Act
(42 U.S.C. 1395ee) (relating to the Medicare Provider Om-
budsman), as added by subsection (a)(5), such sums as are
necessary for fiscal year 2004 and each succeeding fiscal
year.
SEC. 535. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAMS.
(a) DEMONSTRATION ON THE PROVISION OF ADVICE
AND ASSISTANCE TO MEDICARE BENEFICIARIES AT LOCAL
OFFICES OF THE SOCIAL SECURITY ADMINISTRATION.—
(1) ESTABLISHMENT.—The Secretary shall estab-
lish a demonstration program (in this subsection re-
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ferred to as the ‘‘demonstration program’’) under
which medicare specialists employed by the Depart-
ment of Health and Human Services provide advice
and assistance to medicare beneficiaries at the loca-
tion of existing local offices of the Social Security Ad-
ministration.
(2) LOCATIONS.—
(A) IN GENERAL.—The demonstration pro-
gram shall be conducted in at least 6 offices or
areas. Subject to subparagraph (B), in selecting
such offices and areas, the Secretary shall pro-
vide preference for offices with a high volume of
visits by medicare beneficiaries.
(B) 
ASSISTANCE
FOR
RURAL
BENE-
FICIARIES.—The Secretary shall provide for the
selection of at least 2 rural areas to participate
in the demonstration program. In conducting the
demonstration program in such rural areas, the
Secretary shall provide for medicare specialists
to travel among local offices in a rural area on
a scheduled basis.
(3) DURATION.—The demonstration program
shall be conducted over a 3-year period.
(4) EVALUATION AND REPORT.—
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(A) EVALUATION.—The Secretary shall pro-
vide for an evaluation of the demonstration pro-
gram. Such evaluation shall include an analysis
of—
(i) utilization of, and beneficiary satis-
faction with, the assistance provided under
the program; and
(ii) the cost-effectiveness of providing
beneficiary 
assistance 
through 
out-sta-
tioning medicare specialists at local social
security offices.
(B) REPORT.—The Secretary shall submit
to Congress a report on such evaluation and
shall include in such report recommendations re-
garding the feasibility of permanently out-sta-
tioning Medicare specialists at local social secu-
rity offices.
(b) DEMONSTRATION ON PROVIDING PRIOR DETER-
MINATIONS.—
(1) ESTABLISHMENT.—By not later than 1 year
after the date of enactment of this Act, the Secretary
shall establish a demonstration project to test the ad-
ministrative feasibility of providing a process for
medicare beneficiaries and entities and individuals
furnishing such beneficiaries with items and services
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under title XVIII of the Social Security Act program
to make a request for, and receive, a determination
(after an advance beneficiary notice is issued with re-
spect to the item or service involved but before such
item or service is furnished to the beneficiary) as to
whether the item or service is covered under such title
consistent with the applicable requirements of section
1862(a)(1)(A) of such Act (42 U.S.C. 1395y(a)(1)(A))
(relating to medical necessity).
(2) EVALUATION AND REPORT.—
(A) EVALUATION.—The Secretary shall pro-
vide for an evaluation of the demonstration pro-
gram conducted under paragraph (1).
(B) REPORT.—By not later than January
1, 2006, the Secretary shall submit to Congress
a report on such evaluation together with rec-
ommendations for such legislation and adminis-
trative actions as the Secretary considers appro-
priate.
Subtitle E—Review, Recovery, and
Enforcement Reform
SEC. 541. PREPAYMENT REVIEW.
(a) IN GENERAL.—Section 1874A, as added by section
521(a)(1) and as amended by sections 531(b)(1) and
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532(a), is amended by adding at the end the following new
subsection:
‘‘(g) CONDUCT OF PREPAYMENT REVIEW.—
‘‘(1) STANDARDIZATION
OF
RANDOM
PREPAY-
MENT
REVIEW.—A medicare administrative con-
tractor shall conduct random prepayment review only
in accordance with a standard protocol for random
prepayment audits developed by the Secretary.
‘‘(2) LIMITATIONS ON INITIATION OF NONRANDOM
PREPAYMENT
REVIEW.—A medicare administrative
contractor may not initiate nonrandom prepayment
review of a provider of services, physician, practi-
tioner, or supplier based on the initial identification
by that provider of services, physician, practitioner,
or supplier of an improper billing practice unless
there is a likelihood of sustained or high level of pay-
ment error (as defined by the Secretary).
‘‘(3) TERMINATION OF NONRANDOM PREPAYMENT
REVIEW.—The Secretary shall establish protocols or
standards relating to the termination, including ter-
mination dates, of nonrandom prepayment review.
Such regulations may vary such a termination date
based upon the differences in the circumstances trig-
gering prepayment review.
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‘‘(4) CONSTRUCTION.—Nothing in this subsection
shall be construed as preventing the denial of pay-
ments for claims actually reviewed under a random
prepayment review. In the case of a provider of serv-
ices, physician, practitioner, or supplier with respect
to which amounts were previously overpaid, nothing
in this subsection shall be construed as limiting the
ability of a medicare administrative contractor to re-
quest the periodic production of records or supporting
documentation for a limited sample of submitted
claims to ensure that the previous practice is not con-
tinuing.
‘‘(5) RANDOM PREPAYMENT REVIEW DEFINED.—
For purposes of this subsection, the term ‘random pre-
payment review’ means a demand for the production
of records or documentation absent cause with respect
to a claim.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendment made by subsection (a)
shall take effect on the date of enactment of this Act.
(2) DEADLINE FOR PROMULGATION OF CERTAIN
REGULATIONS.—The Secretary shall first issue regula-
tions under section 1874A(g) of the Social Security
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Act, as added by subsection (a), by not later than 1
year after the date of enactment of this Act.
(3) APPLICATION OF STANDARD PROTOCOLS FOR
RANDOM PREPAYMENT REVIEW.—Section 1874A(g)(1)
of the Social Security Act, as added by subsection (a),
shall apply to random prepayment reviews conducted
on or after such date (not later than 1 year after the
date of enactment of this Act) as the Secretary shall
specify. The Secretary shall develop and publish the
standard protocol under such section by not later
than 1 year after the date of enactment of this Act.
SEC. 542. RECOVERY OF OVERPAYMENTS.
(a) IN GENERAL.—Section 1874A, as added by section
521(a)(1) and as amended by sections 531(b)(1), 532(a),
and 541(a), is amended by adding at the end the following
new subsection:
‘‘(h) RECOVERY OF OVERPAYMENTS.—
‘‘(1) USE OF REPAYMENT PLANS.—
‘‘(A) IN GENERAL.—If the repayment, with-
in the period otherwise permitted by a provider
of services, physician, practitioner, or other sup-
plier, of an overpayment under this title meets
the standards developed under subparagraph (B),
subject to subparagraph (C), and the provider,
physician, practitioner, or supplier requests the
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Secretary to enter into a repayment plan with
respect to such overpayment, the Secretary shall
enter into a plan with the provider, physician,
practitioner, or supplier for the offset or repay-
ment (at the election of the provider, physician,
practitioner, or supplier) of such overpayment
over a period of at least 1 year, but not longer
than 3 years. Interest shall accrue on the balance
through the period of repayment. The repayment
plan shall meet terms and conditions determined
to be appropriate by the Secretary.
‘‘(B) DEVELOPMENT OF STANDARDS.—The
Secretary shall develop standards for the recov-
ery of overpayments. Such standards shall—
‘‘(i) include a requirement that the
Secretary take into account (and weigh in
favor of the use of a repayment plan) the
reliance (as described in section 1871(d)(2))
by a provider of services, physician, practi-
tioner, and supplier on guidance when de-
termining whether a repayment plan should
be offered; and
‘‘(ii) provide for consideration of the
financial hardship imposed on a provider of
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services, physician, practitioner, or supplier
in considering such a repayment plan.
In developing standards with regard to financial
hardship with respect to a provider of services,
physician, practitioner, or supplier, the Sec-
retary shall take into account the amount of the
proposed recovery as a proportion of payments
made to that provider, physician, practitioner,
or supplier.
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if—
‘‘(i) the Secretary has reason to suspect
that the provider of services, physician,
practitioner, or supplier may file for bank-
ruptcy or otherwise cease to do business or
discontinue participation in the program
under this title; or
‘‘(ii) there is an indication of fraud or
abuse committed against the program.
‘‘(D) IMMEDIATE COLLECTION IF VIOLATION
OF REPAYMENT PLAN.—If a provider of services,
physician, practitioner, or supplier fails to make
a payment in accordance with a repayment plan
under this paragraph, the Secretary may imme-
diately seek to offset or otherwise recover the total
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balance outstanding (including applicable inter-
est) under the repayment plan.
‘‘(E) RELATION TO NO FAULT PROVISION.—
Nothing in this paragraph shall be construed as
affecting the application of section 1870(c) (re-
lating to no adjustment in the cases of certain
overpayments).
‘‘(2) LIMITATION ON RECOUPMENT.—
‘‘(A) NO RECOUPMENT UNTIL RECONSIDER-
ATION EXERCISED.—In the case of a provider of
services, physician, practitioner, or supplier that
is determined to have received an overpayment
under this title and that seeks a reconsideration
of such determination by a qualified independent
contractor under section 1869(c), the Secretary
may not take any action (or authorize any other
person, including any Medicare contractor, as
defined in subparagraph (C)) to recoup the over-
payment until the date the decision on the recon-
sideration has been rendered.
‘‘(B) PAYMENT OF INTEREST.—
‘‘(i) RETURN OF RECOUPED AMOUNT
WITH INTEREST IN CASE OF REVERSAL.—
Insofar as such determination on appeal
against the provider of services, physician,
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practitioner, or supplier is later reversed,
the Secretary shall provide for repayment of
the amount recouped plus interest for the
period in which the amount was recouped.
‘‘(ii) INTEREST IN CASE OF AFFIRMA-
TION.—Insofar as the determination on
such appeal is against the provider of serv-
ices, physician, practitioner, or supplier,
interest on the overpayment shall accrue on
and after the date of the original notice of
overpayment.
‘‘(iii) RATE OF INTEREST.—The rate of
interest under this subparagraph shall be
the rate otherwise applicable under this title
in the case of overpayments.
‘‘(C) MEDICARE
CONTRACTOR
DEFINED.—
For purposes of this subsection, the term ‘medi-
care contractor’ has the meaning given such term
in section 1889(e).
‘‘(3) PAYMENT AUDITS.—
‘‘(A) WRITTEN NOTICE FOR POST-PAYMENT
AUDITS.—Subject to subparagraph (C), if a
medicare contractor decides to conduct a post-
payment audit of a provider of services, physi-
cian, practitioner, or supplier under this title,
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the contractor shall provide the provider of serv-
ices, physician, practitioner, or supplier with
written notice (which may be in electronic form)
of the intent to conduct such an audit.
‘‘(B) EXPLANATION OF FINDINGS FOR ALL
AUDITS.—Subject to subparagraph (C), if a
medicare contractor audits a provider of services,
physician, practitioner, or supplier under this
title, the contractor shall—
‘‘(i) give the provider of services, phy-
sician, practitioner, or supplier a full re-
view and explanation of the findings of the
audit in a manner that is understandable
to the provider of services, physician, prac-
titioner, or supplier and permits the devel-
opment of an appropriate corrective action
plan;
‘‘(ii) inform the provider of services,
physician, practitioner, or supplier of the
appeal rights under this title as well as con-
sent settlement options (which are at the
discretion of the Secretary); and
‘‘(iii) give the provider of services, phy-
sician, practitioner, or supplier an oppor-
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tunity to provide additional information to
the contractor.
‘‘(C) EXCEPTION.—Subparagraphs (A) and
(B) shall not apply if the provision of notice or
findings would compromise pending law enforce-
ment activities, whether civil or criminal, or re-
veal findings of law enforcement-related audits.
‘‘(4) NOTICE OF OVER-UTILIZATION OF CODES.—
The Secretary shall establish, in consultation with or-
ganizations representing the classes of providers of
services, physicians, practitioners, and suppliers, a
process under which the Secretary provides for notice
to classes of providers of services, physicians, practi-
tioners, and suppliers served by a medicare contractor
in cases in which the contractor has identified that
particular billing codes may be overutilized by that
class of providers of services, physicians, practi-
tioners, or suppliers under the programs under this
title (or provisions of title XI insofar as they relate
to such programs).
‘‘(5) STANDARD METHODOLOGY FOR PROBE SAM-
PLING.—The Secretary shall establish a standard
methodology for medicare administrative contractors
to use in selecting a sample of claims for review in
the case of an abnormal billing pattern.
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‘‘(6) CONSENT SETTLEMENT REFORMS.—
‘‘(A) IN GENERAL.—The Secretary may use
a consent settlement (as defined in subparagraph
(D)) to settle a projected overpayment.
‘‘(B) OPPORTUNITY TO SUBMIT ADDITIONAL
INFORMATION
BEFORE
CONSENT
SETTLEMENT
OFFER.—Before offering a provider of services,
physician, practitioner, or supplier a consent
settlement, the Secretary shall—
‘‘(i) communicate to the provider of
services, physician, practitioner, or supplier
in a nonthreatening manner that, based on
a review of the medical records requested by
the Secretary, a preliminary evaluation of
those records indicates that there would be
an overpayment; and
‘‘(ii) provide for a 45-day period dur-
ing which the provider of services, physi-
cian, practitioner, or supplier may furnish
additional information concerning the med-
ical records for the claims that had been re-
viewed.
‘‘(C) CONSENT
SETTLEMENT
OFFER.—The
Secretary shall review any additional informa-
tion furnished by the provider of services, physi-
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less than a statistically valid sample of claims
and the provider of services, physician, practi-
tioner, or supplier agrees not to appeal the
claims involved.’’.
(b) EFFECTIVE DATES AND DEADLINES.—
(1) Not later than 1 year after the date of enact-
ment of this Act, the Secretary shall first—
(A) develop standards for the recovery of
overpayments under section 1874A(h)(1)(B) of
the Social Security Act, as added by subsection
(a);
(B) establish the process for notice of over-
utilization 
of 
billing 
codes 
under 
section
1874A(h)(4) of the Social Security Act, as added
by subsection (a); and
(C) establish a standard methodology for se-
lection of sample claims for abnormal billing
patterns under section 1874A(h)(5) of the Social
Security Act, as added by subsection (a).
(2) Section 1874A(h)(2) of the Social Security
Act, as added by subsection (a), shall apply to actions
taken after the date that is 1 year after the date of
enactment of this Act.
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(3) Section 1874A(h)(3) of the Social Security
Act, as added by subsection (a), shall apply to audits
initiated after the date of enactment of this Act.
(4) Section 1874A(h)(6) of the Social Security
Act, as added by subsection (a), shall apply to consent
settlements entered into after the date of enactment of
this Act.
SEC. 543. PROCESS FOR CORRECTION OF MINOR ERRORS
AND OMISSIONS ON CLAIMS WITHOUT PUR-
SUING APPEALS PROCESS.
(a) IN GENERAL.—The Secretary shall develop, in con-
sultation with appropriate medicare contractors (as defined
in section 1889(e) of the Social Security Act, as added by
section 531(d)(1)) and representatives of providers of serv-
ices, physicians, practitioners, facilities, and suppliers, a
process whereby, in the case of minor errors or omissions
(as defined by the Secretary) that are detected in the sub-
mission of claims under the programs under title XVIII of
such Act, a provider of services, physician, practitioner, fa-
cility, or supplier is given an opportunity to correct such
an error or omission without the need to initiate an appeal.
Such process shall include the ability to resubmit corrected
claims.
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(b) DEADLINE.—Not later than 1 year after the date
of enactment of this Act, the Secretary shall first develop
the process under subsection (a).
SEC. 544. AUTHORITY TO WAIVE A PROGRAM EXCLUSION.
The first sentence of section 1128(c)(3)(B) (42 U.S.C.
1320a–7(c)(3)(B)) is amended to read as follows: ‘‘Subject
to subparagraph (G), in the case of an exclusion under sub-
section (a), the minimum period of exclusion shall be not
less than 5 years, except that, upon the request of an admin-
istrator of a Federal health care program (as defined in
section 1128B(f)) who determines that the exclusion would
impose a hardship on beneficiaries of that program, the Sec-
retary may, after consulting with the Inspector General of
the Department of Health and Human Services, waive the
exclusion under subsection (a)(1), (a)(3), or (a)(4) with re-
spect to that program in the case of an individual or entity
that is the sole community physician or sole source of essen-
tial specialized services in a community.’’.
Subtitle F—Other Improvements
SEC. 551. INCLUSION OF ADDITIONAL INFORMATION IN NO-
TICES TO BENEFICIARIES ABOUT SKILLED
NURSING FACILITY AND HOSPITAL BENEFITS.
(a) IN GENERAL.—The Secretary shall provide that in
medicare beneficiary notices provided (under section
1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a))
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with respect to the provision of post-hospital extended care
services and inpatient hospital services under part A of title
XVIII of the Social Security Act, there shall be included
information on the number of days of coverage of such serv-
ices remaining under such part for the medicare beneficiary
and spell of illness involved.
(b) EFFECTIVE DATE.—Subsection (a) shall apply to
notices provided during calendar quarters beginning more
than 6 months after the date of enactment of this Act.
SEC. 552. INFORMATION ON MEDICARE-CERTIFIED SKILLED
NURSING 
FACILITIES 
IN 
HOSPITAL 
DIS-
CHARGE PLANS.
(a) AVAILABILITY OF DATA.—The Secretary shall pub-
licly provide information that enables hospital discharge
planners, medicare beneficiaries, and the public to identify
skilled nursing facilities that are participating in the medi-
care program.
(b) INCLUSION OF INFORMATION IN CERTAIN HOS-
PITAL DISCHARGE PLANS.—
(1) IN
GENERAL.—Section 1861(ee)(2)(D) (42
U.S.C. 1395x(ee)(2)(D)) is amended—
(A) by striking ‘‘hospice services’’ and in-
serting ‘‘hospice care and post-hospital extended
care services’’; and
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(B) by inserting before the period at the end
the following: ‘‘and, in the case of individuals
who are likely to need post-hospital extended care
services, the availability of such services through
facilities that participate in the program under
this title and that serve the area in which the
patient resides’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to discharge plans made
on or after such date as the Secretary shall specify,
but not later than 6 months after the date the Sec-
retary provides for availability of information under
subsection (a).
SEC. 553. EVALUATION AND MANAGEMENT DOCUMENTA-
TION GUIDELINES CONSIDERATION.
The Secretary shall ensure, before making changes in
documentation guidelines for, or clinical examples of, or
codes to report evaluation and management physician serv-
ices under title XVIII of Social Security Act, that the proc-
ess used in developing such guidelines, examples, or codes
was widely consultative among physicians, reflects a broad
consensus among specialties, and would allow verification
of reported and furnished services.
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SEC. 554. COUNCIL FOR TECHNOLOGY AND INNOVATION.
Section 1868 (42 U.S.C. 1395ee), as amended by sec-
tion 534(a), is amended by adding at the end the following
new subsection:
‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVATION.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a Council for Technology and Innovation
within the Centers for Medicare & Medicaid Services
(in this section referred to as ‘CMS’).
‘‘(2) COMPOSITION.—The Council shall be com-
posed of senior CMS staff and clinicians and shall be
chaired by the Executive Coordinator for Technology
and Innovation (appointed or designated under para-
graph (4)).
‘‘(3) DUTIES.—The Council shall coordinate the
activities of coverage, coding, and payment processes
under this title with respect to new technologies and
procedures, including new drug therapies, and shall
coordinate the exchange of information on new tech-
nologies between CMS and other entities that make
similar decisions.
‘‘(4) EXECUTIVE
COORDINATOR
FOR
TECH-
NOLOGY AND INNOVATION.—The Secretary shall ap-
point (or designate) a noncareer appointee (as defined
in section 3132(a)(7) of title 5, United States Code)
who shall serve as the Executive Coordinator for Tech-
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nology and Innovation. Such executive coordinator
shall report to the Administrator of CMS, shall chair
the Council, shall oversee the execution of its duties,
and shall serve as a single point of contact for outside
groups and entities regarding the coverage, coding,
and payment processes under this title.’’.
SEC. 555. TREATMENT OF CERTAIN DENTAL CLAIMS.
(a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is
amended by adding after subsection (g) the following new
subsection:
‘‘(h)(1) Subject to paragraph (2), a group health plan
(as defined in subsection (a)(1)(A)(v)) providing supple-
mental or secondary coverage to individuals also entitled
to services under this title shall not require a medicare
claims determination under this title for dental benefits spe-
cifically excluded under subsection (a)(12) as a condition
of making a claims determination for such benefits under
the group health plan.
‘‘(2) A group health plan may require a claims deter-
mination under this title in cases involving or appearing
to involve inpatient dental hospital services or dental serv-
ices expressly covered under this title pursuant to actions
taken by the Secretary.’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the date that is 60 days after
the date of enactment of this Act.
TITLE VI—OTHER PROVISIONS
SEC. 601. INCREASE IN MEDICAID DSH ALLOTMENTS FOR
FISCAL YEARS 2004 AND 2005.
(a) IN GENERAL.—Section 1923(f)(4) (42 U.S.C.
1396r–4(f)(4)) is amended—
(1) in the paragraph heading, by striking ‘‘FIS-
CAL YEARS 2001 AND 2002’’ and inserting ‘‘CERTAIN
FISCAL YEARS’’;
(2) in subparagraph (A)—
(A) in clause (i)—
(i) by striking ‘‘paragraph (2)’’ and
inserting ‘‘paragraphs (2) and (3)’’; and
(ii) by striking ‘‘and’’ at the end;
(B) in clause (ii), by striking the period
and inserting a semicolon; and
(C) by adding at the end the following:
‘‘(iii) for fiscal year 2004, shall be the
DSH allotment determined under para-
graph (3) for that fiscal year increased by
the amount equal to the product of 0.50 and
the difference between—
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‘‘(I) the amount that the DSH al-
lotment would be if the DSH allotment
for the State determined under clause
(ii) were increased, subject to subpara-
graph (B) and paragraph (5), by the
percentage change in the Consumer
Price Index for all urban consumers
(all items; U.S. city average) for each
of fiscal years 2002 and 2003; and
‘‘(II) the DSH allotment deter-
mined under paragraph (3) for the
State for fiscal year 2004; and
‘‘(iv) for fiscal year 2005, shall be the
DSH allotment determined under para-
graph (3) for that fiscal year increased by
the amount equal to the product of 0.50 and
the difference between—
‘‘(I) the amount that the DSH al-
lotment would be if the DSH allotment
for the State determined under clause
(ii) were increased, subject to subpara-
graph (B) and paragraph (5), by the
percentage change in the Consumer
Price Index for all urban consumers
(all items; U.S. city average) for each
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of fiscal years 2002, 2003, and 2004;
and
‘‘(II) the DSH allotment deter-
mined under paragraph (3) for the
State for fiscal year 2005.’’; and
(3) in subparagraph (C)—
(A) in the subparagraph heading, by strik-
ing ‘‘AFTER FISCAL YEAR 2002’’ and inserting
‘‘FOR OTHER FISCAL YEARS’’; and
(B) by striking ‘‘2003 or’’ and inserting
‘‘2003, fiscal year 2006, or’’.
(b) DSH ALLOTMENT FOR THE DISTRICT OF COLUM-
BIA.—Section 1923(f)(4) (42 U.S.C. 1396r–4(f)(4)), as
amended by paragraph (1), is amended—
(1) in subparagraph (A), by inserting ‘‘and ex-
cept as provided in subparagraph (C)’’ after ‘‘para-
graph (2)’’;
(2) by redesignating subparagraph (C) as sub-
paragraph (D); and
(3) by inserting after subparagraph (B) the fol-
lowing:
‘‘(C) DSH ALLOTMENT FOR THE DISTRICT
OF COLUMBIA.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A), the DSH allotment for
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the District of Columbia for fiscal year
2004, shall be determined by substituting
‘‘49’’ for ‘‘32’’ in the item in the table con-
tained in paragraph (2) with respect to the
DSH allotment for FY 00 (fiscal year 2000)
for the District of Columbia, and then in-
creasing such allotment, subject to subpara-
graph (B) and paragraph (5), by the per-
centage change in the Consumer Price Index
for all urban consumers (all items; U.S.
city average) for each of fiscal years 2000,
2001, 2002, and 2003.
‘‘(ii) NO APPLICATION TO ALLOTMENTS
AFTER FISCAL YEAR 2004.—The DSH allot-
ment for the District of Columbia for fiscal
year 2003, fiscal year 2005, or any suc-
ceeding fiscal year shall be determined
under paragraph (3) without regard to the
DSH allotment determined under clause
(i).’’.
(c) CONFORMING AMENDMENT.—Section 1923(f)(3) of
such Act (42 U.S.C. 1396r–4(f)(3)) is amended by inserting
‘‘, paragraph (4),’’ after ‘‘subparagraph (B)’’.
(d) URBAN HEALTH PROVIDER ADJUSTMENT.—
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SEC. 602. INCREASE IN FLOOR FOR TREATMENT AS AN EX-
TREMELY LOW DSH STATE UNDER THE MED-
ICAID PROGRAM FOR FISCAL YEARS 2004 AND
2005.
(a) IN GENERAL.—Section 1923(f)(5) (42 U.S.C.
1396r–4(f)(5)) is amended—
(1) by striking ‘‘In the case of’’ and inserting the
following:
‘‘(A) IN GENERAL.—In the case of’’; and
(2) by adding at the end the following:
‘‘(B) INCREASE
IN
FLOOR
FOR
FISCAL
YEARS 2004 AND 2005.—
‘‘(i) FISCAL YEAR 2004.—In the case of
a State in which the total expenditures
under the State plan (including Federal
and State shares) for disproportionate share
hospital adjustments under this section for
fiscal year 2000, as reported to the Admin-
istrator of the Centers for Medicare & Med-
icaid Services as of August 31, 2003, is
greater than 0 but less than 3 percent of the
State’s total amount of expenditures under
the State plan for medical assistance during
the fiscal year, the DSH allotment for fiscal
year 2004 shall be increased to 3 percent of
the State’s total amount of expenditures
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under such plan for such assistance during
such fiscal year.
‘‘(ii) FISCAL YEAR 2005.—In the case of
a State in which the total expenditures
under the State plan (including Federal
and State shares) for disproportionate share
hospital adjustments under this section for
fiscal year 2001, as reported to the Admin-
istrator of the Centers for Medicare & Med-
icaid Services as of August 31, 2004, is
greater than 0 but less than 3 percent of the
State’s total amount of expenditures under
the State plan for medical assistance during
the fiscal year, the DSH allotment for fiscal
year 2005 shall be the DSH allotment deter-
mined for the State for fiscal year 2004
(under clause (i) or paragraph (4) (as ap-
plicable)), increased by the percentage
change in the consumer price index for all
urban consumers (all items; U.S. city aver-
age) for fiscal year 2004.
‘‘(iii) NO
APPLICATION
TO
ALLOT-
MENTS
AFTER
FISCAL
YEAR
2005.—The
DSH allotment for any State for fiscal year
2006 or any succeeding fiscal year shall be
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determined under this subsection without
regard to the DSH allotments determined
under this subparagraph.’’.
(b) ALLOTMENT ADJUSTMENT.—
(1) IN GENERAL.—Section 1923(f) of the Social
Security Act (42 U.S.C. 1396r–4(f)) is amended—
(A) by redesignating paragraph (6) as
paragraph (7); and
(B) by inserting after paragraph (5) the fol-
lowing:
‘‘(6) ALLOTMENT ADJUSTMENT.—Only with re-
spect to fiscal year 2004 or 2005, if a statewide waiv-
er under section 1115 that was implemented on Janu-
ary 1, 1994, is revoked or terminated before the end
of either such fiscal year, the Secretary shall—
‘‘(A) permit the State whose waiver was re-
voked or terminated to submit an amendment to
its State plan that would describe the method-
ology to be used by the State (after the effective
date of such revocation or termination) to iden-
tify and make payments to disproportionate
share hospitals, including children’s hospitals
and institutions for mental diseases or other
mental health facilities (other than State-owned
institutions or facilities), on the basis of the pro-
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portion of patients served by such hospitals that
are low-income patients with special needs; and
‘‘(B) provide for purposes of this subsection
for computation of an appropriate DSH allot-
ment for the State for fiscal year 2004 or 2005
(or both) that provides for the maximum amount
(permitted consistent with paragraph (3)(B)(ii))
that does not result in greater expenditures
under this title than would have been made if
such waiver had not been revoked or termi-
nated.’’.
(2) TREATMENT OF INSTITUTIONS FOR MENTAL
DISEASES.—Section 1923(h)(1) of the Social Security
Act (42 U.S.C. 1396r–4(h)(1)) is amended—
(A) in paragraph (1), in the matter pre-
ceding subparagraph (A), by inserting ‘‘(subject
to paragraph (3))’’ after ‘‘the lesser of the fol-
lowing’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) SPECIAL RULE.—The limitation of para-
graph (1) shall not apply in the case of a State to
which subsection (f)(6) applies.’’.
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(3) APPLICATION TO HAWAII.—Section 1923(f)
(42 U.S.C. 1396r–4(f)), as amended by paragraph
(1), is amended—
(A) by redesignating paragraph (7) as
paragraph (8); and
(B) by inserting after paragraph (6), the
following:
‘‘(7) TREATMENT
OF
HAWAII
AS
A
LOW-DSH
STATE.—The Secretary shall compute a DSH allot-
ment for the State of Hawaii for each of fiscal years
2004 and 2005 in the same manner as DSH allot-
ments are determined with respect to those States to
which paragraph (5) applies (but without regard to
the requirement under such paragraph that total ex-
penditures under the State plan for disproportionate
share hospital adjustments for any fiscal year exceeds
0).’’.
SEC. 603. INCREASED REPORTING REQUIREMENTS TO EN-
SURE THE APPROPRIATENESS OF PAYMENT
ADJUSTMENTS 
TO 
DISPROPORTIONATE
SHARE HOSPITALS UNDER THE MEDICAID
PROGRAM.
Section 1923 (42 U.S.C. 1396r–4) is amended by add-
ing at the end the following new subsection:
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‘‘(j) ANNUAL REPORTS REGARDING PAYMENT ADJUST-
MENTS.—With respect to fiscal year 2004 and each fiscal
year thereafter, the Secretary shall require a State, as a
condition of receiving a payment under section 1903(a)(1)
with respect to a payment adjustment made under this sec-
tion, to submit an annual report that—
‘‘(1) identifies each disproportionate share hos-
pital that received a payment adjustment under this
section for the preceding fiscal year and the amount
of the payment adjustment made to such hospital for
the preceding fiscal year; and
‘‘(2) includes such other information as the Sec-
retary determines necessary to ensure the appro-
priateness of the payment adjustments made under
this section for the preceding fiscal year.’’.
SEC. 604. CLARIFICATION OF INCLUSION OF INPATIENT
DRUG PRICES CHARGED TO CERTAIN PUBLIC
HOSPITALS IN THE BEST PRICE EXEMPTIONS
FOR THE MEDICAID DRUG REBATE PROGRAM.
(a) IN GENERAL.—Section 1927(c)(1)(C)(i)(I) of the
Social Security Act (42 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is
amended by inserting before the semicolon the following:
‘‘(including inpatient prices charged to hospitals described
in section 340B(a)(4)(L) of the Public Health Service Act)’’.
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(b) 
ANTI-DIVERSION
PROTECTION.—Section
1927(c)(1)(C) of the Social Security Act (42 U.S.C. 1396r–
8(c)(1)(C)) is amended by adding at the end the following:
‘‘(iii) APPLICATION OF AUDITING AND
RECORDKEEPING REQUIREMENTS.—With re-
spect to a covered entity described in section
340B(a)(4)(L) of the Public Health Service
Act, any drug purchased for inpatient use
shall be subject to the auditing and record-
keeping requirements described in section
340B(a)(5)(C) of the Public Health Service
Act.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section take effect on October 1, 2003.
SEC. 605. ASSISTANCE WITH COVERAGE OF LEGAL IMMI-
GRANTS UNDER THE MEDICAID PROGRAM
AND SCHIP.
(a) MEDICAID PROGRAM.—Section 1903(v) (42 U.S.C.
1396b(v)) is amended—
(1) in paragraph (1), by striking ‘‘paragraph
(2)’’ and inserting ‘‘paragraphs (2) and (4)’’; and
(2) by adding at the end the following new para-
graph:
‘‘(4)(A) With respect to any or all of fiscal years 2005
through 2007, a State may elect (in a plan amendment
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under this title) to provide medical assistance under this
title (including under a waiver authorized by the Secretary)
for aliens who are lawfully residing in the United States
(including battered aliens described in section 431(c) of
such Act) and who are otherwise eligible for such assistance,
within either or both of the following eligibility categories:
‘‘(i) PREGNANT WOMEN.—Women during preg-
nancy (and during the 60-day period beginning on
the last day of the pregnancy).
‘‘(ii) CHILDREN.—Children (as defined under
such plan), including optional targeted low-income
children described in section 1905(u)(2)(B).
‘‘(B)(i) In the case of a State that has elected to pro-
vide medical assistance to a category of aliens under sub-
paragraph (A), no debt shall accrue under an affidavit of
support against any sponsor of such an alien on the basis
of provision of assistance to such category and the cost of
such assistance shall not be considered as an unreimbursed
cost.
‘‘(ii) The provisions of sections 401(a), 402(b), 403,
and 421 of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 shall not apply to a State
that makes an election under subparagraph (A).’’.
(b) 
SCHIP.—Section 
2107(e)(1) 
(42 
U.S.C.
1397gg(e)(1)) is amended by redesignating subparagraphs
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(C) and (D) as subparagraph (D) and (E), respectively,
and by inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) Section 1903(v)(4) (relating to op-
tional coverage of categories of permanent resi-
dent alien children), but only if the State has
elected to apply such section to the category of
children under title XIX and only with respect
to any or all of fiscal years 2005 through 2007.’’.
SEC. 606. ESTABLISHMENT OF CONSUMER OMBUDSMAN AC-
COUNT.
(a) IN GENERAL.—Section 1817 (42 U.S.C. 1395i) is
amended by adding at the end the following new subsection:
‘‘(i) CONSUMER OMBUDSMAN ACCOUNT.—
‘‘(1) ESTABLISHMENT.—There is hereby estab-
lished in the Trust Fund an expenditure account to
be known as the ‘Consumer Ombudsman Account’ (in
this subsection referred to as the ‘Account’).
‘‘(2) APPROPRIATED AMOUNTS TO ACCOUNT FOR
HEALTH INSURANCE INFORMATION, COUNSELING, AND
ASSISTANCE GRANTS.—
‘‘(A) IN GENERAL.—There are hereby ap-
propriated to the Account from the Trust Fund
for each fiscal year beginning with fiscal year
2005, the amount described in subparagraph (B)
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for such fiscal year for the purpose of making
grants under section 4360 of the Omnibus Budg-
et Reconciliation Act of 1990.
‘‘(B) AMOUNT DESCRIBED.—For purposes of
subparagraph (A), the amount described in this
subparagraph for a fiscal year is the amount
equal to the product of—
‘‘(i) $1; and
‘‘(ii) the total number of individuals
receiving benefits under this title for the cal-
endar year ending on December 31 of the
preceding fiscal year.’’.
(b) CONFORMING AMENDMENT.—Section 4360(g) of
the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C.
1395b–4(g)) is amended to read as follows:
‘‘(g) FUNDING.—The Secretary shall use amounts ap-
propriated to the Consumer Ombudsman Account in ac-
cordance with section 1817(i) of the Social Security Act for
a fiscal year for making grants under this section for that
fiscal year.’’.
SEC. 607. GAO STUDY REGARDING IMPACT OF ASSETS TEST
FOR LOW-INCOME BENEFICIARIES.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study to determine the extent to
which drug utilization and access to covered drugs for an
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individual described in subsection (b) differs from the drug
utilization and access to covered drugs of an individual who
qualifies for the transitional assistance prescription drug
card program under section 1807A of the Social Security
Act (as added by section 111) or for the premiums and cost-
sharing subsidies applicable to a qualified medicare bene-
ficiary, a specified low-income medicare beneficiary, or a
qualifying individual under section 1860D–19 of the Social
Security Act (as added by section 101).
(b) INDIVIDUAL DESCRIBED.—An individual is de-
scribed in this subsection if the individual does not qualify
for the transitional assistance prescription drug card pro-
gram under section 1807A of the Social Security Act or
for the premiums and cost-sharing subsidies applicable to
a qualified medicare beneficiary, a specified low-income
medicare beneficiary, or a qualifying individual under sec-
tion 1860D–19 of the Social Security Act solely as a result
of the application of an assets test to the individual.
(c) REPORT.—Not later than September 30, 2007, the
Comptroller General shall submit a report to Congress on
the study conducted under subsection (a) that includes such
recommendations for legislation as the Comptroller General
determines are appropriate.
(d) DEFINITIONS.—In this section:
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(1) COVERED DRUGS.—The term ‘‘covered drugs’’
has the meaning given that term in section
1860D(a)(D) of the Social Security Act.
(2) QUALIFIED MEDICARE BENEFICIARY; SPECI-
FIED
LOW-INCOME
MEDICARE
BENEFICIARY; QUALI-
FYING INDIVIDUAL.—The terms ‘‘qualified medicare
beneficiary’’, ‘‘specified low-income medicare bene-
ficiary’’ and ‘‘qualifying individual’’ have the mean-
ing given those terms under section 1860D–19 of the
Social Security Act.
SEC. 608. HEALTH CARE INFRASTRUCTURE IMPROVEMENT.
At the end of the Social Security Act, add the following
new title:
‘‘TITLE XXII—HEALTH CARE IN-
FRASTRUCTURE 
IMPROVE-
MENT
‘‘SEC. 2201. DEFINITIONS.
‘‘In this title, the following definitions apply:
‘‘(1) ELIGIBLE PROJECT COSTS.—The term ‘eli-
gible project costs’ means amounts substantially all of
which are paid by, or for the account of, an obligor
in connection with a project, including the cost of—
‘‘(A) development phase activities, including
planning, feasibility analysis, revenue fore-
casting, environmental study and review, per-
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mitting, architectural engineering and design
work, and other preconstruction activities;
‘‘(B) construction, reconstruction, rehabili-
tation, replacement, and acquisition of facilities
and real property (including land related to the
project and improvements to land), environ-
mental mitigation, construction contingencies,
and acquisition of equipment;
‘‘(C) capitalized interest necessary to meet
market requirements, reasonably required reserve
funds, capital issuance expenses, and other car-
rying costs during construction;
‘‘(D) major medical equipment determined
to be appropriate by the Secretary; and
‘‘(E) refinancing projects or activities that
are otherwise eligible for financial assistance
under subparagraphs (A) through (D).
‘‘(2) FEDERAL CREDIT INSTRUMENT.—The term
‘Federal credit instrument’ means a secured loan,
loan guarantee, or line of credit authorized to be
made available under this title with respect to a
project.
‘‘(3) INVESTMENT-GRADE
RATING.—The term
‘investment-grade rating’ means a rating category of
BBB minus, Baa3, or higher assigned by a rating
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agency to project obligations offered into the capital
markets.
‘‘(4) LENDER.—The term ‘lender’ means any
non-Federal qualified institutional buyer (as defined
in section 230.144A(a) of title 17, Code of Federal
Regulations (or any successor regulation), known as
Rule 144A(a) of the Securities and Exchange Com-
mission and issued under the Securities Act of 1933
(15 U.S.C. 77a et seq.)), including—
‘‘(A) a qualified retirement plan (as defined
in section 4974(c) of the Internal Revenue Code
of 1986) that is a qualified institutional buyer;
and
‘‘(B) a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986) that is a qualified institutional buyer.
‘‘(5) LINE OF CREDIT.—The term ‘line of credit’
means an agreement entered into by the Secretary
with an obligor under section 2204 to provide a direct
loan at a future date upon the occurrence of certain
events.
‘‘(6) LOAN GUARANTEE.—The term ‘loan guar-
antee’ means any guarantee or other pledge by the
Secretary to pay all or part of the principal of and
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interest on a loan or other debt obligation issued by
an obligor and funded by a lender.
‘‘(7) LOCAL SERVICER.—The term ‘local servicer’
means a State or local government or any agency of
a State or local government that is responsible for
servicing a Federal credit instrument on behalf of the
Secretary.
‘‘(8) OBLIGOR.—The term ‘obligor’ means a
party primarily liable for payment of the principal
of or interest on a Federal credit instrument, which
party may be a corporation, partnership, joint ven-
ture, trust, or governmental entity, agency, or instru-
mentality.
‘‘(9) PROJECT.—The term ‘project’ means any
project that is designed to improve the health care in-
frastructure, including the construction, renovation,
or other capital improvement of any hospital, medical
research facility, or other medical facility or the pur-
chase of any equipment to be used in a hospital, re-
search facility, or other medical research facility.
‘‘(10) PROJECT OBLIGATION.—The term ‘project
obligation’ means any note, bond, debenture, lease, in-
stallment sale agreement, or other debt obligation
issued or entered into by an obligor in connection
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with the financing of a project, other than a Federal
credit instrument.
‘‘(11) RATING AGENCY.—The term ‘rating agen-
cy’ means a bond rating agency identified by the Se-
curities and Exchange Commission as a Nationally
Recognized Statistical Rating Organization.
‘‘(12) SECURED LOAN.—The term ‘secured loan’
means a direct loan or other debt obligation issued by
an obligor and funded by the Secretary in connection
with the financing of a project under section 2203.
‘‘(13) STATE.—The term ‘State’ has the meaning
given the term in section 101 of title 23, United
States Code.
‘‘(14) SUBSIDY
AMOUNT.—The term ‘subsidy
amount’ means the amount of budget authority suffi-
cient to cover the estimated long-term cost to the Fed-
eral Government of a Federal credit instrument, cal-
culated on a net present value basis, excluding ad-
ministrative costs and any incidental effects on gov-
ernmental receipts or outlays in accordance with the
provisions of the Federal Credit Reform Act of 1990
(2 U.S.C. 661 et seq.).
‘‘(15) SUBSTANTIAL
COMPLETION.—The term
‘substantial completion’ means the opening of a
project to patients or for research purposes.
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‘‘SEC. 2202. DETERMINATION OF ELIGIBILITY AND PROJECT
SELECTION.
‘‘(a) ELIGIBILITY.—To be eligible to receive financial
assistance under this title, a project shall meet the following
criteria:
‘‘(1) APPLICATION.—A State, a local servicer
identified under section 2205(a), or the entity under-
taking a project shall submit a project application to
the Secretary.
‘‘(2) ELIGIBLE PROJECT COSTS.—To be eligible
for assistance under this title, a project shall have
total eligible project costs that are reasonably antici-
pated to equal or exceed $40,000,000.
‘‘(3) SOURCES OF REPAYMENTS.—Project financ-
ing shall be repayable, in whole or in part, from reli-
able revenue sources as described in the application
submitted under paragraph (1).
‘‘(4) PUBLIC
SPONSORSHIP
OF
PRIVATE
ENTI-
TIES.—In the case of a project that is undertaken by
an entity that is not a State or local government or
an agency or instrumentality of a State or local gov-
ernment, the project that the entity is undertaking
shall be publicly sponsored or sponsored by an entity
that is described in section 501(c)(3) of the Internal
Revenue Code of 1986 and exempt from tax under sec-
tion 501(a) of such Code.
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‘‘(b) SELECTION AMONG ELIGIBLE PROJECTS.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish criteria for selecting among projects that meet
the eligibility criteria specified in subsection (a).
‘‘(2) SELECTION CRITERIA.—
‘‘(A) IN GENERAL.—The selection criteria
shall include the following:
‘‘(i) The extent to which the project is
nationally or regionally significant, in
terms of expanding or improving the health
care infrastructure of the United States or
the region or in terms of the medical benefit
that the project will have.
‘‘(ii) 
The 
creditworthiness 
of 
the
project, including a determination by the
Secretary that any financing for the project
has appropriate security features, such as a
rate covenant, credit enhancement require-
ments, or debt services coverages, to ensure
repayment.
‘‘(iii) The extent to which assistance
under this title would foster innovative pub-
lic-private partnerships and attract private
debt or equity investment.
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‘‘(iv) The likelihood that assistance
under this title would enable the project to
proceed at an earlier date than the project
would otherwise be able to proceed.
‘‘(v) The extent to which the project
uses or results in new technologies.
‘‘(vi) The amount of budget authority
required to fund the Federal credit instru-
ment made available under this title.
‘‘(vii) The extent to which the project
helps maintain or protect the environment.
‘‘(B) SPECIFIC REQUIREMENTS.—The selec-
tion criteria shall require that a project
applicant—
‘‘(i) be engaged in research in the
causes, prevention, and treatment of cancer;
‘‘(ii) be designated as a cancer center
for the National Cancer Institute or be des-
ignated by the State as the official cancer
institute of the State; and
‘‘(iii) be located in a State that, on the
date of enactment of this title, has a popu-
lation of less than 3,000,000 individuals.
‘‘(C) RATING
LETTER.—For purposes of
subparagraph (A)(ii), the Secretary shall require
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each project applicant to provide a rating letter
from at least 1 rating agency indicating that the
project’s senior obligations have the potential to
achieve an investment-grade rating with or with-
out credit enhancement.
‘‘SEC. 2203. SECURED LOANS.
‘‘(a) IN GENERAL.—
‘‘(1) AGREEMENTS.—Subject to paragraphs (2)
through (4), the Secretary may enter into agreements
with 1 or more obligors to make secured loans, the
proceeds of which shall be used—
‘‘(A) to finance eligible project costs;
‘‘(B) to refinance interim construction fi-
nancing of eligible project costs; or
‘‘(C) to refinance existing debt or prior
project obligations;
of any project selected under section 2202.
‘‘(2) LIMITATION ON REFINANCING OF INTERIM
CONSTRUCTION FINANCING.—A loan under paragraph
(1) shall not refinance interim construction financing
under paragraph (1)(B) later than 1 year after the
date of substantial completion of the project.
‘‘(3) RISK
ASSESSMENT.—Before entering into
an agreement for a secured loan under this subsection,
the Secretary, in consultation with each rating agen-
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cy 
providing 
a 
rating 
letter 
under 
section
2202(b)(2)(B), shall determine an appropriate capital
reserve subsidy amount for each secured loan, taking
into account such letter.
‘‘(4) 
INVESTMENT-GRADE
RATING
REQUIRE-
MENT.—The funding of a secured loan under this sec-
tion shall be contingent on the project’s senior obliga-
tions receiving an investment-grade rating, except
that—
‘‘(A) the Secretary may fund an amount of
the secured loan not to exceed the capital reserve
subsidy amount determined under paragraph (3)
prior to the obligations receiving an investment-
grade rating; and
‘‘(B) the Secretary may fund the remaining
portion of the secured loan only after the obliga-
tions have received an investment-grade rating
by at least 1 rating agency.
‘‘(b) TERMS AND LIMITATIONS.—
‘‘(1) IN GENERAL.—A secured loan under this
section with respect to a project shall be on such terms
and conditions and contain such covenants, represen-
tations, warranties, and requirements (including re-
quirements for audits) as the Secretary determines
appropriate.
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‘‘(2) MAXIMUM AMOUNT.—The amount of the se-
cured loan shall not exceed 100 percent of the reason-
ably anticipated eligible project costs.
‘‘(3) PAYMENT.—The secured loan—
‘‘(A) shall—
‘‘(i) be payable, in whole or in part,
from reliable revenue sources; and
‘‘(ii) include a rate covenant, coverage
requirement, or similar security feature
supporting the project obligations; and
‘‘(B) may have a lien on revenues described
in subparagraph (A) subject to any lien securing
project obligations.
‘‘(4) INTEREST RATE.—The interest rate on the
secured loan shall be not less than the yield on mar-
ketable United States Treasury securities of a similar
maturity to the maturity of the secured loan on the
date of execution of the loan agreement.
‘‘(5) MATURITY DATE.—The final maturity date
of the secured loan shall be not later than 30 years
after the date of substantial completion of the project.
‘‘(6) NONSUBORDINATION.—The secured loan
shall not be subordinated to the claims of any holder
of project obligations in the event of bankruptcy, in-
solvency, or liquidation of the obligor.
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‘‘(7) FEES.—The Secretary may establish fees at
a level sufficient to cover all or a portion of the costs
to the Federal Government of making a secured loan
under this section.
‘‘(c) REPAYMENT.—
‘‘(1) SCHEDULE.—The Secretary shall establish
a repayment schedule for each secured loan under this
section based on the projected cash flow from project
revenues and other repayment sources.
‘‘(2) COMMENCEMENT.—Scheduled loan repay-
ments of principal or interest on a secured loan under
this section shall commence not later than 5 years
after the date of substantial completion of the project.
‘‘(3) SOURCES
OF
REPAYMENT
FUNDS.—The
sources of funds for scheduled loan repayments under
this section shall include any revenue generated by
the project.
‘‘(4) DEFERRED PAYMENTS.—
‘‘(A) AUTHORIZATION.—If, at any time
during the 10 years after the date of substantial
completion of the project, the project is unable to
generate sufficient revenues to pay the scheduled
loan repayments of principal and interest on the
secured loan, the Secretary may, subject to sub-
paragraph (C), allow the obligor to add unpaid
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principal and interest to the outstanding balance
of the secured loan.
‘‘(B) INTEREST.—Any payment deferred
under subparagraph (A) shall—
‘‘(i) continue to accrue interest in ac-
cordance with subsection (b)(4) until fully
repaid; and
‘‘(ii) be scheduled to be amortized over
the remaining term of the loan beginning
not later than 10 years after the date of
substantial completion of the project in ac-
cordance with paragraph (1).
‘‘(C) CRITERIA.—
‘‘(i) IN GENERAL.—Any payment de-
ferral under subparagraph (A) shall be con-
tingent on the project meeting criteria es-
tablished by the Secretary.
‘‘(ii) REPAYMENT
STANDARDS.—The
criteria established under clause (i) shall
include standards for reasonable assurance
of repayment.
‘‘(5) PREPAYMENT.—
‘‘(A) USE OF EXCESS REVENUES.—Any ex-
cess revenues that remain after satisfying sched-
uled debt service requirements on the project obli-
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gations and secured loan and all deposit require-
ments under the terms of any trust agreement,
bond resolution, reimbursement agreement, credit
agreement, loan agreement, or similar agreement
securing project obligations may be applied an-
nually to prepay the secured loan without pen-
alty.
‘‘(B) 
USE
OF
PROCEEDS
OF
REFI-
NANCING.—The secured loan may be prepaid at
any time without penalty, regardless of whether
such repayment is from the proceeds of refi-
nancing from non-Federal funding sources.
‘‘(6) FORGIVENESS
OF
INDEBTEDNESS.—The
Secretary may forgive a loan secured under this title
under terms and conditions that are analogous to the
loan forgiveness provision for student loans under
part D of title IV of the Higher Education Act of
1965 (20 U.S.C. 1087a et seq.), except that the Sec-
retary shall condition such forgiveness on the estab-
lishment by the project of—
‘‘(A) an outreach program for cancer pre-
vention, early diagnosis, and treatment that pro-
vides services to a substantial majority of the
residents of a State or region, including residents
of rural areas;
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‘‘(B) an outreach program for cancer pre-
vention, early diagnosis, and treatment that pro-
vides services to multiple Indian tribes; and
‘‘(C)(i) unique research resources (such as
population databases); or
‘‘(ii) an affiliation with an entity that has
unique research resources.
‘‘(d) SALE OF SECURED LOANS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), as
soon as practicable after substantial completion of a
project and after notifying the obligor, the Secretary
may sell to another entity or reoffer into the capital
markets a secured loan for the project if the Secretary
determines that the sale or reoffering can be made on
favorable terms.
‘‘(2) CONSENT OF OBLIGOR.—In making a sale
or reoffering under paragraph (1), the Secretary may
not change the original terms and conditions of the
secured loan without the written consent of the obli-
gor.
‘‘(e) LOAN GUARANTEES.—
‘‘(1) IN GENERAL.—The Secretary may provide
a loan guarantee to a lender in lieu of making a se-
cured loan if the Secretary determines that the budg-
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etary cost of the loan guarantee is substantially the
same as that of a secured loan.
‘‘(2) TERMS.—The terms of a guaranteed loan
shall be consistent with the terms set forth in this sec-
tion for a secured loan, except that the rate on the
guaranteed loan and any prepayment features shall
be negotiated between the obligor and the lender, with
the consent of the Secretary.
‘‘SEC. 2204. LINES OF CREDIT.
‘‘(a) IN GENERAL.—
‘‘(1) AGREEMENTS.—Subject to paragraphs (2)
through (4), the Secretary may enter into agreements
to make available lines of credit to 1 or more obligors
in the form of direct loans to be made by the Sec-
retary at future dates on the occurrence of certain
events for any project selected under section 2202.
‘‘(2) USE OF PROCEEDS.—The proceeds of a line
of credit made available under this section shall be
available to pay debt service on project obligations
issued to finance eligible project costs, extraordinary
repair and replacement costs, operation and mainte-
nance expenses, and costs associated with unexpected
Federal or State environmental restrictions.
‘‘(3) RISK
ASSESSMENT.—Before entering into
an agreement for a secured loan under this subsection,
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the Secretary, in consultation with each rating agen-
cy 
providing 
a 
rating 
letter 
under 
section
2202(b)(2)(B), shall determine an appropriate sub-
sidy amount for each secured loan, taking into ac-
count such letter.
‘‘(4) 
INVESTMENT-GRADE
RATING
REQUIRE-
MENT.—The funding of a line of credit under this sec-
tion shall be contingent on the project’s senior obliga-
tions receiving an investment-grade rating from at
least 1 rating agency.
‘‘(b) TERMS AND LIMITATIONS.—
‘‘(1) IN GENERAL.—A line of credit under this
section with respect to a project shall be on such terms
and conditions and contain such covenants, represen-
tations, warranties, and requirements (including re-
quirements for audits) as the Secretary determines
appropriate.
‘‘(2) MAXIMUM AMOUNTS.—
‘‘(A) TOTAL AMOUNT.—The total amount of
the line of credit shall not exceed 33 percent of
the reasonably anticipated eligible project costs.
‘‘(B) 1-YEAR DRAWS.—The amount drawn
in any 1 year shall not exceed 20 percent of the
total amount of the line of credit.
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‘‘(3) DRAWS.—Any draw on the line of credit
shall represent a direct loan and shall be made only
if net revenues from the project (including capitalized
interest, any debt service reserve fund, and any other
available reserve) are insufficient to pay the costs
specified in subsection (a)(2).
‘‘(4) INTEREST RATE.—The interest rate on a di-
rect loan resulting from a draw on the line of credit
shall be not less than the yield on 30-year marketable
United States Treasury securities as of the date on
which the line of credit is obligated.
‘‘(5) SECURITY.—The line of credit—
‘‘(A) shall—
‘‘(i) be payable, in whole or in part,
from reliable revenue sources; and
‘‘(ii) include a rate covenant, coverage
requirement, or similar security feature
supporting the project obligations; and
‘‘(B) may have a lien on revenues described
in subparagraph (A) subject to any lien securing
project obligations.
‘‘(6) PERIOD
OF
AVAILABILITY.—The line of
credit shall be available during the period beginning
on the date of substantial completion of the project
and ending not later than 10 years after that date.
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‘‘(7) RIGHTS OF THIRD-PARTY CREDITORS.—
‘‘(A) AGAINST FEDERAL GOVERNMENT.—A
third-party creditor of the obligor shall not have
any right against the Federal Government with
respect to any draw on the line of credit.
‘‘(B) ASSIGNMENT.—An obligor may assign
the line of credit to 1 or more lenders or to a
trustee on the lenders’ behalf.
‘‘(8) NONSUBORDINATION.—A direct loan under
this section shall not be subordinated to the claims of
any holder of project obligations in the event of bank-
ruptcy, insolvency, or liquidation of the obligor.
‘‘(9) FEES.—The Secretary may establish fees at
a level sufficient to cover all or a portion of the costs
to the Federal Government of providing a line of cred-
it under this section.
‘‘(10) RELATIONSHIP TO OTHER CREDIT INSTRU-
MENTS.—A project that receives a line of credit under
this section also shall not receive a secured loan or
loan guarantee under section 2203 of an amount that,
combined with the amount of the line of credit, ex-
ceeds 100 percent of eligible project costs.
‘‘(c) REPAYMENT.—
‘‘(1) TERMS
AND
CONDITIONS.—The Secretary
shall establish repayment terms and conditions for
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each direct loan under this section based on the pro-
jected cash flow from project revenues and other re-
payment sources.
‘‘(2) TIMING.—All scheduled repayments of prin-
cipal or interest on a direct loan under this section
shall commence not later than 5 years after the end
of the period of availability specified in subsection
(b)(6) and be fully repaid, with interest, by the date
that is 25 years after the end of the period of avail-
ability specified in subsection (b)(6).
‘‘(3) SOURCES
OF
REPAYMENT
FUNDS.—The
sources of funds for scheduled loan repayments under
this section shall include reliable revenue sources.
‘‘SEC. 2205. PROJECT SERVICING.
‘‘(a) REQUIREMENT.—The State in which a project
that receives financial assistance under this title is located
may identify a local servicer to assist the Secretary in serv-
icing the Federal credit instrument made available under
this title.
‘‘(b) AGENCY; FEES.—If a State identifies a local
servicer under subsection (a), the local servicer—
‘‘(1) shall act as the agent for the Secretary; and
‘‘(2) may receive a servicing fee, subject to ap-
proval by the Secretary.
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‘‘(c) LIABILITY.—A local servicer identified under sub-
section (a) shall not be liable for the obligations of the obli-
gor to the Secretary or any lender.
‘‘(d) ASSISTANCE FROM EXPERT FIRMS.—The Sec-
retary may retain the services of expert firms in the field
of project finance to assist in the underwriting and serv-
icing of Federal credit instruments.
‘‘SEC. 2206. STATE AND LOCAL PERMITS.
‘‘The provision of financial assistance under this title
with respect to a project shall not—
‘‘(1) relieve any recipient of the assistance of any
obligation to obtain any required State or local per-
mit or approval with respect to the project;
‘‘(2) limit the right of any unit of State or local
government to approve or regulate any rate of return
on private equity invested in the project; or
‘‘(3) otherwise supersede any State or local law
(including any regulation) applicable to the construc-
tion or operation of the project.
‘‘SEC. 2207. REGULATIONS.
‘‘The Secretary may issue such regulations as the Sec-
retary determines appropriate to carry out this title.
‘‘SEC. 2208. FUNDING.
‘‘(a) FUNDING.—
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‘‘(1) IN GENERAL.—There are authorized to be
appropriated to carry out this title, $49,000,000 to
remain available during the period beginning on July
1, 2004 and ending on September 30, 2008.
‘‘(2) 
ADMINISTRATIVE
COSTS.—From 
funds
made available under paragraph (1), the Secretary
may use, for the administration of this title, not more
than $2,000,000 for each of fiscal years 2004 through
2008.
‘‘(b) CONTRACT AUTHORITY.—Notwithstanding any
other provision of law, approval by the Secretary of a Fed-
eral credit instrument that uses funds made available under
this title shall be deemed to be acceptance by the United
States of a contractual obligation to fund the Federal credit
instrument.
‘‘(c) AVAILABILITY.—Amounts appropriated under
this section shall be available for obligation on July 1, 2004.
‘‘SEC. 2209. REPORT TO CONGRESS.
‘‘Not later than 4 years after the date of enactment
of this title, the Secretary shall submit to Congress a report
summarizing the financial performance of the projects that
are receiving, or have received, assistance under this title,
including a recommendation as to whether the objectives of
this title are best served—
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‘‘(1) by continuing the program under the au-
thority of the Secretary;
‘‘(2) by establishing a Government corporation
or Government-sponsored enterprise to administer the
program; or
‘‘(3) by phasing out the program and relying on
the capital markets to fund the types of infrastructure
investments assisted by this title without Federal par-
ticipation.’’.
SEC. 609. CAPITAL INFRASTRUCTURE REVOLVING LOAN
PROGRAM.
(a) IN GENERAL.—Part A of title XVI of the Public
Health Service Act (42 U.S.C. 300q et seq.) is amended by
adding at the end the following new section:
‘‘CAPITAL INFRASTRUCTURE REVOLVING LOAN PROGRAM
‘‘SEC. 1603. (a) AUTHORITY TO MAKE AND GUAR-
ANTEE LOANS.—
‘‘(1) AUTHORITY
TO
MAKE
LOANS.—The Sec-
retary may make loans from the fund established
under section 1602(d) to any rural entity for projects
for capital improvements, including—
‘‘(A) the acquisition of land necessary for
the capital improvements;
‘‘(B) the renovation or modernization of
any building;
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‘‘(C) the acquisition or repair of fixed or
major movable equipment; and
‘‘(D) such other project expenses as the Sec-
retary determines appropriate.
‘‘(2) AUTHORITY TO GUARANTEE LOANS.—
‘‘(A) IN
GENERAL.—The Secretary may
guarantee the payment of principal and interest
for loans made to rural entities for projects for
any capital improvement described in paragraph
(1) to any non-Federal lender.
‘‘(B) INTEREST SUBSIDIES.—In the case of
a guarantee of any loan made to a rural entity
under subparagraph (A), the Secretary may pay
to the holder of such loan, for and on behalf of
the project for which the loan was made,
amounts sufficient to reduce (by not more than
3 percent) the net effective interest rate otherwise
payable on such loan.
‘‘(b) AMOUNT OF LOAN.—The principal amount of a
loan directly made or guaranteed under subsection (a) for
a project for capital improvement may not exceed
$5,000,000.
‘‘(c) FUNDING LIMITATIONS.—
‘‘(1) GOVERNMENT
CREDIT
SUBSIDY
EXPO-
SURE.—The total of the Government credit subsidy
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exposure under the Credit Reform Act of 1990 scoring
protocol with respect to the loans outstanding at any
time with respect to which guarantees have been
issued, or which have been directly made, under sub-
section (a) may not exceed $50,000,000 per year.
‘‘(2) TOTAL
AMOUNTS.—Subject to paragraph
(1), the total of the principal amount of all loans di-
rectly made or guaranteed under subsection (a) may
not exceed $250,000,000 per year.
‘‘(d) CAPITAL ASSESSMENT AND PLANNING GRANTS.—
‘‘(1) NONREPAYABLE GRANTS.—Subject to para-
graph (2), the Secretary may make a grant to a rural
entity, in an amount not to exceed $50,000, for pur-
poses of capital assessment and business planning.
‘‘(2) LIMITATION.—The cumulative total of
grants awarded under this subsection may not exceed
$2,500,000 per year.
‘‘(e) TERMINATION
OF AUTHORITY.—The Secretary
may not directly make or guarantee any loan under sub-
section (a) or make a grant under subsection (d) after Sep-
tember 30, 2008.’’.
(b) RURAL ENTITY DEFINED.—Section 1624 of the
Public Health Service Act (42 U.S.C. 300s–3) is amended
by adding at the end the following new paragraph:
‘‘(14)(A) The term ‘rural entity’ includes—
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‘‘(i) a rural health clinic, as defined in sec-
tion 1861(aa)(2) of the Social Security Act;
‘‘(ii) any medical facility with at least 1
bed, but with less than 50 beds, that is located
in—
‘‘(I) a county that is not part of a met-
ropolitan statistical area; or
‘‘(II) a rural census tract of a metro-
politan statistical area (as determined
under the most recent modification of the
Goldsmith Modification, originally pub-
lished in the Federal Register on February
27, 1992 (57 Fed. Reg. 6725));
‘‘(iii) a hospital that is classified as a
rural, regional, or national referral center under
section 1886(d)(5)(C) of the Social Security Act;
and
‘‘(iv) a hospital that is a sole community
hospital (as defined in section 1886(d)(5)(D)(iii)
of the Social Security Act).
‘‘(B) For purposes of subparagraph (A), the fact
that a clinic, facility, or hospital has been geographi-
cally reclassified under the medicare program under
title XVIII of the Social Security Act shall not pre-
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clude a hospital from being considered a rural entity
under clause (i) or (ii) of subparagraph (A).’’.
(c) CONFORMING AMENDMENTS.—Section 1602 of the
Public Health Service Act (42 U.S.C. 300q–2) is
amended—
(1) in subsection (b)(2)(D), by inserting ‘‘or
1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’; and
(2) in subsection (d)—
(A) in paragraph (1)(C), by striking ‘‘sec-
tion 1601(a)(2)(B)’’ and inserting ‘‘sections
1601(a)(2)(B) and 1603(a)(2)(B)’’; and
(B) in paragraph (2)(A), by inserting ‘‘or
1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’.
SEC. 610. FEDERAL REIMBURSEMENT OF EMERGENCY
HEALTH SERVICES FURNISHED TO UNDOCU-
MENTED ALIENS.
(a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—
There is appropriated, out of any funds in the Treasury
not otherwise appropriated, $250,000,000 for each of fiscal
years 2005 through 2008, for the purpose of making allot-
ments under this section to States described in paragraph
(1) or (2) of subsection (b). Funds appropriated under the
preceding sentence shall remain available until expended.
(b) STATE ALLOTMENTS.—
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(1) BASED ON PERCENTAGE OF UNDOCUMENTED
ALIENS.—
(A) IN GENERAL.—Out of the amount ap-
propriated under subsection (a) for a fiscal year,
the Secretary shall use $167,000,000 of such
amount to make allotments for such fiscal year
in accordance with subparagraph (B).
(B) FORMULA.—The amount of the allot-
ment for each State for a fiscal year shall be
equal to the product of—
(i) the total amount available for allot-
ments under this paragraph for the fiscal
year; and
(ii) the percentage of undocumented
aliens residing in the State with respect to
the total number of such aliens residing in
all States, as determined by the Statistics
Division of the Immigration and Natu-
ralization Service, as of January 2003,
based on the 2000 decennial census.
(2) BASED
ON
NUMBER
OF
UNDOCUMENTED
ALIEN APPREHENSION STATES.—
(A) IN GENERAL.—Out of the amount ap-
propriated under subsection (a) for a fiscal year,
the Secretary shall use $83,000,000 of such
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amount to make allotments for such fiscal year
for each of the 6 States with the highest number
of undocumented alien apprehensions for such
fiscal year.
(B) DETERMINATION OF ALLOTMENTS.—The
amount of the allotment for each State described
in subparagraph (A) for a fiscal year shall bear
the same ratio to the total amount available for
allotments under this paragraph for the fiscal
year as the ratio of the number of undocumented
alien apprehensions in the State in that fiscal
year bears to the total of such numbers for all
such States for such fiscal year.
(C) DATA.—For purposes of this paragraph,
the highest number of undocumented alien ap-
prehensions for a fiscal year shall be based on
the 4 most recent quarterly apprehension rates
for undocumented aliens in such States, as re-
ported by the Immigration and Naturalization
Service.
(3) RULE OF CONSTRUCTION.—Nothing in this
section shall be construed as prohibiting a State that
is described in both of paragraphs (1) and (2) from
receiving an allotment under both paragraphs for a
fiscal year.
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(c) USE OF FUNDS.—
(1) AUTHORITY TO MAKE PAYMENTS.—From the
allotments made for a State under subsection (b) for
a fiscal year, the Secretary shall pay directly to local
governments, hospitals, or other providers located in
the State (including providers of services received
through an Indian Health Service facility whether
operated by the Indian Health Service or by an In-
dian tribe or tribal organization) that provide un-
compensated emergency health services furnished to
undocumented aliens during that fiscal year, and to
the State, such amounts (subject to the total amount
available from such allotments) as the local govern-
ments, hospitals, providers, or State demonstrate were
incurred for the provision of such services during that
fiscal year.
(2) LIMITATION
ON
STATE
USE
OF
FUNDS.—
Funds paid to a State from allotments made under
subsection (b) for a fiscal year may only be used for
making payments to local governments, hospitals, or
other providers for costs incurred in providing emer-
gency health services to undocumented aliens or for
State costs incurred with respect to the provision of
emergency health services to such aliens.
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(3) INCLUSION OF COSTS INCURRED WITH RE-
SPECT TO CERTAIN ALIENS.—Uncompensated emer-
gency health services furnished to aliens who have
been allowed to enter the United States for the sole
purpose of receiving emergency health services may be
included in the determination of costs incurred by a
State, local government, hospital, or other provider
with respect to the provision of such services.
(d) APPLICATIONS; ADVANCE PAYMENTS.—
(1) DEADLINE FOR ESTABLISHMENT OF APPLICA-
TION PROCESS.—24
(A) IN GENERAL.—Not later
than September 1, 2004, the Secretary shall establish
a process under which States, local governments, hos-
pitals, or other providers located in the State may
apply for payments from allotments made under sub-
section (b) for a fiscal year for uncompensated emer-
gency health services furnished to undocumented
aliens during that fiscal year.
(B) INCLUSION OF MEASURES TO COMBAT
FRAUD.—The Secretary shall include in the
process established under subparagraph (A)
measures to ensure that fraudulent payments are
not made from the allotments determined under
subsection (b).